<PAGE> 1
As filed with the Securities and Exchange Commission
on July 3, 1997
Registration Nos. 33-21660 and 811-5551
-------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 23 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 |_|
Amendment No. 24 |X|
AMSOUTH MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Address of Principal Executive Offices)
(800) 451-8379
--------------
(Registrant's Telephone Number, Including Area Code)
Name and address
of agent for service: Copy to:
--------------------- --------
Mr. J. David Huber Alan G. Priest, Esq.
AmSouth Mutual Funds Ropes & Gray
3435 Stelzer Road 1301 K Street, N.W., Suite 800 East
Columbus, Ohio 43219 Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate
box)
|_| immediately upon filing pursuant to paragraph (b)
|_| on ___________, 1997 pursuant to paragraph (b)
|X| 60 days after filing pursuant to paragraph (a)(i)
|_| on (date) pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on (date) pursuant to paragraph (a)(ii) of Rule 485
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
The Registrant has registered an indefinite number or amount of its shares
of beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2.
The Registrant has filed a Rule 24f-2 Notice with respect to the Registrant's
fiscal year ended July 31, 1996 on September 25, 1996.
<PAGE> 2
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
AMSOUTH MUTUAL FUNDS
PREMIER SHARES
1. Cover Page................. Cover Page
2. Synopsis .................. Fee Table
3. Condensed Financial
Information ............. Financial Highlights
4. General Description
of Registrant ........... The Trust; Investment Objective and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund .... Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ........ The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........... Valuation of Shares; How to Purchase and
Redeem Shares
8. Redemption or Repurchase .. How to Purchase and Redeem Shares
9. Legal Proceedings ......... Inapplicable
<PAGE> 3
AMSOUTH MUTUAL FUNDS
PREMIER SHARES
3435 Stelzer Road For current yield, purchase
Columbus, Ohio 43219 and redemption information call
(800) 451-8382
The AmSouth Prime Obligations Fund (the "Prime Obligations Fund"), the
AmSouth U.S. Treasury Fund (the "AmSouth U.S. Treasury Fund"), and the AmSouth
Tax Exempt Fund (the "Tax Exempt Fund") (collectively, the "Money Market
Funds"), the AmSouth Bond Fund (the "Bond Fund"), the AmSouth Limited Maturity
Fund (the "Limited Maturity Fund"), the AmSouth Government Income Fund (the
"Government Income Fund"), the AmSouth Florida Tax-Free Fund (the "Florida
Fund"), and the AmSouth Municipal Bond Fund (the "Municipal Bond Fund")
(collectively, "the Income Funds" and the Florida Fund and Municipal Bond Fund
sometimes collectively referred to herein as "the Tax-Free Funds"), and the
AmSouth Equity Fund (the "Equity Fund"), the AmSouth Regional Equity Fund (the
"Regional Equity Fund"), the AmSouth Balanced Fund (the "Balanced Fund"), the
AmSouth Capital Growth Fund ( the "Capital Growth Fund"), the AmSouth Small Cap
Fund (the "Small Cap Fund"), and the AmSouth Equity Income Fund (the "Equity
Income Fund") (collectively, the "Capital Appreciation Funds") are 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. All securities or
instruments in which the Money Market Funds invest have remaining maturities of
397 days or less. Each Money Market Fund seeks to maintain a constant net asset
value of $1.00 per unit of beneficial interest, but there can be no assurance
that net asset value will not vary. Each Income Fund and Capital Appreciation
has its own investment objective and the net asset value per share of each
Income Fund and Capital Appreciation Fund will fluctuate as the value of such
Fund's investment portfolio changes in response to changing market interest
rates and other factors. The Shares of the Income Funds and the Capital
Appreciation Funds outstanding on August 31, 1997, have been redesignated as
Classic Shares.
AMSOUTH PRIME OBLIGATIONS FUND seeks current income with liquidity and
stability of principal. The Prime Obligations Fund invests in high quality
United States dollar-denominated money market instruments and other high-quality
United States dollar-denominated instruments.
AMSOUTH U.S. TREASURY FUND seeks current income with liquidity and
stability of principal. The AmSouth U.S. Treasury Fund invests exclusively in
short-term obligations issued by the U.S. Treasury, some of which may be subject
to repurchase agreements collateralized by U.S. Treasury obligations.
<PAGE> 4
AMSOUTH TAX EXEMPT FUND seeks to produce as high a level of current
interest income exempt from federal income taxes as is consistent with the
preservation of capital and relative stability of principal. The Tax Exempt Fund
seeks to achieve this objective by investing in short-term high-quality
obligations. While the Tax Exempt Fund may invest in short-term taxable
obligations, under normal market conditions at least 80% of the Tax Exempt
Fund's total assets will be invested in obligations exempt from federal income
tax.
AMSOUTH BOND FUND seeks current income consistent with the preservation of
capital. The Fund seeks to achieve this objective by investing in long-term
bonds and other fixed-income securities. These investments may include debt
securities issued by United States corporations and debt securities issued or
guaranteed by the United States Government or its agencies or instrumentalities
as well as zero-coupon obligations. The Bond Fund invests in fixed-income
securities with a maturity in excess of one year, although such securities can
have maturities of thirty years or longer.
AMSOUTH LIMITED MATURITY FUND seeks current income consistent with the
preservation of capital. The Fund seeks to achieve this objective by investing
in bonds (including debentures), notes and other debt securities which have a
stated or remaining maturity of five years or less or which have an
unconditional redemption feature that will permit the Limited Maturity Fund to
require the issuer of the security to redeem the security within five years from
the date of purchase or for which the Limited Maturity Fund has acquired an
unconditional "put" to sell the security within five years from the date of
purchase. These investments may include debt securities issued by United States
corporations and debt securities issued or guaranteed by the United States
Government or its agencies or instrumentalities as well as zero-coupon
obligations.
AMSOUTH GOVERNMENT INCOME FUND seeks current income consistent with the
preservation of capital. The Fund seeks to achieve this objective by investing,
under normal market conditions, at least 65% of the value of its total assets in
obligations issued or guaranteed by the U.S. Government its agencies or
instrumentalities.
AMSOUTH FLORIDA TAX-FREE FUND seeks to produce as high a level of current
interest income exempt from federal income taxes and Florida intangible taxes as
is consistent with the preservation of capital. The Florida Fund seeks to
achieve this objective by investing in high-grade obligations. While the Florida
Fund may invest in taxable obligations, under normal market conditions at least
80% of the Florida Fund's net assets will be invested in obligations exempt from
both federal personal income tax and, as at year-end, the Florida intangible
personal property tax. The Fund is non-diversified and therefore may invest more
than 5% of its total assets in the obligations of one issuer.
AMSOUTH MUNICIPAL BOND FUND seeks to produce as high a level of current
interest income exempt from federal income taxes as is consistent with the
preservation of
-2-
<PAGE> 5
capital. The Municipal Bond Fund seeks to achieve this objective by investing in
high-grade obligations. While the Municipal Bond Fund may invest in taxable
obligations, under normal market conditions at least 80% of the Municipal Bond
Fund's net assets will be invested in obligations exempt from federal income
tax. The Municipal Bond Fund is a diversified fund.
AMSOUTH 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. The Advisor will seek
opportunities for the Equity Fund in securities that are believed to represent
investment value.
AMSOUTH 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. The Advisor will seek
opportunities for the Regional Equity Fund in securities that are believed to
represent investment value.
AMSOUTH 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 Advisor will seek opportunities for the
Balanced Fund in securities that are believed to represent investment value.
AMSOUTH 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.
AMSOUTH 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.
AMSOUTH 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.
AmSouth Bank, Birmingham, Alabama ("AmSouth"), acts as the investment
advisor to each Fund of the Trust (the "Advisor"). BISYS Fund Services,
Limited Partnership ("BISYS Fund Services"), Columbus, Ohio, acts as the Trust's
distributor ("Distributor").
Each Fund has been divided into three classes of Shares, Premier Shares,
Classic Shares and Class B Shares, except that the AmSouth U.S. Treasury Fund
and the Tax-Exempt Fund are divided into Premier Shares and Classic Shares
only. The following investors qualify to purchase Premier Shares: (i) investors
for whom AmSouth acts in a fiduciary, advisory, custodial, agency or similar
capacity through an account with its Trust Department; (ii) investors who
purchase Shares of a Fund through a 401(k) plan or a 403(b) plan which by its
terms permits purchases of Shares; and (iii) orders placed on behalf of other
investment companies distributed by the Distributor and its affiliated
companies. All other investors are eligible to purchase Classic Shares or Class
B Shares only. As of the date of this Prospectus, the Small Cap Fund is not
currently offering Shares.
This Prospectus relates only to the Premier Shares of the Funds.
Interested persons who wish to obtain a copy of the prospectuses of Classic
Shares and Class B Shares of the Money Market Funds, the Income Funds and the
Capital Appreciation Funds may contact the Trust's distributor at the telephone
number shown above. Additional information about the 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 Premier
Shares of the Funds that a prospective investor ought to know before investing.
Investors should read this Prospectus and retain it for future reference.
-4-
<PAGE> 6
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR ENDORSED OR GUARANTEED BY AMSOUTH OR ANY OF
ITS AFFILIATES. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR BY ANY OTHER AGENCY.
AN INVESTMENT IN THE TRUST'S SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER
INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE
----------------------
The date of this Prospectus is September 1, 1997.
-5-
<PAGE> 7
FEE TABLE FOR THE MONEY MARKET FUNDS
<TABLE>
<CAPTION>
AmSouth
Prime Obligations U.S. Treasury Tax
Fund Fund Exempt Fund
----------------- ------------- -----------
Premier Premier Premier
Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed
on Purchases (as a percentage
of offering price) 0% 0% 0%
Maximum Sales Load Imposed
on Reinvested Dividends
(as a percentage of offering price) 0% 0% 0%
Deferred Sales Load (as
a percentage of original
purchase price or redemption
proceeds, as applicable) 0% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable)(2) 0% 0% 0%
Exchange Fee $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees (after voluntary 0.40% 0.40% 0.20%(3)
fee reduction for the Tax Exempt
Fund)
12b-1 Fees 0% 0% 0%
Other Expenses 0.31% 0.31% 0.34%
---- ---- ----
Total Fund Operating Expenses
(after voluntary fee reduction
for the Tax Exempt Fund) 0.71% 0.71% 0.54%(4)
==== ==== ====
</TABLE>
-6-
<PAGE> 8
(1) AmSouth may charge a Customer's (as defined in the Prospectus) account
fees for automatic investment and other cash management services provided in
connection with investment in a Money Market Fund. (See "HOW TO PURCHASE AND
REDEEM SHARES - Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire
redemption payment made at the request of a shareholder. (See "HOW TO PURCHASE
AND REDEEM SHARES - Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management
Fees as a percentage of average net assets would be .40% for the Tax Exempt
Fund. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - INVESTMENT ADVISOR.")
(4) In the absence of any voluntary reduction in investment advisory fees,
Total Fund Operating Expenses for the Premier Shares of the Tax Exempt Fund
would be .74%.
Example
You would pay the following expenses on a $1,000 investment in Premier
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Prime Obligations Fund $7 $23 $40 $88
AmSouth U.S. Treasury Fund $7 $23 $40 $88
Tax Exempt Fund $6 $17 $30 $68
Premier Shares are not subject to a 12b-1 fee and are not sold pursuant to
a sales charge.
The purpose of the table above is to assist a potential investor in
understanding the various costs and expenses that an investor in Premier Shares
of a Money Market Fund will bear directly or indirectly. See "MANAGEMENT OF
AMSOUTH MUTUAL FUNDS" for a more complete discussion of annual operating
expenses of the Money Market Funds.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
-7-
<PAGE> 9
FEE TABLE FOR THE INCOME FUNDS
<TABLE>
<CAPTION>
Limited Government Municipal
Bond Maturity Income Florida Bond
Fund Fund Fund Fund Fund
---- -------- ---------- ------- ---------
Premier Premier Premier Premier Premier
Shares Shares Shares Shares Shares
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on 0% 0% 0% 0% 0%
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on 0% 0% 0% 0% 0%
Reinvested Dividends (as a
percentage of offering price)
Deferred Sales Load (as a percentage 0% 0% 0% 0% 0%
of original purchase price or
redemption proceeds, as applicable)
Redemption Fees (as a percentage 0% 0% 0% 0% 0%
of amount redeemed, if applicable)(2)
Exchange Fee $0 $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees .50% .50% .30% .30% .40%
(after voluntary fee reduction)(3)
12b-1 Fees .00% .00% .00% .00% .00%
Other Expenses (after voluntary fee
reduction)(4) .25% .26% .35% .29% .30%(5)
--- --- --- --- ---
Total Fund Operating Expenses
(after voluntary fee reduction)(6) .75% .76% .65% .59% .70%
=== === === === ===
</TABLE>
(1) AmSouth may charge a Customer's (as defined in the Prospectus) account
fees for automatic investment and other cash management services provided in
connection with investment in the Fund. (See "HOW TO PURCHASE AND REDEEM SHARES
- - Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire
redemption payment made at the request of a shareholder. (See "HOW TO PURCHASE
AND REDEEM SHARES - Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management
Fees as a percentage of average net assets would be .65% for each Income Fund.
(See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - Investment Advisor.")
-8-
<PAGE> 10
(4) Absent the voluntary reduction of administration fees, Other Expenses
as a percentage of average net assets would be 0.33% for the Bond Fund, 0.34%
for the Limited Maturity Fund, 0.45% for the Government Income Fund and 0.39%
for the Florida Fund and are estimated to be 0.38% for the Municipal Bond Fund.
(See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS-Administrator and Distributor.")
(5) Other expenses for the Municipal Bond Fund are based on estimated
amounts for the current fiscal year.
(6) In the absence of any voluntary reduction in investment advisory fees
and administration fees, Total Fund Operating Expenses would be 0.98% for the
Bond Fund, 0.99% for the Limited Maturity Fund, 1.10% for the Government Income
Fund, 1.04% for the Florida Fund, and are estimated to be 1.03% for the
Municipal Bond Fund.
Example:
You would pay the following expenses on a $1,000 investment in Premier
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Bond Fund $47 $63 $80 $129
Limited Maturity Fund $47 $63 $81 $130
Government Income Fund $46 $60 $75 $118
Florida Fund $46 $58 $72 $111
Municipal Bond Fund $47 $61 N/A N/A
Premier Shares are not subject to a 12b-1 fee and are not sold pursuant to
a sales charge.
The purpose of the table above is to assist an investor in the Premier Shares of
the Income Funds in understanding the various costs and expenses that an
investor will bear directly or indirectly. See "MANAGEMENT OF AMSOUTH MUTUAL
FUNDS" for a more complete discussion of annual operating expenses of the Income
Funds.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
-9-
<PAGE> 11
FEE TABLE FOR THE CAPITAL APPRECIATION FUNDS
<TABLE>
<CAPTION>
Regional Capital Equity
Equity Equity Balanced Growth Small Income
Fund Fund Fund Fund Cap Fund Fund
------- ------- ------- ------- ------- -------
Premier Premier Premier Premier Premier Premier
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable)(2) 0% 0% 0% 0% 0% 0%
Exchange Fee $0 $0 $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees .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%
==== ==== ==== ==== ==== ====
</TABLE>
-10-
<PAGE> 12
(1) AmSouth 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.
Example:
You would pay the following expenses on a $1,000 investment in Premier
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Equity Fund $ 10 $ 32 $ 56 $125
Regional Equity Fund $ 11 $ 33 $ 58 $128
Balanced Fund $ 11 $ 33 $ 57 $127
Capital Growth Fund $ 11 $ 34 N/A N/A
Small Cap Fund $ 12 $ 37 N/A N/A
Equity Income Fund $ 11 $ 34 N/A N/A
Premier Shares are not subject to a 12b-1 fee and are not sold pursuant to
a sales charge.
The purpose of the table above is to assist a potential investor in
understanding the various costs and expenses that an investor in Premier Shares
of 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.
-11-
<PAGE> 13
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Funds for the period of commencement of
operations to January 31, 1997. The information from the commencement of
operations to July 31, 1996 is a part of the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants for the Trust, whose report on
the Trust's financial statements for the year ended July 31, 1996 appears in the
Statement of Additional Information. The information for the period ended
January 31, 1997 is unaudited. The Municipal Bond Fund, Capital Growth Fund,
Small Cap Fund and Equity Income Fund had not commenced operations as of January
31, 1997. Further financial data is incorporated by reference into the
Statement of Additional Information.
<TABLE>
<CAPTION>
Prime Obligations Fund
----------------------
Year Ended July 31,
------------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Premier (b) Premier (b)
----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.024 0.016 0 .050 0.029 0.027
-------- -------- -------- -------- --------
Distributions
Net investment income (0.024) (0.016) (0.050) (0.029) (0.027)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return 2.46%(d) 5.10% 5.14% 2.94% 2.76%
Ratios/Supplemental Data:
Net Assets at end of period (000) $450,867 $478,542 $617,673 $577,331 $456,428
Ratio of expenses to average net assets 0.68%(c) 0.71% 0.69% 0.70% 0.71%
Ratio of net investment income to average net assets 4.83%(c) 5.01% 5.04% 2.92% 2.73%
Ratio of expenses to average net assets* (e) (e) (e) (e) (e)
Ratio of net investment income to average net assets* (e) (e) (e) (e) (e)
<CAPTION>
Prime Obligations Fund
----------------------
Year Ended July 31,
-------------------------------------------------------
August 8,
1988 to
July 31
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1,000 $ 1,000 $ 1,000
-------- -------- -------- --------
Investment Activities
Net investment income 0.042 0.067 0.079 0.084
-------- -------- -------- --------
Distributions
Net investment income (0.042) (0.067) (0.079) (0.084)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1,000 $ 1,000 $ 1,000
======== ======== ======== ========
Total Return 4.28% 6.87% 8.16% 8.72%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $457,511 $307,873 $298,498 $293,749
Ratio of expenses to average net assets 0.71% 0.72% 0.70% 0.58%(c)
Ratio of net investment income to average net assets 4.08% 6.61% 7.88% 8.69%(c)
Ratio of expenses to average net assets* (e) (e) 0.72% 0.71%(c)
Ratio of net investment income to average net assets* (e) (e) 7.86% 8.56%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund Commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
(e) There were no waivers during the period.
-12-
<PAGE> 14
<TABLE>
<CAPTION>
AmSouth U.S. Treasury Fund
--------------------------
Year Ended July 31,
------------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Premier (b) Premier (b)
----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.023 0.015 0.048 0.028 0.027
-------- -------- -------- -------- --------
Distributions
Net investment income (0.023) (0.015) (0.048) (0.028) (0.027)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return 2.33%(d) 4.93% 4.90% 2.80% 2.69%
Ratios/Supplemental Data:
Net Assets at end of period (000) $312,929 $368,162 $322,939 $300,603 $404,473
Ratio of expenses to average net assets 0.70%(c) 0.71% 0.70% 0.71% 0.72%
Ratio of net investment income to average net assets 4.58%(c) 4.82% 4.81% 2.77% 2.66%
Ratio of expenses to average net assets* (e) (e) (e) (e) (e)
Ratio of net investment income to average net assets* (e) (e) (e) (e) (e)
<CAPTION>
AmSouth U.S. Treasury Fund
--------------------------
Year Ended July 31,
------------------------------------------------------
September 8,
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities
Net investment income 0.041 0.064 0.077 0.075
-------- -------- -------- --------
Distributions
Net investment income (0.041) (0.064) (0.077) (0.075)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return 4.15% 6.58% 8.04% 7.75%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $339,666 $343,967 $239,291 $131,956
Ratio of expenses to average net assets 0.73% 0.72% 0.68% 0.61%(c)
Ratio of net investment income to average net assets 4.08% 6.28% 7.73% 8.31%(c)
Ratio of expenses to average net assets* (e) (e) 0.73% 0.74%(c)
Ratio of net investment income to average net assets* (e) (e) 7.68% 8.18%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
(e) There were no waivers during the period.
-13-
<PAGE> 15
<TABLE>
<CAPTION>
Tax Exempt Fund
---------------
Year Ended July 31,
------------------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Premier (b) Premier (b)
----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.015 0.010 0.032 0.019 0.021
-------- -------- -------- -------- --------
Distributions
Net investment income (0.015) (0.010) (0.032) (0.019) (0.021)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return 1.55%(d) 3.15% 3.22% 1.95% 2.16%
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 66,974 $ 43,611 $ 57,640 $ 60,923 $ 48,151
Ratio of expenses to average net assets 0.51%(c) 0.54% 0.54% 0.57% 0.49%
Ratio of net investment income
to average net assets 3.07%(c) 3.11% 3.15% 1.93% 2.12%
Ratio of expenses to average net assets* 0.71%(c) 0.74% 0.74% 0.77% 0.78%
Ratio of net investment income to average net assets* 2.87%(c) 2.91% 2.95% 1.73% 1.83%
<CAPTION>
Tax Exempt Fund
---------------
Year Ended July 31,
--------------------------------------------
June 27
1988 to
July 31,
1992 1991 1990 (a)
---- ---- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1,000 $ 1,000
-------- -------- --------
Investment Activities
Net investment income 0.030 0.046 0.011
-------- -------- --------
Distributions
Net investment income (0.030) (0.046) (0.011)
-------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1,000 $ 1,000
======== ======== ========
Total Return 3.12% 4.69% 0.54%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 38,392 $ 25,400 $ 28,246
Ratio of expenses to average net assets 0.65% 0.52% 0.21%(c)
Ratio of net investment income
to average net assets 2.98% 4.59% 5.70%(c)
Ratio of expenses to average net assets* 0.77% 0.77% 0.81%(c)
Ratio of net investment income to average net assets* 2.86% 4.34% 5.10%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
-14-
<PAGE> 16
<TABLE>
<CAPTION>
Bond Fund
---------
Year Ended July 31,
----------------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.54 $ 10.83 $ 10.59 $ 11.29 $ 11.29
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.32 $ 0.65 0.69 0.69 0.71
Net realized and unrealized
gains (losses) from investments 0.15 (0.18) 0.28 (0.66) 0.33
-------- -------- -------- -------- --------
Total from Investment Activities 0.47 0.47 0.97 0.03 1.04
-------- -------- -------- -------- --------
Distributions
Net investment income (0.36) (0.65) (0.69) (0.70) (0.71)
Net realized gains 0.00 -- (0.04) (0.03) (0.33)
-------- -------- -------- -------- --------
In excess of net realized gain -- (0.11) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.36) (0.76) (0.73) (0.73) (1.04)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 10.65 $ 10.54 $ 10.83 $ 10.59 $ 11.29
======== ======== ======== ======== ========
Total Return (Excludes Sales Charge) 4.53%(c) 4.40% 9.70% 0.23% 9.80%
Ratios/Supplemental Data:
Net Assets at end of period (000) $132,112 $132,737 $ 94,671 $ 79,472 $ 65,777
Ratio of expenses to average net assets 0.75%(b) 0.75% 0.75% 0.78% 0.78%
Ratio of net investment income to average net assets 6.03%(b) 6.12% 6.63% 6.31% 6.37%
Ratio of expenses to average net assets* 0.98%(b) 0.98% 0.98% 1.01% 1.01%
Ratio of net investment income to average net assets* 5.80%(b) 5.89% 6.40% 6.08% 6.14%
Portfolio Turnover 11.20% 9.60% 17.70% 30.90% 14.98%
<CAPTION>
Bond Fund
---------
Year Ended July 31,
-------------------------------------
December 1,
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.42 $ 10.39 $ 10.61 $ 10.00
-------- -------- -------- --------
Investment Activities
Net investment income 0.74 0.74 0.77 0.50
Net realized and unrealized
gains (losses) from investments 0.91 0.05 (0.21) 0.56
-------- -------- -------- --------
Total from Investment Activities 1.65 0.79 0.56 1.06
-------- -------- -------- --------
Distributions
Net investment income (0.73) (0.74) (0.75) (0.45)
Net realized gains (0.05) (0.02) (0.03) --
In excess of net realized gain -- -- -- --
-------- -------- -------- --------
Total Distributions (0.78) (0.76) (0.78) (0.45)
-------- -------- -------- --------
Net Asset Value, End of Period $ 11.29 $ 10.42 $ 10.39 $ 10.61
======== ======== ======== ========
Total Return (Excludes Sales Charge) 16.41% 7.99% 5.54% 10.91%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 60,156 $ 26,008 $ 17,518 $ 4,954
Ratio of expenses to average net assets 0.82% 0.93% 0.84% 1.10%(b)
Ratio of net investment income to average net assets 6.94% 7.26% 7.82% 7.47%(b)
Ratio of expenses to average net assets* 1.01% 1.11% 1.21% 2.28%(b)
Ratio of net investment income to average net assets* 6.75% 7.09% 7.45% 6.29%(b)
Portfolio Turnover 240.64% 181.77% 53.52% 0.00%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
-15-
<PAGE> 17
<TABLE>
<CAPTION>
Limited Maturity Fund
---------------------
Year Ended July 31,
--------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.31 $ 10.41 $ 10.23 $ 10.81 $ 10.81
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.30 0.58 0.58 0.54 0.60
Net realized and unrealized gains (losses) from investments 0.04 (0.10) 0.17 (0.45) 0.09
-------- -------- -------- -------- --------
Total from Investment Activities 0.34 0.48 0.75 0.09 0.69
-------- -------- -------- -------- --------
Distributions
Net investment income (0.33) (0.57) (0.57) (0.54) (0.61)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- -- -- -- (0.08)
In excess of net realized gains -- -- -- (0.13) --
-------- -------- -------- -------- --------
Total Distributions (0.33) (0.58) (0.57) (0.67) (0.69)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 10.32 $ 10.31 $ 10.41 $ 10.23 $ 10.81
======== ======== ======== ======== ========
Total Return (Excludes Sales Charge) 3.29%(c) 4.74% 7.65% 0.77% 6.72%
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 41,087 $ 46,005 $ 59,798 $ 51,660 $ 53,933
Ratio of expenses to average net assets 0.77%(b) 0.76% 0.80% 0.79% 0.69%
Ratio of net investment income to average net assets 5.56%(b) 5.48% 5.69% 5.05% 5.67%
Ratio of expenses to average net assets* 1.00%(b) 0.99% 1.03% 1.02% 1.03%
Ratio of net investment income to average net assets* 5.33%(b) 5.25% 5.46% 4.82% 5.33%
Portfolio Turnover 42.36% 29.56% 38.11% 48.06% 141.27%
<CAPTION>
Limited Maturity Fund
---------------------
Year Ended July 31,
--------------------------------------
February 1,
1988 to
July 31,
1992 1991 1990 1989(a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.44 $ 10.29 $ 10.35 $ 10.00
-------- -------- -------- --------
Investment Activities
Net investment income 0.70 0.73 0.72 0.35
Net realized and unrealized gains (losses) from investments 0.45 0.17 (0.05) 0.32
-------- -------- -------- --------
Total from Investment Activities 1.15 0.90 0.67 0.67
-------- -------- -------- --------
Distributions
Net investment income (0.69) (0.73) (0.70) (0.32)
In excess of net investment income -- -- -- --
Net realized gains (0.09) (0.02) (0.03) --
In excess of net realized gains -- -- -- --
-------- -------- -------- --------
Total Distributions (0.78) (0.75) (0.73) (0.32)
-------- -------- -------- --------
Net Asset Value, End of Period $ 10.81 $ 10.44 $ 10.29 $ 10.35
======== ======== ======== ========
Total Return (Excludes Sales Charge) 11.48% 9.06% 6.80% 6.87%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 38,206 $ 11,112 $ 5,983 $ 3,165
Ratio of expenses to average net assets 0.68% 0.85% 1.02% 1.41%(b)
Ratio of net investment income to average net assets 6.78% 7.19% 7.23% 6.82%(b)
Ratio of expenses to average net assets* 1.03% 1.20% 1.45% 2.72%(b)
Ratio of net investment income to average net assets* 6.43% 6.84% 6.80% 5.51%(b)
Portfolio Turnover 35.64% 85.08% 119.69% 28.28%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
-16-
<PAGE> 18
<TABLE>
<CAPTION>
Government Income Fund
----------------------
Six Months Ended Year Ended October 1, 1993
January 31, July 31, to July 31,
1997 1996 1995 1994(a)
---- ---- ---- -------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.40 $ 9.54 $ 9.48 $ 10.00
-------- -------- -------- --------
Investment Activities
Net investment income 0.26 0.66 0.68 0.54
Net realized and unrealized gains (losses)
from investments 0.20 (0.20) 0.08 (0.57)
-------- -------- -------- --------
Total from Investment Activities 0.46 0.46 0.76 (0.03)
-------- -------- -------- --------
Distributions
Net investment income (0.27) (0.59) (0.70) (0.33)
Tax return of capital -- (0.01) -- (0.16)
-------- -------- -------- --------
Total Distributions (0.27) (0.60) (0.70) (0.49)
-------- -------- -------- --------
Net Asset Value, End of Period $ 9.59 $ 9.40 $ 9.54 $ 9.48
======== ======== ======== ========
Total Return (Excludes Sales Charge) 4.95%(c) 4.91% 8.43% (0.26)%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 13,762 $ 15,752 $ 16,679 $ 15,465
Ratio of expenses to average net assets 0.72%(b) 0.65% 0.58% 0.37%(b)
Ratio of net investment income to average
net assets 5.49%(b) 6.81% 7.18% 6.56%(b)
Ratio of expenses to average net assets* 1.17%(b) 1.10% 1.19% 1.22%(b)
Ratio of net investment income to average
net assets* 5.04%(b) 6.36% 6.57% 5.71%(b)
Portfolio Turnover 2.65% 78.31% 27.32% 122.94%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
-17-
<PAGE> 19
<TABLE>
<CAPTION>
Florida Tax-Free Fund
---------------------
Six Months Ended Year Ended September 30, 1994
January 31, July 31, to July 31,
1997 1996 1995(a)
---- ---- -------
(Unaudited)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.30 $ 10.32 $ 10.00
-------- -------- --------
Investment Activities
Net investment income 0.22 0.45 0.34
Net realized and unrealized gains (losses) from investments 0.05 (0.01) 0.30
-------- -------- --------
Total from Investment Activities 0.27 0.44 0.64
-------- -------- --------
Distributions
Net investment income (0.25) (0.45) (0.32)
Net realized gains (0.01) (0.01) --
-------- -------- --------
Total Distributions (0.26) (0.46) (0.32)
-------- -------- --------
Net Asset Value, End of Period $ 10.31 $ 10.30 $ 10.32
======== ======== ========
Total Return (Excludes Sales Charge) 2.71%(c) 4.24% 6.53%(c)
Ratios/Supplemental Data:
Net Asset at end of period (000) $ 52,825 $ 48,869 $ 48,333
Ratio of expenses to average net assets 0.54%(b) 0.59% 0.70%(b)
Ratio of net investment income to average net assets 4.35%(b) 4.33% 4.16%(b)
Ratio of expenses to average net assets* 0.99%(b) 1.04% 1.01%(b)
Ratio of net investment income to average net assets* 3.90%(b) 3.88% 3.86%(b)
Portfolio Turnover 2.30% 12.21% 2.33%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
-18-
<PAGE> 20
<TABLE>
<CAPTION>
Equity Fund
-----------
Year Ended July 31,
---------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.62 $ 16.75 $ 14.82 $ 14.38 $ 13.40
-------- -------- -------- -------- --------
Investment Activities
Net Investment income 0.16 0.33 0.33 0.28 0.28
Net realized and unrealized gains from investments 2.30 1.48 2.39 0.83 1.48
-------- -------- -------- -------- --------
Total from Investment Activities 2.46 1.81 2.72 1.11 1.76
-------- -------- -------- -------- --------
Distributions
Net investment income (0.17) (0.33) (0.32) (0.28) (0.29)
Net realized gains (1.04) (0.61) (0.47) (0.39) (0.49)
-------- -------- -------- -------- --------
Total Distributions (1.21) (0.94) (0.79) (0.67) (0.78)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 18.87 $ 17.62 $ 16.75 $ 14.82 $ 14.38
======== ======== ======== ======== ========
Total Return (Excludes Sales Charge) 14.32%(c) 11.09% 19.27% 7.90% 13.81%
Ratios/Supplemental Data:
Net Assets at end of period (000) $419,009 $374,622 $275,757 $205,611 $153,074
Ratio of expenses to average net assets 1.01%(b) 1.02% 1.03% 0.94% 0.95%
Ratio of net investment income to average net assets 1.71%(b) 1.86% 2.17% 1.93% 2.08%
Ratio of expenses to average net assets* 1.09%(b) 1.11% 1.11% 1.11% 1.13%
Ratio of net investment income to average net assets* 1.63%(b) 1.77% 2.09% 1.76% 1.90%
Portfolio Turnover 11.94% 19.11% 19.46% 11.37% 15.12%
Average commission rate paid (d) $ 0.0668 $ 0.0700 -- -- --
<CAPTION>
Equity Fund
-----------
Year Ended July 31,
-----------------------------------
December 1
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.57 $ 11.99 $ 12.18 $ 10.00
-------- -------- -------- --------
Investment Activities
Net Investment income 0.32 0.36 0.37 0.22
Net realized and unrealized gains from investments 1.20 0.61 (0.17) 2.16
-------- -------- -------- --------
Total from Investment Activities 1.52 0.97 0.20 2.38
-------- -------- -------- --------
Distributions
Net investment income (0.33) (0.37) (0.35) (0.20)
Net realized gains (0.36) (0.02) (0.04) --
-------- -------- -------- --------
Total Distributions (0.69) (0.39) (0.39) (0.20)
-------- -------- -------- --------
Net Asset Value, End of Period $ 13.40 $ 12.57 $ 11.99 $ 12.18
======== ======== ======== ========
Total Return (Excludes Sales Charge) 12.94% 8.46% 1.66% 24.06%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $107,934 $ 32,406 $ 14,383 $ 5,476
Ratio of expenses to average net assets 1.01% 1.15% 1.11% 1.16%(b)
Ratio of net investment income to average net assets 2.50% 3.16% 3.16% 2.91%(b)
Ratio of expenses to average net assets* 1.15% 1.26% 1.41% 2.34%(b)
Ratio of net investment income to average net assets* 2.36% 3.04% 2.86% 1.73%(b)
Portfolio Turnover 113.12% 15.78% 14.89% 4.03%
Average commission rate paid (d) -- -- -- --
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) 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.
-19-
<PAGE> 21
<TABLE>
<CAPTION>
Regional Equity Fund
--------------------
Year Ended July 31,
-------------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.95 $ 18.94 $ 16.68 $ 16.74 $ 14.86
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.15 0.26 0.23 0.23 0.19
Net realized and unrealized gains from investments 3.79 2.20 2.26 0.58 2.09
-------- -------- -------- -------- --------
Total from Investment Activities 3.94 2.46 2.49 0.81 2.28
-------- -------- -------- -------- --------
Distributions
Net investment income (0.15) (0.26) (0.23) (0.23) (0.20)
Net realized gains (0.49) (0.19) -- (0.41) (0.20)
In excess of net realized gains -- -- -- (0.23) --
-------- -------- -------- -------- --------
Total Distributions (0.64) (0.45) (0.23) (0.87) (0.40)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 24.25 $ 20.95 $ 18.94 $ 16.68 $ 16.74
======== ======== ======== ======== ========
Total Return (Excludes Sales Charge) 18.96%(c) 13.10% 15.10% 4.87% 15.53%
Ratios/Supplemental Data:
Net Assets at end of period (000) $120,448 $ 93,584 $ 68,501 $ 54,744 $ 41,347
Ratio of expenses to average net assets 1.03%(b) 1.05% 1.07% 0.79% 0.80%
Ratio of net investment income to average net assets 1.22%(b) 1.30% 1.35% 1.36% 1.17%
Ratio of expenses to average net assets* 1.11%(b) 1.13% 1.15% 1.24% 1.28%
Ratio of net investment income to average net assets* 1.14%(b) 1.22% 1.27% 0.90% 0.69%
Portfolio Turnover 7.45% 8.22% 14.25% 5.83% 10.22%
Average commission rate paid (d) $ 0.0829 $ 0.0827 -- -- --
<CAPTION>
Regional Equity Fund
--------------------
Year Ended July 31,
-------------------------------------
December 1,
1988 to
July 31,
1992 1991 1990 1989(a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.44 $ 12.45 $ 11.64 $ 10.00
-------- -------- -------- --------
Investment Activities
Net investment income 0.23 0.26 0.23 0.14
Net realized and unrealized gains from investments 2.34 1.20 0.84 1.64
-------- -------- -------- --------
Total from Investment Activities 2.57 1.46 1.07 1.78
-------- -------- -------- --------
Distributions
Net investment income (0.23) (0.26) (0.22) (0.14)
Net realized gains (0.92) (0.21) (0.04) --
In excess of net realized gains -- -- -- --
-------- -------- -------- --------
Total Distributions (1.15) (0.47) (0.26) (0.14)
-------- -------- -------- --------
Net Asset Value, End of Period $ 14.86 $ 13.44 $ 12.45 $ 11.64
======== ======== ======== ========
Total Return (Excludes Sales Charge) 20.66% 12.52% 9.41% 17.79%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 15,707 $ 7,853 $ 3,161 $ 2,523
Ratio of expenses to average net assets 0.91% 0.79% 1.22% 1.41%(b)
Ratio of net investment income to average net assets 1.61% 2.21% 1.92% 1.98%(b)
Ratio of expenses to average net assets* 1.36% 1.58% 2.32% 2.65%(b)
Ratio of net investment income to average net assets* 1.16% 1.42% 0.82% 0.74%(b)
Portfolio Turnover 24.99% 14.41% 14.00% 1.13%
Average commission rate paid (d) -- -- -- --
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) 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.
-20-
<PAGE> 22
<TABLE>
<CAPTION>
Balanced Fund
-------------
Year Ended July 31,
--------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.03 $ 12.76 $ 11.81 $ 11.86 $ 11.12
-------- -------- -------- -------- --------
Investment Activities
Net Investment income 0.25 0.47 0.47 0.42 0.44
Net realized and unrealized gains from investments 0.99 0.58 1.24 0.18 0.80
-------- -------- -------- -------- --------
Total from Investment Activities 1.24 1.05 1.71 0.60 1.24
-------- -------- -------- -------- --------
Distributions
Net investment income (0.27) (0.47) (0.46) (0.42) (0.45)
Net realized gains (0.58) (0.31) (0.30) (0.23) (0.05)
-------- -------- -------- -------- --------
Total Distributions (0.85) (0.78) (0.76) (0.65) (0.50)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 13.42 $ 13.03 $ 12.76 $ 11.81 $ 11.86
======== ======== ======== ======== ========
Total Return (Excludes Sales Charge) 9.73%(c) 8.37% 15.27% 5.13% 11.47%
Ratios/Supplemental Data:
Net Assets at end of period (000) $355,980 $338,425 $295,509 $236,306 $179,134
Ratio of expenses to average net assets 1.02%(b) 0.98% 0.94% 0.84% 0.84%
Ratio of net investment income to average net assets 3.62%(b) 3.61% 3.91% 3.56% 3.90%
Ratio of expenses to average net assets* 1.10%(b) 1.11% 1.12% 1.11% 1.12%
Ratio of net investment income to average net assets* 3.54%(b) 3.48% 3.73% 3.28% 3.62%
Portfolio Turnover 13.57% 20.47% 16.97% 14.43% 11.09%
Average commission rate paid (d) $ 0.0760 $ 0.0773 -- -- --
</TABLE>
December 19,
1991 to
July 31,
1992(a)
------------
Net Asset Value, Beginning of Period $ 10.00
--------
Investment Activities
Net Investment income 0.27
Net realized and unrealized gains from investments 1.09
--------
Total from Investment Activities 1.36
--------
Distributions
Net investment income (0.24)
Net realized gains --
--------
Total Distributions (0.24)
--------
Net Asset Value, End of Period $ 11.12
========
Total Return (Excludes Sales Charge) 13.71%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $143,813
Ratio of expenses to average net assets 0.83%(b)
Ratio of net investment income to average net assets 4.45%(b)
Ratio of expenses to average net assets* 1.17%(b)
Ratio of net investment income to average net assets* 4.10%(b)
Portfolio Turnover 23.18%
Average commission rate paid (d) --
- ----------
* 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.
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<PAGE> 23
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each Fund is fundamental and may not be
changed without a vote of a majority of the outstanding Shares of that Fund (as
defined below under "GENERAL INFORMATION -- Miscellaneous" in this prospectus).
There can be, of course, no assurance that any Fund will achieve its investment
objective.
THE PRIME OBLIGATIONS AND AMSOUTH U.S. TREASURY FUNDS
The investment objective of the Prime Obligations Fund and the AmSouth
U.S. Treasury Fund is to seek current income with liquidity and stability of
principal. Although the Prime Obligations Fund and the AmSouth U.S. Treasury
Fund have the same Advisor and the same investment objective, their particular
portfolio securities and yield will ordinarily differ due to differences in the
types of investments permitted, cash flow, and the availability of particular
portfolio investments. Market conditions and interest rates may affect the types
and yields of securities held in each Fund.
Changes in prevailing interest rates may affect the yield, and possibly
the net asset value, of each Fund. Each Money Market Fund invests only in those
securities and instruments considered by the Advisor to present minimal credit
risks under guidelines established by the Trust's Board of Trustees. All
securities or instruments in which each of the Money Market Funds invest have
remaining maturities of 397 days or less, although instruments subject to
repurchase agreements may bear longer maturities. The dollar-weighted average
maturity of the securities in each Money Market Fund will not exceed 90 days.
The Prime Obligations Fund invests in U.S. dollar-denominated,
high-quality short-term debt instruments. Investments will be limited to those
obligations which, at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical rating organizations
(an "NRSRO") (for example, commercial paper rated "A-1" by Standard & Poor's
Corporation and "P-1" by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) do not possess a rating (i.e., are unrated) but are
determined to be of comparable quality to the rated instruments eligible for
purchase by the Fund under the guidelines adopted by the Trustees. The Statement
of Additional Information contains further information concerning the rating and
other requirements governing the Prime Obligation Fund's investments, including
information relating to the treatment of securities subject to a tender or
demand feature and securities deemed to possess a rating based on comparable
rated securities of the same issuer. The Statement also identifies the NRSROs
that may be utilized by the Advisor with respect to portfolio investments for
the Fund and provides a description of the relevant ratings assigned by each
such NRSRO.
