<PAGE> 1
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 six of fourteen series of units of beneficial interest ("Shares") each
representing interests in one of fourteen 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 CAPITAL GROWTH FUND (the "Capital Growth Fund") seeks long-term
capital appreciation and growth of income by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stocks such as convertible bonds and convertible preferred stocks. (See
"INVESTMENT OBJECTIVES AND POLICIES.")
THE AMSOUTH SMALL CAP FUND (the "Small Cap Fund") seeks capital appreciation
by investing primarily in a diversified portfolio of securities consisting of
common stocks and securities convertible into common stocks such as convertible
bonds and convertible preferred stock. Any current income generated from these
securities is incidental to the investment objective of the Fund. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
common stocks and securities convertible into common stocks such as convertible
bonds and convertible preferred stock of companies with a market capitalization
of less than $1 billion. (See "INVESTMENT OBJECTIVES AND POLICIES.")
THE AMSOUTH EQUITY INCOME FUND (the "Equity Income Fund") seeks above
average income and capital appreciation by investing primarily in a diversified
portfolio of common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock. Under normal market
conditions, the Fund will invest at least 65% of its total assets in
income-producing equity securities including common stock, preferred stock, and
securities convertible into common stocks such as convertible bonds and
convertible preferred stock. The portion of the Fund's total assets invested in
common stock, preferred stock, and convertible securities will vary according to
the Fund's assessment of market and economic conditions and outlook. (See
"INVESTMENT OBJECTIVES AND POLICIES.")
AmSouth acts as the investment advisor to each Capital Appreciation Fund.
Rockhaven Asset Management, LLC ("Rockhaven") acts as the investment sub-advisor
to the Equity Income 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"), and 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
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 March 17, 1997.
<PAGE> 2
FEE TABLE
<TABLE>
<CAPTION>
REGIONAL CAPITAL EQUITY
EQUITY EQUITY BALANCED GROWTH SMALL INCOME
FUND FUND FUND FUND CAP FUND FUND
------ -------- -------- ------- -------- ------
<S> <C> <C> <C> <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% 4.50% 4.50% 4.50%
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................................... .80% .80% .80%(3) .80% .90% .80%
12b-1 Fees........................................ .00% .00% .00% .00% .00% .00%
Other Expenses (After Voluntary Fee
Reduction)(4)................................... .22% .25% .24% .27% .27% .27%
Total Fund Operating Expenses (After Voluntary Fee
Reductions)..................................... 1.02%(5) 1.05%(5) 1.04%(3,5) 1.07% 1.17% 1.07%
==== ==== ==== ==== ==== ====
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
Capital Growth Fund...................................................... $ 55 $78 N/A N/A
Small Cap Fund........................................................... $ 56 $80 N/A N/A
Equity Income Fund....................................................... $ 55 $78 N/A N/A
</TABLE>
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(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. Other Expenses for the Capital Growth Fund, Small Cap
Fund, and Equity Income Fund are based on estimates for the current fiscal
year.
(5) In the absence of any 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> 3
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information concerning the
investment results for the Capital Appreciation Funds for the periods indicated.
The Capital Growth Fund, Small Cap Fund and Equity Income 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>
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>
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* 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> 4
<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>
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* 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> 5
<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 -- -- -- --
</TABLE>
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* 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.
5
<PAGE> 6
INVESTMENT OBJECTIVES AND POLICIES
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.
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 CAPITAL GROWTH FUND seeks long-term capital appreciation and growth of
income 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 SMALL CAP FUND seeks capital appreciation by investing primarily in a
diversified portfolio of securities consisting of common stocks and securities
convertible into common stocks such as convertible bonds and convertible
preferred stocks. Any current income generated from these securities is
incidental to the investment objective of the Fund. Under normal market
conditions, the Fund will invest at least 65% of its total assets in common
stocks and securities convertible into common stocks of companies with a market
capitalization of less than $1 billion determined at the time the security is
purchased.
THE EQUITY INCOME FUND seeks above average income and capital appreciation by
investing primarily in a diversified portfolio of common stocks, preferred
stocks, and securities that are convertible into common stocks, such as
convertible bonds and convertible preferred stock. Under normal market
conditions, the Fund will invest at least 65% of its total assets in
income-producing equity securities including common stock, preferred stock, and
securities convertible into common stocks such as convertible bonds and
convertible preferred stock. The portion of the Fund's total assets invested in
common stock, preferred stock, and convertible securities will vary according to
the Fund's assessment of market and economic conditions and outlook.