The Prime Obligations Fund will invest in a variety of U.S. Treasury
obligations, differing in their interest rates, maturities, and times of
issuance, and other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. Obligations of
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<PAGE> 24
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association and the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Student Loan Marketing Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Bank or the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Prime Obligations
Fund will invest in the obligations of such agencies or instrumentalities only
when the Advisor believes that the credit risk with respect thereto is minimal.
The Prime Obligations Fund may invest in bankers' acceptances guaranteed
by domestic and foreign banks if at the time of investment the guarantor bank
has capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements). The Prime Obligations
Fund may invest in certificates of deposit and demand and time deposits of
domestic and foreign banks and savings and loan associations if (a) at the time
of investment the depository institution has capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation.
Variable amount master demand notes in which the Prime Obligations Fund
may invest are unsecured demand notes that permit the indebtedness thereunder to
vary, and that provide for periodic adjustments in the interest rate according
to the terms of the instrument. Because master demand notes are direct lending
arrangements between the Prime Obligations Fund and the issuer, they are not
normally traded. Although there is no secondary market in the notes, the Prime
Obligations Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as to quality as set forth above for commercial paper. The Advisor will consider
the earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand. The period of time remaining until the principal
amount can be recovered under a variable master demand note may not exceed seven
days.
The Prime Obligations Fund may invest in the securities of other money
market funds that have similar policies and objectives, invest in securities of
equal or higher short-term ratings, and are in compliance with Rule 2a-7 under
the Investment Company Act of 1940.
-23-
<PAGE> 25
The Prime Obligations Fund may also invest in short-term municipal
obligations.
The AmSouth U.S. Treasury Fund invests exclusively in short-term United
States dollar-denominated obligations issued by the U.S. Treasury. Such
obligations may include "stripped" U.S. Treasury obligations such as Treasury
Receipts issued by the U.S. Treasury representing either future interest or
principal payments. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment on the security and does not receive any rights to periodic
interest payments on the security. These securities may exhibit greater price
volatility then ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Obligations purchased by the
AmSouth U.S. Treasury Fund may be subject to repurchase agreements
collateralized by the underlying U.S. Treasury obligation.
THE BOND FUND AND LIMITED MATURITY FUND
The Bond Fund seeks current income consistent with the preservation of
capital. The Bond Fund invests in long-term bonds and other fixed-income
securities. The Bond Fund's investments primarily consist of, but are not
limited to, debt obligations such as bonds, notes and debentures, which are
issued by United States corporations or issued or guaranteed by the United
States Government or its agencies or instrumentalities. The Bond Fund invests in
debt securities only if they are rated at time of purchase in one of the three
highest rating categories by an NRSRO, or including all subclassifications
indicated by modifiers of such "A" ratings. See "Appendix" to the Statement of
Additional Information for an explanation of these ratings.
The Bond Fund invests in fixed-income securities with a maturity in excess
of one year, except for amounts held in cash equivalents. Fixed-income
securities can have maturities of thirty years or more. The Bond Fund will
invest at least 65% of the value of its total assets in bonds (including
debentures), except that, when market conditions indicate a temporary defensive
investment strategy as determined by the Advisor, more than 35% of the Bond
Fund's total assets may be held in cash and cash equivalents. "Cash equivalents"
are short-term, interest-bearing instruments or deposits. The purpose of cash
equivalents is to provide income at money market rates while minimizing the risk
of decline in value to the maximum extent possible. The instruments may include,
but are not limited to, commercial paper, certificates of deposit, repurchase
agreements, bankers' acceptances, United States Treasury Bills, bank money
market deposit accounts and money market mutual funds. The Bond Fund will
purchase commercial paper rated at the time of purchase in the highest rating
category by an NRSRO or, if not rated, found by the Advisor under guidelines
established by the Trust's Board of Trustees to be of comparable quality. See
"Appendix" to the Statement of Additional Information for an explanation of
these ratings.
The Limited Maturity Fund seeks current income consistent with the
preservation of capital. The Limited Maturity Fund invests in bonds (including
debentures), notes and other debt securities which have a stated or remaining
maturity of five years or less or which have
-24-
<PAGE> 26
an unconditional redemption feature that will permit the Limited Maturity Fund
to require the issuer of the security to redeem the security within five years
from the date of purchase by the Limited Maturity Fund or for which the Limited
Maturity Fund has acquired an unconditional "put" to sell the security within
five years from the date of purchase by the Limited Maturity Fund.
The Limited Maturity Fund's investments consist primarily of, but are not
limited to, debt securities such as bonds, notes and debentures, which are
issued by United States corporations or issued or guaranteed by the United
States Government or its agencies or instrumentalities. The Limited Maturity
Fund invests in debt securities only if they are rated at time of purchase in
one of the three highest rating categories by an NRSRO or, if not rated, found
by the Advisor under guidelines established by the Trust's Board of Trustees to
be of comparable quality. See "Appendix" to the Statement of Additional
Information for an explanation of these ratings.
Under normal circumstances, the Limited Maturity Fund will invest at least
65% of the value of its total assets in bonds (including debentures), notes and
other debt securities which have a stated or remaining maturity of five years or
less or which have an unconditional redemption feature that will permit the
Limited Maturity Fund to require the issuer of the security to redeem the
security within five years from the date of purchase by The Limited Maturity
Fund or for which the Limited Maturity Fund has acquired an unconditional "put"
to sell the security within five years from the date of purchase by the Limited
Maturity Fund. The remainder of the Limited Maturity Fund's assets will be
invested in cash, cash equivalents and government and corporate bonds, including
without limitation cash or money-market instruments, commercial paper,
certificates of deposit, repurchase agreements, bankers' acceptances, U.S.
Treasury Bills, obligations of the U.S. Government and its agencies, bank money
market deposit accounts and money market mutual funds. The Limited Maturity Fund
will purchase commercial paper rated at the time of purchase in the highest
rating category by an NRSRO or, if not rated, found by the Advisor under
guidelines established by the Trust's Board of Trustees to be of comparable
quality. See "Appendix" to the Statement of Additional Information for an
explanation of these ratings. At times, the Advisor may determine that it is not
in the best interests of Shareholders of the Limited Maturity Fund to invest 65%
of The Limited Maturity Fund's total assets in bonds, debentures, notes and
other debt securities. At such times, the Fund may follow the temporary
defensive investment strategy of investing more than 35% of its total assets in
cash, cash equivalents and corporate bonds with remaining maturities of less
than 1 year. There is no way to predict when, or for how long, the Limited
Maturity Fund may pursue such a defensive investment strategy.
At the time of purchase of a debt security with a stated or remaining
maturity in excess of three years from the date of purchase by the Limited
Maturity Fund, the Limited Maturity Fund may acquire a "put" with respect to
such debt securities. Under a "put", the Limited Maturity Fund would have the
right to sell the debt security within a specified period of time
-25-
<PAGE> 27
at a specified minimum price. The Limited Maturity Fund will only acquire puts
from dealers, banks and broker-dealers which the Advisor has determined are
creditworthy under guidelines established by the Trust's Board of Trustees. A
put will be sold, transferred, or assigned by the Limited Maturity Fund only
with the underlying debt security. The Limited Maturity Fund will acquire puts
solely to shorten the maturity of the underlying debt security. The aggregate
price of a security subject to a put may be higher than the price which
otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.
Master Demand Notes
The Bond and Limited Maturity Funds may also invest in master demand notes
in order to satisfy short-term needs or, if warranted, as part of their
temporary defensive investment strategy. Such notes are demand obligations that
permit the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a United States commercial bank
acting as agent for the payees of such notes. Master demand notes are callable
on demand by an Income Fund, but are not marketable to third parties. Master
demand notes are direct lending arrangements between an Income Fund and the
issuer of such notes. The quality of master demand notes will be reviewed by the
Advisor of the Income Funds at least quarterly, which review will consider the
earning power, cash flow and debt-to-equity ratios indicating the borrower's
ability to pay principal together with accrued interest on demand. While master
demand notes are not typically rated by credit rating agencies, issuers of such
notes must satisfy the same criteria for the Bond Fund and the Limited Maturity
Fund set forth above for commercial paper.
Variable and Floating Rate Notes
The Bond Fund and the Limited Maturity Fund may acquire rated and unrated
variable and floating rate notes. Variable and floating rate notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by an Income Fund will be determined by the
Advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality at the time of purchase to rated instruments eligible for
purchase under the Fund's investment policies. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to an Income Fund will approximate their par value.
It is anticipated that the only non-income producing securities to be held
in the Bond Fund and Limited Maturity Fund will be zero-coupon obligations
evidencing ownership of future interest and principal payments on United States
Treasury Bonds. Such zero-coupon obligations pay no current interest and are
typically sold at prices greatly discounted from par value, with par value to be
paid to the holder at maturity. The return on a zero-coupon obligation, when
held to maturity, equals the difference between the par value and the original
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<PAGE> 28
purchase price. Zero-coupon obligations have greater price volatility than
coupon obligations and such obligations will be purchased when the yield spread,
in light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the Bond Fund's total assets, and
the Limited Maturity Fund will only purchase zero-coupon obligations if, at the
time of purchase, such investments do not exceed 25% of the value of the Limited
Maturity Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Funds and a decline in interest rates will generally increase
the value of those investments. Depending upon prevailing market conditions, the
Advisor may purchase debt securities at a discount from face value, which
produces a yield greater than the coupon rate. Conversely, if debt securities
are purchased at a premium over face value, the yield will be lower than the
coupon rate. In making investment decisions, the Advisor will consider many
factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
THE GOVERNMENT INCOME FUND
The Government Income Fund seeks current income consistent with
preservation of capital. The Government Income Fund invests at least 65% of its
total assets in obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, although up to 35% of the value of its total
assets may be invested in other types of debt securities, preferred stocks and
options. Consistent with the foregoing, under normal market conditions, the
Government Income Fund will invest up to 80% of the value of its total assets in
mortgage-related securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related
securities issued by nongovernmental entities which are rated, at the time of
purchase, in one of the three highest rating categories by an NRSRO or, if
unrated, which the Advisor deems present attractive opportunities and are of
comparable quality. For a description of the rating symbols of each NRSRO, see
the Appendix to the Statement of Additional Information.
The Government Income Fund may also hold some short-term obligations (with
maturities of 12 months or less) consisting of domestic and foreign commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit and time deposits of domestic and foreign branches of
U.S. banks and foreign banks, and repurchase and reverse repurchase agreements.
The Government Income Fund may also invest in corporate debt securities that are
rated at the time of purchase in one of the three highest rating categories by
an NRSRO or, if not rated, found by the Advisor under guidelines established by
the Trust's Board of Trustees to be of comparable quality.
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<PAGE> 29
U.S. Government Obligations
The types of U.S. Government obligations, including mortgage-related
securities, invested in by the Government Income Fund includes obligations
issued or guaranteed as to payment of principal and interest by the full faith
and credit of the U.S. Treasury, such as Treasury bills, notes, bonds and
certificates of indebtedness, and obligations issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, but not supported by such
full faith and credit. Obligations of the U.S. Treasury include "stripped" U.S.
Treasury Obligations such as Treasury Receipts, representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Obligations of certain agencies and instrumentalities of the U.S.
Government, such as GNMA and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of FNMA, are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or FHLMC, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
The principal governmental (i.e., backed by the full faith and credit of
the United States Government) guarantor of mortgage-related securities is GNMA.
GNMA is a wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
United States Government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
government-sponsored corporations owned entirely by private stockholders.
Pass-through securities issued by FNMA and FHLMC are guaranteed as to timely
payment of principal and interest by FNMA and FHLMC but are not backed by the
full faith and credit of the U.S. Government.
Mortgage-Related Securities -- In General
Mortgage-related securities have mortgage obligations backing such
securities, including among others, conventional thirty year fixed rate mortgage
obligations, graduated payment mortgage obligations, fifteen year mortgage
obligations, and adjustable rate mortgage obligations. All of these mortgage
obligations can be used to create pass-through securities.
-28-
<PAGE> 30
A pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. Accelerated prepayments have an adverse impact on yields for
pass-throughs purchased at a premium (i.e., a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-throughs purchased at a discount. The Government
Income Fund may purchase mortgage-related securities at a premium or at a
discount.
Mortgage-Related Securities Issued By Nongovernmental Entities
The Government Income Fund may invest in mortgage-related securities
issued by nongovernmental entities. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issues also create pass-through pools of conventional
residential mortgage loans. Such issuers may also be the originators of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such nongovernmental issuers generally offer a
higher rate of interest than government and government-related pools because
there are not direct or indirect government guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools is
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance. The insurance and guarantees are issued
by government entities, private insurers and the mortgage poolers. Such
insurance and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets the
Government Income Fund's investment quality standards. There can be no assurance
that the private insurers can meet their obligations under the policies. The
Government Income Fund may buy mortgage-related securities without insurance or
guarantees if through an examination of the loan experience and practices of the
poolers the Advisor determines that the securities meet the Government Income
Fund's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The Government Income Fund will not purchase
mortgage-related securities or any other assets which in the Advisor's opinion
are illiquid, if as a result, more than 15% of the value of the Government
Income Fund's net assets will be illiquid.
-29-
<PAGE> 31
Collateralized Mortgage Obligations
Mortgage-related securities in which the Government Income Fund may invest
may also include collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations issued generally by finance subsidiaries or trusts that are secured
by mortgage-backed certificates, including, in many cases, certificates issued
by government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations. The staff of the Securities and Exchange Commission has
determined that certain issuers of CMOs are investment companies for purposes of
the Investment Company Act of 1940, as amended (the "1940 Act").
CMOs may include Stripped Mortgage Securities. Such securities are
derivative multiclass mortgage securities issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Stripped Mortgage Securities are usually structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of Stripped Mortgage
Security will have one class receiving all of the interest from the mortgage
assets (the interest-only or "IO" class), while the other class will receive all
of the principal (the principal-only or "PO" class). The yield to maturity on an
IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the securities' yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated AAA or Aaa.
The Stripped Mortgage Securities held by the Fund will be considered
liquid securities only under guidelines established by the Trust's Board of
Trustees, and the Fund will not purchase a Stripped Mortgage Security that is
illiquid if, as a result thereof, more than 15% of the value of the Fund's net
assets would be invested in such securities and other illiquid securities.
In reliance on a recent staff interpretation, the Government Income Fund's
investment in certain qualifying CMOs, including CMOs that have elected to be
treated as Real Estate Mortgage Investment Conduits (REMICs), are not subject to
the 1940 Act's limitation on acquiring interests in other investment companies.
In order to be able to rely on the staff's interpretation, the CMOs and REMICs
must be unmanaged, fixed-asset issuers, that (a) invest primarily in
mortgaged-backed securities, (b) do not issue redeemable securities, (c) operate
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<PAGE> 32
under general exemptive orders exempting them from all provisions of the 1940
Act, and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that the Government Income Fund selects CMOs or REMICs
that do not meet the above requirements, the Government Income Fund's investment
in such securities will be subject to the limitations on its investment in
investment company securities as set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Statement of Additional Information.
The Government Income Fund expects that governmental, government-related
or private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may be different from customary long-term fixed rate mortgages. As new
types of mortgage-related securities are developed and offered to investors, the
Advisor will, consistent with the Government Income Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
THE TAX EXEMPT FUND, FLORIDA FUND AND MUNICIPAL BOND FUND
The Tax Exempt Fund seeks as high a level of current interest income
exempt from federal income taxes as is consistent with the preservation of
capital and relative stability of principal. The Tax Exempt Fund invests
primarily in bonds and notes issued by or on behalf of states (including the
District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is both exempt from federal income tax and
not treated as a preference item for purposes of the federal alternative minimum
tax for individuals ("Municipal Securities") and which generally have remaining
maturities of one year or less. The Tax Exempt Fund may also invest up to 10% of
the value of its total assets in the securities of money market mutual funds
which invest primarily in obligations exempt from federal income tax. The Tax
Exempt Fund will incur additional expenses due to the duplication of expenses as
a result of investing in securities of such money market mutual funds.
Additional restrictions on the Tax Exempt Fund's investments in the securities
of such money market funds are contained in the Statement of Additional
Information. As a fundamental policy, under normal market conditions at least
80% of the Tax Exempt Fund's total assets will be invested in Municipal
Securities and in securities of money market mutual funds which invest primarily
in obligations exempt from federal income tax.
Changes in prevailing interest rates may affect the yield, and possibly
the net asset value, of the Tax Exempt Fund. The Tax Exempt Fund invests only in
those securities and instruments considered by the Advisor to present minimal
credit risks under guidelines established by the Trust's Board of Trustees. All
securities or instruments in which the Fund invests have remaining maturities of
397 days or less, although instruments subject to repurchase
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agreements and certain variable rate and floating rate instruments subject to
demand features may bear longer maturities. The dollar-weighted average maturity
of the securities in the Tax Exempt Fund will not exceed 90 days.
The Tax Exempt Fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital appreciation.
Investment in the Tax Exempt Fund would not be appropriate for tax-deferred
plans, such as IRA and Keogh plans. Investors should consult a tax or other
financial advisor to determine whether investment in the Tax Exempt Fund would
be appropriate.
The Florida Fund seeks to produce as high a level of current interest
income exempt from federal income taxes and Florida intangibles taxes as is
consistent with the preservation of capital. The Florida Fund invests primarily
in bonds, notes and warrants generally issued by or on behalf of the State of
Florida and its political subdivisions, the interest on which, in the opinion of
the issuer's bond counsel at the time of issuance, is exempt from federal income
tax, is not treated as a preference item for purposes of the federal alternative
minimum tax for individuals, and is exempt from the Florida Intangible Personal
Property Tax ("Florida Municipal Securities"). As a fundamental policy, under
normal market conditions at least 80% of the Florida Fund's net assets will be
invested in Florida Municipal Securities.
The Municipal Bond Fund seeks to produce as high a level of current
federal tax-exempt income, as is consistent with the preservation of capital.
The Municipal Bond Fund invests primarily in Municipal Securities, as defined
above. As a fundamental policy, under normal market conditions at least 80% of
the Municipal Bond Funds' net assets will be invested in Municipal Securities
and in securities of money market mutual funds which invest primarily in
obligations exempt from federal income tax. Additionally, as a fundamental
policy, under normal market conditions at least 65% of the Municipal Bond Fund's
total assets will be invested in bonds.
It is a fundamental policy that, under normal market conditions, the Tax
Exempt Fund may invest up to 20% of its total assets in obligations, the
interest on which is either subject to federal income taxation or treated as a
preference item for purposes of the federal alternative minimum tax ("Taxable
Obligations"). Under normal market conditions, the Florida Fund and the
Municipal Bond Fund may invest up to 20% of its net assets in Taxable
Obligations. The Florida Fund may also invest in Municipal Securities. At times,
the Advisor may determine that, because of unstable conditions in the markets
for Municipal Securities or Florida Municipal Securities (hereinafter referred
to collectively as "Eligible Municipal Securities"), pursuing the Funds' basic
investment strategies is inconsistent with the best interests of the
Shareholders of the Funds. At such times, the Advisor may use temporary
defensive strategies differing from those designed to achieve the Funds'
investment objectives. With regard to the Tax Exempt Fund, the Advisor may
increase its holdings in short-term Taxable Obligations to over 20% of its total
assets and hold uninvested cash reserves pending investment. With regard to the
Tax-Free Funds, the Advisor may increase each Fund's holdings in Taxable
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Obligations to over 20% of each Fund's net assets, and with respect to the
Florida Fund, increase its holdings in Municipal Securities to over 20% of net
assets, and by holding uninvested cash reserves pending investment. Taxable
Obligations may include obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (some of which may be subject to repurchase
agreements), certificates of deposit, demand and time deposits, bankers'
acceptances of selected banks, and commercial paper meeting the Funds' quality
standards (as described below) for tax-exempt commercial paper. These
obligations are described further in the Statement of Additional Information.
The Tax Exempt Fund and the Tax-Free Funds may also invest in private
activity bonds ("industrial development bonds" under prior law). Interest on
private activity bonds (and industrial development bonds) is fully tax-exempt
only if the bonds fall within certain defined categories of qualified private
activity bonds and meet the requirements specified in those respective
categories. Regardless of whether they qualify for tax-exempt status, private
activity bonds may subject both individual and corporate investors to tax
liability under the alternative minimum tax. However, private activity bonds
will only be considered Eligible Municipal Securities for the purposes of this
Prospectus if they do not have this effect regarding individuals. For additional
information on the federal alternative minimum tax, see "DIVIDENDS AND TAXES."
The Tax Exempt Fund will invest only in those Municipal Securities and
other obligations which are considered by the Advisor, pursuant to guidelines
approved by the Board of Trustees, to present minimal credit risks. In addition,
investments will be limited to those obligations which, at the time of purchase,
(i) possess one of the two highest short-term ratings from an NRSRO in the case
of single-rated securities or (ii) possess, in the case of multiple-rated
securities, one of the two highest short-term ratings by at least two NRSROs; or
(iii) do not possess a rating (i.e., are unrated) but are determined by the
Advisor to be of comparable quality to the rated instruments eligible for
purchase by the Fund under the guidelines adopted by the Trustees. The Statement
of Additional Information contains further information concerning the rating and
other requirements governing the Tax Exempt Fund's investments, including
information relating to the treatment of securities subject to a tender or
demand feature and securities deemed to possess a rating based on comparable
rated securities of the same issuer. The Statement of Additional Information
also identifies the NRSROs that may be utilized by the Advisor with respect to
portfolio investments for the Fund and provides a description of the relevant
ratings assigned by each such NRSRO.
The Tax-Free Funds may invest in Eligible Municipal Securities that are
rated at the time of purchase within the three highest rating groups assigned by
a nationally recognized statistical rating organization (an "NRSRO"). The
Tax-Free Funds may also purchase Eligible Municipal Securities that are unrated
at the time of purchase but are determined to be of comparable quality by the
Advisor pursuant to guidelines approved by the Trust's Board of Trustees.
Eligible Municipal Securities may be purchased in reliance upon a rating only
when
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the rating organization is not affiliated with the issuer or guarantor of the
securities. The applicable ratings are described in the Appendix to the
Statement of Additional Information.
The two principal classifications of Eligible Municipal Securities that
may be held by the Tax-Free Funds and the Tax Exempt Fund are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities, or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as the user of the facility being financed. Private activity
bonds held by the Funds are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. Consequently, the credit quality
of private activity bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
Eligible Municipal Securities may also include "moral obligation" bonds,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality that
created the issuer.
Opinions relating to the validity of Eligible Municipal Securities and to
the exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Tax
Exempt Fund, the Tax-Free Funds nor the Advisor will review the proceedings
relating to the issuance of Eligible Municipal Securities or the basis for such
opinions.
Although the Municipal Bond Fund and the Tax Exempt Fund do not presently
intend to do so on a regular basis, each may invest more than 25% of its total
assets in Municipal Securities that are related in such a way that an economic,
business, or political development or change affecting one such security would
likewise affect the other Municipal Securities. An example of such securities
are obligations the repayment of which is dependent upon similar types of
projects or projects located in the same state. Such investments would be made
only if deemed necessary or appropriate by the Advisor. To the extent that a
Fund's assets are concentrated in Municipal Securities that are so related, a
Fund will be subject to the peculiar risks presented by such securities, such as
negative developments in a particular industry or state, to a greater extent
than it would be if the Fund's assets were not so concentrated.
The Tax Exempt Fund and the Tax-Free Funds may acquire "puts" with respect
to Eligible Municipal Securities held in their portfolios. Under a put, the
Funds would have the right to sell a specified Eligible Municipal Security
within a specified period of time at a specified price to a third party. A put
would be sold, transferred, or assigned only with the underlying Eligible
Municipal Security. The Funds will acquire puts solely to facilitate portfolio
liquidity, shorten the maturity of the underlying Eligible Municipal Securities,
or
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permit the investment of the Funds' at a more favorable rate of return.
The Tax-Free Funds expect that they will generally acquire puts only where the
puts are available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the Tax-Free Funds may pay for a put
separately in cash. The aggregate price of a security subject to a put may be
higher than the price which otherwise would be paid for the security without
such an option, thereby increasing the security's cost and reducing its yield.
The Tax-Free Funds may also invest in master demand notes in order to
satisfy short-term needs or, if warranted, as part of its temporary defensive
investment strategy. Such notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial bank acting as
agent for the payees of such notes. Master demand notes are callable on demand
by the Funds, but are not marketable to third parties. Master demand notes are
direct lending arrangements between the Fund and the issuer of such notes. The
Advisor will review the quality of master demand notes at least quarterly, and
will consider the earning power, cash flow and debt-to-equity ratios indicating
the borrower's ability to pay principal together with accrued interest on
demand. While master demand notes are not typically rated by credit rating
agencies, issuers of such notes must satisfy the same criteria for the Funds set
forth above for commercial paper.
Municipal Securities purchased by the Tax Exempt Fund may include rated
and unrated variable and floating rate tax-exempt notes, which may have a stated
maturity in excess of one year but which will, in such event, be subject to a
demand feature that will permit the Tax Exempt Fund to demand payment of the
principal of the note either (i) at any time upon not more than thirty days'
notice or (ii) at specified intervals not exceeding one year and upon no more
than thirty days' notice. The Tax-Free Funds may also acquire rated and unrated
variable and floating rate notes. Variable and floating rate notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by the Funds will be determined by the Advisor
under guidelines established by the Board of Trustees to be of comparable
quality at the time of purchase to rated instruments eligible for purchase under
the Funds' investment policies. There may be no active secondary market with
respect to a particular variable or floating rate note. Nevertheless, the
periodic readjustments of their interest rates tend to assure that their value
to the Funds will approximate their par value.
The Tax Exempt Fund and the Tax-Free Funds may acquire zero coupon
obligations. Such zero-coupon obligations pay no current interest and are
typically sold at prices greatly discounted from par value, with par value to be
paid to the holder at maturity. The return on a zero-coupon obligation, when
held to maturity, equals the difference between the par value and the original
purchase price. Zero-coupon obligations have greater price volatility than
coupon obligations and such obligations will be purchased when the yield spread,
in light of the obligation's duration, is considered advantageous. The Tax-Free
Funds will only purchase zero-coupon obligations if, at the time of purchase,
such investments do not exceed 20% of the value of the Florida Fund's total
assets and 25% of the Municipal Bond Fund's total assets.
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An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Advisor may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Advisor will consider
many factors besides current yield, including the preservation of capital,
maturity, and yield to maturity.
The Municipal Bond Fund -- Concentration
The Municipal Bond Fund may invest 25% or more of its total assets in
bonds, notes and warrants generally issued by or on behalf of the State of
Alabama and its political subdivisions, the interest on which, in the opinion of
the issuer's bond counsel at the time of issuance, is exempt form both federal
income tax and Alabama personal income tax and is not treated as a preference
item for purposes of the federal alternative minimum tax for individuals
("Alabama Municipal Securities"). Because of the relatively small number of
issuers of Alabama Municipal Securities, the Fund is more likely to invest a
higher percentage of its assets in the securities of a single issuer. This
concentration involves an increased risk of loss if the issuer is unable to make
interest or principal payments or if the market value of such securities were to
decline. Concentration of this nature may cause greater fluctuation in the net
asset value of the Fund's Shares.
General Economic Characteristics of Alabama
Alabama ranks twenty-second in the nation in total population, with over
four million residents in 1995. Its economy has historically been based
primarily on agriculture, textiles, mineral extraction and iron and steel
production, although the state has diversified into health care related
industries and other service-oriented sectors. Overall job growth rate was 4.0%
for the period from 1992 to 1994. Alabama's per capita income in 1996 was ranked
thirty-ninth in the nation. Currently Alabama's general obligations are rated Aa
by Moody's and AA by Standard and Poor's.
Balanced Budget and Pro-Ration Procedures
Section 213 of the Constitution of Alabama, as amended, requires that
annual financial operations of Alabama must be on a balanced budget. The
Constitution also prohibits the state from incurring general obligation debt
unless authorized by an amendment to the Constitution. Amendments to the
Constitution have generally been adopted through a procedure that requires each
amendment to be proposed by a favorable vote of three-fifths of all the members
of each house of the Legislature and thereafter approved by a majority of the
voters of the state voting in a statewide election.
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Alabama has statutory budget provisions which create a proration procedure
in the event that estimated budget resources in a fiscal year are insufficient
to pay in full all appropriations for such fiscal year. The Alabama state budget
is composed of two funds - the General Fund and the Education Fund. Proration of
either Fund is possible in any fiscal year, and proration may have a material
adverse effect on entities dependent on state funding, including certain issuers
of Alabama Municipal Securities held in the Alabama Fund.
Court decisions have indicated that certain state expenses necessary for
essential functions of government are not subject to proration under applicable
law. The Supreme Court of Alabama has held that the debt prohibition contained
in the constitutional amendment does not apply to obligations incurred for
current operating expenses payable during the current fiscal year, debts
incurred by separate public corporations, or state debt incurred to repel
invasion or suppress insurrection. The state may also make temporary loans not
exceeding $300,000 to cover deficits in the state treasury. Limited obligation
debt may be authorized by the legislature without amendment to the Constitution.
The state has followed the practice of financing certain capital improvement
programs - principally for highways, education and improvements to the State
Docks - through the issuance of limited obligation bonds payable solely out of
certain taxes and other revenues specifically pledged for their payment and not
from the general revenues of the state.
General Obligation Warrants
Municipalities and counties in Alabama traditionally have issued general
obligation warrants to finance various public improvements. Alabama statutes
authorizing the issuance of such interest-bearing warrants do not require an
election prior to issuance. On the other hand, the Constitution of Alabama
(Section 222) provides that general obligation bonds may not be issued without
an election.
The Supreme Court of Alabama validated certain general obligation warrants
issued by the City of Hoover, reaffirming that such obligations did not require
an election under ss. 222 of the Constitution of Alabama. In so holding, the
Court found that warrants are not "bonds" within the meaning of ss. 222.
According to the Court, warrants are not negotiable instruments and transferees
of warrants cannot be holders in due course. Therefore, a transferee of warrants
is subject to all defenses that the issuer of such warrants may have against the
transferor.
County boards of education may borrow money by issuing interest-bearing
warrants payable solely out of such board's allocated or apportioned share of
specified tax. The county board's apportioned share of such tax may be
diminished upon the establishment of a city school system, which could
jeopardize the payment of the county board's warrants.
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Limited Taxing Authority
Political subdivisions of the state have limited taxing authority. Ad
valorem taxes may be levied only as authorized by the Alabama Constitution. In
order to increase the rate at which any ad valorem tax is levied above the limit
otherwise provided in the Constitution, the proposed increase must be proposed
by the governing body of the taxing authority after a public hearing, approved
by an act of the Alabama Legislature and approved at an election within the
taxing authority's jurisdiction. In addition, the Alabama Constitution limits
the total amount of state, county, municipal and other ad valorem taxes that may
be imposed on any class of property in any one tax year. This limitation is
expressed in terms of a specified percentage of the market value of such
property.
Specific authorizing legislation is required for the levy of taxes by
local governments. In addition, the rate at which such taxes are levied may be
limited to the authorizing legislation or judicial precedent. For example, the
Alabama Supreme Court has held that sales and use taxes, which usually comprise
a significant portion of the revenues for local governments, may not be levied
at rates that are confiscatory or unreasonable. The total sales tax (state and
local) in some jurisdictions is 9%. State and local governments in Alabama are
more dependent on general and special sales taxes than are state and local
governments in many states. Because sales taxes are less stable sources of
revenue than are property taxes, state and local governments in Alabama may be
subject to shortfalls in revenue due to economic cycles.
Priority for Essential Governmental Functions
Numerous decisions of the Alabama Supreme Court hold that a governmental
unit may first use its taxes and other revenues to pay the expenses of providing
necessary governmental services before paying debt service on its bonds,
warrants or other indebtedness.
Challenge to Education Funding
On April 1, 1993, Montgomery Circuit Court Judge Gene Reese ruled that an
unconstitutional disparity exists among Alabama's school districts because of
inequitable distribution of tax funds. Judge Reese issued an order calling for a
new design for the distribution of funds for educational purposes as well as a
new system for funding public education.
On January 10, 1997, the Alabama Supreme Court affirmed Judge Reese's
ruling. The court stated that the Alabama Legislature must develop a plan within
one year to correct the unconstitutional disparity. Any allocation of funds away
from school districts could impair the ability of such districts to service
debt.
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The Florida Fund--Diversification and Concentration
The Florida Fund is a non-diversified fund under the Investment Company
Act of 1940 (the "1940 Act") and may concentrate its investments in the
securities of a limited number of issuers. Under the Internal Revenue Code of
1986, as amended (the "Code"), the Florida Fund generally may not invest in a
manner such that at the end of each fiscal quarter, (i) more than 25% of its
total assets are represented by securities of any one issuer (other than U.S.
government securities) and (ii) with respect to 50% of its total assets, more
than 5% of its total assets are represented by in the securities of any one
issuer (other than U.S. government securities). Thus, the Florida Fund generally
may each invest up to 25% of its total assets in the securities of each of any
two issuers. Because of the relatively small number of issuers of Florida
Municipal Securities, the Florida Fund is more likely to invest a higher
percentage of its assets in the securities of a single issuer than an investment
company that invests in a broad range of tax-exempt securities. This
concentration involves an increased risk of loss if the issuer is unable to make
interest or principal payments or if the market value of such securities were to
decline. Concentration of this nature may cause greater fluctuation in the net
asset value of the Florida Fund's shares.
General Economic Characteristics of Florida
Florida ranks fourth in the nation in total population, with over 12.9
million residents in 1990, and has been one of the fastest growing states in the
nation. Historically, tourism, agriculture, construction and manufacturing have
constituted the most important sectors of the state's economy. Construction
activity slows during periods of high interest rates or cyclical downturns. The
service sector employs the largest number of people in Florida. While wages in
the service sector tend to be lower than in manufacturing and other sectors of
the economy, the service sector traditionally has been less sensitive to
business cycles. Currently, Florida's general obligations are rated AA by both
Moody's and Standard and Poor's.
The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
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The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
Sources of State and Local Revenues
Florida's Constitution prohibits deficit spending by the state for
governmental operations. Florida does not have a personal income tax. An
amendment to the state's Constitution would be required in order to institute an
income tax, and passage of such an amendment is believed to be unlikely due to
the relatively large number of retirees living in the state as well as to the
general unpopularity of tax increases in the current political climate. A
two-thirds approval of voters voting in an election is now required for the
addition of any new taxes to the Florida Constitution. The principal sources of
state revenues are a 6% sales tax, state lottery, motor fuels tax, corporate
income tax, and miscellaneous other revenue sources, including beverage tax and
licenses, cigarette tax, documentary stamp taxes and an intangible tax.
Dependence on the sales tax may subject state revenues to more volatility than
would be the case if Florida had a personal income tax, with sales tax
collections adversely affected during recessions and periods when tourism
declines.
Taxation by units of government other than the state is permitted only to
the extent that Florida's legislature enacts enabling legislation. The principle
sources of county and municipal government revenues are ad valorem property
taxes, state revenue sharing, and miscellaneous other revenue sources, including
utilities services fees and local option fees. The principal sources of revenues
for Florida's school districts are ad valorem property taxes and state revenue
sharing, including revenues from a state lottery. The state Constitution imposes
millage limits, including a 10-mill limit each on county, municipal and school
ad valorem taxes. Effective January 1, 1995, Florida's voters amended the state
Constitution to limit annual increases in the assessed value of homestead
property to the lesser of 3% of the prior year's assessment or the percentage
change in the Consumer Price Index during the preceding calendar year. The
limitation on increases in assessment of homestead property could eventually
lead to ratings revisions that could have a negative impact on the prices of
obligations funded with this source of taxation. However, the effect of the
limit will be tempered by reassessments of homestead property at market value
when sold.
Units of state and local government in Florida will continue to face
spending pressures due to infrastructure needs for an expanding population,
especially in view of growth management laws enacted by Florida's legislature.
These laws include concurrency requirements that impose building moratoriums
unless roads and other infrastructure are added concurrently with additional
commercial or residential developments.
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Types of Indebtedness
The two principal types of indebtedness issued by state or local units of
government in Florida are "general obligation bonds" and "revenue bonds."
General obligation bonds are secured by a pledge of the full faith, credit and
taxing power of the governmental entity issuing the bonds. They can be issued in
Florida only after a referendum in which the voters in the jurisdictional limits
of the jurisdiction issuing the bonds approve their issuance. Revenue bonds are
payable only from the revenues derived from a facility or class of facilities
or, in some cases, from the proceeds of a special tax or other specific revenue
source. Revenue bonds are not secured by the full faith, credit and taxing power
of the governmental issuer.
Market Risk Caused by Intangible Tax Considerations
As a normal policy, on January 1 of each calendar year the Florida Fund
intends to own only assets which are exempt from the Florida Intangible Tax.
Accordingly, it is possible that the Florida Fund, in disposing of non-exempt
assets to meet this policy objective, might sustain losses which might not
otherwise be incurred absent this policy of avoiding the Florida Intangible Tax.
CAPITAL APPRECIATION FUNDS
The Advisor will seek to invest in equity securities which are believed to
represent investment value. Factors which the Advisor may consider in selecting
equity securities include industry and company fundamentals, historical price
relationships, and/or underlying asset value.
The Advisor to the Equity, Regional Equity, and Balanced Funds will use a
variety of economic projections, technical analysis, and earnings projections in
formulating individual stock purchase and sale decisions. The Advisor 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, the Advisor may therefore be making investment decisions which
could be contrary to the present expectations of other professional investors.
These decisions may involve greater risks compared to other mutual funds, of
either (a) more accurate assessment by other investors, in which case losses may
be incurred by a Fund, or (b) long delay in investor recognition of the accuracy
of the investment decisions of a Fund, in which case invested capital of a
Capital Appreciation Fund in an individual security or group of securities may
not appreciate for an extended period.
In managing the Capital Growth Fund and Small Cap Fund, the Advisor will
seek securities with potential to produce above-average earnings growth. Issuers
include companies
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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 seeks capital appreciation by investing primarily in a
diversified portfolio of common stock and securities convertible into common
stocks such as convertible bonds and convertible preferred stock. 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 the Advisor to be
undervalued. The production of current income is an incidental objective of the
Fund. 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 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. 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 the
Advisor to be undervalued of 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 the Fund. Under
normal market conditions, the Regional Equity Fund may also invest up to 35% of
the value of its total assets in common
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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."
There can be no assurance that the economy of the Southern Region or the
companies headquartered in the Southern Region will grow in the future or that a
company headquartered in the Southern Region whose assets, revenues or employees
are located substantially outside of the Southern Region will share in any
economic growth of the Southern Region. Additionally, any localized negative
economic factors or possible physical disasters in the Southern Region area
could have a much greater impact on the Regional Equity Fund's assets than on
similar funds whose investments are geographically more diverse.
The Balanced Fund 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 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
the Advisor 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 an NRSRO
at the time of purchase, or if not rated, found the by the 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 the Advisor, 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
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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 the Advisor to
judge and react to changing market conditions.
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 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 the Advisor 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 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. Under normal market conditions, the Small Cap Fund may invest up to
35% of the value of its total assets in common stock and securities convertible
into common stocks of companies with a market capitalization of greater than $1
billion determine at the time the security is purchased, 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
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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 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.
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 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. 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
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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."
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.
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.
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 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
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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-Advisor's credit analysis than would be the case if the
Equity Income Fund were 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-Advisor 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.
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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 the Advisor or Sub-Advisor, 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 Advisor or
Sub-Advisor 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 Advisor or Sub-Advisor
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.
OTHER INVESTMENTS
Foreign Investments
The Prime Obligations Fund may invest in Eurodollar Certificates of
Deposits ("ECDs") which are U.S. dollar denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar denominated
deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time
Deposits ("CTDs") which are essentially the same as ETDs except they are issued
by Canadian offices of major Canadian banks; and Yankee Certificates of Deposit
("Yankee CDs") which are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States.
The Prime Obligations Fund will not invest in excess of 10% of its net
assets in time deposits, including ETDs and CTDs but not including certificates
of deposit, with maturities in excess of seven days which are subject to
penalties upon early withdrawal.
The Prime Obligations Fund may also invest in commercial paper (including
variable amount master demand notes) issued by U.S. or foreign corporations. The
Prime Obligations Fund may also invest in Canadian Commercial Paper ("CCP"),
which is commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar
denominated commercial paper of a foreign issuer. The Prime Obligations Fund
will acquire securities issued by foreign branches of U.S. banks, foreign banks,
or other foreign issuers only when the Advisor believes that the risks
associated with such instruments are minimal and only when such instruments are
denominated and payable in United States dollars.
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The Bond Fund may invest up to 20% of the value of its total assets and
the Limited Maturity Fund may invest up to 30% of its total assets in debt
securities of foreign issuers. Each Capital Appreciation Fund 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. The Bond Fund, the
Limited Maturity Fund, and the Capital Appreciation Funds may also invest in
ECDs, ETDs, CTDs, Yankee CDs, CCP, and Europaper.
Investment in securities of foreign issuers is subject to special risks,
such as future adverse political and economic developments, the possible
imposition of withholding taxes on interest income, possible seizure, currency
blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore less liquidity and greater price volatility than U.S. securities,
and the risk that custodian and brokerage costs may be higher. In addition,
foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting,
and record keeping standards than those applicable to domestic branches of U.S.
banks. To the extent that a Fund may invest in securities of foreign issuers
which are not traded on any exchange, there is a further risk that these
securities may not be readily marketable. The Income Funds will not hold foreign
currency as a result of such investments.
Insurance Company Funding Agreements
The Prime Obligations Fund, the Bond Fund, and the Limited Maturity Fund
may invest in funding agreements, also known as guaranteed investment contracts,
("Funding Agreements") issued by insurance companies. Pursuant to such
agreements, the Bond Fund and Limited Maturity Fund invests an amount of cash
with an insurance company and the insurance company credits such investment on a
monthly basis with guaranteed interest which is based on an index. The Funding
Agreements provide that this guaranteed interest will not be less than a certain
minimum rate. The Prime Obligations Fund, the Bond Fund and the Limited Maturity
Fund will only purchase a Funding Agreement (i) when the Advisor has determined,
under guidelines established by the Board of Trustees, that the Funding
Agreement presents minimal credit risks to the Fund and is of comparable quality
to instruments that are rated high quality by an NRSRO that is not an affiliated
person, as defined in the Investment Company Act of 1940, of the issuer, on any
insurer, guarantor, or provider of credit support for the instrument and (ii)
with respect to the Prime Obligations Fund, if it may receive all principal of
and accrued interest on a Funding Agreement at any time upon
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thirty days' written notice. The Bond Fund and the Limited Maturity Fund may
receive all principal of and accrued interest on a Funding Agreement at any time
upon thirty days' written notice. Because a Fund may not receive the principal
amount of a Funding Agreement from the insurance company on seven days' notice
or less, a Funding Agreement is considered an illiquid investment, and, together
with other instruments in such Fund which are not readily marketable, will not
exceed 10% of the Prime Obligations Fund's net assets and 15% of the Bond Fund
or Limited Maturity Fund's net assets. With regard to the Prime Obligations
Fund, in determining average weighted portfolio maturity, a Funding Agreement
will be deemed to have a maturity equal to 30 days, representing the period of
time remaining until the principal amount can be recovered through demand.
Asset-Backed Securities
The Prime Obligations Fund, the Bond Fund and the Limited Maturity Fund
may invest in securities backed by automobile receivables and credit-card
receivables and other securities backed by other types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, typically 18 months. The CARD'S principal balance
remains constant during this period, while any cardholder repayments or new
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
CARDS generally have monthly payment schedules, weighted-average lives of 18- 24
months and stated final maturities ranging from 3 to 5 years. Cash flows on
CARDS are certain during the interest-only period. After this initial
interest-only period, the cash flow will depend on how fast cardholders repay
their borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the
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total credit card portfolio balance. This ratio can be adjusted monthly or can
be based on the balances at the beginning of the amortization period. In some
issues, investors are allocated most of the repayments, regardless of the CARDS'
balance. This method results in especially fast amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. Asset-backed securities purchased by the Prime Obligations
Fund will be subject to the same quality requirements as other securities
purchased by the Fund. The Bond Fund and the Limited Maturity Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three highest rating categories by an NRSRO or, if unrated, found by the
Advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality.
INVESTMENT TECHNIQUES
Options
The Bond Fund, Limited Maturity Fund, Government Income Fund, and the
Capital Appreciation Funds may engage in writing call options from time to time
as the Advisor or Sub-Advisor deems to be appropriate. Options are written
solely as covered call options (options on securities owned by a Fund). Such
options must be issued by the Options Clearing Corporation and may or may not be
listed on a national securities exchange. In order to close out an option
position, a 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, a Fund effects a
closing purchase transactions so as to close out any existing call option on
that security. If a Fund is unable to effect a closing purchase transactions so
as to close out any existing call option on that security. If a Fund is unable
to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or a Fund delivers the underlying
security upon exercise. 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.
From time to time, the Bond Fund and the Limited Maturity Fund may also
purchase call options on any of the types of securities in which each Fund may
invest. A purchased call option gives a Fund the right to buy and obligates the
seller to sell the underlying security at a specified exercise price during the
option period. Purchasing call options is a specialized investment technique
that entails a substantial risk of a complete loss of the amounts paid as
premiums to writers of options.
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From time to time, the Bond Fund and the Balanced Fund may purchase put
options as the Advisor 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 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. The Bond Fund and 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 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 which are acquired
subject to the puts (thus reducing the yield to maturity otherwise available for
the same securities). 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 puts (thus reducing the yield to maturity
otherwise available for the same securities). The Bond Fund intends to enter
into puts only with dealers, banks, and broker-dealers which, in the Advisor's
opinion, present minimal credit risks.
For a discussion of the Limited Maturity Fund's ability to acquire puts,
see "The Bond Fund and the Limited Maturity Fund" in this prospectus.
For discussion of the Tax Exempt Fund's and the Tax-Free Funds' ability to
acquire puts, see "The Tax-Free Fund, the Florida Fund and the Municipal Bond
Fund" in this Prospectus.
When-Issued Securities
The Tax Exempt Fund, the Income Funds and 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 that available in the market when delivery takes
place. A Fund will generally not pay for such securities or start earning
interest on them until they are received. When a Fund agrees to purchase
securities on a "when-issued" basis, the Trust's custodian will set aside cash
or liquid securities equal to the amount of the commitment in a segregated
account. Securities purchased on a "when-issued" basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. Each Fund expects that commitments to purchase "when-issued"
securities will not exceed 25% of the value of its total assets under normal
market conditions, and that a commitment to purchase "when-issued" securities
will not exceed 60 days. In the
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event that a Fund's commitment to purchase "when-issued" securities ever
exceeded 25% of the value of its total assets, a Fund's liquidity and the
Advisor's or Sub-Advisor's ability to manage it might be adversely affected. The
Funds do not intend to purchase "when-issued" securities for speculation
purposes, but only for the purpose of acquiring portfolio securities.
Repurchase Agreements
Securities held by each Fund may be subject to repurchase agreements. If
the seller under a repurchase agreement were to default on its repurchase
obligation or become insolvent, a 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 a 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 a Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate.
Reverse Repurchase Agreements
Each Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
them at a mutually agreed-upon date and price. Reverse purchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which a Fund is obligated to repurchase the
securities.
Other Investment Practices
Each Income Fund and 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, the AmSouth U.S.
Treasury Fund (and, with respect to the Tax-Free Funds, the AmSouth Tax Exempt
Fund), provided that no more than 10% of each Fund's total assets may be
invested in the securities of money market mutual funds in the aggregate. In
order to avoid the imposition of additional fees as a result of investments by
the a Fund in the Prime Obligations Fund and the AmSouth U.S. Treasury Fund (and
with respect to the Tax-Free Funds, the AmSouth Tax-Exempt Fund), the Advisor
and the Administrator will reduce that portion of their usual service fees from
each Fund by an amount equal to their service fees from the AmSouth Money Market
Funds that are attributable to those Fund investments. The Advisor and the
Administrator will promptly forward such fees to the Funds. Each Fund will incur
additional expenses due to the duplication of expenses as a result of investing
in securities of other unaffiliated money market mutual funds. Additional
restrictions regarding the Funds' investments in the securities of an
unaffiliated money market
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fund and/or the AmSouth Money Market Funds are contained in the Statement of
Additional Information.
In order to generate additional income, the Bond Fund, Limited Maturity
Fund, Government Income Fund and the Capital Appreciation Funds may, from time
to time, lend its securities to broker-dealers, banks or institutional borrowers
of securities which are not affiliated directly or indirectly with the Trust.
While the lending of securities may subject the Funds to certain risks, such as
delays or an inability to regain the securities in the event the borrower were
to default on its lending agreement or enter into bankruptcy, each Fund will
receive 100% collateral in the form of cash or other liquid securities. This
collateral will be valued daily by the Advisor or Sub-Advisor and should the
market value of the loaned securities increase, the borrower will furnish
additional collateral to each Fund. During the time securities of a Fund are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination by a Fund or the borrower at any
time. While the Funds do not have the right to vote securities on loan, each
Fund intends to terminate the loan and regain the right to vote if that is
considered important with respect to the investment. The Funds will only enter
into loan arrangements with broker-dealers, banks or other institutions which
the Advisor or Sub-Advisor has determined are creditworthy under guidelines
established by the Trust's Board of Trustees.
The Government Income Fund and the Capital Appreciation Funds may engage
in the technique of short-term trading. Such trading involves the selling of
securities held for a short time, ranging from several months to less than a
day. The object of such short-term trading is to increase the potential for
capital appreciation and/or income of the Government Income Fund in order to
take advantage of what the Advisor or Sub-Advisor believes are changes in
market, industry or individual company conditions or outlook. Any such trading
would increase the turnover rate of the Government Income Fund and its
transaction costs. The Bond Fund and Limited Maturity Funds will not purchase
securities solely for the purpose of short-term trading.
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 and Income 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.
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INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of that Fund. See
"GENERAL INFORMATION -- Miscellaneous" in this prospectus.
The Prime Obligations Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Prime
Obligations Fund's total assets would be invested in such issuer, except that
25% or less of the value of the Prime Obligations Fund's total assets may be
invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of
the Prime Obligations Fund's total assets at the time of purchase to be invested
in securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, bank certificates of deposit or bankers'
acceptances issued by a domestic bank or by a U.S. branch of a foreign bank
provided that such U.S. branch is subject to the same regulation as United
States banks, and repurchase agreements secured by bank instruments or
obligations of the U.S. Government or its agencies or instrumentalities; (b)
wholly owned finance companies will be 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.
The AmSouth U.S. Treasury Fund may not:
1. Purchase securities other than bills, notes, and bonds issued by the
U.S. Treasury, certain of which securities may be subject to repurchase
agreements collateralized by the underlying U.S. Treasury obligation.
The Tax Exempt Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the Tax
Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by
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the government entity (or entities) whose assets and revenues back the security;
with respect to a private activity bond that is backed only by the assets and
revenues of a non-government user, a security is considered to be issued by such
non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax Exempt
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax Exempt Fund's assets.
The Bond Fund, Limited Maturity Fund, Government Income Fund, Municipal
Bond Fund and the Capital Appreciation Funds may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities.
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The Income Funds and the Capital Appreciation Funds may not:
1. Purchase any securities which would cause more than 25% of the value of
such Income Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) for the Bond Fund, the
Limited Maturity Fund, the Florida Fund, and the Municipal Bond Fund there is no
limitation with respect to Municipal Securities, which, for purposes of this
limitation only, do not include private activity bonds that are backed only by
the assets and revenues of a non-governmental user; (c) wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (d) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
The Tax-Free Funds may not:
1. Write or sell puts, calls, straddles, spreads, or combinations thereof
except that the Funds may acquire puts with respect to Eligible Municipal
Securities and sell those puts in conjunction with a sale of those Eligible
Municipal Securities.
The Money Market Funds, Income Funds, and Capital Appreciation Funds may
not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of such Fund's total assets
at the time of its borrowing. A Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
2. Make loans, except that each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies, may lend Fund
securities in accordance with its investment objective and policies, and may
enter into repurchase agreements.
VALUATION OF SHARES
The net asset value of each Income Fund and Capital Appreciation Fund is
determined and its Shares are priced as of 4:00 p.m., Eastern Time (the
"Valuation Time") on each
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Business Day of such Fund. The net asset value of each of the Prime Obligations
Fund and the AmSouth U.S. Treasury Fund is determined and its Shares are priced
as of 1:00 p.m. and 4:00 p.m., Eastern Time ("Valuation Times") on each Business
Day of such Fund. The net asset value of the Tax Exempt Fund is determined and
its Shares are priced as of 12:00 noon and 4:00 p.m., Eastern Time (the
"Valuation Times") on each Business Day of the Fund. As used herein a "Business
Day" constitutes any day on which the New York Stock Exchange (the"NYSE") is
open for trading and the Federal Reserve Bank of Atlanta is open, except days on
which there are not sufficient changes in the value of the Fund's portfolio
securities that the Fund's net asset value might be materially affected, or days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received. Currently, either the NYSE or the Federal Reserve Bank of
Atlanta is closed on the customary national business holidays of New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund, less the liabilities charged to that Class, by the
number of the outstanding Shares of that Class. The net asset value per Share of
each Income Fund and Capital Appreciation Fund will fluctuate as the value of
its investment portfolio changes.
The securities in each Income Fund and 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 Income Funds and Capital Appreciation Funds, see the
Statement of Additional Information.
The assets in each Money Market Fund are valued based upon the amortized
cost method. Pursuant to rules and regulations of the Securities and Exchange
Commission regarding the use of the amortized cost method, each Money Market
Fund will maintain a dollar-weighted average portfolio maturity of 90 days or
less. Although the Trust seeks to maintain each Money Market Fund's net asset
value per share at $1.00, there can be no assurance that net asset value will
not vary.
HOW TO PURCHASE AND REDEEM SHARES
Distributor
Shares in each Fund are sold on a continuous basis by the Trust's
distributor, BISYS Fund Services (the "Distributor"). The principal office of
the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to
purchase Shares, contact the Trust at (800) 451-8382.
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Each Fund has been divided into three classes of Shares, Premier Shares,
Classic Shares and B Shares, except that the AmSouth U.S. Treasury Fund and Tax
Exempt Fund are divided into Premier Shares and Classic Shares only. Class B
Shares are not currently offered in the Limited Maturity Fund, Government Income
Fund, Florida Fund and Municipal Bond Fund. The three classes of a particular
Fund represent interests in the same investments and are identical in all
respects except that (i) Classic Shares bear the expense of the fee under the
Trust's Shareholder Servicing Plan (the "Servicing Plan"), which will cause the
Classic Shares to have a higher expense ratio and to pay lower dividends than
those of the Premier Shares, (ii) Class B Shares bear the expense of the fee
under the Trust's Distribution and Shareholder Services Plan (the "Distribution
Plan"), which will cause the Class B Shares to have a higher expense ratio and
to pay a lower dividend than those of the Classic Shares or Premier Shares,
(iii) Classic Shares have certain exclusive voting rights with respect to the
Servicing Plan and Class B Shares have certain exclusive voting rights with
respect to the Distribution Plan, and (iv) Classic Shares are subject to a
front-end sales charge and Class B Shares are subject to a contingent deferred
sales charge. The following investors qualify to purchase Premier Shares: (i)
investors for whom AmSouth acts in a fiduciary, advisory, custodial, agency or
similar capacity through an account with its Trust Department; (ii) investors
who purchase Shares of a Fund through a 401(k) plan or a 403(b) plan which by
its terms permits purchases of Shares; and (iii) orders placed on behalf of
other investment companies distributed by the Distributor and its affiliated
companies. All other investors are eligible to purchase Classic Shares or Class
B Shares only.
Purchases of Premier Shares
Shares of the 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.
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 AmSouth and its Customer are invested by the
Distributor in Shares of a Money Market Fund.
Premier Shares of the Trust sold to AmSouth on behalf of Customers will
normally be held of record by AmSouth. With respect to Shares so sold, it is the
responsibility of AmSouth 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 AmSouth and reflected in
the account statements provided by AmSouth to Customers.
Premier Shares of each Fund are purchased at the appropriate net asset
value per Share (see "VALUATION OF SHARES") next determined after receipt by the
Distributor of an order in good form to purchase Shares. An order to purchase
Money Market Fund Shares will be deemed to have been received by the Distributor
only when federal funds with respect
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thereto are available to the Trust's custodian for investment. Federal funds are
monies credited to a bank's account within a Federal Reserve Bank. Payment for
an order to purchase Shares which is transmitted by federal funds wire will be
available the same day for investment by the Trust's custodian, if received
prior to the last Valuation Time (see "VALUATION OF SHARES"). Payments
transmitted by other means (such as by check drawn on a member of the Federal
Reserve System) will normally be converted into federal funds within two banking
days after receipt. The Trust strongly recommends that investors of substantial
amounts use federal funds to purchase Shares.
Purchases of Shares of a Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") of such Fund. With respect to the Income Funds
and the Capital Appreciation Funds, 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.
With respect to the Money Market Funds, an order received prior to a
Valuation Time on any Business Day will be executed at the net asset value
determined as of the next Valuation Time on the date of receipt. An order
received after the last Valuation Time on any Business Day will be executed at
the net asset value determined as of the next Valuation Time on the next
Business Day. Shares of the Prime Obligations Fund and the AmSouth U.S. Treasury
Fund purchased before 1:00 p.m., Eastern Time, begin earning dividends on the
same Business Day. Shares of the Tax Exempt Fund purchased before 12:00 noon,
Eastern Time, begin earning dividends on the same Business Day. All Shares of a
Money Market Fund continue to earn dividends through the day before their
redemption.
In the case of orders for the purchase of Shares placed through a
broker-dealer, the applicable public offering price will be calculated with
reference to the net asset value as so determined, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Distributor prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). The broker-dealer is responsible for transmitting such orders by
close of business. 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.
There is no sales charge imposed by the Trust in connection with the
purchase of Premier Shares of a Fund. Sales charges apply to purchases of other
classes. Depending upon the terms of a particular Customer account, AmSouth may
charge a Customer's account fees for automatic investment and other cash
management services provided in connection with investment in a Fund.
Information concerning these services and any charges can be obtained from
AmSouth. This Prospectus should be read in conjunction with any such information
received from AmSouth.
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The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign and third
party drafts or checks.
Every Shareholder will receive a confirmation of each new transaction in
his or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. Reports of purchases, redemptions and
exchanges of Shares by AmSouth on behalf of its Customers will be sent by
AmSouth to its Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
Exchange Privilege
Premier Shares of each Fund may be exchanged for Premier Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Premier Shares (with certain exceptions and
subject to the terms and conditions described in this prospectus). Premier
Shares of each Fund may also be exchanged for Classic Shares, if the Shareholder
ceases to be eligible to purchase Premier Shares. Premier Shares of each Fund
may not be exchanged for Class B Shares.
The Trust does not impose a charge for processing exchanges of its Premier
Shares. However, the exchange of Premier Shares for Classic Shares will require
payment of the sales charge unless a sales charge waiver applies. Shareholders
may exchange their Premier Shares for Premier Shares of another Fund on the
basis of the relative net asset value of the Shares exchanged.
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss. In general,
if a shareholder exchanges Income Fund shares for Shares of another Fund without
paying a sales charge, the gain or loss on the exchange of the Fund Shares will
be calculated without taking into account the sales charge paid on the Fund
Shares if the Fund Shares were held less than 91 days. The sales charge will
instead be added to the basis of the Fund Shares acquired in the exchange. The
application of this rule will increase the gain or reduce the loss that the
Shareholder would otherwise recognize on the exchange of the Shares of the Fund.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund and class 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
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increase transaction costs, the Trust has established a policy of limiting
excessive exchange activity. Exchange activity will not be deemed excessive if
limited to four substantive exchange redemptions from a Fund during any calendar
year.
Directed Dividend Option
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice.
In addition, the Trust may suspend a shareholder's Directed Dividend Option
without notice if the account balance is less than the minimum $1,000.
Participation in the Option may be terminated or changed by the shareholder at
anytime by writing the Distributor. The Directed Dividend Option is not
available to participants in an AmSouth Mutual Funds IRA.
Check Writing Service
A Shareholder may write checks on his or her Prime Obligations Fund
account for $1,000 or more. Once a Shareholder has signed and returned a
signature card, he or she will receive a supply of checks drawn on Huntington
National Bank. The check may be made payable to any person, and the
Shareholder's account will continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the exact value of a Fund
account, a Shareholder should not use a check to close his or her account. The
Shareholder's account will be charged a fee on stopping payment of a check upon
the Shareholder's request or if the check cannot be honored because of
insufficient funds or other valid reasons.
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 AmSouth. For example, if a
Customer has agreed with AmSouth to maintain a minimum balance in his or her
account with AmSouth, and the balance in that account falls below that minimum,
the Customer may be obliged to redeem, or AmSouth may redeem for and on behalf
of the Customer, all or part of the Customer's Shares of a Fund of the Trust to
the extent necessary to maintain the required minimum balance.
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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 then maximum wire redemption
charge. Such charge is presently $7.00 for each wire redemption. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated bank account. For telephone
redemptions, call the Trust at (800) 451-8382. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if these procedures are not followed, the Trust may be liable for any losses due
to unauthorized or fraudulent instructions. These procedures include recording
all phone conversations, sending confirmations to Shareholders within 72 hours
of the telephone transaction, verifying the account name and a shareholder's
account number or tax identification number, and sending redemption proceeds
only to the address of record or to a previously authorized account.
During periods of significant economic or market change, telephone
redemptions may be difficult to complete. If a Shareholder is unable to contact
the Distributor by telephone, a Shareholder may also mail the redemption request
to the Distributor at the address listed above under "HOW TO REDEEM SHARES -
Redemption by Mail."
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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 an Income Fund and 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 Income Fund and
Capital Appreciation Fund Shareholders for next Business Day payments upon
redemption of Shares if the request for redemption is received by the Transfer
Agent before 4:00 p.m., Eastern Time, on a Business Day or, if the request for
redemption is received after 4:00 p.m., Eastern Time, to honor requests for
payment within two Business Days, unless it would be disadvantageous to the
Trust or the Shareholders of the particular Income Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner. To the greatest extent possible, the Trust will attempt to honor
requests from Money Market Fund Shareholders for same day payments upon
redemption of Shares if the request for redemption is received by the Transfer
Agent before 12:00 noon, Eastern Time, on a Business Day or, if the request for
redemption is received after 12:00 noon, Eastern Time, to honor requests for
payment on the next Business Day, unless it would be disadvantageous to the
Trust or the Shareholders of the particular Money Market Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payments in that manner.
At various times, the Trust may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Trust may delay
the forwarding of proceeds only until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay in
payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by wire transfer. The Trust
intends to pay cash for all Shares redeemed, but under abnormal conditions which
make payment in cash unwise, the Trust may make payment wholly or partly in
portfolio securities at their then current market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Fund has a value of less than $250.
Accordingly, an investor purchasing Shares of a Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems some of his or her Shares. Before the Trust exercises its
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $250.
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See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and
"VALUATION-Valuation of the Money Market Funds" in the Statement of Additional
Information for examples of when the Trust may suspend the right of redemption
or redeem Shares involuntarily if it appears appropriate to do so in light of
the Trust's responsibilities under the Investment Company Act of 1940.
DIVIDENDS AND TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund intends to qualify for treatment as a "regulated investment company"
under the Code. If it so qualifies, a Fund will not have to pay federal income
taxes on net income and net capital gain income that they distribute to
shareholders. Regulated investment companies are also subject to a federal
excise tax if they do not distribute their income on a timely basis. Each Fund
intends to avoid paying federal income and excise taxes by timely distributing
substantially all its net income and net capital gain income.
The amount of dividends payable with respect to the Premier Shares will
exceed dividends on Classic Shares, and the amount of dividends on Classic
Shares will exceed the dividends on Class B Shares, as a result of the
Shareholder Services Plan fee applicable to Classic Shares and the Distribution
and Shareholder Services Plan fee applicable to Class B Shares.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION - Additional Tax Information."
The following 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 following is also intended only as a brief summary
of some of the important tax considerations generally affecting the Funds and
Shareholders. Potential investors are urged to consult their tax advisors
concerning their own tax situations and concerning the application of state and
local taxes which may differ from the federal income tax consequences described
below.
Shareholders will be advised at least annually as to the character for
federal income tax purposes of distributions made during the year.
Prime Obligations Fund and AmSouth U.S. Treasury Fund
The net income of each Money Market Fund is declared daily as a dividend
to Shareholders of record at the close of business on the day of declaration.
The net income attributable to a Fund's Classic Shares and the dividends payable
on Classic Shares will be
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reduced by the shareholder service fee assessed against such Shares under the
Shareholder Servicing Plan (see Administrator and Distributor below). Dividends
will generally be paid monthly. Distributable net capital gains (if any) will be
distributed at least annually. A Shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional Shares of the same class at net asset value as of the date of payment
unless the Shareholder elects to receive such dividends or distributions in
cash. Reinvested dividends receive the same tax treatment as dividends paid in
cash. Such election, or any revocation thereof, must be made in writing to the
Transfer Agent at P.O. Box 182733, Columbus, Ohio 43218-2733, and will become
effective with respect to dividends and distributions having record dates after
its receipt by the Transfer Agent. Dividends are paid in cash not later than
seven Business Days after a Shareholder's complete redemption of his or her
Shares. Dividends are generally taxable when received. However, dividends
declared in October, November, or December to Shareholders of record during
those months and paid during the following January are treated for tax purposes
as if they were received by each Shareholder on December 31 of the prior year.
Dividends will generally be taxable to a Shareholder as ordinary income to
the extent of the Shareholder's ratable share of each Fund's earnings and
profits as determined for tax purposes. Because all of the net investment income
of the Prime Obligations Fund and the AmSouth U.S. Treasury Fund is expected to
be interest income, it is anticipated that no distributions will qualify for the
dividends received deduction for corporate shareholders. The Prime Obligations
Fund and the AmSouth U.S. Treasury Fund do not expect to realize any long-term
capital gains and, therefore, do not foresee paying any "capital gains
dividends" as described in the Code. Dividends received by a Shareholder that
are derived from the AmSouth U.S. Treasury Fund's investments in U.S. government
obligations may not be eligible for exemption from state and local taxes even
though the income on such investments would have been exempt from state and
local taxes if the Shareholder directly held such investments. In addition, the
state and local tax exemption for interest earned on U.S. government obligations
may not extend to income earned on U.S. government obligations that are subject
to a repurchase agreement. Shareholders are advised to consult their own tax
advisors concerning their own tax situation and the application of state and
local taxes.
The Income Funds
A dividend for each Income Fund will be declared monthly at the close of
business on the day of declaration consisting of an amount of accumulated
undistributed net income of the Fund as determined to be necessary or
appropriate by the appropriate officers of the Trust. Dividends will generally
be paid monthly. Distributable net realized capital gains are distributed
annually to Shareholders of record. A Shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional Shares unless the Shareholder elects to receive such dividends or
distributions in cash. Dividends and distributions are reinvested without a
sales charge as of the ex-dividend date using the net asset value determined on
that date and are credited to a Shareholder's account on the payment date.
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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 P.O. Box 182733, Columbus, Ohio 43218-2733, and will become effective
with respect to dividends and distributions having record dates after its
receipt by the Transfer Agent.
BOND FUND, LIMITED MATURITY FUND, AND GOVERNMENT INCOME FUND
Distributions by the Bond Fund, Limited Maturity Fund, and Government
Income Fund of ordinary income and/or an excess of short-term capital gain over
net long-term loss are taxable to shareholders as ordinary income. It is not
expected that the dividends-received deduction for corporations will apply.
Distribution by the Bond Fund, Limited Maturity Fund, and Government
Income Fund of the excess of net long-term capital gain over net short-term
capital loss is taxable to Shareholders as long-term capital gain in the year in
which it is received, regardless of how long the Shareholder has held Shares in
such Fund. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing Shares of the Bond Fund, Limited Maturity Fund, and
Government Income Fund, the impact of dividends or capital gains distributions
which are expected to be declared or have been declared, but not paid, should be
carefully considered. Dividends or capital gains distributions paid after a
purchase of Shares are subject to federal income taxes, although in some
circumstances the dividends or distributions may be, as an economic matter, a
return of capital. A Shareholder should consult his or her own advisor for any
special advice.
Dividends received by a Shareholder that are derived from the Bond Fund,
Limited Maturity Fund, and Government Income Fund investments in U.S. Government
obligations may not be entitled to the exemptions from state and local income
taxes that would be available if the Shareholder had purchased U.S. Government
obligations directly.
A Shareholder will generally recognize long-term capital gain or loss on
the sale or exchange of shares in an Income Fund held by the Shareholder for
more than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Maturity Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
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The holder of a security issued with "original issue discount" (including
a zero-coupon United States Treasury security) is required to accrue as income
each year a portion of the discount at which the security was purchased, even
though the holder does not currently receive the interest payment in cash. A
security has original issue discount if its redemption price exceeds its issue
price by more than a de minimis amount. Accordingly, the Bond Fund, Limited
Maturity Fund, and Government Income Fund may be required to distribute each
year an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions may be made from the cash assets of the
Fund or by liquidation of its portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would have in the absence of such
transactions.
TAX EXEMPT FUND, FLORIDA FUND, AND MUNICIPAL BOND FUND
The Tax Exempt and Tax-Free Funds' Shareholders may treat as exempt
interest and exclude from gross income for federal income tax purposes dividends
derived from net exempt-interest income and designated by the Funds as exempt
interest dividends. However, such dividends may be taxable to shareholders under
state or local law as ordinary income even though all or a portion of the
amounts may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such taxes.
Dividends from the Tax Exempt and Tax-Free Funds attributable to
exempt-interest dividends may cause the social security and railroad retirement
benefits of individual shareholders to become taxable, or increase the amount
that is taxable. Interest on indebtedness incurred by a Shareholder to purchase
or carry Shares is not deductible for federal income tax purposes to the extent
the Funds distribute exempt-interest dividends during the Shareholder's taxable
year. The amount of the disallowed interest deduction is the total amount of
interest paid or accrued on the indebtedness multiplied by a fraction, the
numerator of which is the amount of exempt-interest dividends received by the
Shareholder and the denominator of which is the sum of the exempt-interest
dividends and taxable dividends received by the Shareholder (excluding capital
gain dividends received by the Shareholder and capital gains required to be
included in the Shareholder's computation of long-term capital gains under
Section 852(b)(3)(D) of the Code). It is anticipated that distributions from the
Tax Exempt and Tax-Free Funds will not be eligible for the dividends received
deduction for corporate shareholders.
Gains on the sale of Shares in the Tax Exempt and Tax-Free Funds will be
subject to federal, state, and local taxes. If a Shareholder receives an
exempt-interest dividend with respect to any Share of the Fund and such Share is
held for six months or less, any loss on the sale or exchange of such Share will
be disallowed to the extent of the amount of such exempt-interest dividend.
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The Tax Exempt Fund and the Tax-Free Funds may at times purchase Municipal
Securities at a discount from the price at which they were originally issued.
For federal income tax purposes, some or all of this market discount will be
included in a Fund's ordinary income and will be taxable to Shareholders as such
when it is distributed to them.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit, market discount
or repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax advisor for any
special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in alternative minimum taxable
income of individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate shareholders.
Alabama Taxes
Section 40-18-14(2)f of the Alabama Code specifies that interest on
obligations of the State of Alabama and any county, municipality or other
political subdivision thereof is exempt from personal income tax. Section
40-18-14(2)d provides similar tax-exempt treatment for interest on obligations
of the United States or its Possessions (including Puerto Rico, Guam and the
Virgin Islands). In addition, Regulation Section 810-3-14-.02(4)(b)2 and an
Administrative ruling of the Alabama Department of Revenue dated March 1, 1990
extend these exemptions for interest to distributions from a regulated
investment company to the extent that they are paid out of interest earned on
such exempt obligations. Tax-exempt treatment is not available on distributions
from income earned on securities that are merely guaranteed by the federal
government (GNMAs, FNMAs, etc.), for repurchase agreements collateralized by
U.S. Government obligations or for obligations of other states to the extent
such investments are made by the Fund for temporary or defensive purposes. Such
interest will be taxable on a pro rata basis.
Any distributions of net short-term and net long-term capital gain earned
by the Fund are fully includable in each shareholder's Alabama taxable income as
dividend income and long-term capital gain, respectively. Both types of income
are currently taxed at ordinary rates.
The foregoing discussion 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 Alabama tax considerations
generally affecting the Municipal Fund and its
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Shareholders. Potential investors are urged to consult their tax advisors
concerning their own tax situation and concerning the application of state and
local (as well as federal) taxes.
Florida Taxes
The State of Florida does not impose an income tax on individuals.
Therefore, distributions of the Florida Fund to individuals will not be subject
to personal income taxation in Florida. Corporations and other entities subject
to the Florida income tax will be subject to tax on distributions of investment
income and capital gains by the Fund. Distributions attributable to interest on
obligations of any state (including Florida), the District of Columbia, U.S.
possessions, or any political subdivision thereof, will be taxable to
corporations and other entities for Florida income tax purposes even though such
interest income is exempt from federal income tax. Similarly, distributions
attributable to interest on obligations of the United States and its territories
will be taxable to corporations and other entities under the Florida income tax.
For individuals and other entities subject to taxation in states and localities
other than Florida, distributions of the Fund will be subject to applicable
taxes imposed by such other states and localities.
In the opinion of special Florida tax counsel to the Fund, shareholders of
the Florida Fund who are subject to the Florida Intangible Personal Property Tax
(the "Intangible Tax") will not be subject to the Intangible Tax on shares of
the Florida Fund if, on the first day of the applicable calendar year, the
assets of the Florida Fund consist solely of obligations of Florida or its
political subdivisions; obligations of the United States, Puerto Rico, the
Virgin Islands or Guam; or bank deposits, cash or other assets which would be
exempt from the Intangible Tax if directly held by the shareholder. A ruling
confirming this tax treatment is being sought from the Florida Department of
Revenue. As described above, it is the Florida Fund's policy to invest at least
80% of its net assets in Florida Municipal Securities exempt from the Intangible
Tax under normal market conditions. The Florida Fund intends to insure that,
absent abnormal market conditions, all of its assets held on January 1 of each
year are exempt from the Intangible Tax. Accordingly, the value of the Florida
Fund shares held by a shareholder should ordinarily be exempt from the
Intangible Tax. However, if on any January 1 the Florida Fund holds investments
that are not exempt from the Intangible Tax, the Florida Fund's shares could be
wholly or partially subject to the Intangible Tax for that year.
The foregoing discussion is intended only as a brief summary of the
Florida tax laws currently in effect which would generally affect the Florida
Fund and its shareholders. Potential investors are urged to consult with their
Florida tax counsel concerning their own tax situation.
THE CAPITAL APPRECIATION FUNDS
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
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generally be paid monthly. Distributable net realized capital gains are
distributed at least 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 P.O. Box 182733, Columbus, Ohio 43218-2733, and will become
effective with respect to dividends and distributions having record dates after
its receipt by the Transfer Agent.
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 advisor for any special advice.
Dividends received by a Shareholder that are derived from a Capital
Appreciation Fund's investments in U.S. government obligations may not be
entitled to the exemptions from state and local income taxes that would be
available if the Shareholder had purchased U.S.
government obligations directly.
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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.
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):
Position(s) Held Principal Occupation
Name and Address With the Trust During the Past 5 Years
- ---------------- -------------- -----------------------
George R. Landreth* Chairman From December 1992 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services, Limited Partnership;
Columbus, OH 43219 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.
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present,
459 DER Building Professor and Vice Chairman,
1808 7th Avenue South Department of Medicine,
UAB Medical Center University of Alabama at
Birmingham, Alabama 35294 Birmingham School of Medicine;
December 1995, to present,
Physician, University of
Alabama Health Services
Foundation; from June 1988 to
October 1992, President, Chief
Executive Officer and Medical
Director, University of
Alabama Health Services
Foundation
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Wendell D. Cleaver Trustee From September 3, 1993 to
209 Lakewood Drive, West present, retired; from
Mobile, Alabama 36608 December 1988 to August, 1993,
Executive Vice President,
Chief Operating Officer and
Director, Mobile Gas Service
Corporation
J. David Huber* Trustee From June 1987 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services, Limited Partnership
Columbus, OH 43219
Homer H. Turner, Jr. Trustee From June 1991 to present,
729 Cary Drive retired; until June 1991, Vice
Auburn, Alabama 36830 President, Birmingham
Division, Alabama Power
Company
James H. Woodward, Jr. Trustee From 1996 to present, Trustee
The University of North of The Sessions Group; from
Carolina at Charlotte July 1989 to present,
Charlotte, North Carolina 28223 Chancellor, The University of
North Carolina at Charlotte;
until July 1989, Senior Vice
President, University College,
University of Alabama at
Birmingham
- ----------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
providing fund accounting services to the Trust. Messrs. Huber and Landreth are
employees and executive officers of BISYS Fund Services.
Investment Advisor
AmSouth is the Advisor of each Fund of the Trust. AmSouth is the 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
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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
Funds, the Advisor manages the Funds (except with respect to the Equity Income
Fund), makes decisions with respect to and places orders for all purchases and
sales of their investment securities, and maintains their records relating to
such purchases and sales.
Brian B. Sullivan, CFA is the portfolio manager for the Bond Fund and, as
such, has had primary responsibility for the day-to-day portfolio management of
the Bond Fund since 1992. Mr. Sullivan has been a portfolio manager at AmSouth
since 1984, and is currently Senior Vice President and Trust Investment Officer
in charge of fixed income investments.
John P. Boston, CFA, is the portfolio manager for the Limited Maturity
Fund since August, 1995, and of the Government Income Fund since inception and,
as such, has primary responsibility for the day-to-day portfolio management of
the Limited Maturity and Government Income Funds. Mr. Boston has been associated
with AmSouth's Trust Investment Group for over five years and is currently a
Vice President and Trust Investment Officer.
Dorothy E. Thomas, CFA, is the portfolio manager for the Municipal Bond
Fund and since May 15, 1997 is the portfolio manager for the Florida Fund, and
as such, has primary responsibility for the day-to-day management of each Fund's
portfolio. Ms. Thomas has been associated with AmSouth's Trust Investment Group
for over ten years and is currently Vice President and Trust Investment Officer.
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 investment advisory agreements between the Trust and the Advisor,
the fee payable to the Advisor by each Fund for investment advisory services is
the lesser of (a) a fee computed daily and paid monthly at the annual rate of:
forty one hundredths of one percent (.40%) of each Money Market Fund's average
daily net assets; sixty-five one-hundredths of one percent (.65%) of each Income
Fund's average daily net assets; eighty one-hundredths of one percent (.80%) of
each of the Equity, Regional Equity, Balanced, Equity Income and Capital Growth
Fund's average daily net assets; and ninety one-hundredths of one percent (.90%)
of the Small Cap Fund's average daily net assets; or (b) such fee as may from
time to
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time be agreed upon in writing by the Trust and the Advisor. With respect to the
Capital Appreciation Funds, while this fee may be 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 the Advisor 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, the Advisor received
investment advisory fees amounting to .40% of the Prime Obligation Fund's
average net assets, .40% of the AmSouth U.S. Treasury Fund's average net assets
and .20% of the Tax Exempt Fund's average net assets, after voluntary fee
reductions with respect to the Tax Exempt Fund.
During the Trust's fiscal year ended July 31, 1996, after voluntary fee
reductions, the Advisor received investment advisory fees amounting to 0.50% of
the Bond Fund's average net assets, .50% of the Limited Maturity Fund's average
net assets, .30% of the Government Income Fund's average net assets, and .30% of
the Florida Fund's average net assets. The Municipal Bond Fund had not commenced
operations as of July 31, 1996.
During the Trust's fiscal year ended July 31, 1996, the Advisor received
investment advisory fees amounting to .80% of the Equity Fund's average daily
net assets, .80% of the Regional Equity Fund's average daily net assets and .75%
of the Balanced Fund's average daily net assets after voluntary fee reductions
with respect to the Balanced Fund.
Investment Sub-Advisor
Rockhaven Asset Management, LLC ("Rockhaven") serves as sub-advisor to the
Equity Income Fund pursuant to a Sub-Advisory Agreement with the Advisor
("Sub-Advisor"). Under the Sub-Advisory Agreement, the Sub-Advisor 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 the Advisor 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 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,
the Sub-Advisor is entitled to a fee, payable by the Advisor. 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 the Advisor and Sub-Advisor.
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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 August 1, 1991 to January 31, 1997, he was the portfolio manager of the
Federated Equity Income Fund.
The cumulative total return for the Federated Equity Income Fund from
August 1, 1991 through January 31, 1997 was 138.72%. The cumulative total return
for the same period for the Standard & Poor's Composite Stock Price Index ("S&P
500 Index") was 135.09%. At January 31, 1997, the Fund had approximately $970
million in net assets. As portfolio manager of the Federated Equity Income Fund,
Mr. Wiles had full discretionary authority over the selection of investments for
that Fund. Average annual returns for the one-year, three-year, and five-year
periods ended January 31, 1997 and for the entire period during which Mr. Wiles
managed that fund compared with the performance of the S&P 500 Index were:
Federated S&P 500 Lipper Equity
Equity Income Fund(a)(b) Index (c) Income Fund Index (d)
------------------------ --------- ---------------------
One Year 23.03% 26.34% 19.48%
Three Years 16.93% 20.72%
Five Years 16.38% 17.02%
August 1, 1991 through
January 31, 1997 17.11% 16.78%
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(b) During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Federated Equity Income Fund ranged from
.95% to 1.05% of the Fund's average daily net assets.
(c) The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock
market. The Index is adjusted to reflect reinvestment of dividends.
(d) The Lipper Equity Income Fund Index is equally weighted and composed of
the largest mutual funds within its investment objective. These funds seek
high current income and growth of income through investing 60% or more of
their respective portfolios in equity securities.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The
Federated Equity Income Fund is a separate fund and its historical performance
is not indicative of the potential performance of the AmSouth Equity Income
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Fund. Share prices and investment returns will fluctuate reflecting market
conditions, as well as changes in company-specific fundamentals of portfolio
securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager
from August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors in
1990 and served as a Vice President of the Fund's investment advisor from 1992
and Senior Vice President from October, 1996 to January 31, 1997. Mr. Wiles
served as Assistant Vice President of the Fund's investment advisor in 1991. Mr.
Wiles is a Chartered Financial Analyst and received his M.B.A. in Finance from
Cleveland State University.
Administrator and Distributor
ASO Service 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 Funds'
administration and operation. Under management and administration agreements
between the Trust, the fee payable by each Fund to the Administrator for
administration services is the lesser of (a) a fee computed at the annual rate
of twenty one-hundredths of one percent (.20%) of such Income Fund's average
daily net assets or (b) such fee as may from time to time be agreed upon by the
Trust and the Administrator. A fee agreed to from time to time by the Trust and
the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower an Income Fund's
expenses and increase the net income of the Fund during the period when such
lower fee is in effect.
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
amounting to .20% of each Money Market Fund's average daily net assets. During
the Trust's fiscal year ended July 31, 1996, BISYS and ASC received
administration fees, after voluntary fee reductions, amounting to .12% of the
Bond Fund's average daily net assets; .12% of the Limited Maturity Fund's
average daily net assets; .10% of the Government Income Fund's average daily net
assets; .10% of the Florida Fund's average daily net assets; .11% of the Equity
Fund's average daily net assets, .12% of the Regional Equity Fund's average
daily net assets, and .11%of the Balanced Fund's average daily net assets.