As investment advisor 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.
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
6
<PAGE> 7
capital of a Capital Appreciation Fund in an individual security or group of
securities may not appreciate for an extended period.
In managing the Capital Growth Fund and Small Cap Fund, AmSouth will seek
securities with potential to produce above-average earnings growth. Issuers
include companies with a history of above-average growth or companies that are
expected to enter periods of above-average growth or are positioned in emerging
growth industries. Should the expected growth potential of such companies fail
to be realized, a loss may be incurred.
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.
Each Capital Appreciation Fund may provide current income. The Balanced Fund
and the Equity Income Fund are expected to produce a higher level of current
income than the other Capital Appreciation Funds.
Most companies in which the Equity, Regional Equity, Balanced, Capital Growth,
and Equity Income Funds will invest will be listed on national securities
exchanges. Stocks held by the Small Cap Fund will frequently be traded over the
counter.
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, and 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. 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 stocks
and securities convertible into common stock of companies headquartered outside
the Southern Region, preferred stocks, corporate bonds, notes, and warrants, and
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. 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 eco-
7
<PAGE> 8
nomic 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 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. The Balanced Fund
may also write covered call options. See "Options."
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.
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.
THE CAPITAL GROWTH FUND will normally invest at least 65% 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 have attractive potential for growth. Under normal market conditions, the
Capital Growth Fund may also invest up to 35% of the value of their total assets
in preferred stocks, corporate bonds, notes, and warrants, and 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. If deemed appropriate for temporary defensive purposes, the
Capital Growth Fund may increase its holdings in short-term obligations to over
35% of their total assets and may also hold uninvested cash pending investment.
The Capital Growth Fund may also write covered call options. See "Options."
THE SMALL CAP FUND will normally invest at least 65% of its total assets in
common stocks and securities convertible into common stocks such as convertible
bonds and convertible preferred stock of companies with a market capitalization
of less than $1 billion determined at the time the security is purchased. Under
normal market conditions, the Small Cap Fund may invest up to 35% of the value
of its total assets in preferred stocks, corporate bonds, notes, and warrants,
and obligations with
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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. If deemed appropriate for temporary defensive purposes, Small Cap
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 Small Cap
Fund may also write covered call options. See "Options."
While small-capital company securities may offer a greater capital
appreciation potential than investments in mid- or large-cap company securities,
they may also present greater risks. Small capital company securities tend to be
more sensitive to changes in earnings expectations and have lower trading
volumes than mid-to large-cap company securities and, as a result, they may
experience more abrupt and erratic price movements. Any current income produced
by a security is not a primary factor in the selection of investments.
The Small Cap Fund may also invest in investment grade debt securities, that
is, securities rated "BBB" or higher by an NRSRO at the time of purchase. If the
rating of a security falls below investment grade, the Investment Advisor will
consider whatever action is appropriate consistent with the Fund's investment
objectives and policies. See the Appendix to the Statement of Additional
Information for a discussion of rating categories.
In pursuit of its objective, the Small Cap Fund may employ certain active
investment management techniques including forward foreign currency exchange
contracts, options and futures contracts on currencies, securities and
securities indices and options on such futures contracts. These techniques may
be employed in an attempt to hedge foreign currency risks and other risks
associated with the Fund's portfolio securities. See the Statement of Additional
Information for a description of these investment practices and associated
risks.
The Small Cap Fund is managed in accordance with a value philosophy. This
approach consists of developing a diversified portfolio of securities consistent
with the Fund's investment objective and selected primarily on the basis of the
advisor's judgment that the securities have an underlying value, or potential
value, which exceeds their current prices. The basis and quantification of the
economic worth, or basic value of individual companies reflects the advisor's
assessment of a company's assets and the company's prospects for earning growth
over the next 1 1/2-to-3 years. The advisor relies primarily on the knowledge,
experience and judgment of its own research staff, but also receives and uses
information from a variety of outside sources, including brokerage firms,
electronic data bases, specialized research firms and technical journals.
THE EQUITY INCOME FUND will normally invest at least 65% of the value of its
total assets in income-producing equity securities such as common stocks,
preferred stocks, and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The portion of the Fund's
total assets invested in common stocks, preferred stocks, and convertible
securities will vary according to the Fund's assessment of market and economic
conditions and outlook. Under normal market conditions, the Equity Income Fund
may also invest up to 35% of the value of its total assets in corporate bonds,
notes, and warrants, and 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. If deemed appropriate for temporary defensive
purposes, the Equity Income 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 Equity Income Fund may also write covered call options.
See "Options."
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The Equity Income Fund's stock selection emphasizes those common stocks in
each sector that have good value, attractive yield, and dividend growth
potential. The Fund will utilize convertible securities because such securities
typically offer higher yields and good potential for capital appreciation.
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.
CONVERTIBLE SECURITIES
Each of the Capital Appreciation Funds may invest in convertible securities.
Convertible securities are fixed income-securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder-during a specified time period. Convertible securities
may take the form of convertible preferred stock, convertible bonds or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. Each Capital Appreciation Fund
other than the Balanced Fund and the Equity Income Fund may invest in
convertible securities rated "BBB" or higher by an NRSRO at the time of
investment, or if unrated, of comparable quality. The Equity Income Fund may
invest in convertible securities rated "BB" or lower by an NRSRO at the time of
investment, or if unrated, of comparable quality. The Balanced Fund may invest
in convertible securities rated "A" or higher by an NRSRO or, if unrated, of
comparable quality. If a convertible security falls below these minimum ratings
after a Fund has purchased it, a Fund is not required to drop the convertible
bond from its portfolio, but will consider appropriate action. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives.
Securities which are rated "BB" or lower by Standard & Poor's or "Ba" or lower
by Moody's either have speculative characteristics or are speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligations. A description of the rating categories is contained in
the Appendix to the Statement of Additional Information. There is no lower limit
with respect to rating categories for convertible securities in which the Equity
Income Fund may invest.
Corporate debt obligations that are not determined to be investment-grade are
high-yield, high-risk bonds, typically subject to greater market fluctuations
and greater risk of loss of income and principal due to an issuer's default. To
a greater extent than investment-grade securities, lower rated securities tend
to reflect short-term corporate, economic and market developments, as well as
investor perceptions or the issuer's credit quality. Because investments in
lower rated securities involve greater investment risk, achievement of the
Equity Income Fund's investment objective may be more dependent on the
Sub-Adviser's credit analysis than would be the case if the Equity Income Fund
were
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investing in higher rated securities. High yield securities may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade securities. A projection of an economic
downturn, for example, could cause a decline in high yield prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. In addition, the
secondary trading market for high yield securities may be less liquid than the
market for higher grade securities. The market prices of debt securities also
generally fluctuate with changes in interest rates so that the Equity Income
Fund's net asset value can be expected to decrease as long-term interest rates
rise and to increase as long-term rates fall. In addition, lower rated
securities may be more difficult to dispose of or to value than high-rated,
lower-yielding securities. The Sub-Adviser's attempts to reduce the risks
described above through diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
Convertible bonds and convertible preferred stocks are fixed-income securities
that generally retain the investment characteristics of fixed-income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed-income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities, and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar non-convertible securities of the same
company. The interest income and dividends from convertible bonds and preferred
stocks provide a stable stream of income with generally higher yields than
common stocks, but lower than non-convertible securities of similar quality.
The Capital Appreciation Funds will exchange or convert the convertible
securities held in portfolio into shares of the underlying common stock in
instances in which, in the opinion of AmSouth, the investment characteristics of
the underlying common shares will assist a Fund in achieving its investment
objectives. Otherwise, a Fund will hold or trade the convertible securities. In
selecting convertible securities for a Fund, the Adviser evaluates the
investment characteristics of the convertible security as a fixed-income
instrument, and the investment potential of the underlying equity security for
capital appreciation. In evaluating these matters with respect to a particular
convertible security, the Adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to other
investment alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.
As with all debt securities, the market values of convertible securities tend
to increase when interest rates decline and, conversely, tend to decline when
interest rates increase.
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
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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" 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
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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 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.