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Sub-Administrators
AmSouth serves as a 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 daily net assets.
BISYS Fund Services serves as a Sub-Administrator to the Trust. Pursuant
to its agreement with the Administrator, BISYS is entitled to compensation as
mutually agreed from time to time by it and the Administrator.
Expenses
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Advisor and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for an Fund. No Fund will bear, directly or indirectly, the cost of
any activity primarily intended to result in the distribution of Shares of such
Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Classic, Class B, and
Premier Class of a Fund on the basis of the relative net asset value of each
Class. At present, the only expenses that will be borne solely by Classic and
Class B Shares, other than in accordance with the relative net asset value of
the Class, are expenses under the Servicing Plan with respect to the Classic
Shares and under the Distribution Plan with respect to the Class B Shares.
Banking Laws
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Funds contemplated by its investment
advisory agreement with the Trust and described in this Prospectus without
violation of applicable banking laws and regulations, and has so represented in
its investment advisory agreement with the Trust. Future changes in federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which AmSouth could continue
to perform such services for the Trust. See "MANAGEMENT OF THE TRUST -
Glass-Steagall Act" in the Statement of Additional Information for further
discussion of applicable banking laws and regulations.
-78-
<PAGE> 80
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 Capital
Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity Income Fund, the
AmSouth Bond Fund, the AmSouth Limited Maturity Fund, the AmSouth Municipal Bond
Fund, the AmSouth Balanced Fund, the AmSouth Government Income Fund and the
AmSouth Florida Tax-Free Fund. Each Fund, except the AmSouth Florida Tax-Free
Fund, is diversified for purposes of the 1940 Act. Each Fund offers three
classes of shares: Premier, Classic and Class B Shares, except the AmSouth U.S.
Treasury Fund and Tax Exempt Fund which offer only Premier Shares and Classic
Shares. As of the date of this prospectus, however, Class B Shares are not
offered in the Limited Maturity Fund, Government Income Fund, Florida Fund and
Municipal Bond Fund. Each Share represents an equal proportionate interest in a
Fund with other Shares of the same series, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shares of the Trust are entitled to one vote per share (with proportional
voting for fractional shares) on such matters as Shareholders are entitled to
vote. Shareholders vote in the aggregate and not by series or class on all
matters except (i) when required by the 1940 Act, shares shall be voted by
individual series, (ii) when the Trustees have determined that the matter
affects only the interests of one or more series or class, then only
Shareholders of such series or class shall be entitled to vote thereon, (iii)
only the holders of Classic Shares will be entitled to vote on matters submitted
to Shareholder vote with regard to the Servicing Plan, and (iv) only the holders
of Class B Shares will be entitled to vote on matters submitted to Shareholder
vote with regard to the Distribution Plan.
Overall responsibility for the management of the Trust is vested in the
Board of Trustees. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - Trustees of the
Trust." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION - Miscellaneous" in
the Statement of Additional Information for further information.
The Trust believes that as of May 20, 1997, AmSouth, 1901 Sixth Avenue
North, Birmingham, AL 35203, was the Shareholder of record of 92.43% of the
outstanding shares
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<PAGE> 81
of the Premier Class of the Prime Obligations Fund, 98.20% of the outstanding
shares of the Premier Class of the AmSouth U.S. Treasury Fund, and 99.36% of the
Premier Class of the Tax Exempt Fund. As of May 20, 1997, AmSouth was the
beneficial owner of approximately 70.79% of the outstanding shares of the
Premier Shares of the Prime Obligations Fund, 11.55% of the outstanding shares
of the Premier Shares of the AmSouth U.S. Treasury Fund and 70.23% of the
outstanding shares of the Premier Shares of the Tax Exempt Fund, and may be
deemed to be a "controlling person" of each of the Premier Shares of the Prime
Obligations Fund and the Tax Exempt Fund within the meaning of the Investment
Company Act of 1940.
The Trust believes as of May 20, 1997, AmSouth, 1901 Sixth Avenue North,
Birmingham, AL 35203, was the Shareholder of record of 95.88% of the outstanding
shares of the Bond Fund, 90.99% of the outstanding shares of the Limited
Maturity Fund, 87.86% of the outstanding shares of the Florida Fund; 91.55% of
the outstanding shares of the Equity Fund; 67.67% of the outstanding shares of
the Regional Equity Fund; and 87.49% of the outstanding shares of the Balanced
Fund. As of May 20, 1997, AmSouth was the beneficial owner of approximately
71.48% of the outstanding shares of the Bond Fund, 55.14% of the outstanding
shares of the Limited Maturity Fund; 61.73% of the outstanding shares of the
Equity Fund; 54.68% of the outstanding shares of the Regional Equity Fund; and
81.58% of the outstanding shares of the Balanced Fund and may be deemed to be a
"controlling person" of each of the above-mentioned Funds within the meaning of
the Investment Company Act of 1940.
Custodian
As of April 17, 1997, AmSouth serves as custodian for the Trust
("Custodian"). Pursuant to the Custodian Agreement with the Trust, the Custodian
receives compensation from each Fund for such services in an amount equal to an
asset-based fee.
Transfer Agent and Fund Accounting
BISYS Funds Services Ohio, Inc. serves as transfer agent for and provides
fund accounting services to the Trust.
Performance Information
Municipal Bond Fund
The Municipal Bond Fund commenced operations on July 1, 1997 subsequent to
the transfer of assets by the Tax-Exempt Portfolio, a common trust fund, to the
Municipal Bond Fund in exchange for shares of the
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<PAGE> 82
Municipal Bond Fund. The Municipal Bond Fund's portfolio of investments on July
1, 1997 was the same as the portfolio of the Tax-Exempt Portfolio immediately
prior to the transfer.
The Tax-Exempt Portfolio is not a registered investment company as it is
exempt from registration under the 1940 Act. Since, in a practical sense, the
common trust fund constitutes a "predecessor" of the Fund, the Municipal Bond
Fund calculates the performance for each Class of the Fund for periods
commencing prior to the transfer of the Tax-Exempt Portfolio assets to the
Municipal Bond Fund by including the Tax-Exempt Portfolio's total return
adjusted to reflect the deduction of fees and expenses applicable to the
Premier Shares of the Fund as stated in the Fee Table in this prospectus
(i.e., adjusted to reflect anticipated expenses, net of management and
administrative fee waivers).
The Municipal Bond Fund from time to time may advertise certain investment
performance figures, as discussed below. These figures are based on historical
earnings, but past performance data is not necessarily indicative of future
performance of the Fund.
AVERAGE ANNUAL TOTAL RETURN*
<TABLE>
<CAPTION>
Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio 3.93% 4.95% 5.14% 6.31%
</TABLE>
* Figures do not reflect an imposition of a sales charge given that Premier
Shares of the Municipal Bond Fund are not subject to a sales charge.
The above-quoted performance data includes the performance of the
Tax-Exempt Portfolio for the period before the Municipal Bond Fund commenced
operations adjusted to reflect the deduction of fees and expenses applicable to
the Premier Shares of the Municipal Bond Fund (i.e., adjusted to reflect
anticipated expenses, net of management and administrative fee waivers). The
Tax-Exempt Portfolio was not registered under the 1940 Act and therefore was not
subject to certain investment restrictions imposed by the Act. If the
Tax-Exempt Portfolio had been registered under the 1940 Act, its performance
may have been adversely affected.
Money Market Funds
From time to time, the Money Market Funds' annualized "yield" and
"effective yield" and total return may be presented in advertisements and sales
literature.
The "yield" of a Money Market Fund is based upon the income earned by the
Money Market Fund over a seven-day period and then annualized, i.e. the income
earned in the period is assumed to be earned every seven days over a 52-week
period and is stated as a percentage of the investment. The "effective yield" of
a Money Market Fund is calculated similarly but when annualized, the income
earned by the investment is assumed to be reinvested in Shares of the Fund and
thus compounded in the course of a 52-week period. The effective yield will be
higher than the yield because of the compounding effect of this assumed
reinvestment.
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<PAGE> 83
The Tax Exempt Fund may also present its "tax equivalent yield" and "tax
equivalent effective yield" which reflect the amount of income subject to
federal income taxation that a taxpayer in a stated tax bracket would have to
earn in order to obtain the same after-tax income as that derived from the yield
and effective yield, respectively, of the Tax Exempt Fund. The tax equivalent
yield and tax equivalent effective yield will be significantly higher than the
yield and effective yield of the Tax Exempt Fund.
Total return is calculated for the past year, five years (if applicable)
and the period since the establishment of a Money Market Fund. Average annual
total return is measured by comparing the value of an investment in a Money
Market Fund at the beginning of the relevant period to the redemption value of
the investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Income Funds and Capital Appreciation Funds
From time to time performance information for the Premier Shares of a Fund
showing its total return and/or yield may be presented in advertisements, sales
literature and Shareholder reports. Total return will be calculated for the past
year, five years (if applicable) and the period since the establishment of a
Fund. Average annual total return is measured by comparing the value of an
investment in a Fund at the beginning of the relevant period to the redemption
value of the investment at the end of the period (assuming the investor paid the
maximum sales load on the investment and assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield will be computed by dividing a Fund's net investment income
per share earned during a recent one-month period by the Fund's per share
maximum offering price (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last day of the period and annualizing the
result. Each Fund may also present its total return and/or yield excluding the
effect of the sales charge.
The Tax-Free Funds may also present its "tax equivalent yield" which
reflects the amount of income subject to federal income taxation that a taxpayer
in a stated tax bracket would have to earn in order to obtain the same after-tax
income as that derived from the yield of the Funds. The tax equivalent yield
will be significantly higher than the yield of the Tax-Free Funds.
General
Yield, effective yield, tax-equivalent yield, and total return will be
calculated separately for each Class of Shares. Because Premier Shares are not
subject to a distribution and/or
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<PAGE> 84
shareholder services fee, the yield and total return for Premier Shares will be
higher than that of the Classic and Class B Shares for the same period.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. Comparisons may also
be made to indices or data published in Money Magazine, Forbes, Barron's, The
Wall Street Journal, The New York Times, Business Week, American Banker,
Fortune, Institutional Investor, Ibbotson Associates, Inc., Morningstar Inc.,
CDA/Wiesenberger, Pensions and Investments, U.S.A. Today, and local newspapers.
In addition to performance information, general information about these Funds
that appears in a publication such as those mentioned above may be included in
advertisements, sales literature and in reports to Shareholders. Additional
performance information is contained in the Trust's Annual Report, which is
available free of charge by calling the number on the front page of the
prospectus.
Information about each Fund's performance is based on the Fund's record up
to a certain date and is not intended to indicate future performance. Yield and
total return are functions of the type and quality of instruments held in Fund,
operating expenses and market conditions. Yields and total return of each Fund
will fluctuate. Any fees charged by AmSouth with respect to accounts investing
in Shares of a Fund will not be included in performance calculations.
Miscellaneous
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Fund upon
the issuance or sale of Shares in that Group, together with all income,
earnings, profits, and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange, or liquidation of such investments, and
any funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund in proportion to the relative net assets of
the respective Funds at the time of allocation. The timing of allocations of
general assets and general liabilities and expenses of the Trust to particular
Funds will be
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<PAGE> 85
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
P.O. Box 182733, Columbus, Ohio 43218-2733, or by calling toll free (800)
451-8382.
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<PAGE> 86
AMSOUTH MUTUAL FUNDS
INVESTMENT ADVISOR
AmSouth Bank
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
DISTRIBUTOR
BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005-3333
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
AUDITORS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
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<PAGE> 87
TABLE OF CONTENTS
Page
----
Fee Table ........................................................
Financial Highlights .............................................
Investment Objective and Policies ..............................
Investment Techniques ...........................................
Investment Restrictions ..........................................
Valuation of Shares ..............................................
How to Purchase and Redeem Shares ..............................
Dividends and Taxes ..............................................
Management of the AmSouth Mutual Funds............................
General Information .............................................
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.
-86-
<PAGE> 88
AMSOUTH MUTUAL FUNDS
AmSouth Bank
Investment Advisor
BISYS FUND SERVICES, LIMITED PARTNERSHIP
Prospectus dated September 1, 1997
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<PAGE> 89
CROSS REFERENCE SHEET
- ---------------------
Part A
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
PROSPECTUS FOR AMSOUTH PRIME OBLIGATIONS
----------------------------------------
FUND, AMSOUTH U.S. TREASURY FUND AND
------------------------------------
AMSOUTH TAX EXEMPT FUND
-----------------------
CLASSIC SHARES AND CLASS B SHARES
---------------------------------
1. Cover Page ........................ Cover Page
2. Synopsis .......................... Fee Table
3. Condensed Financial
Information ...................... Financial Highlights
4. General Description
of Registrant .................... The Trust; Investment
Objective and Policies;
Investment Restrictions;
General Information -
Description of the Trust
and Its Shares
5. Management of the Fund ............ Management of AmSouth
Mutual Funds; General
Information - Custodian
and Transfer Agent
6. Capital Stock and
Other Securities ................. The Trust; How to Purchase
and Redeem Shares;
Dividends and Taxes;
General Information -
Description of the Trust
and Its Shares; General
Information -Miscellaneous
7. Purchase of Securities
Being Offered ..................... Valuation of Shares;
How to Purchase and
Redeem Shares
8. Redemption or Repurchase .......... How to Purchase and
Redeem Shares
9. Legal Proceedings ................. Inapplicable
-1-
<PAGE> 90
AMSOUTH MUTUAL FUNDS
MONEY MARKET FUNDS
CLASSIC SHARES AND CLASS B SHARES
---------------------------------
3435 Stelzer Road For current yield,
Columbus, Ohio 43219 purchase, and redemption
information, call (800) 451-8382
The AmSouth Mutual Funds Money Market Funds (the "Money Market Funds") are
three 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. All securities or instruments in which the Money Market
Funds invest have remaining maturities of 397 days or less. Each Money Market
Fund seeks to maintain a constant net asset value of $1.00 per unit of
beneficial interest, but there can be no assurance that net asset value will not
vary.
AMSOUTH PRIME OBLIGATIONS FUND (the "Prime Obligations Fund") seeks
current income with liquidity and stability of principal. The Prime Obligations
Fund invests in high quality United States dollar-denominated money market
instruments and other high-quality United States dollar-denominated instruments.
AMSOUTH U.S. TREASURY FUND (the "AmSouth U.S. Treasury Fund") seeks
current income with liquidity and stability of principal. The AmSouth U.S.
Treasury Fund invests exclusively in short-term obligations issued by the U.S.
Treasury, some of which may be subject to repurchase agreements collateralized
by U.S. Treasury obligations.
AMSOUTH TAX EXEMPT FUND (the "Tax Exempt Fund") seeks to produce as high a
level of current interest income exempt from federal income taxes as is
consistent with the preservation of capital and relative stability of principal.
The Tax Exempt Fund seeks to achieve this objective by investing in short-term
high-quality obligations. While the Tax Exempt Fund may invest in short-term
taxable obligations, under normal market conditions at least 80% of the Tax
Exempt Fund's total assets will be invested in obligations exempt from federal
income tax.
AmSouth Bank , Birmingham, Alabama ("AmSouth"), acts as the investment
advisor to each Money Market Fund ("Advisor"). BISYS Fund Services, Limited
Partnership ("BISYS Fund Services"), Columbus, Ohio, acts as distributor to each
Money Market Fund ("Distributor").
The Prime Obligations Fund has been divided into three classes of Shares:
Premier Shares, Classic Shares, and Class B Shares and the AmSouth U.S. Treasury
<PAGE> 91
Fund and Tax Exempt Fund have been divided into two classes of Shares:
Premier Shares and Classic Shares. The following investors qualify to purchase a
Money Market Fund's Premier Shares: (i) investors for whom AmSouth acts in a
fiduciary, advisory, custodial, agency or similar capacity through an account
with its Trust Department ; (ii) investors who purchase Shares of a Money Market
Fund through a 401(k) plan or a 403(b) plan which by its terms permits purchases
of Shares; and (iii) orders placed on behalf of other investment companies
distributed by the Distributor and its affiliated companies. All other investors
are eligible to purchase only Classic Shares of the Money Market Funds. Class B
Shares of the Prime Obligations Fund only are available to Shareholders of Class
B Shares of another Fund who wish to exchange their Class B Shares of such other
Fund for Class B Shares of the Prime Obligations Fund.
This Prospectus relates only to the Classic Shares of the Money Market
Funds and Class B Shares of the Prime Obligations Fund which are offered to the
general public. Through a separate Prospectus, the Trust also offers Premier
Shares of the Money Market Funds. Interested persons who wish to obtain a copy
of the prospectuses of the AmSouth Equity Fund, the AmSouth Regional Equity
Fund, the AmSouth Balanced Fund, the AmSouth Capital Growth Fund, the AmSouth
Small Cap Fund, and the AmSouth Equity Income Fund (the "Capital Appreciation
Funds"); the AmSouth Bond Fund, the AmSouth Limited Maturity Fund, the AmSouth
Government Income Fund, the AmSouth Municipal Bond Fund, and the AmSouth Florida
Tax-Free Fund (the "Income Funds") may contact the Distributor at the telephone
number shown above. Additional information about the Money Market Funds,
contained in a Statement of Additional Information, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by writing to the Trust at its address or by calling the Trust at the telephone
number shown above. The Statement of Additional Information bears the same date
as this Prospectus and is incorporated by reference in its entirety into this
Prospectus.
This Prospectus sets forth concisely the information about the Classic
Shares and Class B Shares of the Money Market Funds that a prospective investor
ought to know before investing. Investors should read this Prospectus and retain
it for future reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
ENDORSED OR GUARANTEED BY AMSOUTH OR ANY OF ITS AFFILIATES.
THE TRUST'S SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR BY ANY OTHER AGENCY. AN INVESTMENT IN
THE TRUST'S SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
------------
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED
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<PAGE> 92
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION")
OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION OF THE
CONTRARY IS A CRIMINAL OFFENSE.
------------
The date of this Prospectus is September 1, 1997.
-3-
<PAGE> 93
<TABLE>
<CAPTION>
FEE TABLE
AmSouth
Prime Obligations U.S. Treasury Tax
Fund Fund Exempt Fund
-------------------- -------------------- --------------------
Classic Class B Classic Classic
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed
on Purchases (as a percentage
of offering price) 0% 0% 0% 0%
Maximum Sales Load Imposed
on Reinvested Dividends
(as a percentage of offering price) 0% 0% 0% 0%
Deferred Sales Load (as
a percentage of original
purchase price or redemption
proceeds, as applicable) 0% 5.00% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable)(2) 0% 0% 0% 0%
Exchange Fee $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees (after voluntary .40% .40% .40% .20%
fee reduction for the Tax Exempt
Fund)(3)
12b-1 Fees .00% 1.00% .00% .00%
Shareholder Servicing Fees(4)
(after voluntary fee reductions
for the Classic Shares) .10% .00% .10% .10%
Other Expenses .31% .31% .32% .38%
Total Fund Operating Expenses(5)
(after voluntary fee reductions
for the Classic Shares) .81% 1.71% .82% .68%
</TABLE>
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<PAGE> 94
(1) Financial Institutions may charge a Customer's (as defined in the
Prospectus) account fees for automatic investment and other cash management
services provided in connection with investment in a Money Market Fund. (See
"HOW TO PURCHASE AND REDEEM SHARES - Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire
redemption payment made at the request of a shareholder. (See "HOW TO PURCHASE
AND REDEEM SHARES - Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management
Fees as a percentage of average net assets would be .40% for the Tax Exempt
Fund. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS -INVESTMENT ADVISOR.")
(4) Absent the voluntary reduction of shareholder servicing fees,
Shareholder Servicing Fees as a percentage of average net assets would be .25%
for the Classic Shares of each Money Market Fund.
(5) In the absence of any voluntary reduction in shareholder servicing and
investment advisory fees, Total Fund Operating Expenses for the Classic Shares
of the Prime Obligations Fund would be .96%, for the AmSouth U.S. Treasury Fund
would be .97%, and for the Tax Exempt Fund would be 1.03%.
Example
You would pay the following expenses on a $1,000 investment in Classic
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Fund $8 $26 $45 $100
AmSouth U.S. Treasury Fund $8 $26 $46 $101
Tax Exempt Fund $7 $22 $38 $85
</TABLE>
You would pay the following expenses on a $1,000 investment in Class B
Shares, assuming (1) deduction of the applicable Contingent Deferred Sales
Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Fund
Assuming a complete
redemption at end of period $67 $84 $113 $178
Assuming no redemption $17 $54 $93 $178
</TABLE>
The purpose of the tables above is to assist an investor in Classic Shares
or Class B Shares of a Money Market Fund in understanding the various costs and
expenses that an investor in a Fund will bear directly or indirectly. See
"MANAGEMENT OF AMSOUTH MUTUAL FUNDS" for a more complete discussion of annual
operating expenses of the Money Market Funds.
THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
-5-
<PAGE> 95
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Funds for the period of commencement of
operations to January 31, 1997. The information from the commencement of
operations to July 31, 1996 is a part of the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants for the Trust, whose report on
the Trust's financial statements for the year ended July 31, 1996 appears in the
Statement of Additional Information. The information for the period ended
January 31, 1997 is unaudited. Further financial data is incorporated by
reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Prime Obligations Fund
----------------------
Year Ended July 31,
-------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Classic (b) Classic (b)
----------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.024 0.050 0.050 0.029 0.027
-------- -------- -------- -------- --------
Distributions
Net investment income (0.024) (0.050) (0.050) (0.029) (0.027)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
======== ======== ======== ======== ========
Total Return 2.41%(d) 5.07%(f) 5.14% 2.94% 2.76%
Ratios/Supplemental Data:
Net Assets at end of period (000) $108,985 $125,075 $617,673 $577,331 $456,428
Ratio of expenses to average net assets 0.78%(c) 0.81%(c) 0.69% 0.70% 0.71%
Ratio of net investment income to average net assets 4.73%(c) 4.61%(c) 5.04% 2.92% 2.73%
Ratio of expenses to average net assets* 0.93%(c) 0.96%(c) (e) (e) (e)
Ratio of net investment income to average net assets* 4.58%(c) 4.46%(c) (e) (e) (e)
<CAPTION>
Prime Obligations Fund
Year Ended July 31,
-------------------------------------------------
August 8,
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities
Net investment income 0.042 0.067 0.079 0.084
-------- -------- -------- --------
Distributions
Net investment income (0.042) (0.067) (0.079) (0.084)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return 4.28% 6.87% 8.16% 8.72%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $457,511 $307,873 $298,498 $293,749
Ratio of expenses to average net assets 0.71% 0.72% 0.70% 0.58%(c)
Ratio of net investment income to average net assets 4.08% 6.61% 7.88% 8.69%(c)
Ratio of expenses to average net assets* (e) (e) 0.72% 0.71%(c)
Ratio of net investment income to average net assets* (e) (e) 7.86% 8.56%(c)
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
(e) There were no waivers during the period.
(f) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Classic Shares for
the period from April 1, 1996 to July 31, 1996.
-6-
<PAGE> 96
<TABLE>
<CAPTION>
AmSouth U.S. Treasury Fund
--------------------------
Year Ended July 31,
-------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994
---- ---- ---- ----
Classic (b) Classic (b)
----------- -----------
(Unaudited)
-----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities
Net investment income 0.023 0.048 0.048 0.028
-------- -------- -------- --------
Distributions
Net investment income (0.023) (0.048) (0.048) (0.028)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return 2.28%(d) 4.90%(f) 4.90% 2.80%
Ratios/Supplemental Data:
Net Assets at end of period (000) $11,559 $12,263 $322,939 $300,603
Ratio of expenses to average net assets 0.80%(c) 0.82%(c) 0.70% 0.71%
Ratio of net investment income to average net assets 4.48%(c) 4.44%(c) 4.81% 2.77%
Ratio of expenses to average net assets* 0.95%(c) 0.97%(c) (e) (e)
Ratio of net investment income to average net assets* 4.33%(c) 4.29%(c) (e) (e)
<CAPTION>
AmSouth U.S. Treasury Fund
--------------------------
Year Ended July 31,
-------------------------------------
September 8,
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income 0.027 0.041 0.064 0.077 0.075
-------- -------- -------- -------- --------
Distributions
Net investment income (0.027) (0.041) (0.064) (0.077) (0.075)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return 2.69% 4.15% 6.58% 8.04% 7.75%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $404,473 $339,666 $343,967 $239,291 $131,956
Ratio of expenses to average net assets 0.72% 0.73% 0.72% 0.68% 0.61%(c)
Ratio of net investment income to average net assets 2.66% 4.08% 6.28% 7.73% 8.31%(c)
Ratio of expenses to average net assets* (e) (e) (e) 0.73% 0.74%(c)
Ratio of net investment income to average net assets* (e) (e) (e) 7.68% 8.18%(c)
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
(e) There were no waivers during the period.
(f) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Classic Shares for
the period from April 1, 1996 to July 31, 1996.
-7-
<PAGE> 97
<TABLE>
<CAPTION>
Tax Exempt Fund
Year Ended July 31,
-------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994
-------- -------- -------- --------
Classic (b) Classic (b)
----------- -----------
(Unaudited)
-----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities
Net investment income 0.149 0.031 0.032 0.019
-------- -------- -------- --------
Distributions
Net investment income (0.149) (0.031) (0.032) (0.019)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return 1.50%(d) 3.12%(e) 3.22% 1.95%
Ratios/Supplemental Data:
Net Assets at end of period (000) $16,390 $17,116 $57,640 $60,923
Ratio of expenses to average net assets 0.61%(c) 0.68%(c) 0.54% 0.57%
Ratio of net investment income to average net assets 2.96%(c) 2.82%(c) 3.15% 1.93%
Ratio of expenses to average net assets* 0.96%(c) 1.03%(c) 0.74% 0.77%
Ratio of net investment income to average net assets* 2.61%(c) 2.47%(c) 2.95% 1.73%
<CAPTION>
Tax Exempt Fund
---------------
Year Ended July 31,
-------------------------------------
June 27
1988 to
July 31,
1993 1992 1991 1990 (a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $1.000 $ 1.000
-------- -------- -------- --------
Investment Activities
Net investment income 0.021 0.030 0.046 0.011
-------- -------- -------- --------
Distributions
Net investment income (0.021) (0.030) (0.046) (0.011)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return 2.16% 3.12% 4.69% 0.54%(d)
Ratios/Supplemental Data:
Net Assets at end of period (000) $ 48,151 $ 38,392 $ 25,400 $28,246
Ratio of expenses to average net assets 0.49% 0.65% 0.52% 0.21%(c)
Ratio of net investment income to average net assets 2.12% 2.98% 4.59% 5.70%(c)
Ratio of expenses to average net assets* 0.78% 0.77% 0.77% 0.81%(c)
Ratio of net investment income to average net assets* 1.83% 2.86% 4.34% 5.10%(c)
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized.
(d) Not annualized.
(e) Represents the total return for the Premier Shares for the period from
August 1, 1995 to March 31, 1996 plus the total return for the Classic
Shares for the period from April 1, 1996 to July 31, 1996.
-8-
<PAGE> 98
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Prime Obligations Fund and the AmSouth
U.S. Treasury Fund is to seek current income with liquidity and stability of
principal. The investment objective of the Tax Exempt Fund is to seek as high a
level of current interest income exempt from federal income taxes as is
consistent with the preservation of capital and relative stability of principal.
Although the Prime Obligations Fund and the AmSouth U.S. Treasury Fund have the
same Advisor and the same investment objective, their particular portfolio
securities and yield will ordinarily differ due to differences in the types of
investments permitted, cash flow, and the availability of particular portfolio
investments. Market conditions and interest rates may affect the types and
yields of securities held in each Fund. The investment objective of each Money
Market Fund is fundamental and may not be changed without a vote of the
outstanding Shares of that Fund (as defined below under "GENERAL INFORMATION -
Miscellaneous.") There can be, of course, no assurance that any Money Market
Fund will achieve its investment objective.
Changes in prevailing interest rates may affect the yield, and possibly
the net asset value, of each Fund. Each of the Money Market Funds invests only
in those securities and instruments considered by the Advisor to present minimal
credit risks under guidelines established by the Trust's Board of Trustees. All
securities or instruments in which each of the Money Market Funds invest have
remaining maturities of 397 days or less, although instruments subject to
repurchase agreements (and, in the case of the Tax Exempt Fund, certain variable
rate and floating rate instruments subject to demand features) may bear longer
maturities. The dollar-weighted average maturity of the securities in each Money
Market Fund will not exceed 90 days.
The Tax Exempt Fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital appreciation.
Investment in the Tax Exempt Fund would not be appropriate for tax-deferred
plans, such as IRA and Keogh plans. Investors should consult a tax or other
financial adviser to determine whether investment in the Tax Exempt Fund would
be appropriate.
The Prime Obligations Fund invests in U.S. dollar-denominated,
high-quality short-term debt instruments. Investments will be limited to those
obligations which, at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical rating organizations
(an "NRSRO") (for example, commercial paper rated "A-1" by Standard & Poor's
Corporation and "P-1" by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) do not possess a rating (i.e., are unrated) but are
determined to be of comparable quality to the rated instruments eligible for
purchase by the Fund under the guidelines adopted by the Trustees. The Statement
of Additional Information contains further information concerning the rating and
other requirements governing the Prime Obligation Fund's investments, including
information relating to the treatment of securities subject to a tender or
demand feature and securities deemed to possess a rating based on comparable
rated securities of the same issuer. The Statement also identifies the NRSROs
that may be utilized by the Advisor with respect to
-9-
<PAGE> 99
portfolio investments for the Fund and provides a description of the relevant
ratings assigned by each such NRSRO.
The Prime Obligations Fund will invest in a variety of U.S. Treasury
obligations, differing in their interest rates, maturities, and times of
issuance, and other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association, are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others, such as
those of the Federal Farm Credit Bank or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Prime Obligations Fund will invest in the
obligations of such agencies or instrumentalities only when the Advisor believes
that the credit risk with respect thereto is minimal.
The Prime Obligations Fund may invest in bankers' acceptances guaranteed
by domestic and foreign banks if at the time of investment the guarantor bank
has capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements). The Prime Obligations
Fund may invest in certificates of deposit and demand and time deposits of
domestic and foreign banks and savings and loan associations if (a) at the time
of investment the depository institution has capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation.
The Prime Obligations Fund may also invest in Eurodollar Certificates of
Deposits ("ECDs") which are U.S. dollar denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar denominated
deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time
Deposits ("CTDs") which are essentially the same as ETDs except they are issued
by Canadian offices of major Canadian banks; and Yankee Certificates of Deposit
("Yankee CDs") which are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States.
The Prime Obligations Fund will not invest in excess of 10% of its net
assets in time deposits, including ETDs and CTDs but not including certificates
of deposit, with maturities in excess of seven days which are subject to
penalties upon early withdrawal.
-10-
<PAGE> 100
The Prime Obligations Fund may invest in commercial paper (including
variable amount master demand notes) issued by U.S. or foreign corporations. The
Prime Obligations Fund may also invest in Canadian Commercial Paper ("CCP"),
which is commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar
denominated commercial paper of a foreign issuer.
Variable amount master demand notes in which the Prime Obligations Fund
may invest are unsecured demand notes that permit the indebtedness thereunder to
vary, and that provide for periodic adjustments in the interest rate according
to the terms of the instrument. Because master demand notes are direct lending
arrangements between the Prime Obligations Fund and the issuer, they are not
normally traded. Although there is no secondary market in the notes, the Prime
Obligations Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as to quality as set forth above for commercial paper. The Advisor will consider
the earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand. The period of time remaining until the principal
amount can be recovered under a variable master demand note may not exceed seven
days.
Investments in ECDs, ETDs, CTDs, Yankee CDs, CCP, and Europaper may
subject the Prime Obligations Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of foreign withholding taxes on interest income,
possible seizure, currency blockage, nationalization, or expropriation of
foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely effect
the payment of principal and interest on such obligations. In addition, foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting, and
record keeping standards than those applicable to domestic branches of U.S.
banks. The Prime Obligations Fund will acquire securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers only when the
Advisor believes that the risks associated with such instruments are minimal and
only when such instruments are denominated and payable in United States dollars.
The Prime Obligations Fund may invest in funding agreements ("Funding
Agreements"), also known as guaranteed investment contracts, issued by insurance
companies. Pursuant to such agreements, the Prime Obligations Fund invests an
amount of cash with an insurance company and the insurance company credits such
investment on a monthly basis with guaranteed interest which is based on an
index. The Funding Agreements provide that this guaranteed interest will
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<PAGE> 101
not be less than a certain minimum rate. The Funding Agreements provide for
adjustment of the interest rate monthly and are considered variable rate
instruments. The Prime Obligations Fund will only purchase a Funding Agreement
(i) when the Advisor has determined, under guidelines established by the Board
of Trustees, that the Funding Agreement presents minimal credit risks to the
Prime Obligations Fund and is of comparable quality to instruments that are
rated high quality by an NRSRO that is not an affiliated person, as defined in
the Investment Company Act of 1940, of the issuer, or any insurer, guarantor, or
provider of credit support for the instrument and (ii) if it may receive all
principal of and accrued interest on a Funding Agreement at any time upon thirty
days' written notice. Because the Prime Obligations Fund may not receive the
principal amount of a Funding Agreement from the insurance company on seven
days' notice or less, the Funding Agreement is considered an illiquid
investment, and, together with other instruments in the Fund which are not
readily marketable, may not exceed 10% of the Fund's net assets. In determining
average weighted portfolio maturity, a Funding Agreement will be deemed to have
a maturity equal to 30 days, representing the period of time remaining until the
principal amount can be recovered through demand.
The Prime Obligations Fund may invest in the securities of other money
market funds that have similar policies and objectives, invest in securities of
equal or higher short-term ratings, and are in compliance with Rule 2a-7 under
the Investment Company Act of 1940.
The Prime Obligations Fund may also invest in short-term municipal
obligations.
Asset-Backed Securities
The Prime Obligations Fund may invest in securities backed by automobile
receivables and credit-card receivables and other securities backed by other
types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period. The CARDS principal balance remains constant during this
period, while any cardholder repayments or new
-12-
<PAGE> 102
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
Cash flows on CARDS are certain during the interest-only period. After this
initial interest-only period, the cash flow will depend on how fast cardholders
repay their borrowings. Historically, monthly cardholder repayment rates have
been relatively fast. As a consequence, CARDS amortize rapidly after the end of
the interest-only period. During this amortization period, the principal
payments on CARDS depend specifically on the method for allocating cardholder
repayments to investors. In many cases, the investor's participation is based on
the ratio of the CARDS' balance to the total credit card portfolio balance. This
ratio can be adjusted monthly or can be based on the balances at the beginning
of the amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. Asset-backed securities purchased by the Prime Obligations
Fund will be subject to the same quality requirements as other securities
purchased by the Fund.
The AmSouth U.S. Treasury Fund invests exclusively in short-term United
States dollar-denominated obligations issued by the U.S. Treasury. Such
obligations may include "stripped" U.S. Treasury obligations such as Treasury
Receipts issued by the U.S. Treasury representing either future interest or
principal payments. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment on the security and does not receive any rights to periodic
interest payments on the security. These securities may exhibit greater price
volatility then ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Obligations purchased by the
AmSouth U.S. Treasury Fund may be subject to repurchase agreements
collateralized by the underlying U.S. Treasury obligation.
The Tax Exempt Fund invests primarily in bonds and notes issued by or on
behalf of states (including the District of Columbia), territories, and
possessions of the United States and their respective authorities, agencies,
instrumentalities, and political subdivisions, the interest on which is both
exempt from federal income tax and not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Municipal Securities")
and which generally have remaining maturities of one year or less. The Tax
Exempt Fund may also invest up to 10% of the value of its total assets in the
securities of money market mutual funds which invest primarily in obligations
exempt from federal income tax. The Tax Exempt Fund will incur additional
expenses due to the duplication of expenses as a result of investing in
securities of such money market mutual funds. Additional restrictions on the Tax
Exempt Fund's investments in the securities of such money market funds are
contained in the Statement of Additional Information. As a fundamental policy,
under normal market conditions at least 80% of the Tax
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<PAGE> 103
Exempt Fund's total assets will be invested in Municipal Securities and in
securities of money market mutual funds which invest primarily in obligations
exempt from federal income tax.
It is a fundamental policy that, under normal market conditions, the Tax
Exempt Fund may invest up to 20% of its total assets in obligations, the
interest on which is either subject to regular federal income tax or treated as
a preference item for purposes of the federal alternative minimum tax for
individuals ("Taxable Obligations"). At times, the Advisor may determine that,
because of unstable conditions in the markets for Municipal Securities, pursuing
the Tax Exempt Fund's investment objective is inconsistent with the best
interests of the Shareholders of the Tax Exempt Fund. At such times, the Advisor
may use temporary defensive strategies differing from those designed to achieve
the Tax Exempt Fund's investment objective, by increasing the Tax Exempt Fund's
holdings in short-term Taxable Obligations to over 20% of the Tax Exempt Fund's
total assets and by holding uninvested cash reserves pending investment. Taxable
Obligations may include obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (some of which may be subject to repurchase
agreements), certificates of deposit and bankers' acceptances of selected banks,
and commercial paper meeting the Tax Exempt Fund's quality standards (as
described below) for tax-exempt commercial paper. These obligations are
described further in the Statement of Additional Information.
The Tax Exempt Fund may also invest in private activity bonds ("industrial
development bonds" under prior law). Interest on private activity bonds (and
industrial development bonds) is fully tax-exempt only if the bonds fall within
certain defined categories of qualified private activity bonds and meet the
requirements specified in those respective categories. Regardless of whether
they qualify for tax-exempt status, private activity bonds may subject both
individual and corporate investors to tax liability under the alternative
minimum tax. However, private activity bonds will only be considered Municipal
Securities for the purposes of this Prospectus if they do not have this effect
regarding individuals. For additional information on the federal alternative
minimum tax see "DIVIDENDS AND TAXES" below.
The Tax Exempt Fund will invest only in those Municipal Securities and
other obligations which are considered by the Advisor, pursuant to guidelines
approved by the Board of Trustees, to present minimal credit risks. In addition,
investments will be limited to those obligations which, at the time of purchase,
(i) possess one of the two highest short-term ratings from an NRSRO in the case
of single-rated securities or (ii) possess, in the case of multiple-rated
securities, one of the two highest short-term ratings by at least two NRSROs; or
(iii) do not possess a rating (i.e., are unrated) but are determined by the
Advisor to be of comparable quality to the rated instruments eligible for
purchase by the Fund under the guidelines adopted by the Trustees. The Statement
of Additional Information contains further information concerning the rating and
other requirements governing the Tax Exempt Fund's investments, including
information relating to the treatment of securities subject to a tender or
demand feature and securities deemed to possess a rating based on comparable
rated securities of the same issuer. The Statement of Additional Information
also identifies the NRSROs that may be utilized by
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<PAGE> 104
the Advisor with respect to portfolio investments for the Fund and provides a
description of the relevant ratings assigned by each such NRSRO.
The two principal classifications of Municipal Securities which may be
held by the Tax Exempt Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Tax Exempt Fund are
in most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of private activity
bonds is usually directly related to the credit standing of the corporate user
of the facility involved.
Municipal Securities in which the Tax Exempt Fund may invest may also
include "moral obligation" bonds, which are normally issued by special purpose
public authorities. If the issuer of moral obligation bonds is unable to meet
its debt service obligations from current revenues, it may draw on a reserve
fund, the restoration of which is a moral commitment but not a legal obligation
of the state or municipality that created the issuer.
Municipal Securities purchased by the Tax Exempt Fund may include rated
and unrated variable and floating rate tax-exempt notes, which may have a stated
maturity in excess of one year but which will, in such event, be subject to a
demand feature that will permit the Tax Exempt Fund to demand payment of the
principal of the note either (i) at any time upon not more than thirty days'
notice or (ii) at specified intervals not exceeding one year and upon no more
than thirty days' notice. There may be no active secondary market with respect
to a particular variable or floating rate note. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to the Tax
Exempt Fund will approximate their par value. The Tax Exempt Fund may acquire
zero coupon obligations, which have greater price volatility than coupon
obligations and which will not result in the payment of interest until maturity.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Tax
Exempt Fund nor its Advisor will review the proceedings relating to the issuance
of Municipal Securities or the basis for such opinions.
Although the Tax Exempt Fund presently does not intend to do so on a
regular basis, it may invest more than 25% of its total assets in Municipal
Securities which are related in such a way that an economic, business, or
political development or change affecting one such security would likewise
affect the other Municipal Securities. Examples of such securities are
obligations the repayment of which is dependent upon similar types of projects
or projects located in the same state. Such investments would be made only if
deemed necessary or appropriate by the Advisor. To the extent that the Tax
Exempt Fund's assets are concentrated in Municipal
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Securities that are so related, the Tax Exempt Fund will be subject to the
peculiar risks presented by such Municipal Securities, such as negative
developments in a particular industry or state, to a greater extent than it
would be if the Tax Exempt Fund's assets were not so concentrated.
The Tax Exempt Fund may also purchase Municipal Securities on a
"when-issued" basis. "When-issued" securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield thereby
involving the risk that the yield obtained in the transaction will be less than
that available in the market when delivery takes place. The Tax Exempt Fund will
generally not pay for such securities and no income accrues on the securities
until they are received. When the Tax Exempt Fund agrees to purchase securities
on a "when-issued" basis, the Trust's custodian will set aside cash or liquid
securities equal to the amount of the commitment in a segregated account.
Securities purchased on a "when-issued" basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Tax Exempt Fund expects that commitments to purchase "when-issued"
securities will not exceed 25% of the value of its total assets under normal
market conditions, and that a commitment by the Tax Exempt Fund to purchase
"when-issued" securities will not exceed 60 days. In the event its commitments
to purchase "when-issued" securities ever exceeded 25% of the value of its total
assets, the Tax Exempt Fund's liquidity and the Advisor's ability to manage it
might be adversely affected. The Tax Exempt Fund does not intend to purchase
"when-issued" securities for speculative purposes but only for the purpose of
acquiring portfolio securities.