REAL ESTATE INVESTMENT TRUSTS
The Capital Growth Fund, Small Cap Fund, and Equity Income Fund may invest in
real estate investment trusts. Real estate investment trusts are sensitive to
factors such as changes in real estate values and property taxes, interest
rates, cash flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Real estate may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
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.
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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 short-term
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.
Each Capital Appreciation 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.
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. Portfolio turnover for the Capital
Growth Fund, Small Cap Fund, and Equity Income Fund is not expected to exceed
200% in the coming year. 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.
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
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(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 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
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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 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
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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 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.
17
<PAGE> 18
<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 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,
18
<PAGE> 19
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 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 nonaffiliated 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.
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.
19
<PAGE> 20
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 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
20
<PAGE> 21
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 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
21
<PAGE> 22
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.
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
22
<PAGE> 23
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.
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.
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<PAGE> 24
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>
Sean M. Kelly* Chairman of the From 1993 to present, Senior Vice President
150 2nd Avenue North, Suite Board of Trustees, of Client Services of BISYS Fund Services;
1170 President prior to 1993, Senior Vice President of
St. Petersburg, FL 33701 Concord Financial Group (now BISYS Fund
Services)
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 from 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* Trustee From June 1987 to present, employee of
3435 Stelzer Road BISYS Fund Services, Limited Partnership
Columbus, Ohio 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 July 1989 to present, Chancellor, The
The University of North University of North Carolina at Charlotte;
Carolina at Charlotte until July 1989, Senior Vice President,
Charlotte, North Carolina University College, University of Alabama
28223 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
24
<PAGE> 25
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, 1996 of $18.4 billion and operated 272
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, 1996, AmSouth and its affiliates had over $7.1 billion
in assets under discretionary management and provided custody services for an
additional $13.4 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 each Capital
Appreciation Fund (except the Equity Income Fund) 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 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 the Equity, Regional Equity, Balanced, Equity Income, and
Capital Growth Funds 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 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. The
fee payable for AmSouth by the Small Cap Fund for investment advisory services
is the lesser of (a) a fee computed daily and paid monthly at the annual rate of
ninety one-hundredths of one percent (.90%) 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. 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 objectives and policies. 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 0.80% 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.
INVESTMENT SUB-ADVISOR
Rockhaven Asset Management, LLC ("Rockhaven") serves as investment sub-advisor
to the Equity Income Fund pursuant to a Sub-Advisory Agreement with AmSouth.
Under the Sub-Advisory Agreement, Rockhaven manages the Fund, selects
investments, and places all order for purchases and sales of securities, subject
to the general supervision of the Trust's Board of Trustees and AmSouth in
accordance with the Fund's investment objective, policies, and restrictions.
Rockhaven is 50% owned by AmSouth and 50% owned by Mr. Christopher H. Wiles.
Rockhaven was organized in 1997 to perform advisory services
25
<PAGE> 26
for investment companies and has its principal offices at 100 First Avenue,
Suite 1050, Pittsburgh, PA 15222.
For its services and expenses incurred under the Sub-Advisory Agreement,
Rockhaven is entitled to a fee, payable by AmSouth. The fee is computed daily
and paid monthly at the annual rate of forty-eight one-hundredths of one percent
(.48%) of the Fund's average daily net assets or such lower fee as may be agreed
upon in writing by AmSouth and Rockhaven.
Mr. Wiles is the portfolio manager for the Equity Income Fund, and, as such,
has the primary responsibility for the day-to-day portfolio management of the
Fund. Mr. Wiles is the President and Chief Investment Officer of Rockhaven. From
May, 1991 to January, 1997 he was the portfolio manager of the Federated Equity
Income Fund.
ADMINISTRATOR AND DISTRIBUTOR
ASO Services Company ("ASC") 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). ASC 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.
ASC succeeded BISYS as Administrator on April 1, 1996. During the Trust's
fiscal year ended July 31, 1996, BISYS and ASC 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.
26
<PAGE> 27
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 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 fourteen 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, the AmSouth Florida Tax-Free Fund, the
AmSouth Capital Growth Fund, the AmSouth Small Cap Fund, and the AmSouth Equity
Income 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
27
<PAGE> 28
Balanced Fund within the meaning of the Investment Company Act of 1940.
CUSTODIAN
AmSouth serves as custodian for the Equity Income Fund. 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.
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
28
<PAGE> 29
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.
29
<PAGE> 30
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<PAGE> 31
AMSOUTH MUTUAL FUNDS
INVESTMENT ADVISOR
LOGO
AmSouth Bank of Alabama
1901 Sixth Avenue North
Birmingham, AL 35203
INVESTMENT SUB-ADVISOR
(Equity Income Fund Only)
Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, PA 15222
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
BISYS Fund Services, Limited Partnership
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...................... 3
Investment Objectives and Policies........ 6
Investment Restrictions................... 14
Valuation of Shares....................... 15
How to Purchase and Redeem Shares......... 15
Dividends and Taxes....................... 22
Management of AmSouth Mutual Funds........ 24
General Information....................... 27
</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.
AS3P031797
<PAGE> 32
A M S O U T H M U T U A L F U N D S
---------------------------------------
_______________________________________
[AMSOUTH LOGO]
AMSOUTH BANK OF ALABAMA
Investment Advisor
C A P I T A L
A P P R E C I A T I O N
F U N D S
A M S O U T H
MUTUAL FUNDS
Not FDIC Insured
BISYS FUND SERVICES, DISTRIBUTOR
Prospectus dated March 17, 1997
<PAGE> 33
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
March 17, 1997
-----------------
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, AmSouth Tax Exempt Fund, AmSouth Government Income
Fund, AmSouth Bond Fund, AmSouth Limited Maturity Fund, AmSouth Municipal Bond
Fund, and AmSouth Florida Tax-Free Fund each dated as of November 30, 1996, and
AmSouth Equity Fund, AmSouth Regional Equity Fund, AmSouth Balanced Fund,
AmSouth Capital Growth Fund, AmSouth Small Cap Fund and AmSouth Equity Income
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> 34
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......................................................................................17
Additional Investment Restrictions...........................................................................18
Portfolio Turnover...........................................................................................19
VALUATION........................................................................................................19
Valuation of the Money Market Funds..........................................................................20
Valuation of the Capital Appreciation Funds and the Income Funds.............................................21
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................21
Purchase of Shares...........................................................................................21
Matters Affecting Redemption.................................................................................22
Additional Tax Information...................................................................................22
Additional Tax Information Concerning the Tax Exempt Fund and Tax-Free Funds.................................24
MANAGEMENT OF THE TRUST..........................................................................................26
Officers ....................................................................................................26
Investment Advisor...........................................................................................28
Investment Sub-Advisor.......................................................................................31
Portfolio Transactions.......................................................................................32
Glass-Steagall Act...........................................................................................34
Manager and Administrator....................................................................................35
Expenses ....................................................................................................37
Sub-Administrators...........................................................................................38
Distributor..................................................................................................38
Shareholder Servicing Plan...................................................................................38
Custodian....................................................................................................39
Transfer Agent and Fund Accounting Services..................................................................39
Auditors ....................................................................................................40
Legal Counsel................................................................................................40
PERFORMANCE INFORMATION..........................................................................................40
General......................................................................................................40
Yields of the Money Market Funds.............................................................................41
Yields of the Capital Appreciation Funds, the Income Funds,
and the Tax-Free Funds..............................................................................42
Calculation of Total Return..................................................................................43
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C>
Performance Comparisons......................................................................................44
ADDITIONAL INFORMATION...........................................................................................46
Organization and Description of Shares.......................................................................46
Shareholder Liability........................................................................................47
APPENDIX.........................................................................................................50
Financial Statements............................................................................................F-1
</TABLE>
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<PAGE> 36
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of fourteen series of units of beneficial interest
("Shares"), each representing interests in one of fourteen 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"), AmSouth Capital Growth Fund (the
"Capital Growth Fund"), AmSouth Small Cap Fund (the "Small Cap Fund"), and
AmSouth Equity Income Fund (the "Equity Income Fund" and, collectively with the
Equity Fund, the Regional Equity Fund, the Balanced Fund, the Capital Growth
Fund, and the Small Cap 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 with the Bond Fund, the Limited
Maturity Fund, the Government Income Fund and the Municipal Bond Fund, 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, the Capital Growth Fund, the Small Cap Fund, and the Equity Income Fund
are 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.
<PAGE> 37
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 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
B-2
<PAGE> 38
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.