The Tax Exempt Fund may acquire "puts" with respect to Municipal
Securities held in its portfolio. Under a put, the Tax Exempt Fund would have
the right to sell a specified Municipal Security within a specified period of
time at a specified price to a third party. A put would be sold, transferred, or
assigned only with the underlying Municipal Security. The Tax Exempt Fund will
acquire puts solely to either facilitate portfolio liquidity, shorten the
maturity of the underlying Municipal Securities, or permit the investment of the
Tax Exempt Fund's funds at a more favorable rate of return. The aggregate price
of a security subject to a put may be higher
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than the price which otherwise would be paid for the security without such an
option, thereby increasing the security's cost and reducing its yield.
Repurchase Agreements
Securities held by the Money Market Funds may be subject to repurchase
agreements. If the seller under a repurchase agreement were to default on its
repurchase obligation or become insolvent, a Money Market Fund would suffer a
loss to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Money Market Fund were
delayed pending court action. Additionally, if the seller should be involved in
bankruptcy or insolvency proceedings, the Money Market Fund may incur delays and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Money Market Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate. Except as
described below under "Investment Restrictions" there is no aggregate limitation
on the amount of any Money Market Fund's total assets that may be invested in
instruments which are subject to repurchase agreements.
Reverse Repurchase Agreements
Each Money Market Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Money Market Fund
would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Money Market Fund may decline below the price at which
the Money Market Fund is obligated to repurchase the securities.
INVESTMENT RESTRICTIONS
Each of the Money Market Funds is subject to a number of investment
restrictions that may be changed only by a vote of a majority of the outstanding
Shares of that Fund (see "GENERAL INFORMATION -- Miscellaneous" in this
prospectus).
Prime Obligations Fund
The Prime Obligations Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Prime
Obligations Fund's total assets would be invested in such issuer, except that
25% or less of the value of the Prime Obligations Fund's total assets may be
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invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of
the Prime Obligations Fund's total assets at the time of purchase to be invested
in securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, bank certificates of deposit or bankers'
acceptances issued by a domestic bank or by a U.S. branch of a foreign bank
provided that such U.S. branch is subject to the same regulation as United
States banks, and repurchase agreements secured by bank instruments or
obligations of the U.S. Government or its agencies or instrumentalities; (b)
wholly owned finance companies will be 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.
AmSouth U.S. Treasury Fund
The AmSouth U.S. Treasury Fund may not purchase securities other than
bills, notes, and bonds issued by the U.S. Treasury, certain of which securities
may be subject to repurchase agreements collateralized by the underlying U.S.
Treasury obligation.
Tax Exempt Fund
The Tax Exempt Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the Tax
Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax Exempt
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
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3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax Exempt Fund's assets.
Prime Obligations Fund, AmSouth U.S. Treasury Fund and Tax Exempt Fund
The Prime Obligations Fund, the AmSouth U.S. Treasury Fund and the Tax
Exempt Fund may not:
1. Borrow money or issue senior securities, except that each Money Market
Fund may borrow from banks or enter into reverse repurchase agreements for
temporary purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of its borrowing. A Money Market Fund will not purchase securities
while its borrowings (including reverse repurchase agreements) exceed 5% of its
total assets.
2. Make loans, except that each Money Market Fund may purchase or hold
debt instruments in accordance with its investment objective and policies, may
lend portfolio securities in accordance with its investment objective and
policies, and may enter into repurchase agreements.
VALUATION OF SHARES
The net asset value of each of the Prime Obligations Fund and the AmSouth
U.S. Treasury Fund is determined and its Shares are priced as of 1:00 p.m. and
4:00 p.m., Eastern Time (the "Valuation Times") on each Business Day of such
Fund. The net asset value of the Tax Exempt Fund is determined and its Shares
are priced as of 12:00 noon and 4:00 p.m., Eastern Time (the "Valuation Times")
on each Business Day of the Fund. As used herein a "Business Day" constitutes
any day on which the New York Stock Exchange (the "NYSE") is
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open for trading and the Federal Reserve Bank of Atlanta is open, except days
on which there are not sufficient changes in the value of the Fund's portfolio
securities that the Fund's net asset value might be materially affected, or days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received. Currently, either the NYSE or the Federal Reserve Bank of
Atlanta is closed on the customary national business holidays of New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Money Market Fund, less the liabilities charged to that
Class, by the number of the outstanding Shares of that Class.
The assets in each Money Market Fund are valued based upon the amortized
cost method. Pursuant to rules and regulations of the Securities and Exchange
Commission regarding the use of the amortized cost method, each Money Market
Fund will maintain a dollar-weighted average portfolio maturity of 90 days or
less. Although the Trust seeks to maintain each Money Market Fund's net asset
value per share at $1.00, there can be no assurance that net asset value will
not vary.
HOW TO PURCHASE AND REDEEM SHARES
Distributor
Shares of the Money Market Funds are sold on a continuous basis by the
Trust's distributor, BISYS Fund Services (the "Distributor"). The principal
office of the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219. If you
wish to purchase Shares, contact the Trust at (800) 451-8382.
The Prime Obligations Fund offers three classes of Shares, Premier Shares,
Classic Shares, and Class B Shares and the AmSouth U.S. Treasury Fund and the
Tax Exempt Fund offer Classic Shares and Premier Shares. Class B Shares of the
Prime Obligations Fund only are available to Shareholders of Class B Shares of
another Fund who wish to exchange their Class B Shares of such other Fund for
Class B Shares of the Prime Obligations Fund. The three Classes of Shares of a
particular Fund represent interests in the same investments and are identical in
all respects except that (i) Classic Shares bear the expense of the fee under
the Trust's Shareholder Servicing Plan (the "Servicing Plan"), which will cause
the Classic Shares to have a higher expense ratio and to pay lower dividends
than those of the Premier Shares, (ii) Class B Shares bear the expense of the
fee under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), which will cause the Class B Shares to have a higher
expense ratio and to pay lower dividends than those of the Premier Shares and
Classic Shares, (iii) Classic Shares have certain exclusive voting rights with
respect to the Servicing Plan, and Class B Shares have certain exclusive voting
rights with respect to the Distribution Plan, and (iv) Class B Shares
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are subject to a contingent deferred sales charge. The following investors
qualify to purchase a Money Market Fund's Premier Shares: (i) investors for whom
AmSouth acts in a fiduciary, advisory, custodial, agency or similar capacity
through an account with its Trust Department; (ii) investors who purchase Shares
of a Money Market Fund through a 401(k) plan or a 403(b) plan which by its terms
permits purchases of Shares; and (iii) orders placed on behalf of other
investment companies distributed by the Distributor and its affiliated
companies. All other investors are eligible to purchase Classic Shares only.
Purchases of Classic Shares
Shares of the Money Market Funds may be purchased through procedures
established by the Distributor in connection with requirements of qualified
accounts maintained by or on behalf of certain persons ("Customers") by AmSouth
or a financial institution that provides certain administrative support services
for their customers or accountholders (collectively, "Financial Institutions").
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 Financial Institutions and their Customers are
invested by the Distributor in Shares of a Money Market Fund.
Shares of the Money Market Funds sold to Financial Institutions acting in
a fiduciary, advisory, custodial, or other similar capacity on behalf of
Customers will normally be held of record by Financial Institutions. With
respect to Shares so sold, it is the responsibility of the particular Financial
Institution 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 Financial Institution and reflected in the
account statements provided by Financial Institutions to Customers.
There is no sales charge imposed by the Trust in connection with the
purchase of Classic Shares in a Money Market Fund. Sales charges apply to
purchases of the other Funds of the Trust. Depending upon the terms of a
particular Customer account, the Financial Institutions may charge a Customer's
account fees for automatic investment and other cash management services
provided in connection with investment in a Money Market Fund. Information
concerning these services and any charges can be obtained from the Financial
Institutions. This Prospectus should be read in conjunction with any such
information received from the Financial Institutions.
Investors may also purchase Classic Shares of a Money Market Fund by
completing and signing an Account Registration Form and mailing it, together
with a check (or other negotiable bank draft or money order) in at least the
minimum initial purchase amount, payable to the Trust, in care of AmSouth Mutual
Funds, P.O. Box 182733, Columbus, Ohio 43218-2733. Subsequent purchases of
Classic Shares of a Money Market Fund may be made at any time by
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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 Classic Shares either by telephone or
by wiring funds to the Custodian. Telephone orders may be placed by calling the
Trust at (800) 451-8382. Payment for shares ordered by telephone may be made by
check or by wiring funds to the Custodian. To make payment by wire, investors
must call the Trust at (800) 451-8382 to obtain instructions regarding the bank
account number into which the funds should be wired and other pertinent
information.
Investors may also purchase Classic Shares by arranging systematic
monthly, bi-monthly or quarterly investments into the Funds with the Trust's
Automatic Investment Plan ("AIP"). The minimum investment amounts are $50 per
transfer and the maximum amount with respect to any transfer is $100,000. After
investors give the Trust proper authorization, their bank accounts, which must
be with banks that are members of the Automated Clearing House, will be debited
accordingly to purchase Shares. Investors will receive a confirmation from the
Trust for every transaction, and a withdrawal will appear on their bank
statements.
To participate in AIP, investors must complete the appropriate sections of
the Account Registration form or call for instructions. This form may be
obtained by calling the Trust at (800) 451-8382. The amount investors specify
will automatically be invested in Shares at the specified Fund's net asset value
per Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must be
received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
REDEMPTION BY MAIL below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or 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.
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Shares of the Money Market Funds are purchased at the appropriate net
asset value per Share (see "VALUATION OF SHARES") next determined after receipt
by the Distributor of an order in good form to purchase Shares. An order to
purchase Shares will be deemed to have been received by the Distributor only
when federal funds with respect thereto are available to the Trust's custodian
for investment. Federal funds are monies credited to a bank's account within a
Federal Reserve Bank. Payment for an order to purchase Shares which is
transmitted by federal funds wire will be available the same day for investment
by the Trust's custodian, if received prior to the last Valuation Time (see
"VALUATION OF SHARES"). Payments transmitted by other means (such as by check
drawn on a member of the Federal Reserve System) will normally be converted into
federal funds within two banking days after receipt. The Trust strongly
recommends that investors of substantial amounts use federal funds to purchase
Shares.
The minimum investment is $1,000 for the initial purchase of Classic
Shares of a Money Market Fund by an investor. There is no minimum investment for
subsequent purchases; however, as described above, the minimum subsequent
investment when using AIP is $50 per transfer. The minimum initial investment
amount may be waived if purchases are made in connection with Individual
Retirement Accounts, Keogh plans or similar plans. For information on IRAs or
Keoghs or similar plans, contact AmSouth at 800-451-8382.
The maximum investment is $250,000 for total purchases of Class B Shares.
There is no limitation on the amount of Classic Shares that may be purchased.
Purchases of Shares of a Money Market Fund will be effected only on a
Business Day (as defined in "VALUATION OF SHARES") of such Money Market Fund. An
order received prior to a Valuation Time on any Business Day will be executed at
the net asset value determined as of the next Valuation Time on the date of
receipt. An order received after the last Valuation Time on any Business Day
will be executed at the net asset value determined as of the next Valuation Time
on the next Business Day. Shares of the Prime Obligations Fund and the AmSouth
U.S. Treasury Fund purchased before 1:00 p.m., Eastern Time, begin earning
dividends on the same Business Day. Shares of the Tax Exempt Fund purchased
before 12:00 noon, Eastern Time, begin earning dividends on the same Business
Day. All Shares of a Money Market Fund continue to earn dividends through the
day before their redemption.
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. In the case of Classic Shares held of
record by Financial Institutions but beneficially owned by a Customer,
confirmations of purchases, exchanges, and redemptions
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of Classic Shares by a Financial Institution will be sent to the Customer by the
Financial Institution. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
Sales Charge -- Class B Shares
Class B Shares are not subject to a sales charge when they are purchased,
but are subject to a sales charge (the AContingent Deferred Sales Charge@) if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B Shares, the full purchase amount is invested
directly in the applicable Fund. Class B Shares of each Fund are subject to an
ongoing distribution and shareholder service fee at an annual rate of 1.00% of
such Fund's average daily net assets as provided in the Distribution Plan
(described below under AThe Distributor@). This ongoing fee will cause Class B
Shares to have a higher expense ratio and to pay lower dividends than Classic
Shares. Class B Shares convert automatically to Classic Shares after eight
years, commencing from the end of the calendar month in which the purchase order
was accepted under the circumstances and subject to the qualifications described
in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution
and shareholder service fees under the Distribution Plan are payable to the
Distributor to defray the expenses of advance brokerage commissions and expenses
related to providing distribution-related and Shareholder services to the Fund
in connection with the sale of the Class B Shares, such as the payment of
compensation to dealers and agents selling Class B Shares. A dealer commission
of 4.00% of the original purchase price of the Class B Shares of the Fund will
be paid to financial institutions and intermediaries. However, the Distributor
may, in its sole discretion, pay a higher dealer commission.
Contingent Deferred Sales Charge
If the Shareholder redeems Class B Shares prior to the sixth anniversary
of purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
Shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on Shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such Shares. Solely for purposes
of determining the number of years from the time of any payment for the purchase
of Shares, all payments during a month are aggregated and deemed to have been
made on the first day of the month.
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Contingent
Deferred
Sales Charge as a
Year(s) Percentage of
Since Dollar Amount
Purchase Subject to Charge
-------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
6-7 None
7-8 None
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Classic
Shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B Shares redeemed first) or Shares representing capital appreciation, next
of Shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other Shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
The Contingent Deferred Sales Charge is waived on redemption of Shares:
(i) following the death or disability (as defined in the Code) of a Shareholder
or a participant or beneficiary of a qualifying retirement plan if redemption is
made within one year of such death or disability; or (ii) to the extent that the
redemption represents a minimum required distribution from an Individual
Retirement Account or other qualifying retirement plan to a Shareholder who has
attained the age of 70 2. A Shareholder or his or her representative should
contact the Transfer Agent to determine whether a retirement plan qualifies for
a waiver and must notify the Transfer Agent prior to the time of redemption if
such circumstances exist and the Shareholder is eligible for this waiver. In
addition, the following circumstances are not deemed to result in a Aredemption@
of Class B Shares for purposes of the assessment of a Contingent Deferred Sales
Charge, which is therefore waived: (i) plans of reorganization of the Fund, such
as mergers, asset acquisitions and exchange offers to which the Fund is a party;
or (ii) exchanges for Class B Shares of other Funds of the Trust as described
under "Exchange Privilege."
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Conversion Feature
Class B Shares include all Shares purchased pursuant to the Contingent
Deferred Sales Charge which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
purchased. At the end of this period, Class B Shares will automatically convert
to Classic Shares and will be subject to the lower distribution and Shareholder
service fees charged to Classic Shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales charge, fee or other charge. The conversion is not a taxable event to a
Shareholder.
For purposes of conversion to Classic Shares, shares received as dividends
and other distributions paid on Class B Shares in a Shareholder's Fund account
will be considered to be held in a separate sub-account. Each time any Class B
Shares in a Shareholder's Fund account (other than those in the sub-account)
convert to Classic Shares, a pro-rata portion of the Class B Shares in the
sub-account will also convert to Classic Shares.
If a Shareholder effects one or more exchanges among Class B Shares of the
Funds of the Trust during the eight-year period, the Trust will aggregate the
holding periods for the shares of each Fund of the Trust for purposes of
calculating that eight-year period. Because the per share net asset value of the
Classic Shares may be higher than that of the Class B Shares at the time of
conversion, a Shareholder may receive fewer Classic Shares than the number of
Class B Shares converted, although the dollar value will be the same.
Exchange Privilege
Classic Shares
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Classic Shares (with certain exceptions and
subject to the terms and conditions described in this prospectus). Classic
Shares may not be exchanged for Class B Shares of the other Funds, and may be
exchanged for Premier Shares of the other Funds only if the Shareholder becomes
eligible to purchase Premier Shares. Shareholders may exchange their Classic
Shares for Classic Shares of a Fund with the same or lower sales charge on the
basis of the relative net asset value of the Classic Shares exchanged.
Shareholders may exchange their Classic Shares for Classic Shares of a Fund with
a higher sales charge by paying the difference between the two sales charges.
Shareholders may also exchange Classic Shares of a Money Market Fund, for which
no sales load was paid, for Classic Shares of a variable net asset value Fund.
Under such circumstances, the cost of the acquired Classic Shares will be the
net asset value per share plus the appropriate sales load. If Classic Shares of
a Money Market Fund were acquired in a previous exchange involving Shares of a
variable net asset value Fund, then such Shares of the Money Market Fund may be
exchanged for
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Shares of a variable net asset value Fund without payment of any additional
sales load within a twelve month period. Under such circumstances, the
Shareholder must notify the Distributor that a sales load was originally paid.
Depending upon the terms of a particular Customer account, a Participating
Organization may charge a fee with regard to such an exchange. Information about
such charges will be supplied by the Participating Organization.
Class B Shares
Class B Shares of a Fund may be exchanged for Class B Shares of the other
Funds on the basis of relative net asset value per Class B Share, without the
payment of any Contingent Deferred Sales Charge which might otherwise be due
upon redemption of the outstanding Class B Shares. Investors should note that,
Class B Shares are not offered in the AmSouth U.S. Treasury Fund, Tax Exempt
Fund, Government Income Fund, Limited Maturity Fund, Florida Fund, and Municipal
Fund, thus, no exchanges may be effected for Class B Shares of these Funds. For
purposes of computing the Contingent Deferred Sales Charge that may be payable
upon a disposition of the newly acquired Class B Shares, the holding period for
outstanding Class B Shares of the Fund from which the exchange was made is
"tacked" to the holding period of the newly acquired Class B Shares. For
purposes of calculating the eight year holding period applicable to the newly
acquired Class B Shares, the newly acquired Class B Shares shall be deemed to
have been issued on the date of receipt of the Shareholder's order to purchase
the outstanding Class B Shares of the Fund from which the exchange was made.
Class B Shares may not be exchanged for Classic Shares, and may be
exchanged for Premier Shares only if the Shareholder becomes eligible to
purchase Premier Shares. A Contingent Deferred Sales Charge will apply as
described in "How To Purchase and Redeem Shares" -- "Class B Shares" to
exchanges of Class B Shares for Premier Shares.
Additional Information About Exchanges
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund and Class into which the Shares are exchanged. An
exchange may be made by calling the Trust at (800) 451-8382 or by mailing
written instructions to the Trust's transfer agent, BISYS Fund Services Ohio,
Inc. ("Transfer Agent"), P.O. Box 182733, Columbus, Ohio 43218-2733. Exchange
privileges may be exercised only in those states where Shares of such
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other Funds of the Trust may legally be sold, and may be amended or terminated
at any time upon sixty (60) days' notice.
Auto Exchange
AmSouth Mutual Funds Auto Exchange enables Shareholders to make regular,
automatic withdrawals from Classic Shares and Class B Shares of the AmSouth
Prime Obligations Fund and use those proceeds to benefit from
dollar-cost-averaging by automatically making purchases of shares of the same
Class of another AmSouth Mutual Fund. With shareholder authorization, the
Trust's transfer agent will withdraw the amount specified (subject to the
applicable minimums) from the shareholder's AmSouth Prime Obligations Fund
account and will automatically invest that amount in Classic Shares or Class B
Shares of the AmSouth Mutual Fund designated by the Shareholder at the public
offering price on the date of such deduction. In order to participate in the
Auto Exchange, Shareholders must have a minimum initial purchase of $10,000 in
their Prime Obligations Fund account and maintain a minimum account balance of
$1,000.
To participate in the Auto Exchange, Shareholders should complete the
appropriate section of the Account Registration Form, which can be acquired by
calling the Distributor. To change the Auto Exchange instructions or to
discontinue the feature, a Shareholder must send a written request to the
AmSouth Mutual Funds, P.O. Box 182733, Columbus, OH 43218-2733. The Auto
Exchange may be amended or terminated without notice at any time by the
Distributor.
Redemption of Shares
Shareholders may redeem their Classic Shares without charge, and their
Class B Shares subject to the applicable Contingent Deferred Sales Charge, on
any day that net asset value is calculated (see "VALUATION 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 Financial Institution. For
example, if a Customer has agreed with a Financial Institution to maintain a
minimum balance in his or her account with the Financial Institution, and the
balance in that account falls below that minimum, the Customer may be obliged to
redeem, or the Financial Institution may redeem for and on behalf of the
Customer, all or part of the Customer's Shares of a Fund of the Trust to the
extent necessary to maintain the required minimum balance.
Redemption by Mail
A written request for redemption must be received by the Transfer Agent
in order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and
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associations, clearing agencies and savings associations as those terms are
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The Transfer
Agent reserves the right to reject any signature guarantee if (1) it has reason
to believe that the signature is not genuine, (2) it has reason to believe that
the transaction would otherwise be improper, or (3) the guarantor institution is
a broker or dealer that is neither a member of a clearing corporation nor
maintains net capital of at least $100,000. The signature guarantee requirement
will be waived if the following conditions apply: (1) the redemption check is
payable to the Shareholder(s) of record; and (2) the redemption check is mailed
to the Shareholder(s) at the address of record or the proceeds are either mailed
or wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
Redemption by Telephone
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic financial institution account previously designated by
the Shareholder on the Account Registration Form. Under most circumstances, such
payments 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 then maximum wire redemption .
Such charge is presently $7.00 for each wire redemption. There is no charge for
having payment of redemption requests mailed or sent via the Automated Clearing
House to a designated account. For telephone redemptions, call the Trust at
(800) 451-8382. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine; if these procedures are not
followed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions. These procedures include recording all phone
conversations, sending confirmations to Shareholders within 72 hours of the
telephone transaction, verifying the account name and a shareholder's account
number or tax identification number and sending redemption proceeds only to the
address of record or to a previously authorized account.
During periods of significant economic or market change, telephone
redemptions may be difficult to complete. If a Shareholder is unable to contact
the Distributor by telephone, a Shareholder may also mail the redemption request
to the Distributor at the address listed above under "HOW TO REDEEM
SHARES--Redemption by Mail."
Directed Dividend Option
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
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The Directed Dividend Option may be modified or terminated without notice.
In addition, the Trust may suspend a shareholder's Directed Dividend Option
without notice if the account balance is less than the minimum $1,000.
Participation in the Option may be terminated or changed by the shareholder at
anytime by writing the Distributor. The Directed Dividend Option is not
available to participants in an AmSouth Mutual Funds IRA.
Check Writing Service
A Shareholder may write checks on his or her Prime Obligations Fund
account for $1,000 or more. Once a Shareholder has signed and returned a
signature card, he or she will receive a supply of checks drawn on Huntington
National Bank. The check may be made payable to any person, and the
Shareholder's account will continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the exact value of a Fund
account, a Shareholder should not use a check to close his or her account. The
Shareholder's account will be charged a fee on stopping payment of a check upon
the Shareholder's request or if the check cannot be honored because of
insufficient funds or other valid reasons.
Payments to Shareholders
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Transfer Agent of the request for redemption. However,
to the greatest extent possible, the Trust will attempt to honor requests from
Shareholders for same day payments upon redemption of Shares if the request for
redemption is received by the Transfer Agent before 12:00 noon, Eastern Time, on
a Business Day or, if the request for redemption is received after 12:00 noon,
Eastern Time, to honor requests for payment on the next Business Day, unless it
would be disadvantageous to the Trust or the Shareholders of the particular
Money Market Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.
At various times, the Trust may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Trust may delay
the forwarding of proceeds only until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay in
payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by wire transfer. The Trust
intends to pay cash for all Shares redeemed, but under abnormal conditions which
make payment in cash unwise, the Trust may make payment wholly or partly in
portfolio securities at their then market value equal to the redemption price.
In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Money Market Fund
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has a value of less than $250. Accordingly, an investor purchasing Shares of a
Money Market in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her
Shares. Before the Trust exercises its right to redeem such Shares and to send
the proceeds to the Shareholder, the Shareholder will be given notice that the
value of the Shares of a Money Market Fund in his or her account is less than
the minimum amount and will be allowed 60 days to make an additional investment
in an amount which will increase the value of the account to at least $250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and "VALUATION -
Valuation of the Money Market Funds" in the Statement of Additional Information
for examples of when the Trust may suspend the right of redemption or redeem
Shares involuntarily if it appears appropriate to do so in light of the Trust's
responsibilities under the Investment Company Act of 1940.
DIVIDENDS AND TAXES
The net income of each Money Market Fund is declared daily as a dividend
to Shareholders of record at the close of business on the day of declaration.
The net income attributable to a Fund's Classic Shares and the dividends payable
on Classic Shares will be reduced by the shareholder service fee assessed
against such Shares under the Shareholder Servicing Plan (see Administrator and
Distributor below). Dividends will generally be paid monthly. Distributable net
capital gains (if any) will be distributed at least annually. A Shareholder will
automatically receive all income dividends and capital gains distributions in
additional full and fractional Shares of the same class at net asset value as of
the date of payment unless the Shareholder elects to receive such dividends or
distributions in cash. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to the Transfer Agent at P.O. Box 182733, Columbus, Ohio 43218-2733,
and will become effective with respect to dividends and distributions having
record dates after its receipt by the Transfer Agent. Dividends are paid in cash
not later than seven Business Days after a Shareholder's complete redemption of
his or her Shares. Dividends are generally taxable when received. However,
dividends declared in October, November, or December to Shareholders of record
during those months and paid during the following January are treated for tax
purposes as if they were received by each Shareholder on December 31 of the
prior year.
Each Money Market Fund will be treated as a separate entity for federal
income tax purposes. Each Money Market Fund intends to qualify for treatment as
a "regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). If qualified, a Money Market Fund will not have to pay
federal taxes on amounts it distributes to Shareholders. Regulated investment
companies are subject to a federal excise tax if they do not distribute their
income on a timely basis. Each Money Market Fund intends to avoid paying federal
income and excise taxes by timely distributing all its net income and
substantially all its net capital gain
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income. Shareholders will be advised at least annually as to the character for
federal income tax purposes of distributions made during the year.
The amount of dividends payable with respect to the Premier Shares will
exceed dividends on Classic Shares, and the amount of dividends on Classic
Shares will exceed the dividends on Class B Shares, as a result of the
Shareholder Services Plan fee applicable to Classic Shares and the Distribution
and Shareholder Services Plan fee applicable to Class B Shares.
Prime Obligations Fund and AmSouth U.S. Treasury Fund
Dividends will generally be taxable to a Shareholder as ordinary income to
the extent of the Shareholder's ratable share of each Fund's earnings and
profits as determined for tax purposes. Because all of the net investment income
of the Prime Obligations Fund and the AmSouth U.S. Treasury Fund is expected to
be interest income, it is anticipated that no distributions will qualify for the
dividends received deduction for corporate shareholders. The Prime Obligations
Fund and the AmSouth U.S. Treasury Fund do not expect to realize any long-term
capital gains and, therefore, do not foresee paying any "capital gains
dividends" as described in the Code. Dividends received by a Shareholder that
are derived from the AmSouth U.S. Treasury Fund's investments in U.S. government
obligations may not be eligible for exemption from state and local taxes even
though the income on such investments would have been exempt from state and
local taxes if the Shareholder directly held such investments. In addition, the
state and local tax exemption for interest earned on U.S. government obligations
may not extend to income earned on U.S. government obligations that are subject
to a repurchase agreement. Shareholders are advised to consult their own tax
advisors concerning their own tax situation and the application of state and
local taxes.
Tax Exempt Fund
The Tax Exempt Fund's Shareholders may treat as exempt interest and
exclude from gross income for federal income tax purposes dividends derived from
net exempt-interest income and designated by the Tax-Exempt Fund as
exempt-interest dividends. However, such dividends may be taxable to
Shareholders under state or local law as ordinary income even though all or a
portion of the amounts may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such taxes.
Dividends from the Tax Exempt Fund attributable to exempt-interest income
may cause the social security and railroad retirement benefits of individual
Shareholders to become taxable, or increase the amount that is taxable. Interest
on indebtedness incurred by a Shareholder to purchase or carry Shares is not
deductible for federal income tax purposes to the extent the Tax Exempt Fund
distributes exempt-interest dividends during the Shareholder's taxable year. It
is anticipated that distributions from the Tax Exempt Fund will not be eligible
for the dividends received deduction for corporate shareholders.
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Gains on the sale of Shares in the Tax Exempt Fund will be subject to
federal, state and local taxes. If a Shareholder receives an exempt-interest
dividend with respect to any Share of the Fund and such Share is held for six
months or less, any loss on the sale or exchange of such Share will be
disallowed to the extent of the amount of such exempt-interest dividend.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit or repurchase
agreements) or from long-term or short-term capital gains, such dividends will
be subject to federal income tax and may be subject to state and local tax. A
Shareholder should consult his or her own tax advisor for any special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in alternative minimum taxable
income of both individual and corporate Shareholders for the purpose of
determining liability (if any) for the applicable alternative minimum tax. All
tax-exempt interest dividends are required to be taken into account in
calculating the alternative minimum taxable income of corporations.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION -Additional Tax Information" and "Additional Tax Information
Concerning the Tax Exempt Fund."
The foregoing discussion is limited to federal income tax consequences
and is based on tax laws and regulations which are in effect as of the date of
this Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Money Market
Funds and Shareholders. Potential investors are urged to consult their tax
advisors concerning their own tax situations and concerning the application of
state and local taxes which may differ from the federal income tax consequences
described above.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
Trustees of the Trust
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust, who are elected by the Shareholders of the Trust. There
are currently six Trustees, two of whom are "interested persons" of the Trust
within the meaning of that term under the Investment Company Act of 1940. The
Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
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Position(s) Held Principal Occupation
Name and Address With the Trust During the Past 5 Years
- ---------------- -------------- -----------------------
George R. Landreth* Chairman From December
3435 Stelzer Road 1992 to present,
Columbus, Ohio employee of
43219 BISYS Fund
Services, Limited
Partnership; form
July 1991 to
December 1992,
employee of PNC
Financial Corp.;
from October
1984 to July 1991,
employee of The
Central Trust
Co., N.A.
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present,
459 DER Building Professor and Vice
1808 7th Avenue Chairman, Department
South of Medicine, University
UAB Medical Center of Alabama at
Birmingham, Birmingham School
Alabama 35294 of Medicine; December
1995 to present,
Physician, University
of Alabama Health
Services Foundation;
from June 1988 to
October 1992,
President, Chief
Executive Officer
and Medical Director,
University of
AlabamaHealth
Services Foundation
Wendell D. Cleaver Trustee From September,
209 Lakewood Drive, 1993 to present,
West retired; from
Mobile, Alabama December 1988 to
36608 August, 1993,
Executive Vice
President, Chief
Operating Officer
and Director,
Mobile Gas
Service Corporation
J. David Huber* Trustee From June 1987 to
3435 Stelzer Road present, employee
Columbus, Ohio of BISYS Fund
43219 Services, Limited
Partnership
Homer H. Turner, Jr. Trustee From June 1991 to
729 Cary Drive present, retired;
Auburn, Alabama until June 1991,
36830 Vice President,
Birmingham
Division, Alabama
Power Company
James H. Woodward, Jr. Trustee From 1996 to
The University of North present, Trustee of
Carolina at Charlotte The Sessions
Charlotte, North Group; from July
Carolina 28223 1989 to present,
Chancellor, The
University of
North Carolina at
Charlotte; until
July 1989, Senior
Vice President,
University
College,
University of
Alabama at
Birmingham
- ----------
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<PAGE> 124
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and
providing fund accounting services to the Trust. Messrs. Landreth and Huber are
executive officers and employees of BISYS Fund Services.
Investment Advisor
AmSouth is the Advisor of each Fund of the Trust. AmSouth is the 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
Money Market Funds, the Advisor manages the Money Market Funds, makes decisions
with respect to and places orders for all purchases and sales of their
investment securities, and maintains their records relating to such purchases
and sales.
Under an investment advisory agreement between the Trust and the Advisor,
the fee payable to the Advisor by each Money Market Fund for investment advisory
services is the lesser of (a) a fee computed daily and paid monthly at the
annual rate of forty one-hundredths of one percent (.40%) of such Money Market
Fund's average daily net assets or (b) such fee as may from time to time be
agreed upon in writing by the Trust and the Advisor. A fee agreed to in writing
from time to time by the Trust and the Advisor may be significantly lower than
the fee calculated at the annual rate and the effect of such lower fee would be
to lower a Money Market Fund's expenses and increase the net income of the Fund
during the period when such lower fee is in effect.
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During the Trust's fiscal year ended July 31, 1996, the Advisor received
investment advisory fees amounting to .40%of the Prime Obligation Fund's average
daily net assets, .40% of the AmSouth U.S. Treasury Fund's average daily net
assets and .20% of the Tax Exempt Fund's average daily net assets, after
voluntary fee reductions with respect to the Tax Exempt Fund.
Administrator
ASO Services Company ("ASC") is the administrator for each Fund of the
Trust (the "Administrator"). 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 Money Market
Funds' administration and operation. Under a management and administration
agreement between the Trust and the Administrator, the fee payable by each Money
Market Fund to the Administrator for administration services is the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(.20%) of such Money Market Fund's average daily net assets or (b) such fee as
may from time to time be agreed upon by the Trust and the Administrator. A fee
agreed to from time to time by the Trust and the Administrator may be
significantly lower than the fee calculated at the annual rate and the effect of
such lower fee would be to lower a Money Market Fund's expenses and increase the
net income of the Fund during the period when such lower fee is in effect.
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
amounting to .20% of each Money Market Fund's average daily net assets.
Sub-Administrators
AmSouth serves as a Sub-Administrator to the Trust. Pursuant to its
current agreement with the Administrator, the Sub-Administrator has assumed
certain of the Administrator's duties, for which the Sub-Administrator 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 daily net assets.
BISYS Fund Services serves as a Sub-Administrator to the Trust. Pursuant
to its agreement with the Administrator, BISYS is entitled to compensation as
mutually agreed from time to time by it and the Administrator.
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Distributor
BISYS Fund Services acts as the Trust's principal underwriter and
distributor (the "Distributor") pursuant to a Distribution Agreement under which
shares are sold on a continuous basis.
Classic Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Classic Shares of each Fund.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class B Shares of a Fund will pay a monthly distribution
fee to the Distributor as compensation for its services in connection with the
Distribution Plan at an annual rate equal to one percent (1.00%) of the average
daily net assets of Class B Shares of each Fund which includes a Shareholder
Servicing fee of .25% of the average daily net assets of the Class B Shares of
each Fund. The Distributor may periodically waive all or a portion of the fee
with respect to a Fund in order to increase the net investment income of the
Fund available for distribution as dividends. The Distributor may apply the B
Share Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's B Shares;
(ii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors)
as brokerage commissions in connection with the sale of such Fund's B Shares;
and (iii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
B Shares.
All payments by the Distributor for distribution assistance or shareholder
services under the Distribution Plan will be made pursuant to an agreement (a
"Servicing Agreement") between the Distributor and such bank, other financial
institution or intermediary, broker-dealer, or affiliate or subsidiary of the
Distributor (hereinafter referred to individually as "Participating
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares to the Participating Organization's customers on whose behalf the
investment in such Shares is made and/or to the provision of shareholder
services to the Participating Organization's customers owning a Fund's Class B
Shares. Under the Distribution Plan, a Participating Organization may include
AmSouth or a subsidiary bank or nonbank affiliates, or the subsidiaries or
affiliates of those banks. A Servicing
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<PAGE> 127
Agreement entered into with a bank (or any of its subsidiaries or affiliates)
will contain a representation that the bank (or subsidiary or affiliate)
believes that it possesses the legal authority to perform the services
contemplated by the Servicing Agreement without violation of applicable banking
laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the amount
of the fee is more or less than the actual expenses incurred in a particular
year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks generally
from engaging in the business of underwriting securities, but in general do not
prohibit banks from purchasing securities as agent for and upon the order of
customers. Accordingly, the Trust will require banks acting as Participating
Organizations to provide only those services which, in the banks' opinion, are
consistent with the then current legal requirements. It is possible, however,
that future legislative, judicial or administrative action affecting the
securities activities of banks will cause the Trust to alter or discontinue its
arrangements with banks that act as Participating Organizations, or change its
method of operations. It is not anticipated, however, that any change in a
Fund's method of operations would affect its net asset value per share or result
in financial loss to any customer.
Expenses
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Advisor and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for a Money Market Fund. No Money Market Fund will bear, directly or
indirectly, the cost of any activity primarily intended to result in the
distribution of Shares of such Money Market Fund; such costs will be borne by
the Distributor.
As a general matter, expenses are allocated to the Premier, Classic, and
Class B Shares of a Fund on the basis of the relative net asset value of each
class. At present, the only expenses that will be borne solely by Classic and
Class B Shares, other than in accordance with the relative net asset value of
the class, are expenses under the Trust's
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Servicing Plan which relates only to the Classic Shares and the Distribution
Plan which relates only to the Class B Shares.
Banking Laws
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Money Market Funds contemplated by its
investment advisory agreement with the Trust and described in this Prospectus
without violation of applicable banking laws and regulations, and has so
represented in its investment advisory agreement with the Trust. Future changes
in federal or state statutes and regulations relating to permissible activities
of banks or bank holding companies and their subsidiaries and affiliates as well
as further judicial or administrative decisions or interpretations of present
and future statutes and regulations could change the manner in which AmSouth
could continue to perform such services for the Trust. See "MANAGEMENT OF THE
TRUST - Glass Steagall Act" in the Statement of Additional Information for
further discussion of applicable banking laws and regulations.
GENERAL INFORMATION
Description of the Trust and Its Shares
The Trust was organized as a Massachusetts business trust on October 1,
1987. The Trust has an unlimited number of authorized shares of beneficial
interest which may, without shareholder approval, be divided into an unlimited
number of series of such shares, and which are presently divided into 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 Bond
Fund, the AmSouth Municipal Bond Fund, the AmSouth Limited Maturity Fund, the
AmSouth Balanced Fund, the AmSouth Government Income 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. As of the date of this Prospectus, Shares were not yet being offered in
the AmSouth Small Cap Fund. Each Fund has authorized three classes of Shares:
Premier, Classic and Class B Shares, except for the AmSouth U.S. Treasury Fund
and Tax-Exempt Fund which has authorized two classes of Shares: Premier and
Classic Shares. However, Class B Shares are not currently offered in the AmSouth
Limited Maturity Fund, the Government Income Fund, the Florida Fund, and the
Municipal Bond Fund. 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).
-39-
<PAGE> 129
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 Investment Company Act of 1940, shares
shall be voted by individual series or class, (ii) when the Trustees have
determined that the matter affects only the interests of one or more series or
class, (iii) only the holders of Classic Shares will vote on matters submitted
to shareholder vote with regard to the Servicing Plan, and (iv) only the holders
of Class B Shares will vote on matters submitted to shareholder vote with regard
to the Distribution Plan.
Overall responsibility for the management of the Trust is vested in the
Board of Trustees. See "MANAGEMENT OF AmSouth Mutual Funds - Trustees of the
Trust." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION -Miscellaneous" in
the Statement of Additional Information for further information.
Custodian
As of April 17, 1997, AmSouth serves as custodian for the Trust
("Custodian"). Pursuant to the Custodian Agreement with the Trust, the Custodian
receives compensation from each Fund for such services in an amount equal to an
asset-based fee.
Transfer Agent and Fund Accounting
BISYS Fund Services Ohio, Inc. serves as transfer agent for and provides
fund accounting services to the Trust.
Performance Information
From time to time, the Money Market Funds' annualized "yield" and
"effective yield" and total return may be presented in advertisements and sales
literature.
The "yield" of a Money Market Fund is based upon the income earned by the
Money Market Fund over a seven-day period and then annualized, i.e. the income
earned in the period is assumed to be earned every seven days over a 52-week
period and is stated as a percentage of the investment. The "effective yield" of
a Money Market Fund is calculated similarly but when annualized, the income
earned by the investment is assumed to be reinvested in Shares of the Fund and
thus compounded in the course of a 52-week period. The effective yield will be
higher than the yield because of the compounding effect of this assumed
reinvestment.
-40-
<PAGE> 130
The Tax Exempt Fund may also present its "tax equivalent yield" and "tax
equivalent effective yield" which reflect the amount of income subject to
federal income taxation that a taxpayer in a stated tax bracket would have to
earn in order to obtain the same after-tax income as that derived from the yield
and effective yield, respectively, of the Tax Exempt Fund. The tax equivalent
yield and tax equivalent effective yield will be significantly higher than the
yield and effective yield of the Tax Exempt Fund.
Total return is calculated for the past year, five years (if applicable)
and the period since the establishment of a Money Market Fund. Average annual
total return is measured by comparing the value of an investment in a Money
Market Fund at the beginning of the relevant period to the redemption value of
the investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of annualized.
Yield, effective yield, tax-equivalent yield and total return will be
calculated separately for each Class of Shares. Because Classic Shares are
subject to lower Shareholder Services fees than Class B Shares, the yield and
total return for Classic Shares will be higher than that of the Class B Shares
for the same period. Because Premier Shares are not subject to the Distribution
and Shareholder Services fees, the yield and total return for Premier Shares
will be higher than that of the Classic and Class B Shares for the same period.
Investors may also judge the performance of each Money Market Fund by
comparing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and data such as that provided by Lipper Analytical Services,
Inc. and Donoghue's MONEY FUND REPORT. Comparisons may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Fortune, Institutional
Investor, Ibbotson Associates, Inc., Morningstar, Inc., CDA/Wiesenberger,
Pensions and Investments, U.S.A. Today and local newspapers and periodicals.
Such publications may refer to Classic Shares as Class A Shares and Premier
Shares as Class Y Shares. In addition to performance information, general
information about these Funds that appears in a publication such as those
mentioned above may be included in advertisements, sales literature and in
reports to Shareholders. Additional performance information is contained in the
Trust's Annual Report, which is available free of charge by calling the number
on the front page of the prospectus.