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
B-3
<PAGE> 39
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. 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
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<PAGE> 40
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. 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 or Rockhaven 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 or Rockhaven 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
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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 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.
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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:
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
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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.
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
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<PAGE> 44
on and principal of its Municipal Securities may be materially adversely
affected by litigation or other conditions.
High Yield Securities. The Equity Income Fund may invest in high yield
convertible securities. High yield securities are securities that are rated
below investment grade by an NRSRO (e.g., "BB" or lower by S&P and "Ba" or
lower by Moody's). Other terms used to describe such securities include "lower
rated bonds," "non-investment grade bonds" and "junk bonds." Generally, lower
rated debt securities provide a higher yield than higher rated debt securities
of similar maturity, but are subject to a greater degree of risk with respect
to the ability of the issuer to meet its principal and interest obligations.
Issuers of high yield securities may not be as strong financially as those
issuing higher rated securities. The securities are regarded as predominantly
speculative. The market value of high yield securities may fluctuate more than
the market value of higher rated securities, since high yield securities tend
to reflect short-term corporate and market developments to a greater extent
than higher rated securities, which fluctuate primarily in response to the
general level of interest rates, assuming that there has been no change in the
fundamental interest rates, assuming that there has been no change in the
fundamental quality of such securities. The market prices of fixed income
securities generally fall when interest rates rise. Conversely, the market
prices of fixed-income securities generally rise when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Equity Income Fund more difficult, at
least in the absence of price concessions. Reduced liquidity also could
adversely affect the Equity Income Fund's ability to accurately value high
yield securities. Issuers of high yield securities also are more vulnerable to
real or perceived economic changes (for instance, an economic downturn or
prolonged period of rising interest rates), political changes or adverse
developments specific to the issuer. Adverse economic, political or other
developments may impair the issuer's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the issuer is highly leveraged. In the event of a
default, the Equity Income Fund would experience a reduction of its income and
could expect a decline in the market value of the defaulted securities.
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
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<PAGE> 45
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 total
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 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.)
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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 or Rockhaven, 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.
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
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<PAGE> 47
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.
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
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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 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.
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<PAGE> 49
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
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.
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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
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
B-15
<PAGE> 51
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 the futures contract, it had invested in the underlying
financial instrument and sold it after the decline.
B-16
<PAGE> 52
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
and investment in real estate investment trusts are permitted for the Capital
Growth, Small Cap and Equity Income Funds);
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
B-17
<PAGE> 53
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, the Regional Equity Fund, the Capital
Growth Fund, the Small Cap Fund, and the Equity Income 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 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.
B-18
<PAGE> 54
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.
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
B-19
<PAGE> 55
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 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.
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<PAGE> 56
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.
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
B-21
<PAGE> 57
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 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
B-22
<PAGE> 58
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 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
B-23
<PAGE> 59
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 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."
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<PAGE> 60
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 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-
B-25
<PAGE> 61
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>
Sean M. Kelly* Chairman of the Board From 1993 to present, Senior Vice President of
of Trustees, President Client Services of BISYS Fund Services; prior
to 1993, Senior Vice President of Concord
Financial Group (now BISYS Fund Services).
J. David Huber* Trustee From June 1987 to present, employee of BISYS
Fund Services, Limited Partnership.
George A. Landreth Vice President From December 1992 to present, employee of
BISYS Fund Services, Limited Partnership;
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).
</TABLE>
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<PAGE> 62
<TABLE>
<S> <C> <C>
Thomas Line Treasurer From December, 1996 to present, employee of BISYS Fund Services
Limited Partnership; from September, 1989 to November, 1996,
Audit Senior Manager at KPMG Peat Marwick LLP.
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, Line, Kelly,
Landreth, Grimm, Englehart, and Martinez and Mme. Metz are employees of BISYS
Fund Services, Limited Partnership.
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<PAGE> 63
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits 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 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.
B-28
<PAGE> 64
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; the Municipal Bond Fund - sixty-five
one-hundredths of one percent (.65%) annually; the Equity Income Fund - eighty
one-hundredths of one percent (.80%) annually; the Capital Growth Fund - eighty
one-hundredths of one percent (.80%) annually; and the Small Cap Fund - ninety
one-hundredths of one percent (.90%) 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
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,
B-29
<PAGE> 65
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 -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.
B-30
<PAGE> 66
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.