Information about performance of a Money Market Fund is based on the Money
Market Fund's record up to a certain date and is not intended to indicate future
performance. Yield and total return of any investment is generally a function of
portfolio quality and maturity, type of investments and operating expenses.
Yields and total return of each Money Market Fund will fluctuate. Any fees
charged by the Financial Institutions to their customers in connection with
investment in a Money Market Fund are not reflected in the Fund's performance
information.
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<PAGE> 131
Miscellaneous
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Trust upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund in proportion to the relative net assets of
the respective Funds at the time of allocation. The timing of allocations of
general assets and general liabilities and expenses of the Trust to particular
Funds will be determined by the Board of Trustees of the Trust and will be in
accordance with generally accepted accounting principles. Determinations by the
Board of Trustees of the Trust as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Trust or a particular
Fund means the affirmative vote, at a meeting of Shareholders duly called, of
the lesser of (a) 67% or more of the votes of Shareholders of the Trust or such
Fund present at such meeting at which the holders of more than 50% of the votes
attributable to the Shareholders of record of the Trust or such Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of the Trust or such Fund.
Under Massachusetts law, Shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims Shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in every
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of a Fund's
property for all loss and expense of any Shareholder of such Fund held liable on
account of being or having been a Shareholder. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations.
-42-
<PAGE> 132
Inquiries regarding the Trust may be directed in writing to the Trust at
P.O. Box 182733, Columbus, Ohio 43218-2733, or by calling toll free (800)
451-8382.
-43-
<PAGE> 133
INVESTMENT ADVISOR
AmSouth Bank
1901 Sixth Avenue North
Birmingham, AL 35203
DISTRIBUTOR
BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005-3333
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
AUDITORS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
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<PAGE> 134
TABLE OF CONTENTS
- -----------------
Page
----
Fee Table ......................................................... 4
Financial Highlights .............................................. 6
Investment Objective and Policies.................................. 9
Investment Restrictions............................................ 17
Valuation of Shares................................................ 19
How to Purchase and Redeem Share................................... 20
Dividends and Taxes................................................ 31
Management of The AmSouth Mutual Fund.............................. 33
General Information................................................ 39
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.
-45-
<PAGE> 135
AMSOUTH MUTUAL FUNDS
MONEY MARKET FUNDS
AmSouth Bank
Investment Advisor
BISYS Fund Services, Limited Partnership
Prospectus dated September 1, 1997.
-46-
<PAGE> 136
CROSS REFERENCE SHEET
- ---------------------
Part A
- ------
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
PROSPECTUS FOR AMSOUTH BOND FUND,
---------------------------------
AMSOUTH LIMITED MATURITY FUND,
------------------------------
AMSOUTH GOVERNMENT INCOME FUND,
-------------------------------
AMSOUTH FLORIDA TAX-FREE FUND,
------------------------------
AND AMSOUTH MUNICIPAL BOND FUND
-------------------------------
CLASSIC SHARES AND CLASS B SHARES
---------------------------------
1. Cover Page................. Cover Page
2. Synopsis .................. Fee Table
3. Condensed Financial
Information ............. Financial Highlights
4. General Description
of Registrant ........... The Trust; Investment Objective and
Policies; Investment Restrictions;
General Information - Description of
the Trust and Its Shares
5. Management of the Fund .... Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ........ The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the
Trust and Its Shares; General
Information - Miscellaneous
7. Purchase of Securities
Being Offered ........... Valuation of Shares; How to Purchase
and Redeem Shares
8. Redemption or Repurchase .. How to Purchase and Redeem Shares
9. Legal Proceedings ......... Inapplicable
<PAGE> 137
AMSOUTH MUTUAL FUNDS
INCOME FUNDS
CLASSIC SHARES AND CLASS B SHARES
3435 Stelzer Road For current yield, purchase
Columbus, Ohio 43219 and redemption information call
(800) 451-8382
The AmSouth Bond Fund (the "Bond Fund"), the AmSouth Limited Maturity Fund
(the "Limited Maturity Fund"), the AmSouth Government Income Fund (the
"Government Income Fund"), the AmSouth Florida Tax-Free Fund (the "Florida
Fund"), and the AmSouth Municipal Bond Fund (the "Municipal Bond Fund")
(collectively, "the Income Funds" and the Florida Fund and Municipal Bond Fund
sometimes collectively referred to herein as "the Tax- Free Funds") are five of
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
Income Fund has its own investment objective, and the net asset value per share
of each Income Fund will fluctuate as the value of such Fund's investment
portfolio changes in response to changing market interest rates and other
factors. Each Income Fund is authorized to offer Premier Shares, Classic Shares
and Class B Shares. However, currently only Class B Shares of the Bond Fund are
being offered. The Shares of the Income Funds outstanding on August 31, 1997,
have been redesignated as Classic Shares.
AMSOUTH BOND FUND seeks current income consistent with the preservation
of capital. The Bond Fund seeks to achieve this objective by investing in
long-term bonds and other fixed-income securities. These investments may include
debt securities issued by United States corporations and debt securities issued
or guaranteed by the United States Government or its agencies or
instrumentalities as well as zero-coupon obligations. The Bond Fund invests in
fixed-income securities with a maturity in excess of one year, although such
securities can have maturities of thirty years or longer.
AMSOUTH LIMITED MATURITY FUND seeks current income consistent with the
preservation of capital. The Limited Maturity Bond Fund seeks to achieve this
objective by investing in bonds (including debentures), notes and other debt
securities which have a stated or remaining maturity of five years or less or
which have an unconditional redemption feature that will permit the Limited
Maturity Fund to require the issuer of the security to redeem the security
within five years from the date of purchase or for which the Limited Maturity
Fund has acquired an unconditional "put" to sell the security within five
<PAGE> 138
years from the date of purchase. These investments may include debt securities
issued by United States corporations and debt securities issued or guaranteed by
the United States Government or its agencies or instrumentalities as well as
zero-coupon obligations.
AMSOUTH GOVERNMENT INCOME FUND seeks current income consistent with the
preservation of capital. The Government Income Fund seeks to achieve this
objective by investing under normal market conditions, at least 65% of the value
of its total assets in obligations issued or guaranteed by the U.S. Government
its agencies or instrumentalities.
AMSOUTH FLORIDA TAX-FREE FUND seeks to produce as high a level of current
interest income exempt from federal income taxes and Florida intangible taxes as
is consistent with the preservation of capital. The Florida Fund seeks to
achieve this objective by investing in high-grade obligations. While the Florida
Fund may invest in taxable obligations, under normal market conditions at least
80% of the Florida Fund's net assets will be invested in obligations exempt from
both federal personal income tax and, as at year-end, the Florida intangible
personal property tax. The Fund is non-diversified and therefore may invest more
than 5% of its total assets in the obligations of one issuer.
AMSOUTH MUNICIPAL BOND FUND seeks to produce as high a level of current
interest income exempt from federal income taxes as is consistent with the
preservation of capital. The Municipal Bond Fund seeks to achieve this objective
by investing in high-grade obligations. While the Municipal Bond Fund may invest
in taxable obligations, under normal market conditions at least 80% of the
Municipal Bond Fund's net assets will be invested in obligations exempt from
federal income tax. The Municipal Bond Fund is a diversified fund.
AmSouth Bank, Birmingham, Alabama ("AmSouth") acts as the investment
advisor to each Fund of the Trust ("Advisor"). BISYS Fund Services, Limited
Partnership ("BISYS Fund Services"), Columbus, Ohio, acts as the Trust's
distributor ("Distributor").
Each Income Fund has been divided into three classes of Shares, Premier
Shares, Classic Shares and Class B Shares. The following investors qualify to
purchase Premier Shares: (i) investors for whom AmSouth acts in a fiduciary,
advisory, custodial, agency or similar capacity through an account with its
Trust Department; (ii) investors who purchase Shares of a Fund through a 401(k)
plan or a 403(b) plan which by its terms permits purchases of Shares; and (iii)
orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies. All other investors are eligible to
purchase Classic Shares or Class B Shares only.
This Prospectus relates only to the Classic Shares and Class B Shares of
the Income Funds, which are offered to the general public. Premier Shares of the
Income Funds are offered through a separate prospectus. Interested persons who
wish to obtain a copy of the prospectuses of the AmSouth Prime Obligations Fund,
the AmSouth U.S. Treasury
-2-
<PAGE> 139
Fund, and the AmSouth Tax Exempt Fund (the "Money Market Funds") and the AmSouth
Equity Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the
AmSouth Capital Growth Fund, the AmSouth Small Cap Fund, and the AmSouth Equity
Income Fund (the "Capital Appreciation Funds") may contact the Trust's
distributor at the telephone number shown above. Additional information about
the Income Funds, contained in a Statement of Additional Information, has been
filed with the Securities and Exchange Commission and is available upon request
without charge by writing to the Trust at its address or by calling the Trust at
the telephone number shown above. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Classic
Shares and Class B Shares of the Income Funds that a prospective investor ought
to know before investing. Investors should read this Prospectus and retain it
for future reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR ENDORSED OR GUARANTEED BY AMSOUTH OR ANY OF
ITS AFFILIATES. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR BY ANY OTHER AGENCY.
AN INVESTMENT IN THE TRUST'S SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is September 1, 1997.
-3-
<PAGE> 140
FEE TABLE
<TABLE>
<CAPTION>
Limited Government Municipal
Maturity Income Florida Bond
Bond Fund Fund Fund Fund Fund
------------------ -------- ---------- ------- ---------
Classic Class B Classic Classic Classic Classic
Shares Shares Shares Shares Shares Shares
------- ------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.00% 0% 4.00% 4.00% 4.00% 4.00%
Maximum Sales Load Imposed on 0% 0% 0% 0% 0% 0%
Reinvested Dividends (as a percentage of
offering price)
Deferred Sales Load (as a percentage 0% 5.00% 0% 0% 0% 0%
of original purchase price or redemption
proceeds, as applicable)
Redemption Fees (as a percentage 0% 0% 0% 0% 0% 0%
of amount redeemed, if applicable)(2)
Exchange Fee $0 $0 $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees (after voluntary fee .50% .50% .50% .30% .30% .40%
reduction)(3)
12b-1 Fees .00% 1.00% .00% .00% .00% .00%
Shareholder Servicing Fees .25% .00% .25% .25% .25% .25%
Other Expenses (after voluntary fee .25% .25% .26% .35% .29%(4) .30%(5)
reduction)(4) ---- ---- ---- ---- ------- -------
Total Fund Operating Expenses 1.00% 1.75% 1.01% .90% .84% .95%
(after voluntary fee reduction)(6)
</TABLE>
-4-
<PAGE> 141
(1) Financial Institutions may charge a Customer's (as defined in the
Prospectus) account fees for automatic investment and other cash management
services provided in connection with investment in the Fund. (See "HOW TO
PURCHASE AND REDEEM SHARES - Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire
redemption payment made at the request of a shareholder. (See "HOW TO PURCHASE
AND REDEEM SHARES - Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management
Fees as a percentage of average net assets would be .65% for each Income Fund.
(See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - Investment Advisor.")
(4) Absent the voluntary reduction of administration fees, Other Expenses
as a percentage of average net assets would be 0.33% for the Bond Fund, 0.34%
for the Limited Maturity Fund, and 0.45% for the Government Income Fund, 0.39%
of or the Florida Fund and are estimated to be 0.38% for the Municipal Bond
Fund. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS- Administrator.")
(5) "Other expenses" for the Municipal Bond Fund are based on estimated
amounts for the current fiscal year.
(6) In the absence of any voluntary reduction in investment advisory fees
and administration fees, Total Fund Operating Expenses for the Classic Shares
would be 1.23% for the Bond Fund, 1.24% for the Limited Maturity Fund, 1.35% for
the Government Income Fund, 1.29% for the Florida Fund and are estimated to be
1.28% for the Municipal Bond Fund. In the absence of any voluntary reduction in
investment advisory fees and administration fees, Total Fund Operating Expenses
for the Class B Shares would be 1.98% for the Bond Fund.
Example:
You would pay the following expenses on a $1,000 investment in Classic
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Bond Fund $50 $71 $93 $158
Limited Maturity Fund $50 $71 $94 $159
Government Income Fund $49 $68 $88 $146
Florida Fund $48 $66 $85 $140
Municipal Bond Fund $49 $69 N/A N/A
You would pay the following expenses on a $1,000 investment in Class B
Shares, assuming (1) deduction of the applicable Contingent Deferred Sales
Charge; and (2) 5% annual return.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Bond Fund
Assuming a complete
redemption at end of period $68 $85 $115 $186
Assuming no redemption $18 $55 $95 $186
-5-
<PAGE> 142
Long-term shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by NASD Rules.
The purpose of the tables above is to assist an investor in the Classic Shares
and Class B Shares of an Income Fund in understanding the various costs and
expenses that an investor will bear directly or indirectly. See "MANAGEMENT OF
AMSOUTH MUTUAL FUNDS" for a more complete discussion of annual operating
expenses of the Income Funds.
THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing tables and examples relates only to
Classic Shares and Class B Shares. The Trust also offers Premier Shares of each
Income Fund which are subject to the same expenses except that there are no
sales charges nor shareholder servicing or distribution expenses charged to
Premier Shares. (See "Management of AmSouth Mutual Funds" - "Investment Advisor"
and "Distributor").
-6-
<PAGE> 143
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Funds for the period from commencement of
operations to January 31, 1997. The information from the commencement of
operations to July 31, 1996 is a part of the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants for the Trust, whose report on
the Trust's financial statements for the year ended July 31, 1996 appears in the
Statement of Additional Information. The information for the period ended
January 31, 1997 is unaudited. The Municipal Bond Fund had not commenced
operations as of January 31, 1997. Further financial data is incorporated by
reference into the Statement of Additional Information.
Bond Fund
---------
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.54 $10.83 $10.59 $11.29 $11.29
------ ------ ------ ------ ------
Investment Activities
Net investment income 0.32 $0.65 0.69 0.69 0.71
Net realized and unrealized
gains (losses) from investments 0.15 (0.18) 0.28 (0.66) 0.33
------ ------ ------ ------ ------
Total from Investment Activities 0.47 0.47 0.97 0.03 1.04
------ ------ ------ ------ ------
Distributions
Net investment income (0.36) (0.65) (0.69) (0.70) (0.71)
Net realized gains 0.00 (0.11) (0.04) (0.03) (0.33)
------ ------ ------ ------ ------
Total Distributions (0.36) (0.76) (0.73) (0.73) (1.04)
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.65 $10.54 $10.83 $10.59 $11.29
====== ====== ====== ====== ======
Total Return (Excludes Sales Charge) 4.53%(c) 4.40% 9.70% 0.23% 9.80%
Ratios/Supplemental Data:
Net Assets at end of period (000) $132,112 $132,737 $94,671 $79,472 $65,777
Ratio of expenses to average net assets 0.75%(b) 0.75% 0.75% 0.78% 0.78%
Ratio of net investment income to average net assets 6.03%(b) 6.12% 6.63% 6.31% 6.37%
Ratio of expenses to average net assets* 0.98%(b) 0.98% 0.98% 1.01% 1.01%
Ratio of net investment income to average net assets* 5.80%(b) 5.89% 6.40% 6.08% 6.14%
Portfolio Turnover 11.20% 9.60% 17.70% 30.90% 14.98%
<CAPTION>
Year Ended July 31,
----------------------------------
December 1,
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.42 $10.39 $10.61 $10.00
------ ------ ------ ------
Investment Activities
Net investment income 0.74 0.74 0.77 0.50
Net realized and unrealized
gains (losses) from investments 0.91 0.05 (0.21) 0.56
------ ------ ------ ------
Total from Investment Activities 1.65 0.79 0.56 1.06
------ ------ ------ ------
Distributions
Net investment income (0.73) (0.74) (0.75) (0.45)
Net realized gains (0.05) (0.02) (0.03) --
------ ------ ------ ------
Total Distributions (0.78) (0.76) (0.78) (0.45)
------ ------ ------ ------
Net Asset Value, End of Period $11.29 $10.42 $10.39 $10.61
====== ====== ====== ======
Total Return (Excludes Sales Charge) 16.41% 7.99% 5.54% 10.91%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $60,156 $26,008 $17,518 $4,954
Ratio of expenses to average net assets 0.82% 0.93% 0.84% 1.10%(b)
Ratio of net investment income to average net assets 6.94% 7.26% 7.82% 7.47%(b)
Ratio of expenses to average net assets* 1.01% 1.11% 1.21% 2.28%(b)
Ratio of net investment income to average net assets* 6.75% 7.09% 7.45% 6.29%(b)
Portfolio Turnover 240.64% 181.77% 53.52% 0.00%
</TABLE>
-7-
<PAGE> 144
- ----------
* 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.
-8-
<PAGE> 145
Limited Maturity Fund
---------------------
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.31 $10.41 $10.23 $10.81 $10.81
------ ------ ------ ------ ------
Investment Activities
Net investment income 0.30 0.58 0.58 0.54 0.60
Net realized and unrealized gains (losses) from investments 0.04 (0.10) 0.17 (0.45) 0.09
------ ------ ------ ------ ------
Total from Investment Activities 0.34 0.48 0.75 0.09 0.69
------ ------ ------ ------ ------
Distributions
Net investment income (0.33) (0.57) (0.57) (0.54) (0.61)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- -- -- -- (0.08)
In excess of net realized gains -- -- -- (0.13) --
------ ------ ------ ------ ------
Total Distributions (0.33) (0.58) (0.57) (0.67) (0.69)
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.32 $10.31 $10.41 $10.23 $10.81
====== ====== ====== ====== ======
Total Return (Excludes Sales Charge) 3.29%(c) 4.74% 7.65% 0.77% 6.72%
Ratios/Supplemental Data:
Net Assets at end of period (000) $41,087 $46,005 $59,798 $51,660 $53,933
Ratio of expenses to average net assets 0.77%(b) 0.76% 0.80% 0.79% 0.69%
Ratio of net investment income to average net assets 5.56%(b) 5.48% 5.69% 5.05% 5.67%
Ratio of expenses to average net assets* 1.00%(b) 0.99% 1.03% 1.02% 1.03%
Ratio of net investment income to average net assets* 5.33%(b) 5.25% 5.46% 4.82% 5.33%
Portfolio Turnover 42.36% 29.56% 38.11% 48.06% 141.27%
<CAPTION>
February 1,
Year Ended July 31, 1988 to
---------------------------------- July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.44 $10.29 $10.35 $10.00
------ ------ ------ ------
Investment Activities
Net investment income 0.70 0.73 0.72 0.35
Net realized and unrealized gains (losses) from investments 0.45 0.17 (0.05) 0.32
------ ------ ------ ------
Total from Investment Activities 1.15 0.90 0.67 0.67
------ ------ ------ ------
Distributions
Net investment income (0.69) (0.73) (0.70) (0.32)
In excess of net investment income -- -- -- --
Net realized gains (0.09) (0.02) (0.03) --
In excess of net realized gains -- -- -- --
------ ------ ------ ------
Total Distributions (0.78) (0.75) (0.73) (0.32)
------ ------ ------ ------
Net Asset Value, End of Period $10.81 $10.44 $10.29 $10.35
====== ====== ====== ======
Total Return (Excludes Sales Charge) 11.48% 9.06% 6.80% 6.87%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $38,206 $11,112 $5,983 $3,165
Ratio of expenses to average net assets 0.68% 0.85% 1.02% 1.41%(b)
Ratio of net investment income to average net assets 6.78% 7.19% 7.23% 6.82%(b)
Ratio of expenses to average net assets* 1.03% 1.20% 1.45% 2.72%(b)
Ratio of net investment income to average net assets* 6.43% 6.84% 6.80% 5.51%(b)
Portfolio Turnover 35.64% 85.08% 119.69% 28.28%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
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<PAGE> 146
Government Income Fund
----------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 1, 1993
January 31, July 31, to July 31,
1997 1996 1995 1994(a)
---- ---- ---- -------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.40 $9.54 $9.48 $10.00
----- ----- ----- ------
Investment Activities
Net investment income 0.26 0.66 0.68 0.54
Net realized and unrealized gains (losses)
from investments 0.20 (0.20) 0.08 (0.57)
----- ----- ----- ------
Total from Investment Activities 0.46 0.46 0.76 (0.03)
----- ----- ----- ------
Distributions
Net investment income (0.27) (0.59) (0.70) (0.33)
Tax return of capital -- (0.01) -- (0.16)
----- ----- ----- ------
Total Distributions (0.27) (0.60) (0.70) (0.49)
----- ----- ----- ------
Net Asset Value, End of Period $9.59 $9.40 $9.54 $9.48
===== ===== ===== =====
Total Return (Excludes Sales Charge) 4.95%(c) 4.91% 8.43% (0.26)%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $13,762 $15,752 $16,679 $15,465
Ratio of expenses to average net assets 0.72%(b) 0.65% 0.58% 0.37%(b)
Ratio of net investment income to average
net assets 5.49%(b) 6.81% 7.18% 6.56%(b)
Ratio of expenses to average net assets* 1.17%(b) 1.10% 1.19% 1.22%(b)
Ratio of net investment income to average
net assets* 5.04%(b) 6.36% 6.57% 5.71%(b)
Portfolio Turnover 2.65% 78.31% 27.32% 122.94%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
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<PAGE> 147
Florida Tax-Free Fund
---------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30, 1994
January 31, July 31, to July 31,
1997 1996 1995(a)
---- ---- -------
(Unaudited)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.30 $10.32 $10.00
------ ------ ------
Investment Activities
Net investment income 0.22 0.45 0.34
Net realized and unrealized gains (losses) from investments 0.05 (0.01) 0.30
------ ------ ------
Total from Investment Activities 0.27 0.44 0.64
------ ------ ------
Distributions
Net investment income (0.25) (0.45) (0.32)
Net realized gains (0.01) (0.01) --
------ ------ ------
Total Distributions (0.26) (0.46) (0.32)
------ ------ ------
Net Asset Value, End of Period $10.31 $10.30 $10.32
====== ====== ======
Total Return (Excludes Sales Charge) 2.71%(c) 4.24% 6.53%(c)
Ratios/Supplemental Data:
Net Asset at end of period (000) $52,825 $48,869 $48,333
Ratio of expenses to average net assets 0.54%(b) 0.59% 0.70%(b)
Ratio of net investment income to average net assets 4.35%(b) 4.33% 4.16%(b)
Ratio of expenses to average net assets* 0.99%(b) 1.04% 1.01%(b)
Ratio of net investment income to average net assets* 3.90%(b) 3.88% 3.86%(b)
Portfolio Turnover 2.30% 12.21% 2.33%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
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<PAGE> 148
INVESTMENT OBJECTIVE AND POLICIES
Each of the Bond Fund, Limited Maturity Fund, and Government Income Fund
seeks current income consistent with the preservation of capital. There can be,
of course, no assurance that any Fund will achieve its investment objective. The
investment objective of each Fund is fundamental and may not be changed without
a vote of a majority of the outstanding Shares of that Fund (as defined below
under "GENERAL INFORMATION -- Miscellaneous" in this prospectus).
THE BOND FUND AND LIMITED MATURITY FUND
The Bond Fund invests in long-term bonds and other fixed-income
securities. The Bond Fund's investments primarily consist of, but are not
limited to, debt obligations such as bonds, notes and debentures, which are
issued by United States corporations or issued or guaranteed by the United
States Government or its agencies or instrumentalities. The Bond Fund invests in
debt securities only if they are rated at time of purchase in one of the three
highest rating categories by a nationally recognized statistical rating
organization (an "NRSRO"), or including all subclassifications indicated by
modifiers of such "A" ratings. See "Appendix" to the Statement of Additional
Information for an explanation of these ratings.
The Bond Fund invests in fixed-income securities with a maturity in excess
of one year, except for amounts held in cash equivalents. Fixed-income
securities can have maturities of thirty years or more. The Bond Fund will
invest at least 65% of the value of its total assets in bonds (including
debentures), except that, when market conditions indicate a temporary defensive
investment strategy as determined by the Advisor, more than 35% of the Bond
Fund's total assets may be held in cash and cash equivalents. "Cash equivalents"
are short-term, interest-bearing instruments or deposits. The purpose of cash
equivalents is to provide income at money market rates while minimizing the risk
of decline in value to the maximum extent possible. The instruments may include,
but are not limited to, commercial paper, certificates of deposit, repurchase
agreements, bankers' acceptances, United States Treasury Bills, bank money
market deposit accounts and money market mutual funds. The Bond Fund will
purchase commercial paper rated at the time of purchase in the highest rating
category by an NRSRO or, if not rated, found by the Advisor under guidelines
established by the Trust's Board of Trustees to be of comparable quality. See
"Appendix" to the Statement of Additional Information for an explanation of
these ratings.
The Limited Maturity Fund invests in bonds (including debentures), notes
and other debt securities which have a stated or remaining maturity of five
years or less or which have an unconditional redemption feature that will permit
the Limited Maturity Fund to require the issuer of the security to redeem the
security within five years from the date of purchase by the Limited Maturity
Fund or for which the Limited Maturity Fund has acquired an unconditional "put"
to sell the security within five years from the date of purchase by the Limited
Maturity Fund.
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<PAGE> 149
The Limited Maturity Fund's investments consist primarily of, but are not
limited to, debt securities such as bonds, notes and debentures, which are
issued by United States corporations or issued or guaranteed by the United
States Government or its agencies or instrumentalities. The Limited Maturity
Fund invests in debt securities only if they are rated at time of purchase in
one of the three highest rating categories by an NRSRO or, if not rated, found
by the Advisor under guidelines established by the Trust's Board of Trustees to
be of comparable quality. See "Appendix" to the Statement of Additional
Information for an explanation of these ratings.
Under normal circumstances, the Limited Maturity Fund will invest at least
65% of the value of its total assets in bonds (including debentures), notes and
other debt securities which have a stated or remaining maturity of five years or
less or which have an unconditional redemption feature that will permit the
Limited Maturity Fund to require the issuer of the security to redeem the
security within five years from the date of purchase by The Limited Maturity
Fund or for which the Limited Maturity Fund has acquired an unconditional "put"
to sell the security within five years from the date of purchase by the Limited
Maturity Fund. The remainder of the Limited Maturity Fund's assets will be
invested in bonds (including debentures), notes and other debt securities which
have a stated or remaining maturity of greater than five years, cash, cash
equivalents and government and corporate bonds, including without limitation
cash or money-market instruments, commercial paper, certificates of deposit,
repurchase agreements, bankers' acceptances, U.S. Treasury Bills, obligations of
the U.S. Government and its agencies, bank money market deposit accounts and
money market mutual funds. The Limited Maturity Fund will purchase commercial
paper rated at the time of purchase in the highest rating category by an NRSRO
or, if not rated, found by the Advisor under guidelines established by the
Trust's Board of Trustees to be of comparable quality. See "Appendix" to the
Statement of Additional Information for an explanation of these ratings. At
times, the Advisor may determine that it is not in the best interests of
Shareholders of the Limited Maturity Fund to invest 65% of The Limited Maturity
Fund's total assets in bonds, debentures, notes and other debt securities. At
such times, the Fund may follow the temporary defensive investment strategy of
investing more than 35% of its total assets in cash, cash equivalents and
corporate bonds with remaining maturities of less than 1 year. There is no way
to predict when, or for how long, the Limited Maturity Fund may pursue such a
defensive investment strategy.
At the time of purchase of a debt security with a stated or remaining
maturity in excess of three years from the date of purchase by the Limited
Maturity Fund, the Limited Maturity Fund may acquire a "put" with respect to
such debt securities. Under a "put", the Limited Maturity Fund would have the
right to sell the debt security within a specified period of time at a specified
minimum price. The Limited Maturity Fund will only acquire puts from dealers,
banks and broker-dealers which the Advisor has determined are creditworthy under
guidelines established by the Trust's Board of Trustees. A put will be sold,
transferred, or assigned by the Limited Maturity Fund only with the underlying
debt security. The Limited
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<PAGE> 150
Maturity Fund will acquire puts solely to shorten the maturity of the underlying
debt security. The aggregate price of a security subject to a put may be higher
than the price which otherwise would be paid for the security without such an
option, thereby increasing the security's cost and reducing its yield.
Master Demand Notes
The Bond and Limited Maturity Funds may also invest in master demand notes
in order to satisfy short-term needs or, if warranted, as part of their
temporary defensive investment strategy. Such notes are demand obligations that
permit the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a United States commercial bank
acting as agent for the payees of such notes. Master demand notes are callable
on demand by an Income Fund, but are not marketable to third parties. Master
demand notes are direct lending arrangements between an Income Fund and the
issuer of such notes. The quality of master demand notes will be reviewed by the
Advisor of the Income Funds at least quarterly, which review will consider the
earning power, cash flow and debt-to-equity ratios indicating the borrower's
ability to pay principal together with accrued interest on demand. While master
demand notes are not typically rated by credit rating agencies, issuers of such
notes must satisfy the same criteria for the Bond Fund and the Limited Maturity
Fund set forth above for commercial paper.
Variable and Floating Rate Notes
The Bond Fund and the Limited Maturity Fund may acquire rated and unrated
variable and floating rate notes. Variable and floating rate notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by an Income Fund will be determined by the
Advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality at the time of purchase to rated instruments eligible for
purchase under the Fund's investment policies. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to an Income Fund will approximate their par value.
It is anticipated that the only non-income producing securities to be held
in the Bond Fund and Limited Maturity Fund will be zero-coupon obligations
evidencing ownership of future interest and principal payments on United States
Treasury Bonds. Such zero-coupon obligations pay no current interest and are
typically sold at prices greatly discounted from par value, with par value to be
paid to the holder at maturity. The return on a zero-coupon obligation, when
held to maturity, equals the difference between the par value and the original
purchase price. Zero-coupon obligations have greater price volatility than
coupon obligations and such obligations will be purchased when the yield spread,
in light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the
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<PAGE> 151
Bond Fund's total assets, and the Limited Maturity Fund will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 25% of the value of the Limited Maturity Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Income Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Advisor may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Advisor will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
Foreign Investments
The Bond Fund may invest up to 20% of the value of its total assets and
the Limited Maturity Fund may invest up to 30% of its total assets in debt
securities of foreign issuers. Any investments by the Bond Fund and Limited
Maturity Fund in these securities will be in accordance with such Fund's
investment policies and restrictions. The Bond Fund and the Limited Maturity
Fund may also invest in securities issued by foreign branches of U.S. banks and
foreign banks and in Canadian Commercial Paper and Europaper. Investment in
securities of foreign issuers is subject to special risks, such as future
adverse political and economic developments, possible seizure, currency
blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore less liquidity and greater price volatility than U.S. securities,
and the risk that custodian and brokerage costs may be higher. To the extent
that the Income Funds may invest in securities of foreign issuers which are not
traded on any exchange, there is a further risk that these securities may not be
readily marketable. The Income Funds will not hold foreign currency as a result
of such investments.
Insurance Company Funding Agreements
The Bond Fund and the Limited Maturity Fund may invest in funding
agreements ("Funding Agreements") issued by insurance companies. Pursuant to
such agreements, the Bond Fund and Limited Maturity Fund invests an amount of
cash with an insurance company and the insurance company credits such investment
on a monthly basis with guaranteed interest which is based on an index. The
Funding Agreements provide that this guaranteed interest will not be less than a
certain minimum rate. The Bond Fund and the Limited Maturity Fund will only
purchase a Funding Agreement when the Advisor has determined, under
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<PAGE> 152
guidelines established by the Board of Trustees, that the Funding Agreement
presents minimal credit risks to the Fund and is of comparable quality to
instruments that are rated high quality by a nationally recognized statistical
rating organization that is not an affiliated person, as defined in the
Investment Company Act of 1940, of the issuer, on any insurer, guarantor,
provider of credit support for the instrument. The Bond Fund and the Limited
Maturity Fund may receive all principal of and accrued interest on a Funding
Agreement at any time upon thirty days' written notice. Because the Bond Fund
and the Limited Maturity Fund may not receive the principal amount of a Funding
Agreement from the insurance company on seven days' notice or less, the Funding
Agreement is considered an illiquid investment, and, together with other
instruments in such Fund which are not readily marketable, will not exceed 15%
of such Fund's net assets.
Asset-Backed Securities
The Bond Fund and the Limited Maturity Fund may invest in securities
backed by automobile receivables and credit-card receivables and other
securities backed by other types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and tradeins. Many people buy new
cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, typically 18 months. The CARD'S principal balance
remains constant during this period, while any cardholder repayments or new
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
CARDS have monthly payment schedules, weighted-average lives of 18-24 months and
stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors.
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<PAGE> 153
In many cases, the investor's participation is based on the ratio of the CARDS'
balance to the total credit card portfolio balance. This ratio can be adjusted
monthly or can be based on the balances at the beginning of the amortization
period. In some issues, investors are allocated most of the repayments,
regardless of the CARDS' balance. This method results in especially fast
amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. The Bond Fund and the Limited Maturity Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three highest rating categories by an NRSRO or, if unrated, found by the
Advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality.
THE GOVERNMENT INCOME FUND
The Government Income Fund invests at least 65% of its total assets in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, although up to 35% of the value of its total assets may be
invested in other types of debt securities, preferred stocks and options.
Consistent with the foregoing, under normal market conditions, the Government
Income Fund will invest up to 80% of the value of its total assets in
mortgage-related securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related
securities issued by nongovernmental entities which are rated, at the time of
purchase, in one of the three highest rating categories by an NRSRO or, if
unrated, which the Advisor deems present attractive opportunities and are of
comparable quality. For a description of the rating symbols of each NRSRO, see
the Appendix to the Statement of Additional Information.
U.S. Government Obligations
The types of U.S. Government obligations, including mortgage-related
securities, invested in by the Government Income Fund includes obligations
issued or guaranteed as to payment of principal and interest by the full faith
and credit of the U.S. Treasury, such as Treasury bills, notes, bonds and
certificates of indebtedness, and obligations issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, but not supported by such
full faith and credit. Obligations of the U.S. Treasury include "stripped" U.S.
Treasury Obligations such as Treasury Receipts, representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
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<PAGE> 154
Obligations of certain agencies and instrumentalities of the U.S.
Government, such as GNMA and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of FNMA, are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or FHLMC, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
The principal governmental (i.e., backed by the full faith and credit of
the United States Government) guarantor of mortgage-related securities is GNMA.
GNMA is a wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
United States Government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
governmentsponsored corporations owned entirely by private stockholders.
Pass-through securities issued by FNMA and FHLMC are guaranteed as to timely
payment of principal and interest by FNMA and FHLMC but are not backed by the
full faith and credit of the U.S. Government.
Mortgage-Related Securities -- In General
Mortgage-related securities have mortgage obligations backing such
securities, including among others, conventional thirty year fixed rate mortgage
obligations, graduated payment mortgage obligations, fifteen year mortgage
obligations, and adjustable rate mortgage obligations. All of these mortgage
obligations can be used to create pass-through securities. A pass-through
security is created when mortgage obligations are pooled together and undivided
interests in the pool or pools are sold. The cash flow from the mortgage
obligations is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
Prepayments occur when the holder of an individual mortgage obligation prepays
the remaining principal before the mortgage obligation's scheduled maturity
date. As a result of the pass-through of prepayments of principal on the
underlying securities, mortgage-backed securities are often subject to more
rapid prepayment of principal than their stated maturity would indicate. Because
the prepayment characteristics of the underlying mortgage obligations vary, it
is not possible to predict accurately the realized yield or average life of a
particular issue of pass-through certificates. Prepayment rates are important
because of their effect on the yield and price of the securities. Accelerated
prepayments have an adverse impact on yields for pass-throughs purchased at a
premium (i.e., a price in excess of principal amount) and may involve
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<PAGE> 155
additional risk of loss of principal because the premium may not have been fully
amortized at the time the obligation is repaid. The opposite is true for
pass-throughs purchased at a discount. The Government Income Fund may purchase
mortgage-related securities at a premium or at a discount.
Mortgage-Related Securities Issued By Nongovernmental Entities
The Government Income Fund may invest in mortgage-related securities
issued by nongovernmental entities. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issues also create pass-through pools of conventional
residential mortgage loans. Such issuers may also be the originators of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such nongovernmental issuers generally offer a
higher rate of interest than government and government-related pools because
there are not direct or indirect government guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools is
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance. The insurance and guarantees are issued
by government entities, private insurers and the mortgage poolers. Such
insurance and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets the
Government Income Fund's investment quality standards. There can be no assurance
that the private insurers can meet their obligations under the policies. The
Government Income Fund may buy mortgage-related securities without insurance or
guarantees if through an examination of the loan experience and practices of the
poolers the Advisor determines that the securities meet the Government Income
Fund's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The Government Income Fund will not purchase
mortgage-related securities or any other assets which in the Advisor's opinion
are illiquid, if as a result, more than 15% of the value of the Government
Income Fund's net assets will be illiquid.
Collateralized Mortgage Obligations
Mortgage-related securities in which the Government Income Fund may invest
may also include collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations issued generally by finance subsidiaries or trusts that are secured
by mortgage-backed certificates, including, in many cases, certificates issued
by government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations. The staff of the Securities and Exchange Commission has
determined that certain issuers of
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CMOs are investment companies for purposes of the Investment Company Act of
1940, as amended (the "1940 Act").
CMOs may include Stripped Mortgage Securities. Such securities are
derivative multiclass mortgage securities issued by agencies or
instrumentalities of the U.S. Government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Stripped Mortgage Securities are usually structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of Stripped Mortgage
Security will have one class receiving all of the interest from the mortgage
assets (the interest-only or "IO" class), while the other class will receive all
of the principal (the principal-only or "PO" class). The yield to maturity on an
IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the securities' yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated AAA or Aaa.
The Stripped Mortgage Securities held by the Fund will be considered
liquid securities only under guidelines established by the Trust's Board of
Trustees, and the Fund will not purchase a Stripped Mortgage Security that is
illiquid if, as a result thereof, more than 15% of the value of the Fund's net
assets would be invested in such securities and other illiquid securities.
In reliance on a recent staff interpretation, the Government Income Fund's
investment in certain qualifying CMOs, including CMOs that have elected to be
treated as Real Estate Mortgage Investment Conduits (REMICs), are not subject to
the 1940 Act's limitation on acquiring interests in other investment companies.
In order to be able to rely on the staff's interpretation, the CMOs and REMICs
must be unmanaged, fixed-asset issuers, that (a) invest primarily in
mortgaged-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act, and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that the Government Income Fund selects CMOs or REMICs
that do not meet the above requirements, the Government Income Fund's investment
in such securities will be subject to the limitations on its investment in
investment company securities as set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Statement of Additional Information.
The Government Income Fund expects that governmental, government-related
or private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may be different from customary long-term fixed rate
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mortgages. As new types of mortgage-related securities are developed and offered
to investors, the Advisor will, consistent with the Government Income Fund's
investment objective, policies and quality standards, consider making
investments in such new types of securities.
Other Securities
The Government Income Fund may hold some short-term obligations (with
maturities of 12 months or less) consisting of domestic and foreign commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit and time deposits of domestic and foreign branches of
U.S. banks and foreign banks, and repurchase and reverse repurchase agreements.
The Government Income Fund may also invest in corporate debt securities that are
rated at the time of purchase in one of the three highest rating categories by
an NRSRO or, if not rated, found by the Advisor under guidelines established by
the Trust's Board of Trustees to be of comparable quality.
THE FLORIDA FUND AND MUNICIPAL BOND FUND
The Florida Fund seeks to produce as high a level of current interest
income exempt from federal income taxes and Florida intangibles taxes as is
consistent with the preservation of capital. The Municipal Bond Fund seeks to
produce as high a level of current federal tax-exempt income, as is consistent
with the preservation of capital. There can be, of course, no assurance that the
Florida Fund or the Municipal Bond Fund will achieve their investment
objectives. The investment objective of each Tax-Free Fund is fundamental and
may not be changed without a vote of a majority of the outstanding Shares of the
Fund (as defined below under "GENERAL INFORMATION -- Miscellaneous" in this
prospectus).
The Florida Fund invests primarily in bonds, notes and warrants generally
issued by or on behalf of the State of Florida and its political subdivisions,
the interest on which, in the opinion of the issuer's bond counsel at the time
of issuance, is exempt from federal income tax, is not treated as a preference
item for purposes of the federal alternative minimum tax for individuals, and is
exempt from the Florida Intangible Personal Property Tax ("Florida Municipal
Securities"). As a fundamental policy, under normal market conditions at least
80% of the Florida Fund's net assets will be invested in Florida Municipal
Securities.
The Municipal Bond Fund invests primarily in bonds and notes issued by or
on behalf of states (including the District of Columbia), territories, and
possessions of the United States and their respective authorities, agencies,
instrumentalities, and political subdivisions, the interest on which is both
exempt from federal income tax and not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Municipal Securities").
As a fundamental policy, under normal market conditions at least 80% of the
Municipal Bond
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Funds' net assets will be invested in Municipal Securities and in securities of
money market mutual funds which invest primarily in obligations exempt from
federal income tax. Additionally, as a fundamental policy, under normal market
conditions at least 65% of the Municipal Bond Fund's total assets will be
invested in bonds.
Under normal market conditions, each Tax-Free Fund may invest up to 20% of
net assets in obligations, the interest on which is either subject to federal
income taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations"). The Florida Fund may also
invest in Municipal Securities. At times, the Advisor may determine that,
because of unstable conditions in the markets for Municipal Securities or
Florida Municipal Securities (hereinafter referred to collectively as "Eligible
Municipal Securities"), pursuing the Funds' basic investment strategies is
inconsistent with the best interests of the Shareholders of the Funds. At such
times, the Advisor may use temporary defensive strategies differing from those
designed to achieve the Funds' investment objectives, such as by increasing the
Funds' holdings in Taxable Obligations to over 20% of each Fund's net assets and
by holding uninvested cash reserves pending investment and, with respect to the
Florida Fund, increasing its holdings in Municipal Securities to over 20% of net
assets. Taxable Obligations may include obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (some of which may be subject
to repurchase agreements), certificates of deposit, demand and time deposits,
bankers' acceptances of selected banks, and commercial paper meeting the
Tax-Free Funds' quality standards (as described below) for tax-exempt commercial
paper. These obligations are described further in the Statement of Additional
Information.
The Tax-Free Funds may also invest in private activity bonds ("industrial
development bonds" under prior law). Interest on private activity bonds (and
industrial development bonds) is fully tax-exempt only if the bonds fall within
certain defined categories of qualified private activity bonds and meet the
requirements specified in those respective categories. Regardless of whether
they qualify for tax-exempt status, private activity bonds may subject both
individual and corporate investors to tax liability under the alternative
minimum tax. However, private activity bonds will only be considered Municipal
Securities for the purposes of this Prospectus if they do not have this effect
regarding individuals. For additional information on the federal alternative
minimum tax, see "DIVIDENDS AND TAXES."
The Tax-Free Funds may invest in Eligible Municipal Securities that are
rated at the time of purchase within the three highest rating groups assigned by
an NRSRO. The Funds may also purchase Eligible Municipal Securities that are
unrated at the time of purchase but are determined to be of comparable quality
by the Advisor pursuant to guidelines approved by the Trust's Board of Trustees.
Eligible Municipal Securities may be purchased in reliance upon a rating only
when the rating organization is not affiliated with the issuer or guarantor of
the securities. The applicable ratings are described in the Appendix to the
Statement of Additional Information.
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The two principal classifications of Eligible Municipal Securities that
may be held by the Tax-Free Funds are "general obligation" securities and
"revenue" securities. General obligation securities are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue securities are payable only from the revenues derived from
a particular facility or class of facilities, or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Private activity bonds held by the Funds
are in most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of private activity
bonds is usually directly related to the credit standing of the corporate user
of the facility involved.
Eligible Municipal Securities may also include "moral obligation" bonds,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality that
created the issuer.
Opinions relating to the validity of Eligible Municipal Securities and to
the exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Tax-Free
Funds nor the Advisor will review the proceedings relating to the issuance of
Eligible Municipal Securities or the basis for such opinions.
Although the Municipal Bond Fund does not presently intend to do so on a
regular basis, it may invest more than 25% of its total assets in Municipal
Securities that are related in such a way that an economic, business, or
political development or change affecting one such security would likewise
affect the other Municipal Securities. An example of such securities are
obligations the repayment of which is dependent upon similar types of projects.
Such investments would be made only if deemed necessary or appropriate by the
Advisor. To the extent that the Fund's assets are concentrated in Municipal
Securities that are so related, the Fund will be subject to the peculiar risks
presented by such securities, such as negative developments in a particular
industry, to a greater extent than it would be if the Fund's assets were not so
concentrated.
The Tax-Free Funds may acquire "puts" with respect to Eligible Municipal
Securities held in their portfolios. Under a put, the Funds would have the right
to sell a specified Eligible Municipal Security within a specified period of
time at a specified price to a third party. A put would be sold, transferred, or
assigned only with the underlying Eligible Municipal Security. The Funds will
acquire puts solely to facilitate portfolio liquidity, shorten the maturity of
the underlying Eligible Municipal Securities, or permit the investment of the
Funds' at a more favorable rate of return. The Funds expect that they will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, the
Funds may pay for a put separately in
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cash. The aggregate price of a security subject to a put may be higher than the
price which otherwise would be paid for the security without such an option,
thereby increasing the security's cost and reducing its yield.
The Tax-Free Funds may also invest in master demand notes in order to
satisfy short-term needs or, if warranted, as part of its temporary defensive
investment strategy. Such notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial bank acting as
agent for the payees of such notes. Master demand notes are callable on demand
by the Funds, but are not marketable to third parties. Master demand notes are
direct lending arrangements between the Fund and the issuer of such notes. The
Advisor will review the quality of master demand notes at least quarterly, and
will consider the earning power, cash flow and debt-to-equity ratios indicating
the borrower's ability to pay principal together with accrued interest on
demand. While master demand notes are not typically rated by credit rating
agencies, issuers of such notes must satisfy the same criteria for the Funds set
forth above for commercial paper.
The Tax-Free Funds may acquire rated and unrated variable and floating
rate notes. Variable and floating rate notes are frequently not rated by credit
rating agencies; however, unrated variable and floating rate notes purchased by
the Funds will be determined by the Advisor under guidelines established by the
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Funds' investment policies. There
may be no active secondary market with respect to a particular variable or
floating rate note. Nevertheless, the periodic readjustments of their interest
rates tend to assure that their value to the Funds will approximate their par
value.
The Tax-Free Funds may acquire zero coupon obligations. Such zero-coupon
obligations pay no current interest and are typically sold at prices greatly
discounted from par value, with par value to be paid to the holder at maturity.
The return on a zero-coupon obligation, when held to maturity, equals the
difference between the par value and the original purchase price. Zero-coupon
obligations have greater price volatility than coupon obligations and such
obligations will be purchased when the yield spread, in light of the
obligation's duration, is considered advantageous. The Funds will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 20% of the value of the Florida Fund's total assets and 25% of the
Municipal Bond Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Advisor may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Advisor will consider
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many factors besides current yield, including the preservation of capital,
maturity, and yield to maturity.
The Municipal Bond Fund -- Concentration
The Municipal Bond Fund may invest 25% or more of its total assets in
bonds, notes and warrants generally issued by or on behalf of the State of
Alabama and its political subdivisions, the interest on which, in the opinion of
the issuer's bond counsel at the time of issuance, is exempt form both federal
income tax and Alabama personal income tax and is not treated as a preference
item for purposes of the federal alternative minimum tax for individuals
("Alabama Municipal Securities"). Because of the relatively small number of
issuers of Alabama Municipal Securities, the Fund is more likely to invest a
higher percentage of its assets in the securities of a single issuer. This
concentration involves an increased risk of loss if the issuer is unable to make
interest or principal payments or if the market value of such securities were to
decline. Concentration of this nature may cause greater fluctuation in the net
asset value of the Fund's Shares.
General Economic Characteristics of Alabama
Alabama ranks twenty-second in the nation in total population, with over
four million residents in 1995. Its economy has historically been based
primarily on agriculture, textiles, mineral extraction and iron and steel
production, although the state has diversified into health care related
industries and other service-oriented sectors. Overall job growth rate was 4.0%
for the period from 1992 to 1994. Alabama's per capita income in 1996 was ranked
thirty-ninth in the nation. Currently Alabama's general obligations are rated Aa
by Moody's and AA by Standard and Poor's.
Balanced Budget and Pro-Ration Procedures
Section 213 of the Constitution of Alabama, as amended, requires that
annual financial operations of Alabama must be on a balanced budget. The
Constitution also prohibits the state from incurring general obligation debt
unless authorized by an amendment to the Constitution. Amendments to the
Constitution have generally been adopted through a procedure that requires each
amendment to be proposed by a favorable vote of three-fifths of all the members
of each house of the Legislature and thereafter approved by a majority of the
voters of the state voting in a statewide election.
Alabama has statutory budget provisions which create a proration procedure
in the event that estimated budget resources in a fiscal year are insufficient
to pay in full all appropriations for such fiscal year. The Alabama state budget
is composed of two funds the General Fund and the Education Fund. Proration of
either Fund is possible in any fiscal year, and proration may have a material
adverse effect on entities dependent on
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state funding, including certain issuers of Alabama Municipal Securities held in
the Alabama Fund.
Court decisions have indicated that certain state expenses necessary for
essential functions of government are not subject to proration under applicable
law. The Supreme Court of Alabama has held that the debt prohibition contained
in the constitutional amendment does not apply to obligations incurred for
current operating expenses payable during the current fiscal year, debts
incurred by separate public corporations, or state debt incurred to repel
invasion or suppress insurrection. The state may also make temporary loans not
exceeding $300,000 to cover deficits in the state treasury. Limited obligation
debt may be authorized by the legislature without amendment to the Constitution.
The state has followed the practice of financing certain capital improvement
programs - principally for highways, education and improvements to the State
Docks - through the issuance of limited obligation bonds payable solely out of
certain taxes and other revenues specifically pledged for their payment and not
from the general revenues of the state.
General Obligation Warrants
Municipalities and counties in Alabama traditionally have issued general
obligation warrants to finance various public improvements. Alabama statutes
authorizing the issuance of such interest-bearing warrants do not require an
election prior to issuance. On the other hand, the Constitution of Alabama
(Section 222) provides that general obligation bonds may not be issued without
an election.
The Supreme Court of Alabama validated certain general obligation warrants
issued by the City of Hoover, reaffirming that such obligations did not require
an election under ss. 222 of the Constitution of Alabama. In so holding, the
Court found that warrants are not "bonds" within the meaning of ss. 222.
According to the Court, warrants are not negotiable instruments and transferees
of warrants cannot be holders in due course. Therefore, a transferee of warrants
is subject to all defenses that the issuer of such warrants may have against the
transferor.
County boards of education may borrow money by issuing interest-bearing
warrants payable solely out of such board's allocated or apportioned share of
specified tax. The county board's apportioned share of such tax may be
diminished upon the establishment of a city school system, which could
jeopardize the payment of the county board's warrants.
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Limited Taxing Authority
Political subdivisions of the state have limited taxing authority. Ad
valorem taxes may be levied only as authorized by the Alabama Constitution. In
order to increase the rate at which any ad valorem tax is levied above the limit
otherwise provided in the Constitution, the proposed increase must be proposed
by the governing body of the taxing authority after a public hearing, approved
by an act of the Alabama Legislature and approved at an election within the
taxing authority's jurisdiction. In addition, the Alabama Constitution limits
the total amount of state, county, municipal and other ad valorem taxes that may
be imposed on any class of property in any one tax year. This limitation is
expressed in terms of a specified percentage of the market value of such
property.
Specific authorizing legislation is required for the levy of taxes by
local governments. In addition, the rate at which such taxes are levied may be
limited to the authorizing legislation or judicial precedent. For example, the
Alabama Supreme Court has held that sales and use taxes, which usually comprise
a significant portion of the revenues for local governments, may not be levied
at rates that are confiscatory or unreasonable. The total sales tax (state and
local) in some jurisdictions is 9%. State and local governments in Alabama are
more dependent on general and special sales taxes than are state and local
governments in many states. Because sales taxes are less stable sources of
revenue than are property taxes, state and local governments in Alabama may be
subject to shortfalls in revenue due to economic cycles.
Priority for Essential Governmental Functions
Numerous decisions of the Alabama Supreme Court hold that a governmental
unit may first use its taxes and other revenues to pay the expenses of providing
necessary governmental services before paying debt service on its bonds,
warrants or other indebtedness.
Challenge to Education Funding
On April 1, 1993, Montgomery Circuit Court Judge Gene Reese ruled that an
unconstitutional disparity exists among Alabama's school districts because of
inequitable distribution of tax funds. Judge Reese issued an order calling for a
new design for the distribution of funds for educational purposes as well as a
new system for funding public education.
On January 10, 1997, the Alabama Supreme Court affirmed Judge Reese's
ruling. The court stated that the Alabama Legislature must develop a plan within
one year to correct the unconstitutional disparity. Any allocation of funds away
from school districts could impair the ability of such districts to service
debt.
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The Florida Fund--Diversification and Concentration
The Florida Fund is a non-diversified fund under the Investment Company
Act of 1940 (the "1940 Act") and may concentrate its investments in the
securities of a limited number of issuers. Under the Internal Revenue Code of
1986, as amended (the "Code"), the Florida Fund generally may not invest in a
manner such that at the end of each fiscal quarter (i) more than 25% of its
total assets are represented by securities of any one issuer (other than U.S.
government securities) and (ii) with respect to 50% of its total assets, more
than 5% of its total assets are represented by the securities of any one issuer
(other than U.S. government securities) . Thus, the Florida Fund generally may
invest up to 25% of its total assets in the securities of each of any two
issuers. Because of the relatively small number of issuers of Florida Municipal
Securities, the Florida Fund is more likely to invest a higher percentage of its
assets in the securities of a single issuer than an investment company that
invests in a broad range of tax-exempt securities. This concentration involves
an increased risk of loss if the issuer is unable to make interest or principal
payments or if the market value of such securities were to decline.
Concentration of this nature may cause greater fluctuation in the net asset
value of the Florida Fund's shares.
General Economic Characteristics of Florida
Florida ranks fourth in the nation in total population, with over 12.9
million residents in 1990, and has been one of the fastest growing states in the
nation. Historically, tourism, agriculture, construction and manufacturing have
constituted the most important sectors of the state's economy. Construction
activity slows during periods of high interest rates or cyclical downturns. The
service sector employs the largest number of people in Florida. While wages in
the service sector tend to be lower than in manufacturing and other sectors of
the economy, the service sector traditionally has been less sensitive to
business cycles. Currently, Florida's general obligations are rated AA by both
Moody's and Standard and Poor's.
The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's
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economy is more heavily tied to military bases, some of which are closing or
scaling back as a result of Federal budget cutbacks, and the lumber and paper
industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
Sources of State and Local Revenues
Florida's Constitution prohibits deficit spending by the state for
governmental operations. Florida does not have a personal income tax. An
amendment to the state's Constitution would be required in order to institute an
income tax, and passage of such an amendment is believed to be unlikely due to
the relatively large number of retirees living in the state as well as to the
general unpopularity of tax increases in the current political climate. A
two-thirds approval of voters voting in an election is now required for the
addition of any new taxes to the Florida Constitution. The principal sources of
state revenues are a 6% sales tax, state lottery, motor fuels tax, corporate
income tax, and miscellaneous other revenue sources, including beverage tax and
licenses, cigarette tax, documentary stamp taxes and an intangible tax.
Dependence on the sales tax may subject state revenues to more volatility than
would be the case if Florida had a personal income tax, with sales tax
collections adversely affected during recessions and periods when tourism
declines.
Taxation by units of government other than the state is permitted only to
the extent that Florida's legislature enacts enabling legislation. The principle
sources of county and municipal government revenues are ad valorem property
taxes, state revenue sharing, and miscellaneous other revenue sources, including
utilities services fees and local option fees. The principal sources of revenues
for Florida's school districts are ad valorem property taxes and state revenue
sharing, including revenues from a state lottery. The state Constitution imposes
millage limits, including a 10-mill limit each on county, municipal and school
ad valorem taxes. Effective January 1, 1995, Florida's voters amended the state
Constitution to limit annual increases in the assessed value of homestead
property to the lesser of 3% of the prior year's assessment or the percentage
change in the Consumer Price Index during the preceding calendar year. The
limitation on increases in assessment of homestead property could eventually
lead to ratings revisions that could have a negative impact on the prices of
obligations funded with this source of taxation. However, the effect of the
limit will be tempered by reassessments of homestead property at market value
when sold.
Units of state and local government in Florida will continue to face
spending pressures due to infrastructure needs for an expanding population,
especially in view of growth management laws enacted by Florida's legislature.
These laws include concurrency requirements that impose building moratoriums
unless roads and other
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infrastructure are added concurrently with additional commercial or residential
developments.
Types of Indebtedness
The two principal types of indebtedness issued by state or local units of
government in Florida are "general obligation bonds" and "revenue bonds."
General obligation bonds are secured by a pledge of the full faith, credit and
taxing power of the governmental entity issuing the bonds. They can be issued in
Florida only after a referendum in which the voters in the jurisdictional limits
of the jurisdiction issuing the bonds approve their issuance. Revenue bonds are
payable only from the revenues derived from a facility or class of facilities
or, in some cases, from the proceeds of a special tax or other specific revenue
source. Revenue bonds are not secured by the full faith, credit and taxing power
of the governmental issuer.
Market Risk Caused by Intangible Tax Considerations
As a normal policy, on January 1 of each calendar year the Florida Fund
intends to own only assets which are exempt from the Florida Intangible Tax.
Accordingly, it is possible that the Florida Fund, in disposing of non-exempt
assets to meet this policy objective, might sustain losses which might not
otherwise be incurred absent this policy of avoiding the Florida Intangible Tax.
INVESTMENT TECHNIQUES
Each Income Fund may invest up to 5% of the value of its total assets in
the securities of any one money market mutual fund including Shares of the
AmSouth Prime Obligations Fund, the AmSouth U.S. Treasury Fund (and, with
respect to the Tax-Free Funds, the AmSouth Tax Exempt Fund), provided that no
more than 10% of each Fund's total assets may be invested in the securities of
money market mutual funds in the aggregate. In order to avoid the imposition of
additional fees as a result of investments by the each Funds in the Prime
Obligations Fund and the AmSouth U.S. Treasury Fund (and with respect to the
Tax-Free Funds, the AmSouth Tax-Exempt Fund), the Advisor and the Administrator
will reduce that portion of their usual service fees from each Fund by an amount
equal to their service fees from the AmSouth Money Market Funds that are
attributable to those Fund investments. Each Fund will incur additional expenses
due to the duplication of expenses as a result of investing in securities of
other unaffiliated money market mutual funds. Additional restrictions regarding
the Funds' investments in the securities of an unaffiliated money market fund
and/or the AmSouth Money Market Funds are contained in the Statement of
Additional Information.
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Options
The Bond Fund, Limited Maturity Fund, and Government Income Fund may
engage in writing call options from time to time as the Advisor deems to be
appropriate. Options are written solely as covered call options (options on
securities owned by the Fund). Such options are issued by the Options Clearing
Corporation and may or may not be listed on a national securities exchange. In
order to close out an option position, the Fund will enter into a "closing
purchase transaction" -- the purchase of a call option on the same security with
the same exercise price and expiration date as any call option which it may
previously have written on any particular securities. When the portfolio
security is sold, the Fund effects a closing purchase transactions so as to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transactions so as to close out any existing call
option on that security. If the Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise. When
writing a covered call option, the Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but retains the risk of loss should the price of the
security decline.
From time to time, the Bond Fund and the Limited Maturity Fund may also
purchase call options on any of the types of securities in which each Fund may
invest. A purchased call option gives a Fund the right to buy and obligates the
seller to sell the underlying security at a specified exercise price during the
option period. Purchasing call options is a specialized investment technique
that entails a substantial risk of a complete loss of the amounts paid as
premiums to writers of options.
From time to time, the Bond Fund may purchase put options. A put is a
right to sell a specified security (or securities) within a specified period of
time at a specified exercise price. Puts may be acquired by the Fund to
facilitate the liquidity of the portfolio assets. Puts may also be used to
facilitate the reinvestment of assets at a rate of return more favorable than
that of the underlying security. The Bond Fund may sell, transfer, or assign a
put only in conjunction with the sale, transfer or assignment of the underlying
security or securities.
The amount payable to the Bond Fund upon its exercise of a "put" is
normally (i) the Fund's acquisition cost of the securities subject to the put
(excluding any accrued interest which the Fund paid on the acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities which are acquired subject to the puts (thus reducing
the yield to maturity otherwise available for the same securities). The Bond
Fund intends to enter into puts only with dealers, banks, and broker-dealers
which, in the Advisor's opinion, present minimal credit risks.
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For a discussion of the Limited Maturity Fund's ability to acquire puts,
see "The Bond Fund and the Limited Maturity Fund" in this prospectus.
For a discussion of the Tax-Free Funds' ability to acquire puts, see "The
Florida Fund and the Municipal Bond Fund" in this Prospectus.
When-Issued Securities
Each Income Fund may also purchase securities on a "when-issued" basis.
Whenissued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield and thereby involve a risk that the
yield obtained in the transaction will be less than that available in the market
when delivery takes place. The Income Funds will generally not pay for such
securities or start earning interest on them until they are received. When an
Income Fund agrees to purchase securities on a "when-issued" basis, the Trust's
custodian will set aside cash or liquid securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. Each of the Income Funds expects
that commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions, and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event that
its commitment to purchase "when-issued" securities ever exceeded 25% of the
value of its total assets, an Income Fund's liquidity and the Advisor's ability
to manage it might be adversely affected. The Income Funds do not intend to
purchase "when-issued" securities for speculation purposes, but only for the
purpose of acquiring portfolio securities.
Repurchase Agreements
Securities held by the Income Funds may be subject to repurchase
agreements. If the seller under a repurchase agreement were to default on its
repurchase obligation or become insolvent, the Income Fund would suffer a loss
to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Income Fund were delayed
pending court action. Additionally, if the seller should be involved in
bankruptcy or insolvency proceedings, the Income Fund may incur delay and costs
in selling the underlying security or may suffer a loss of principal and
interest if the Income Fund is treated as an unsecured creditor and required to
return the underlying security to the seller's estate.
Reverse Repurchase Agreements
Each Income Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with the investment restrictions
described below. Pursuant to such agreements, an Income Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually
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agreed-upon date and price. Reverse purchase agreements involve the risk that
the market value of the securities sold by an Income Fund may decline below the
price at which the Fund is obligated to repurchase the securities.
Other Investment Practices
In order to generate additional income, the Bond Fund, Limited Maturity
Fund, and Government Income Fund may, from time to time, lend its securities to
broker-dealers, banks or institutional borrowers of securities which are not
affiliated directly or indirectly with the Trust. While the lending of
securities may subject the Funds to certain risks, such as delays or an
inability to regain the securities in the event the borrower were to default on
its lending agreement or enter into bankruptcy, each Fund will receive 100%
collateral in the form of cash or other liquid securities. This collateral will
be valued daily by the Advisor and should the market value of the loaned
securities increase, the borrower will furnish additional collateral to each
Fund. During the time securities of the Funds are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject to
termination by the Funds or the borrower at any time. While the Funds do not
have the right to vote securities on loan, each Fund intends to terminate the
loan and regain the right to vote if that is considered important with respect
to the investment. The Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which the Advisor has determined are
creditworthy under guidelines established by the Trust's Board of Trustees.
The Government Income Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such short-term
trading is to increase the potential for capital appreciation and/or income of
the Government Income Fund in order to take advantage of what the Advisor
believes are changes in market, industry or individual company conditions or
outlook. Any such trading would increase the turnover rate of the Government
Income Fund and its transaction costs. The Bond Fund and Limited Maturity Funds
will not purchase securities solely for the purpose of short-term trading.
INVESTMENT RESTRICTIONS
Each Income Fund is subject to a number of investment restrictions that
may be changed only by a vote of a majority of the outstanding Shares of that
Fund. See "GENERAL INFORMATION -- Miscellaneous" in this prospectus.
The Bond Fund, Limited Maturity Fund, Government Income Fund, and the
Municipal Bond Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase,
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more than 5% of the value of such Fund's total assets would be invested in such
issuer, or such Fund would hold more than 10% of any class of securities of the
issuer or more than 10% of the outstanding voting securities of the issuer,
except that up to 25% of the value of each Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
The Income Funds may not:
1. Purchase any securities which would cause more than 25% of the value of
such Income Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) for the Bond Fund, the
Limited Maturity Fund, the Florida Fund, and the Municipal Bond Fund there is no
limitation with respect to Municipal Securities, which, for purposes of this
limitation only, do not include private activity bonds that are backed only by
the assets and revenues of a non-governmental user; (c) wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (d) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of such Fund's total assets
at the time of its borrowing. A Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
3. Make loans, except that each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies, may lend Fund
securities in accordance with its investment objective and policies, and may
enter into repurchase agreements.
The Tax-Free Funds may not:
1. Write or sell puts, calls, straddles, spreads, or combinations thereof
except that the Funds may acquire puts with respect to Eligible Municipal
Securities and sell those puts in conjunction with a sale of those Eligible
Municipal Securities.
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VALUATION OF SHARES
The net asset value of each Income Fund is determined and its Shares are
priced as of 4:00 p.m., Eastern Time (the "Valuation Time") on each Business Day
of such Fund. As used herein a "Business Day" constitutes any day on which the
New York Stock Exchange (the"NYSE") is open for trading and the Federal Reserve
Bank of Atlanta is open, except days on which there are not sufficient changes
in the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected, or days during which no Shares are tendered for
redemption and no orders to purchase Shares are received. Currently, either the
NYSE or the Federal Reserve Bank of Atlanta is closed on the customary national
business holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving Day and Christmas Day. Net asset value per Share for
purposes of pricing sales and redemptions is calculated by dividing the value of
all securities and other assets belonging to an Income Fund, less the
liabilities charged to that Class, by the number of the outstanding Shares that
Class of that Fund. The net asset value per Share of each Income Fund will
fluctuate as the value of its investment portfolio changes.
The securities in each Fund will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees of the Trust believes accurately reflects fair value. For
further information about valuation of investments in the Income Funds, see the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
Distributor
Shares in each Income Fund are sold on a continuous basis by the Trust's
distributor, BISYS Fund Services (the "Distributor"). The principal office of
the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to
purchase Shares, contact the Trust at (800) 451-8382.
Each Income Fund has been divided into three classes of Shares, Premier
Shares, Classic Shares and B Shares. Class B Shares are currently offered only
in the Bond Fund. The three classes of a particular Fund represent interests in
the same investments and are identical in all respects except that (i) Classic
Shares bear the expense of the fee under the Trust's Shareholder Servicing Plan
(the "Servicing Plan"), which will cause the Classic Shares to have a higher
expense ratio and to pay lower dividends than those of the Premier Shares, (ii)
Class B Shares bear the expense of the fee under the Trust's Distribution and
Shareholder Services Plan (the "Distribution Plan"), which will cause the Class
B Shares to have a higher expense ratio and to pay a lower dividend than those
of the Classic Shares or Premier Shares, (iii) Classic Shares have certain
exclusive voting
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rights with respect to the Servicing Plan and Class B Shares have certain
exclusive voting rights with respect to the Distribution Plan, and (iv) Classic
Shares are subject to a front-end sales charge and Class B Shares are subject to
a contingent deferred sales charge. The following investors qualify to purchase
Premier Shares: (i) investors for whom AmSouth acts in a fiduciary, advisory,
custodial, agency or similar capacity through an account with its Trust
Department; (ii) investors who purchase Shares of a Fund through a 401(k) plan
or a 403(b) plan which by its terms permits purchases of Shares; and (iii)
orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies. All other investors are eligible to
purchase Classic Shares or Class B Shares only.
Purchases of Classic Shares and Class B Shares
Shares of the Income Funds may be purchased through procedures established
by the Distributor in connection with requirements of qualified accounts
maintained by or on behalf of certain persons ("Customers") by AmSouth or
financial institutions that provide certain administrative support services for
their customers or account holders (collectively, "Financial Institutions").
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 Financial Institution and its Customer are
invested by the Distributor in Shares of the Funds. These procedures may also
include transactions whereby AmSouth as agent purchases Shares of the Income
Funds in amounts that correspond to the market value of securities sold to the
Funds by AmSouth as agent.
Shares of the Trust sold to Financial Institutions acting in a fiduciary,
advisory, custodial, agency, or other similar capacity on behalf of Customers
will normally be held of record by the Financial Institutions. With respect to
Shares so sold, it is the responsibility of the particular Financial Institution
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 Financial Institutions and reflected in the account
statements provided by the Financial Institutions to Customers.
Depending upon the terms of a particular Customer account, Financial
Institutions may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in a Fund.
Information concerning these services and any charges can be obtained from the
Financial Institutions. This Prospectus should be read in conjunction with any
such information received from the Financial Institutions.
Investors may also purchase Classic Shares and Class B Shares of an Income
Fund by completing and signing an Account Registration Form and mailing it,
together with a check (or other negotiable bank draft or money order) in at
least the minimum initial purchase amount,
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payable to the Trust in care of AmSouth Mutual Funds, P.O. Box 182733,
Columbus, Ohio 43218-2733. Subsequent purchases of Classic Shares and Class B
Shares of a Fund may be made at any time by mailing a check (or other negotiable
bank draft or money order) payable to the Trust, to the above address.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Classic Shares and Class B Shares of an
Income Fund either by telephone or by wiring funds to the Trust's custodian.
Telephone orders may be placed by calling the Trust at (800) 451-8382. Payment
for Shares ordered by telephone may be made by check and must be received by the
Custodian within three days of the telephone order. If payment is not received
within three days or a check timely received does not clear, the purchase will
be cancelled and the investor could be liable for any losses or fees incurred.
In the case of purchase of Shares effected by wiring funds to the 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 Classic Shares and Class B Shares by arranging
systematic monthly, bi-monthly or quarterly investments into the Funds with the
Trust's Automatic Investment Plan ("AIP"). The minimum investment amounts are
$50 per transfer and the maximum amount with respect to any transfer is
$100,000. After investors give the Trust proper authorization, their bank
accounts, which must be with banks that are members of the Automated Clearing
House, will be debited accordingly to purchase Shares. Investors will receive a
confirmation from the Trust for every transaction, and a withdrawal will appear
on their bank statements.
To participate in AIP, investors must complete the appropriate sections of
the Account Registration form or call for instructions. This form may be
obtained by calling the Trust at (800) 451-8382. The amount investors specify
will automatically be invested in Shares at the specified Fund's public offering
price per Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must be
received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
"REDEMPTION BY MAIL" below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
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<PAGE> 174
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.
Classic Shares and Class B Shares of each Fund are purchased at the public
offering price per Share, which is the net asset value per Share (see "VALUATION
OF SHARES") next determined after receipt by the Distributor of an order in good
form to purchase Shares plus the applicable sales charge at the time of purchase
in the case of Classic Shares as described below. Purchases of Shares of an
Income Fund will be effected only on a Business Day (as defined in "VALUATION OF
SHARES") of such Fund. An order received prior to the Valuation Time on any
Business Day will be executed based on the net asset value determined as of the
Valuation Time on the date of receipt. An order received after the Valuation
Time on any Business Day will be executed based on the net asset value
determined as of the next Business Day.
In the case of orders for the purchase of Shares placed through a
broker-dealer, the applicable public offering price will be calculated with
reference to the net asset value as so determined, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Distributor prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). The broker-dealer is responsible for transmitting such orders by
close of business. 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 Classic
Shares and Class B Shares by an investor. There is no minimum investment for
subsequent purchases; however, as described above, the minimum subsequent
investment when using AIP is $50 per transfer. The minimum initial investment
amount may be waived if purchases are made in connection with Individual
Retirement Accounts, Keogh plans or similar plans. For information on IRAs or
Keogh or similar plans, contact AmSouth at 800-451-8382.
The maximum investment is $250,000 for total purchases of Class B Shares.
There is no limit on the amount of Classic Shares that may be purchased.
The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign and third
party drafts or checks.
Every Shareholder will receive a confirmation of each new transaction in
his or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. In the case of Classic Shares and
Class B Shares held of record by Financial Institutions but beneficially owned
by a Customer, confirmations of purchases, exchanges and redemptions of Classic
Shares or Class B Shares by a Financial Institution
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will be sent to the Customer by the Financial Institution. Shareholders may rely
on these statements in lieu of certificates. Certificates representing Shares
will not be issued.
Sales Charge -- Classic Shares
The public offering price of a Classic Share of an Income Fund equals its
net asset value plus a sales charge. BISYS receives this sales charge as
Distributor and will re-allow a portion of it as dealer discounts and brokerage
commissions. However, BISYS , at its sole discretion, may pay certain dealers
all or part of the portion of the sales charge it receives. A broker or dealer
who receives a reallowance in excess of 90% of the sales charge may be deemed to
be an "underwriter" for purposes of the Securities Act of 1933.
<TABLE>
<CAPTION>
Sales Charge as Dealer Allowance
A Percentage of Sales Charge as As A
Net Amount A Percentage of Percentage of
Amount of Purchase Invested Offering Price Offering Price
- ------------------ -------- -------------- --------------
<S> <C> <C> <C> <C>
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% 1.90%
$500,000 but less than $1,000,000 1.01% 1.00% .90%
$1,000,000 or more 0%* 0%* 0%
</TABLE>
*Classic Shares are offered at net asset value without an initial sales
charge but are subject to a contingent deferred sales charge equal to 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares in the event of
a share redemption within twelve months following the purchase of $1 million or
more in Classic Shares. The Distributor will provide additional compensation in
an amount up to 1.00% of the offering price of Classic Shares of the Funds for
sales of $1 million to $5 million, and 0.50% for sales over $5 million.
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 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.
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Sales Charge Waivers
The following classes of investors may purchase Classic Shares of a Fund
with no sales charge in the manner described below (which may be changed or
eliminated at any time by the Distributor):
(1) Existing Shareholders of a Fund upon the reinvestment of dividend and
capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, AmSouth Bancorporation and its affiliates, and BISYS Fund Services and
its affiliates (and spouses and children of each of the foregoing);
(3) 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;
(4) Investors who purchase Shares of a Fund through a payroll deduction
plan; and
(5) Investors who purchase Shares of a Fund through certain
broker-dealers, registered investment advisors and other financial institutions
that have entered into an agreement with the Distributor which includes a
requirement that such shares be sold for the benefit of clients participating in
a "wrap account," asset allocation or a similar program under which such clients
pay a fee to such broker-dealer, registered investment advisor or other
financial institution.
From time to time, for special promotional purposes, the Distributor may
offer special concessions to enable investors to purchase shares of a Fund
offered by the Trust at net asset value without payment of a front-end charge.
To qualify for a net asset value purchase, the investor must pay for such
purchase with the proceeds from the redemption of shares of a non-affiliated
mutual fund on which a front-end sales charge was paid. A qualifying purchase of
shares must occur within 30 days of prior redemption and must be evidenced by a
confirmation of the redemption transaction. At the time of purchase, the
investment representative must notify the Distributor that the purchase
qualifies for a purchase at net asset value and provide sufficient information
to permit confirmation of qualification. Proceeds from the redemption of shares
on which no front-end sales charge was paid do not qualify for a purchase at net
asset value.
The Distributor may also periodically waive the sales charge for all
investors with respect to any Income Fund.
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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 Classic Shares of an Income Fund in the load fund over a
13-month period (beginning up to 90 days prior to the date indicated on the
account application). The Trust's Transfer Agent will hold in escrow 5% of the
amount indicated for payment of the higher sales charge if a shareholder does
not purchase the full amount indicated on the account application. Upon
completion of the total minimum investment specified on the account application,
the escrow will be released, and an adjustment will be made to reflect any
reduced sales charge applicable to shares purchased during the 90-day period
prior to submission of the account application. Additionally, if the total
purchases within the 13-month period exceed the amount specified, an adjustment
will be made to reflect further reduced sales charges applicable to such
purchases. All such adjustments will be made at the conclusion of the 13-month
period in the form of additional shares credited to the shareholder's account at
the then current Public Offering Price applicable to a single purchase of the
total amount of the total purchases. If total purchases are less than the amount
specified, escrowed shares may be involuntarily redeemed to pay the additional
sales charge. Checking a Letter of Intent box does not bind an investor to
purchase, or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but an investor must complete the intended
purchase to obtain the reduced sales load.
For further information about Letters of Intent, interested investors
should contact the Trust at (800) 451-8382. This program, however, may be
modified or eliminated at any time or from time to time by the Distributor
without notice.
Concurrent Purchases and Right of Accumulation
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Classic Shares of an Income Fund and one or more of the other Funds
of the Trust sold with a sales charge or by combining a current purchase of
Classic Shares of a Fund with prior purchases of Classic 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.
Sales Charge -- Class B Shares
Class B Shares are not subject to a sales charge when they are purchased,
but are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder
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redeems them prior to the sixth anniversary of purchase. When a Shareholder
purchases Class B Shares, the full purchase amount is invested directly in the
applicable Fund. Class B Shares of each Fund are subject to an ongoing
distribution and shareholder service fee at an annual rate of 1.00% of such
Fund's average daily net assets as provided in the Distribution Plan (described
below under "The Distributor"). This ongoing fee will cause Class B Shares to
have a higher expense ratio and to pay lower dividends than Classic Shares.
Class B Shares convert automatically to Classic Shares after eight years,
commencing from the end of the calendar month in which the purchase order was
accepted under the circumstances and subject to the qualifications described in
this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution
and shareholder service fees under the Distribution Plan are payable to the
Distributor to defray the expenses of advance brokerage commissions and expenses
related to providing distribution-related and Shareholder services to the Fund
in connection with the sale of the Class B Shares, such as the payment of
compensation to dealers and agents selling Class B Shares. A dealer commission
of 4.00% of the original purchase price of the Class B Shares of the Fund will
be paid to financial institutions and intermediaries. However, the Distributor
may, in its sole discretion, pay a higher dealer commission.
Contingent Deferred Sales Charge
If the Shareholder redeems Class B Shares prior to the sixth anniversary
of purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
Shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on Shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such Shares. Solely for purposes
of determining the number of years from the time of any payment for the purchase
of Shares, all payments during a month are aggregated and deemed to have been
made on the first day of the month.
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Contingent
Deferred
Sales Charge as a
Year(s) Percentage of
Since Dollar Amount
Purchase Subject to Charge
-------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
6-7 None
7-8 None
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Classic
Shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B Shares redeemed first) or Shares representing capital appreciation, next
of Shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other Shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 Shares at $10 per share (a
total cost of $1,000) and prior to the second anniversary after purchase, the
net asset value per share is $12 and during such time you have acquired 10
additional Shares through dividends paid in Shares. If you then make your first
redemption of 50 Shares (proceeds of $600), 10 Shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
Shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of Shares:
(i) following the death or disability (as defined in the Code) of a Shareholder
or a participant or beneficiary of a qualifying retirement plan if redemption is
made within one year of such death or disability; or (ii) to the extent that the
redemption represents a minimum required distribution from an Individual
Retirement Account or other qualifying retirement plan to a Shareholder who has
attained the age of 70 1/2. A Shareholder or his or her representative should
contact the Transfer Agent to determine whether a retirement plan qualifies for
a waiver and must notify the Transfer Agent prior to the time of redemption if
such circumstances exist and the Shareholder is eligible for
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this waiver. In addition, the following circumstances are not deemed to result
in a "redemption" of Class B Shares for purposes of the assessment of a
Contingent Deferred Sales Charge, which is therefore waived: (i) plans of
reorganization of the Fund, such as mergers, asset acquisitions and exchange
offers to which the Fund is a party; or (ii) exchanges for Class B Shares of
other Funds of the Trust as described under "Exchange Privilege."
Conversion Feature
Class B Shares include all Shares purchased pursuant to the Contingent
Deferred Sales Charge which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
purchased. At the end of this period, Class B Shares will automatically convert
to Classic Shares and will be subject to the lower distribution and Shareholder
service fees charged to Classic Shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales charge, fee or other charge. The conversion is not a taxable event to a
Shareholder.
For purposes of conversion to Classic Shares, shares received as dividends
and other distributions paid on Class B Shares in a Shareholder's Fund account
will be considered to be held in a separate sub-account. Each time any Class B
Shares in a Shareholder's Fund account (other than those in the sub-account)
convert to Classic Shares, a pro-rata portion of the Class B Shares in the
sub-account will also convert to Classic Shares.
If a Shareholder effects one or more exchanges among Class B Shares of the
Funds of the Trust during the eight-year period, the Trust will aggregate the
holding periods for the shares of each Fund of the Trust for purposes of
calculating that eight-year period. Because the per share net asset value of the
Classic Shares may be higher than that of the Class B Shares at the time of
conversion, a Shareholder may receive fewer Classic Shares than the number of
Class B Shares converted, although the dollar value will be the same.
Additional Information Regarding Broker Compensation
The Distributor, at its expense, will also provide additional compensation
to dealers in connection with sales of Classic Shares and Class B 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 dealersponsored 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
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of their families to locations within or outside of the United States for
meetings or seminars of a business nature. Compensation will also include the
following types of non-cash compensation offered through sales contests: (1)
vacation trips, including the provision of travel arrangements and lodging at
luxury resorts at an exotic location, (2) tickets for entertainment events (such
as concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of a Fund's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. None of the aforementioned compensation is paid for by
any Fund or its Shareholders.
Exchange Privilege
Classic Shares
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Classic Shares (with certain exceptions and
subject to the terms and conditions described in this prospectus). Classic
Shares may not be exchanged for Class B Shares of the other Funds, and may be
exchanged for Premier Shares of the other Funds only if the Shareholder becomes
eligible to purchase Premier Shares. Shareholders may exchange their Classic
Shares for Classic Shares of a Fund with the same or lower sales charge on the
basis of the relative net asset value of the Classic Shares exchanged .
Shareholders may exchange their Classic Shares for Classic Shares of a Fund with
a higher sales charge by paying the difference between the two sales charges.
Shareholders may also exchange Classic Shares of a Money Market Fund, for which
no sales load was paid, for Classic Shares of a variable net asset value Fund
("Variable NAV Fund"). Under such circumstances, the cost of the acquired
Classic Shares will be the net asset value per share plus the appropriate sales
load. If Classic Shares of a Money Market Fund were acquired in a previous
exchange involving Shares of a Variable NAV Fund, then such Shares of the Money
Market Fund may be exchanged for Shares of a Variable NAV Fund without payment
of any additional sales load within a twelve month period. Under such
circumstances, the Shareholder must notify the Distributor that a sales load was
originally paid. Depending upon the terms of a particular Customer account, a
Participating Organization may charge a fee with regard to such an exchange.
Information about such charges will be supplied by the Participating
Organization.
Class B Shares
Class B Shares of each Fund may be exchanged for Class B Shares of the
other Funds on the basis of relative net asset value per Class B Share, without
the payment of any Contingent Deferred Sales Charge which might otherwise be due
upon redemption of the outstanding Class B Shares. Investors should note that,
as of the date of this
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prospectus, Class B Shares were not offered in the AmSouth U.S. Treasury Fund,
Tax Exempt Fund, Government Income Fund, Limited Maturity Fund, Florida Fund,
and Municipal Bond Fund, thus, no exchanges may be effected for Class B Shares
of these Funds. For purposes of computing the Contingent Deferred Sales Charge
that may be payable upon a disposition of the newly acquired Class B Shares, the
holding period for outstanding Class B Shares of the Fund from which the
exchange was made is "tacked" to the holding period of the newly acquired Class
B Shares. For purposes of calculating the eight-year holding period applicable
to the newly acquired Class B Shares, the newly acquired Class B Shares shall be
deemed to have been issued on the date of receipt of the Shareholder's order to
purchase the outstanding Class B Shares of the Fund from which the exchange was
made.