Investment Sub-Advisor
Investment sub-advisory services are provided to the Equity Income Fund by
Rockhaven Asset Management, LLC ("Rockhaven") pursuant to a Sub-Advisory
Agreement dated as of March 12, 1997 between AmSouth and Rockhaven
("Sub-Advisory Agreement").
The Sub-Advisor shall not be liable for any error of judgement or mistake
of law or for any loss suffered by the Investment Adviser, the Trust or the
Fund in connection with the matters to which Agreement relates, except that
Sub-Advisor shall be liable to the Investment Advisor for a loss resulting from
a breach of fiduciary duty by Sub-Advisor under the 1940 Act with respect to
the receipt of compensation for services or a loss resulting from willful
B-31
<PAGE> 67
misfeasance, bad faith or gross negligence on the part of Sub-Advisor in the
performance of its duties or from reckless disregard by it of its obligations
or duties thereunder.
Unless sooner terminated, the Sub-Advisory Agreement shall continue with
respect to the Equity Income Fund until January 31, 1998 and shall continue in
effect for successive one-year periods if such continuance is approved at least
annually by the Board of Trustees of the Trust or by vote of the holders of a
majority of the outstanding voting Shares of the Fund (as defined under
"GENERAL INFORMATION - Miscellaneous" in the Prospectus of the Capital
Appreciation Funds) and a majority of the Trustees who are not parties to the
Sub-Advisory Agreement or interested persons (as defined in the 1940 Act) of
any party to the Sub-Advisory Agreement by vote cast in person at a meeting
called for such purpose. This Agreement may be terminated with respect to the
Fund by the Trust at any time without the payment of any penalty by the Board
of Trustees of the Trust, by vote of the holders of a majority of the
outstanding voting securities of the Fund, or by the Investment Advisor or
Sub-Advisor on 60 days written notice. This Agreement will also immediately
terminate in the event of its assignment.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective Shareholders of the Trust may
include descriptions of the investment sub-advisor including, but not limited
to, (i) descriptions of the sub-advisor's operations; (ii) descriptions of
certain personnel and their functions; and (iii) statistics and rankings
relating to the sub-advisor's operations.
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.
B-32
<PAGE> 68
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, Rockhaven, 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 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.
B-33
<PAGE> 69
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, 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.
B-34
<PAGE> 70
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 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 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 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.
B-35
<PAGE> 71
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,
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,
B-36
<PAGE> 72
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.
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.
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<PAGE> 73
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 ASO Services Company as the Sub-Administrator of the Trust. Pursuant to
this agreement, 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 (.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 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
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<PAGE> 74
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 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 serves as custodian of the Trust pursuant to a
Custodial Services Agreement with the Trust. AmSouth serves as custodian of the
Equity Income Fund. Each 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,
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<PAGE> 75
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 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
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<PAGE> 76
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 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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<PAGE> 77
<TABLE>
<CAPTION>
Effective
Fund Yield Yield
---- ----- -----
<S> <C> <C>
Prime Obligations Fund 4.78% 4.89%
U.S. Treasury Fund 4.55% 4.66%
Tax Exempt Fund 3.00% 3.05%
</TABLE>
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:
<TABLE>
<CAPTION>
Effective
Fund Yield Yield
---- ----- -----
<S> <C> <C>
Prime Obligations Fund 4.68% 4.79%
U.S. Treasury Fund 4.45% 4.55%
Tax Exempt Fund 2.90% 2.94%
</TABLE>
Yields of the Capital Appreciation Funds, the Income Funds and the Tax-Free
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 Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when
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<PAGE> 78
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 annualizing the
result for periods of less than one year.
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<PAGE> 79
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. 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
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<PAGE> 80
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 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.
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<PAGE> 81
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 fourteen 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, the Florida Fund,
the Capital Growth Fund, the Small Cap Fund, and the Equity Income 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 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
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<PAGE> 82
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 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, 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
outstanding voting 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, and 88.38% of the outstanding voting Shares of the Florida
Fund were also owned beneficially by
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<PAGE> 83
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 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:
Prime Obligations Fund -- Classic Shares
----------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Wayne Killian 6,062,258.90 5.72%
403 Cagnouster North
Shoal Creek, AL 35242
</TABLE>
U.S. Treasury Fund -- Classic Shares
----------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Association of Edison 702,190.39 5.28%
Illumination
600 18th Street North
Birmingham, AL 35291
</TABLE>
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
B-48
<PAGE> 84
any representation other than those contained in the Prospectuses of the Funds
and this Statement of Additional Information.
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<PAGE> 85
APPENDIX
Commercial Paper Ratings. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short-term in the relevant market. Commercial paper rated
A-1 by S&P indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted A-1+. Commercial paper rated A-2 by S&P indicates
that capacity for timely payment on issues is satisfactory. 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, 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 speculative capacity for timely payment. Commercial
paper rated C is assigned to short-term debt obligations with a doubtful
capacity for payment. Commercial paper rated D represents an issue in default
or when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired.
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 ability for
repayment of senior short-term debt obligations. Issuers rated Prime-2 (or
related supporting institutions) have a strong ability for repayment of senior
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, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternative liquidity is maintained. Issuers
rated Prime-3 (or related supporting institutions) have an acceptable ability
for repayment of short-term 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 may require 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 Information 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 a satisfactory degree
of assurance of timely payment, but that margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings. Commercial paper rated F-3 has an
adequate degree of assurance for timely payment but near-term adverse changes
could cause these securities to be rated below investment grade. Issues rated
F-S have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near term adverse changes in financial and
economic conditions. The plus (+) sign is used after a rating symbol to
designate the relative position of an issuer within the rating category.
B-50
<PAGE> 86
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.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments. The
"BB" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B -- Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
CC -- The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" debt rating.
C -- The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
C1 -- The rating "C1" is reserved for income bonds on which no interest is
being paid.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable
B-51
<PAGE> 87
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
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 edged." 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.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
B-52
<PAGE> 88
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Those bonds within the Aa, A, and Baa categories that Moody's believes
possess the strongest credit attributes within those categories are designated
by the symbols Aa1, A1, and Baa1.
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 by
established cash flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing. 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" Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
"SP-2" Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of
the notes.
Preferred Stock Ratings
The following summarizes the 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.
B-53
<PAGE> 89
The following summarizes the 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.
"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.
"BBB" An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the "A"
category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are regarded,
on balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. "BB" indicates the lowest
degree of speculation and "CCC" the highest. While such issues will likely
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of preferred
stock quality, ratings from "AA" to "CCC" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
B-54
<PAGE> 90
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
F-1
<PAGE> 91
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.
F-2
<PAGE> 92
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.
F-3
<PAGE> 93
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.
F-4
<PAGE> 94
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.
F-5
<PAGE> 95
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.
F-6
<PAGE> 96
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.
F-7
<PAGE> 97
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.
F-8
<PAGE> 98
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.
F-9
<PAGE> 99
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.
F-10
<PAGE> 100
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.
F-11
<PAGE> 101
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
F-12
<PAGE> 102
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
F-13
<PAGE> 103
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.
F-14
<PAGE> 104
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.
F-15
<PAGE> 105
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
F-16
<PAGE> 106
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
F-17
<PAGE> 107
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
F-18
<PAGE> 108
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
F-19
<PAGE> 109
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.
F-20
<PAGE> 110
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
F-21
<PAGE> 111
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.
F-22
<PAGE> 112
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.
F-23
<PAGE> 113
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.
F-24
<PAGE> 114
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
F-25
<PAGE> 115
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.
F-26
<PAGE> 116
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
F-27
<PAGE> 117
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.
F-28
<PAGE> 118
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
F-29
<PAGE> 119
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.
F-30
<PAGE> 120
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
F-31
<PAGE> 121
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
F-32
<PAGE> 122
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.
F-33
<PAGE> 123
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
F-34
<PAGE> 124
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
F-35
<PAGE> 125
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
F-36
<PAGE> 126
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
F-37
<PAGE> 127
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
F-38
<PAGE> 128
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
F-39
<PAGE> 129
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>
F-40
<PAGE> 130
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.
F-41
<PAGE> 131
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.
F-42
<PAGE> 132
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.
F-43
<PAGE> 133
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.
F-44
<PAGE> 134
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.
F-45
<PAGE> 135
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.
F-46
<PAGE> 136
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.
F-47
<PAGE> 137
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.
F-48
<PAGE> 138
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.
F-49