Class B Shares may not be exchanged for Classic Shares of the other Funds,
and may be exchanged for Premier Shares of the other Funds only if the
Shareholder becomes eligible to purchase Premier Shares. A Contingent Deferred
Sales Charge will apply as described in "How To Purchase and Redeem Shares" --
"Class B Shares" to exchanges of Class B Shares for Premier Shares.
Additional Information About Exchanges
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss. In general,
if a shareholder exchanges Income Fund shares for Shares of another Fund without
paying a sales charge, the gain or loss on the exchange of the Fund Shares will
be calculated without taking into account the sales charge paid on the Fund
Shares if the Fund Shares were held less than 91 days. The sales charge will
instead be added to the basis of the Fund Shares acquired in the exchange. The
application of this rule will increase the gain or reduce the loss that the
Shareholder would otherwise recognize on the exchange of the Shares of the Fund.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund and class 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.
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Auto Exchange
AmSouth Mutual Funds Auto Exchange enables Shareholders to make regular,
automatic withdrawals from Classic Shares and Class B Shares of the AmSouth
Prime Obligations Fund and use those proceeds to benefit from
dollar-cost-averaging by automatically making purchases of shares of the same
Class of another AmSouth Mutual Fund. With shareholder authorization, the
Trust's transfer agent will withdraw the amount specified (subject to the
applicable minimums) from the shareholder's Prime Obligations Fund account and
will automatically invest that amount in Classic Shares or Class B Shares of the
AmSouth Mutual Fund designated by the Shareholder at the public offering price
on the date of such deduction. In order to participate in the Auto Exchange,
Shareholders must have a minimum initial purchase of $10,000 in their Prime
Obligations Fund account and maintain a minimum account balance of $1,000.
To participate in the Auto Exchange, Shareholders should complete the
appropriate section of the Account Registration Form, which can be acquired by
calling the Distributor. To change the Auto Exchange instructions or to
discontinue the feature, a Shareholder must send a written request to the
AmSouth Mutual Funds, P.O. Box 182733, Columbus, OH 43218-2733. The Auto
Exchange may be amended or terminated without notice at any time by the
Distributor.
Directed Dividend Option
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice.
In addition, the Trust may suspend a shareholder's Directed Dividend Option
without notice if the account balance is less than the minimum $1,000.
Participation in the Option may be terminated or changed by the shareholder at
anytime by writing the Distributor. The Directed Dividend Option is not
available to participants in an AmSouth Mutual Funds IRA.
Redemption of Shares
Shareholders may redeem their Classic Shares without charge, and their
Class B Shares subject to the applicable Contingent Deferred Sales Charge, on
any day that net asset value is calculated (see "VALUATION 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 Financial Institution. For
example, if a Customer has agreed with a Financial Institution
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to maintain a minimum balance in his or her account with a Financial
Institution, and the balance in that account falls below that minimum, the
Customer may be obliged to redeem, or the Financial Institution may redeem for
and on behalf of the Customer, all or part of the Customer's Shares of a Fund of
the Trust to the extent necessary to maintain the required minimum balance.
Redemption by Mail
A written request for redemption must be received by the Transfer Agent in
order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record; and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
Redemption by Telephone
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic commercial bank account previously designated by the
Shareholder on the Account Registration Form. Under most circumstances, such
payments will be transmitted on the next Business Day following receipt of a
valid request for redemption. Such wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The Transfer Agent may reduce
the amount of a wire redemption payment from the maximum wire redemption charge
of $15.00. Such charge is presently $7.00 for each wire redemption. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated bank account. For telephone
redemptions, call the Trust at (800) 451-8382. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if these procedures are not followed, the Trust may be liable for any losses due
to unauthorized or fraudulent instructions. These procedures include recording
all phone conversations, sending confirmations to Shareholders within 72 hours
of the telephone transaction, verifying the account name and a shareholder's
account number or tax identification number, and sending redemption proceeds
only to the address of record or to a previously authorized account.
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During periods of significant economic or market change, telephone
redemptions may be difficult to complete. If a Shareholder is unable to contact
the Distributor by telephone, a Shareholder may also mail the redemption request
to the Distributor at the address listed above under "HOW TO REDEEM SHARES -
Redemption by Mail."
Payments to Shareholders
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. The proceeds paid upon redemption of Shares in an Income Fund may be more
or less than the amount invested. Payment to Shareholders for Shares redeemed
will be made within seven days after receipt by the Transfer Agent of the
request for redemption. However, to the greatest extent possible, the Trust will
attempt to honor requests from Shareholders for next Business Day payments upon
redemption of Shares if the request for redemption is received by the Transfer
Agent before the Valuation Time on a Business Day or, if the request for
redemption is received after the Valuation Time to honor requests for payment
within two Business Days, unless it would be disadvantageous to the Trust or the
Shareholders of the particular Income Fund to sell or liquidate portfolio
securities in an amount sufficient to satisfy requests for payments in that
manner.
At various times, the Trust may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Trust may delay
the forwarding of proceeds only until payment has been collected for the
purchase of such Shares which may take up to 15 days or more. To avoid delay in
payment upon redemption shortly after purchasing Shares, investors should
purchase Shares by certified or bank check or by wire transfer. The Trust
intends to pay cash for all Shares redeemed, but under abnormal conditions which
make payment in cash unwise, the Trust may make payment wholly or partly in
portfolio securities at their then current market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Income Fund has a value of less than $250.
Accordingly, an investor purchasing Shares of a Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems some of his or her Shares. Before the Trust exercises its
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Trust may suspend the right of
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redemption or redeem Shares involuntarily if it appears appropriate to do so in
light of the Trust's responsibilities under the Investment Company Act of 1940.
DIVIDENDS AND TAXES
A dividend for each Income Fund will be declared monthly at the close of
business on the day of declaration consisting of an amount of accumulated
undistributed net income of the Fund as determined to be necessary or
appropriate by the appropriate officers of the Trust. Dividends will generally
be paid monthly. Distributable net realized capital gains are distributed at
least 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 Income Funds is treated as a separate entity for federal
income tax purposes. Each Income Fund intends to qualify for treatment as a
"regulated investment company" under the Code. If they so qualify, the Income
Funds will not have to pay federal income taxes on net income and net capital
gain income that they distribute to shareholders. Regulated investment companies
are also subject to a federal excise tax if they do not distribute their income
on a timely basis. Each Fund intends to avoid paying federal income and excise
taxes by timely distributing substantially all its net income and net capital
gain income.
The amount of dividends payable with respect to the Premier Shares will
exceed dividends on Classic Shares, and the amount of dividends on Classic
Shares will exceed the dividends on Class B Shares, as a result of the
Shareholder Services Plan fee applicable to Classic Shares and the Distribution
and Shareholder Services Plan fee applicable to Class B Shares.
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BOND FUND, LIMITED MATURITY FUND, AND GOVERNMENT INCOME FUND
Distributions by the Bond Fund, Limited Maturity Fund, and Government
Income Fund of ordinary income and/or an excess of short-term capital gain over
net long-term loss are taxable to shareholders as ordinary income. It is not
expected that the dividends-received deduction for corporations will apply.
Distribution by the Bond Fund, Limited Maturity Fund, and Government
Income Fund of the excess of net long-term capital gain over net short-term
capital loss is taxable to Shareholders as long-term capital gain in the year in
which it is received, regardless of how long the Shareholder has held Shares in
such Fund. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing Shares of the Bond Fund, Limited Maturity Fund, and
Government Income Fund, the impact of dividends or capital gains distributions
which are expected to be declared or have been declared, but not paid, should be
carefully considered. Dividends or capital gains distributions paid after a
purchase of Shares are subject to federal income taxes, although in some
circumstances the dividends or distributions may be, as an economic matter, a
return of capital. A Shareholder should consult his or her own advisor for any
special advice.
Dividends received by a Shareholder that are derived from the Bond Fund,
Limited Maturity Fund, and Government Income Fund investments in U.S. Government
obligations may not be entitled to the exemptions from state and local income
taxes that would be available if the Shareholder had purchased U.S. Government
obligations directly.
A Shareholder will generally recognize long-term capital gain or loss on
the sale or exchange of shares in an Income Fund held by the Shareholder for
more than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Maturity Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
The holder of a security issued with "original issue discount" (including
a zero-coupon United States Treasury security) is required to accrue as income
each year a portion of the discount at which the security was purchased, even
though the holder does not currently receive the interest payment in cash. A
security has original issue discount if its redemption price exceeds its issue
price by more than a de minimis amount. Accordingly, the Bond Fund, Limited
Maturity Fund, and Government Income Fund may be required to distribute each
year an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions may be made from the cash assets of the
Fund or by liquidation of its portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the Fund realizes
net capital gains from such transactions, its
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shareholders may receive a larger capital gain distribution, if any, than they
would have in the absence of such transactions.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION - Additional Tax Information" and "Additional Tax Information
Concerning the Tax Exempt Fund."
The foregoing discussion is limited to federal income tax consequences and
is based on tax laws and regulations which are in effect as of the date of this
Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Income Funds
and their Shareholders. Potential investors in the Bond Fund, Limited Maturity
Fund, and Government Income Fund are urged to consult their tax advisors
concerning their own tax situation and concerning the application of state and
local taxes which may differ from the federal income tax consequences described
above.
Shareholders will be advised at least annually as to the character for
federal income tax purposes of distributions made during the year.
FLORIDA FUND AND MUNICIPAL BOND FUND
The Tax-Free Funds' Shareholders may treat as exempt interest and exclude
from gross income for federal income tax purposes dividends derived from net
exempt-interest income and designated by the Funds as exempt interest dividends.
However, such dividends may be taxable to shareholders under state or local law
as ordinary income even though all or a portion of the amounts may be derived
from interest on tax-exempt obligations which, if realized directly, would be
exempt from such taxes.
Dividends from the Tax-Free Funds attributable to exempt-interest
dividends may cause the social security and railroad retirement benefits of
individual shareholders to become taxable, or increase the amount that is
taxable. Interest on indebtedness incurred by a Shareholder to purchase or carry
Shares is not deductible for federal income tax purposes to the extent the Funds
distribute exempt-interest dividends during the Shareholder's taxable year. The
amount of the disallowed interest deduction is the total amount of interest paid
or accrued on the indebtedness multiplied by a fraction, the numerator of which
is the amount of exempt-interest dividends received by the Shareholder and the
denominator of which is the sum of the exempt-interest dividends and taxable
dividends received by the Shareholder (excluding capital gain dividends received
by the Shareholder and capital gains required to be included in the
Shareholder's computation of long-term capital gains under Section 852(b)(3)(D)
of the Code). It is anticipated that distributions from the TaxFree Funds will
not be eligible for the dividends received deduction for corporate shareholders.
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Gains on the sale of Shares in the Tax-Free Funds will be subject to
federal, state, and local taxes. If a Shareholder receives an exempt-interest
dividend with respect to any Share of the Fund and such Share is held for six
months or less, any loss on the sale or exchange of such Share will be
disallowed to the extent of the amount of such exempt-interest dividend.
A Tax-Free Fund may at times purchase Municipal Securities at a discount
from the price at which they were originally issued. For federal income tax
purposes, some or all of this market discount will be included in the Tax-Free
Fund's ordinary income and will be taxable to Shareholders as such when it is
distributed to them.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit, market discount
or repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax advisor for any
special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in alternative minimum taxable
income of individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate shareholders.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION - Additional Tax Information" and "Additional Tax Information
Concerning the Florida Fund."
The foregoing discussion is limited to federal income tax consequences and
is based on tax laws and regulations which are in effect as of the date of this
Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Tax-Free
Funds and their Shareholders. Potential investors in the Tax-Free Funds are
urged to consult their tax advisers concerning their own tax situation and
concerning the application of state and local taxes which may differ from the
federal income tax consequences described above.
Shareholders will be advised at least annually as to the character for
federal income tax purposes of distributions made during the year.
Alabama Taxes
Section 40-18-14(2)f of the Alabama Code specifies that interest on
obligations of the State of Alabama and any county, municipality or other
political subdivision thereof is
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exempt from personal income tax. Section 40-18-14(2)d provides similar
tax-exempt treatment for interest on obligations of the United States or its
Possessions (including Puerto Rico, Guam and the Virgin Islands). In addition,
Regulation Section 810-3-14- .02(4)(b)2 and an Administrative ruling of the
Alabama Department of Revenue dated March 1, 1990 extend these exemptions for
interest to distributions from a regulated investment company to the extent that
they are paid out of interest earned on such exempt obligations. Tax-exempt
treatment is not available on distributions from income earned on securities
that are merely guaranteed by the federal government (GNMAs, FNMAs, etc.), for
repurchase agreements collateralized by U.S. Government obligations or for
obligations of other states to the extent such investments are made by the Fund
for temporary or defensive purposes. Such interest will be taxable on a pro rata
basis.
Any distributions of net short-term and net long-term capital gain earned
by the Fund are fully includable in each shareholder's Alabama taxable income as
dividend income and long-term capital gain, respectively. Both types of income
are currently taxed at ordinary rates.
The foregoing discussion 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 Alabama tax considerations
generally affecting the Municipal Fund and its Shareholders. Potential investors
are urged to consult their tax advisors concerning their own tax situation and
concerning the application of state and local (as well as federal) taxes.
Florida Taxes
The State of Florida does not impose an income tax on individuals.
Therefore, distributions of the Florida Fund to individuals will not be subject
to personal income taxation in Florida. Corporations and other entities subject
to the Florida income tax will be subject to tax on distributions of investment
income and capital gains by the Fund. Distributions attributable to interest on
obligations of any state (including Florida), the District of Columbia, U.S.
possessions, or any political subdivision thereof, will be taxable to
corporations and other entities for Florida income tax purposes even though such
interest income is exempt from federal income tax. Similarly, distributions
attributable to interest on obligations of the United States and its territories
will be taxable to corporations and other entities under the Florida income tax.
For individuals and other entities subject to taxation in states and localities
other than Florida, distributions of the Fund will be subject to applicable
taxes imposed by such other states and localities.
In the opinion of special Florida tax counsel to the Fund, shareholders of
the Florida Fund who are subject to the Florida Intangible Personal Property Tax
(the "Intangible Tax") will not be subject to the Intangible Tax on shares of
the Florida Fund if, on the first day of
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the applicable calendar year, the assets of the Florida Fund consist solely of
obligations of Florida or its political subdivisions; obligations of the United
States, Puerto Rico, the Virgin Islands or Guam; or bank deposits, cash or other
assets which would be exempt from the Intangible Tax if directly held by the
shareholder. A ruling confirming this tax treatment is being sought from the
Florida Department of Revenue. As described above, it is the Florida Fund's
policy to invest at least 80% of its net assets in Florida Municipal Securities
exempt from the Intangible Tax under normal market conditions. The Florida Fund
intends to insure that, absent abnormal market conditions, all of its assets
held on January 1 of each year are exempt from the Intangible Tax. Accordingly,
the value of the Florida Fund shares held by a shareholder should ordinarily be
exempt from the Intangible Tax. However, if on any January 1 the Florida Fund
holds investments that are not exempt from the Intangible Tax, the Florida
Fund's shares could be wholly or partially subject to the Intangible Tax for
that year.
The foregoing discussion is intended only as a brief summary of the
Florida tax laws currently in effect which would generally affect the Florida
Fund and its shareholders. Potential investors are urged to consult with their
Florida tax counsel concerning their own tax situation.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
Trustees of the Trust
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust, who are elected by the Shareholders of the Trust. There
are currently six Trustees, two of whom are "interested persons" of the Trust
within the meaning of that term under the Investment Company Act of 1940. The
Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current 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):
Position(s) Held Principal Occupation
Name and Address With the Trust During the Past 5 Years
- ---------------- -------------- -----------------------
George R. Landreth* Chairman From December 1992 to
BISYS Fund Services present, employee of BISYS
3435 Stelzer Road Fund Services, Limited
Columbus, Ohio 43219 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.
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Dr. Dick D. Briggs, Jr. Trustee From 1981 to present,
459 DER Building Professor and Vice Chairman,
1808 7th Avenue South Department of Medicine,
UAB Medical Center University of Alabama at
Birmingham, Alabama 35294 Birmingham School of
Medicine; December 1995, to
present, Physician,
University of Alabama Health
Services Foundation; from
June 1988 to October 1992,
President, Chief Executive
Officer and Medical Director,
University of Alabama Health
Services Foundation
Wendell D. Cleaver Trustee From September 3, 1993 to
209 Lakewood Drive, present, retired; from
West Mobile, Alabama 36608 December 1988 to August,
1993, Executive Vice
President, Chief Operating
Officer and Director, Mobile
Gas Service Corporation
J. David Huber* Trustee From June 1987 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services, Limited Partnership
Columbus, OH 43219
Homer H. Turner, Jr. Trustee From June 1991 to present,
729 Cary Drive retired; until June 1991,
Auburn, Alabama 36830 Vice President, Birmingham
Division, Alabama Power
Company
James H. Woodward, Jr. Trustee From 1996 to present, Trustee
The University of North of The Sessions Group; from
Carolina at Charlotte July 1989 to present,
Charlotte, North Carolina 28223 Chancellor, The University of
North Carolina at Charlotte;
until July 1989, Senior Vice
President, University
College, University of
Alabama at Birmingham
- ----------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
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providing fund accounting services to the Trust. Messrs. Huber and Landreth are
employees and executive officers of BISYS Fund Services.
Investment Advisor
AmSouth is the Advisor of each Fund of the Trust. AmSouth is the 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
Funds, the Advisor manages the Funds, makes decisions with respect to and places
orders for all purchases and sales of their investment securities, and maintains
their records relating to such purchases and sales.
Brian B. Sullivan, CFA is the portfolio manager for the Bond Fund and, as
such, has had primary responsibility for the day-to-day portfolio management of
the Bond Fund since 1992. Mr. Sullivan has been a portfolio manager at the
Advisor since 1984, and is currently Senior Vice President and Trust Investment
Officer in charge of fixed income investments.
John P. Boston, CFA is the portfolio manager for the Limited Maturity Fund
since August, 1995, and of the Government Income Fund since inception and, as
such, has primary responsibility for the day-to-day portfolio management of the
Limited Maturity and Government Income Funds. Mr. Boston has been associated
with AmSouth's Trust Investment Group for over five years and is currently a
Vice President and Trust Investment Officer.
Dorothy E. Thomas, CFA is the portfolio manager for the Municipal Bond
Fund and since May 15, 1997 is the portfolio manager for the Florida Fund, and
as such, has primary responsibility for the day-to-day management of each Fund's
portfolio. Ms. Thomas has been associated with AmSouth's Trust Investment Group
for over ten years and is currently Vice President and Trust Investment Officer.
Under investment advisory agreements between the Trust and the Advisor,
the fee payable to the Advisor by each Fund for investment advisory services is
the lesser of (a) a
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fee computed daily and paid monthly at the annual rate of sixty-five
one-hundredths of one percent (.65%) of such Fund's average daily net assets or
(b) such fee as may from time to time be agreed upon in writing by the Trust and
the Advisor. A fee agreed to in writing from time to time by the Trust and the
Advisor 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, the Advisor received
investment advisory fees amounting to .50% of the Bond Fund's average daily net
assets, .50% of the Limited Maturity Fund's average daily net assets, .30% of
the Government Income Fund's average daily net assets, and .30% of the Florida
Fund's average daily net assets. The Municipal Bond Fund had not commenced
operations as of July 31, 1996.
Administrator
ASO Service Company ("ASC") is the administrator for each Fund of the
Trust (the "Administrator"). 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 Funds'
administration and operation. Under management and administration agreements
between the Trust, the fee payable by each Fund to the Administrator for
administration services is the lesser of (a) a fee computed at the annual rate
of twenty one-hundredths of one percent (.20%) of such Income Fund's average
daily net assets or (b) such fee as may from time to time be agreed upon by the
Trust and the Administrator. A fee agreed to from time to time by the Trust and
the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower an Income Fund's
expenses and increase the net income of the Fund during the period when such
lower fee is in effect.
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 .12% of the Bond Fund's average
daily net assets; .12% of the Limited Maturity Fund's average daily net assets;
.10% of the Government Income Fund's average daily net assets; and .10% of the
Florida Fund's average daily net assets, after voluntary fee reductions.
Sub-Administrators
AmSouth serves as a Sub-Administrator to the Trust. Pursuant to its
current agreement with the Administrator, AmSouth has assumed certain of the
Administrator's duties,
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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 daily net assets.
BISYS Fund Services also serves as a Sub-Administrator to the
Trust. Pursuant to its agreement with the Administrator, BISYS is entitled to
compensation as mutually agreed from time to time by it and the Administrator.
Distributor
BISYS Fund Services acts as the Trust's principal underwriter and
distributor (the "Distributor") pursuant to a Distribution Agreement under which
shares are sold on a continuous basis.
Classic Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (.25%) of the average
daily net assets of the Classic Shares of each Fund.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class B Shares of a Fund will pay a monthly distribution
fee to the Distributor as compensation for its services in connection with the
Distribution Plan at an annual rate equal to one percent (1.00%) of the average
daily net assets of Class B Shares of each Fund which includes Shareholder
Servicing fee of .25% of the average daily net assets of the Class B Shares of
each Fund. The Distributor may periodically waive all or a portion of the fee
with respect to a Fund in order to increase the net investment income of the
Fund available for distribution as dividends. The Distributor may apply the B
Share Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's B Shares;
(ii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors)
as brokerage commissions in connection with the sale of such Fund's B Shares;
and (iii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
B Shares.
All payments by the Distributor for distribution assistance or shareholder
services under the Distribution Plan will be made pursuant to an agreement (a
"Servicing Agreement") between the Distributor and such bank, other financial
institution or intermediary, broker-dealer, or affiliate or subsidiary of the
Distributor (hereinafter
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referred to individually as "Participating Organizations"). A Servicing
Agreement will relate to the provision of distribution assistance in connection
with the distribution of a Fund's Class B Shares to the Participating
Organization's customers on whose behalf the investment in such Shares is made
and/or to the provision of shareholder services to the Participating
Organization's customers owning a Fund's Class B Shares. Under the Distribution
Plan, a Participating Organization may include AmSouth or a subsidiary bank or
nonbank affiliates, or the subsidiaries or affiliates of those banks. A
Servicing Agreement entered into with a bank (or any of its subsidiaries or
affiliates) will contain a representation that the bank (or subsidiary or
affiliate) believes that it possesses the legal authority to perform the
services contemplated by the Servicing Agreement without violation of applicable
banking laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the amount
of the fee is more or less than the actual expenses incurred in a particular
year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks generally
from engaging in the business of underwriting securities, but in general do not
prohibit banks from purchasing securities as agent for and upon the order of
customers. Accordingly, the Trust will require banks acting as Participating
Organizations to provide only those services which, in the banks' opinion, are
consistent with the then current legal requirements. It is possible, however,
that future legislative, judicial or administrative action affecting the
securities activities of banks will cause the Trust to alter or discontinue its
arrangements with banks that act as Participating Organizations, or change its
method of operations. It is not anticipated, however, that any change in a
Fund's method of operations would affect its net asset value per share or result
in financial loss to any customer.
Expenses
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Advisor and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for an Income Fund. No
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Fund will bear, directly or indirectly, the cost of any activity primarily
intended to result in the distribution of Shares of such Fund; such costs will
be borne by the Distributor.
As a general matter, expenses are allocated to the Premier, Classic, and
Class B Shares of a Fund on the basis of the relative net asset value of each
class. At present, the only expenses that will be borne solely by Classic and
Class B Shares, other than in accordance with the relative net asset value of
the class, are expenses under the Trust's Servicing Plan which relates only to
the Classic Shares and the Distribution Plan which relates only to the Class B
Shares.
Banking Laws
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Funds contemplated by its investment
advisory agreement with the Trust and described in this Prospectus without
violation of applicable banking laws and regulations, and has so represented in
its investment advisory agreement with the Trust. Future changes in federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which AmSouth could continue
to perform such services for the Trust. See "MANAGEMENT OF The Trust -
Glass-Steagall Act" in the Statement of Additional Information for further
discussion of applicable banking laws and regulations.
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 Capital
Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity Income Fund, the
AmSouth Bond Fund, the AmSouth Limited Maturity Fund, the AmSouth Municipal Bond
Fund, the AmSouth Balanced Fund, the AmSouth Government Income Fund and the
AmSouth Florida Tax-Free Fund. Each Fund, except the AmSouth Florida Tax-Free
Fund, is diversified for purposes of the 1940 Act. As of the date of this
Prospectus, Shares are not currently being offered in the AmSouth Small Cap
Fund. Each Fund has been divided into three classes of Shares: Premier, Classic
and Class B Shares, except that the AmSouth U.S. Treasury Fund and the Tax
Exempt Fund are divided into Premier Shares and Classic Shares only. As of the
date of this Prospectus, however, Class B Shares were
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not offered in the Limited Maturity Fund, Government Income Fund, Florida Fund,
and Municipal Bond Fund. Each Share represents an equal proportionate interest
in a Fund with other Shares of the same series, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund as are declared at the discretion of the Trustees (see "Miscellaneous"
below).
Shares of the Trust are entitled to one vote per share (with proportional
voting for fractional shares) on such matters as Shareholders are entitled to
vote. Shareholders vote in the aggregate and not by series or class on all
matters except (i) when required by the Investment Company Act of 1940, shares
shall be voted by individual series or class, (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 of class shall be entitled to vote
thereon, (iii) only the holders of Classic Shares will be entitled to vote on
matters submitted to Shareholder vote with regard to the Servicing Plan, and
(iv) only the holders of Class B Shares will be entitled to vote on matters
submitted to Shareholder vote with regard to the Distribution Plan.
Overall responsibility for the management of the Trust is vested in the
Board of Trustees. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - Trustees of the
Trust." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION - Miscellaneous" in
the Statement of Additional Information for further information.
The Trust believes as of May 20, 1997, AmSouth , 1901 Sixth Avenue North,
Birmingham, AL 35203, was the Shareholder of record of 95.88% of the outstanding
shares of the Bond Fund, 90.99% of the outstanding shares of the Limited
Maturity Fund, and 87.86% of the outstanding shares of the Florida Fund. As of
May 20, 1997, AmSouth was the beneficial owner of approximately 71.48% of the
outstanding shares of the Bond Fund and 55.14% of the outstanding shares of the
Limited Maturity Fund and may be deemed to be a "controlling person" of the
Bond Fund and the Limited Maturity Fund within the meaning of the Investment
Company Act of 1940.
Custodian
As of April 17, 1997, AmSouth serves as custodian for the Trust
("Custodian"). Pursuant to the Custodian Agreement with the Trust, the Custodian
receives compensation from each Fund for such services in an amount equal to an
asset-based fee.
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Transfer Agent and Fund Accounting
BISYS Funds Services Ohio, Inc. serves as transfer agent for and provides
fund accounting services to the Trust.
Performance Information
The Municipal Bond Fund.
The Municipal Bond Fund commenced operations on July 1, 1997 subsequent to
the transfer of assets by the Tax-Exempt Portfolio, a common trust fund, to the
Municipal Bond Fund in exchange for shares of the Municipal Bond Fund. The
Fund's portfolio of investments on July 1, 1997 was the same as the portfolio
of the Tax-Exempt Portfolio immediately prior to the transfer.
The Tax-Exempt Portfolio is not a registered investment company as it
is exempt from registration under the 1940 Act. Since, in a practical sense, the
Tax-Exempt Portfolio constitutes a "predecessor" of the Fund, the Municipal Bond
Fund calculates the performance for each Class of the Fund for periods
commencing prior to the transfer of the Tax-Exempt Portfolio assets to the Fund
by including the common trust fund's total return adjusted to reflect the
deduction of fees and expenses applicable to the Classic Shares of the
Municipal Bond Fund as stated in the Fee Table in this prospectus (i.e.,
adjusted to reflect anticipated expenses, net of management and administrative
fee waivers). These fees and expenses include the applicable sales charge.
The Municipal Bond Fund from time to time may advertise certain investment
performance figures, as discussed in this section. These figures are based on
historical earnings, but past performance data is not necessarily indicative of
future performance of the Fund.
AVERAGE ANNUAL TOTAL RETURN*
<TABLE>
<CAPTION>
Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio 3.68% 4.70% 4.88% 6.06%
</TABLE>
* The maximum sales load is 4.00% for the Municipal Bond Fund.
The above-quoted performance data includes the performance of the
Tax-Exempt Portfolio for the period before the Municipal Bond Fund commenced
operations adjusted to reflect the deduction of fees and expenses applicable to
the Classic Shares of the Municipal Bond Fund (i.e., adjusted to reflect
anticipated expenses, net of management and administrative fee waivers). The
Tax-Exempt Portfolio was not registered under the 1940 Act and therefore was not
subject to certain investment restrictions imposed by the Act. If the Tax-Exempt
Portfolio had been registered under the 1940 Act, its performance may have been
adversely affected.
General.
From time to time performance information for the Classic Shares and Class
B Shares of an Income Fund showing its total return and/or yield may be
presented in advertisements, sales literature and Shareholder reports. Total
return will be calculated for the past year, five years (if applicable) and the
period since the establishment of a Fund. Average annual total return is
measured by comparing the value of an investment in a Fund at the beginning of
the relevant period to the redemption value of the investment at the end of the
period (assuming the investor paid the maximum sales load on the investment and
assuming immediate reinvestment of any dividends or capital gains distributions)
and annualizing the
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difference. Aggregate total return is calculated similarly to average annual
total return except that the return figure is aggregated over the relevant
period instead of annualized. Yield will be computed by dividing a Fund's net
investment income per share earned during a recent one-month period by the
Fund's per share maximum offering price (reduced by any undeclared earned income
expected to be paid shortly as a dividend) on the last day of the period and
annualizing the result. Each Fund may also present its total return and/or yield
excluding the effect of the sales charge.
The Tax-Free Funds may also present its "tax equivalent yield" which
reflects the amount of income subject to federal income taxation that a taxpayer
in a stated tax bracket would have to earn in order to obtain the same after-tax
income as that derived from the yield of the Funds. The tax equivalent yield
will be significantly higher than the yield of the TaxFree Funds.
Yield, effective yield, tax-equivalent yield, and total return will be
calculated separately for each Class of Shares. Because Classic Shares are
subject to lower Shareholder Services fees than Class B Shares, the yield and
total return for Classic Shares will be higher than that of the Class B Shares
for the same period. Because Premier Shares are not subject to the Distribution
and Shareholder Services fees, the yield and total return for Premier Shares
will be higher than that of the Classic and Class B Shares for the same period.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. Comparisons may also
be made to indices or data published in Money Magazine, Forbes, Barron's, The
Wall Street Journal, The New York Times, Business Week, American Banker,
Fortune, Institutional Investor, Ibbotson Associates, Inc., Morningstar Inc.,
CDA/Wiesenberger, Pensions and Investments, U.S.A. Today, and local newspapers.
In addition to performance information, general information about these Funds
that appears in a publication such as those mentioned above may be included in
advertisements, sales literature and in reports to Shareholders. Additional
performance information is contained in the Trust's Annual Report, which is
available free of charge by calling the number on the front page of the
prospectus.
Information about each Fund's performance is based on the Fund's record up
to a certain date and is not intended to indicate future performance. Yield and
total return are functions of the type and quality of instruments held in Fund,
operating expenses and market conditions. Any fees charged by a Financial
Institution with respect to accounts investing in Shares of an Income Fund will
not be included in performance calculations.
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Miscellaneous
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Fund upon
the issuance or sale of Shares in that Group, together with all income,
earnings, profits, and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange, or liquidation of such investments, and
any funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund in proportion to the relative net assets of
the respective Funds at the time of allocation. The timing of allocations of
general assets and general liabilities and expenses of the Trust to particular
Funds will be determined by the Board of Trustees of the Trust and will be in
accordance with generally accepted accounting principles. Determinations by the
Board of Trustees of the Trust as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Trust or a particular
Fund means the affirmative vote, at a meeting of Shareholders duly called, of
the lesser of (a) 67% or more of the votes of Shareholders of the Trust or such
Fund present at such meeting at which the holders of more than 50% of the votes
attributable to the Shareholders of record of the Trust or such Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of the Trust or such Fund.
Under Massachusetts law, Shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims Shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in every
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of a Fund's
property for all loss and expense of any Shareholder of such Fund held liable on
account of being or having been a Shareholder. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations.
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Inquiries regarding the Trust may be directed in writing to the Trust at
P.O. Box 182733, Columbus, Ohio 43218-2733 or by calling toll free (800)
451-8382.
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AMSOUTH MUTUAL FUNDS
INVESTMENT ADVISOR
AmSouth Bank
1901 Sixth Avenue North
Birmingham, AL 35203
DISTRIBUTOR
BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005-3333
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
AUDITORS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
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TABLE OF CONTENTS
Page
----
The Trust................................................................
Fee Table ...............................................................
Financial Highlights ....................................................
Investment Objective and Policies .....................................
Investment Techniques ..................................................
Investment Restrictions .................................................
Valuation of Shares .....................................................
How to Purchase and Redeem Shares .....................................
Dividends and Taxes .....................................................
Management of the AmSouth Mutual Funds...................................
Information Relating to the Florida Fund.................................
General Information ....................................................
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.
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AMSOUTH MUTUAL FUNDS
INCOME FUNDS
AmSouth Bank
Investment Advisor
BISYS FUND SERVICES, LIMITED PARTNERSHIP
Prospectus dated September 1, 1997
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CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
PROSPECTUS FOR AMSOUTH EQUITY FUND,
AMSOUTH REGIONAL EQUITY FUND, AMSOUTH BALANCED FUND,
AMSOUTH CAPITAL GROWTH FUND,
AMSOUTH SMALL CAP FUND, AND AMSOUTH
EQUITY INCOME FUND
CLASSIC SHARES AND CLASS B SHARES
1. Cover Page............................. Cover Page
2. Synopsis............................... Fee Table
3. Condensed Financial Information........ Financial Highlights
4. General Description of Registrant...... The Trust; Investment Objective
and Policies; Investment
Restrictions; General Information -
Description of the Trust and Its
Shares
5. Management of the Fund................. Management of AmSouth Mutual
Funds; General Information -
Custodian and Transfer Agent
6. Capital Stock and Other Securities..... The Trust; How to Purchase and
Redeem Shares; Dividends and
Taxes; General Information -
Description of the Trust and Its
Shares; General Information -
Miscellaneous
7. Purchase of Securities Being Offered... Valuation of Shares; How to
Purchase and Redeem Shares
8. Redemption or Repurchase............... How to Purchase and Redeem
Shares
9. Legal Proceedings...................... Inapplicable
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<PAGE> 207
AMSOUTH MUTUAL FUNDS
CAPITAL APPRECIATION FUNDS
CLASSIC SHARES AND CLASS B SHARES
3435 Stelzer Road For current yield, purchase,
Columbus, Ohio 43219 and redemption information,
call (800) 451-8382
The 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
Capital Appreciation Fund has its own 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. Each Capital Appreciation Fund
offers Premier Shares, Classic Shares and Class B Shares. The Shares of the
Capital Appreciation Funds outstanding on August 31, 1997, were redesignated as
Classic Shares. Currently, Shares are not being offered in the Small Cap Fund.
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. The
Advisor will seek opportunities for the Equity Fund in securities that are
believed to represent investment value.
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. The
Advisor will seek opportunities for the Regional Equity Fund in securities that
are believed to represent investment value.
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. The Advisor will seek
opportunities for the Balanced Fund in securities that are believed to represent
investment value.
-1-
<PAGE> 208
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.
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.
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.
AmSouth Bank, Birmingham, Alabama ("AmSouth") acts as the investment
advisor to each Capital Appreciation Fund ("Advisor"). Rockhaven Asset
Management, LLC ("Rockhaven") acts as the investment sub-advisor to the Equity
Income Fund ("SubAdvisor"). BISYS Fund Services, Limited Partnership ("BISYS
Fund Services"), Columbus, Ohio, acts as the Capital Appreciation Funds'
distributor ("Distributor").
Each Capital Appreciation Fund has been divided into three classes of
Shares, Premier Shares, Classic Shares and Class B Shares. The following
investors qualify to purchase Premier Shares: (i) investors for whom AmSouth
acts in a fiduciary, advisory, custodial, agency or similar capacity through an
account with its Trust Department; (ii) investors who purchase Shares of a Fund
through a 401(k) plan or a 403(b) plan which by its terms permits purchases of
Shares; and (iii) orders placed on behalf of other investment companies
distributed by the Distributor and its affiliated companies. All other investors
are eligible to purchase Classic Shares or Class B Shares only.
This Prospectus relates only to the Classic Shares and Class B Shares of
the Capital Appreciation Funds, which are offered to the general public. Premier
Shares of the Capital Appreciation Funds are offered through a separate
prospectus. Interested persons
-2-
<PAGE> 209
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
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 Classic
Shares and Class B Shares of 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 September 1, 1997.
-3-
<PAGE> 210
FEE TABLE
<TABLE>
<CAPTION>
Equity Regional Equity Capital Growth
Fund Fund Balanced Fund Fund
---------------- ---------------- ------------------ ----------------
Class B Class B Class B Class B
Classic Shares Classic Shares Classic Shares Classic Shares
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on 4.50% 0% 4.50% 0% 4.50% 0% 4.50% 0%
Purchases (as a percentage of offering
price)
Maximum Sales Load Imposed on 0% 0% 0% 0% 0% 0% 0% 0%
Reinvested Dividends (as a percentage
of offering price)
Deferred Sales Load (as a percentage 0% 5.00% 0% 5.00% 0% 5.00% 0% 5.00%
of original purchase price or redemption
proceeds, as applicable)
Redemption Fees (as a percentage 0% 0% 0% 0% 0% 0% 0% 0%
of amount redeemed, if applicable)(2)
Exchange Fee $0 $0 $0 $0 $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees .80% .80% .80% .80% .80%(3) .80%(3) .80% .80%
12b-1 Fees .00% 1.00% .00% 1.00% .00% 1.00% .00% 1.00%
Shareholder Servicing Fees .25% .00% .25% .00% .25% .00% .25% .00%
Other Expenses (after voluntary .22% .22% .25% .25% .24% .24% .27% .27%
fee reduction)(4)
Total Fund Operating Expenses(5) 1.27% 2.02% 1.30% 2.05% 1.29% 2.04% 1.32% 2.07%
(after voluntary fee reduction)
<CAPTION>
Small Cap Equity Income
Fund Fund
--------------- ----------------
Class B Class B
Classic Shares Classic Shares
------- ------ ------- ------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on 4.50% 0% 4.50% 0%
Purchases (as a percentage of offering
price)
Maximum Sales Load Imposed on 0% 0% 0% 0%
Reinvested Dividends (as a percentage
of offering price)
Deferred Sales Load (as a percentage 0% 5.00% 0% 5.00%
of original purchase price or redemption
proceeds, as applicable)
Redemption Fees (as a percentage 0% 0% 0% 0%
of amount redeemed, if applicable)(2)
Exchange Fee $0 $0 $0 $0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees .90% .90% .80% .80%
12b-1 Fees .00% 1.00% .00% 1.00%
Shareholder Servicing Fees .25% .00% .25% .00%
Other Expenses (after voluntary .27% .27% .27% .27%
fee reduction)(4)
Total Fund Operating Expenses(5) 1.42% 2.17% 1.32% 2.07%
(after voluntary fee reduction)
</TABLE>
-4-
<PAGE> 211
(1) Financial Institutions 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 for the Classic Shares would be 1.36% for the
Equity Fund, 1.38% for the Regional Equity Fund and 1.36% for the Balanced Fund.
In the absence of any voluntary reduction of administration fees, Total Fund
Operating Expenses for the Class B Shares would be 2.11% for the Equity Fund,
2.13% for the Regional Equity Fund and 2.11% for the Balanced Fund.
Example:
You would pay the following expenses on a $1,000 investment in Classic
Shares, assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Equity Fund $57 $83 $112 $191
Regional Equity Fund $58 $84 $113 $195
Balanced Fund $58 $84 $113 $194
Capital Growth Fund $58 $85 N/A N/A
Small Cap Fund $59 $88 N/A N/A
Equity Income Fund $58 $85 N/A N/A
You would pay the following expenses on a $1,000 investment in Class B
Shares, assuming (1) deduction of the applicable Contingent Deferred Sales
Charge; and (2) 5% annual return.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Equity Fund
Assuming a complete
redemption at end of period $71 $93 $129 $216
Assuming no redemption $21 $63 $109 $216
-5-
<PAGE> 212
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Regional Equity Fund
Assuming a complete
redemption at end of period $71 $94 $130 $218
Assuming no redemption $21 $64 $110 $218
Balanced Fund
Assuming a complete
redemption at end of period $71 $94 $130 $217
Assuming no redemption $21 $64 $110 $217
Capital Growth Fund
Assuming a complete
redemption at end of period $71 $95 N/A N/A
Assuming no redemption $21 $65 N/A N/A
Small Cap Fund
Assuming a complete
redemption at end of period $72 $98 N/A N/A
Assuming no redemption $22 $68 N/A N/A
Equity Income Fund
Assuming a complete
redemption at end of period $71 $95 N/A N/A
Assuming no redemption $21 $65 N/A N/A
The purpose of the tables above is to assist a potential investor in
understanding the various costs and expenses that an investor in the Classic
Shares or Class B Shares of each Capital Appreciation Fund will bear directly or
indirectly. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS" for a more complete
discussion of annual operating expenses. THE FOREGOING EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Long-term shareholders may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by NASD Rules.
The information set forth in the foregoing tables and examples relates
only to Classic Shares and Class B Shares. The Trust also offers Premier Shares
of each Capital Appreciation Fund which are subject to the same expenses except
that there are no sales charges nor distribution or shareholder servicing
expenses charged to Premier Shares. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS" --
"Investment Advisor" and "Distributor.")
-6-
<PAGE> 213
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Funds for the period from commencement of
operations to January 31, 1997. The information from the commencement of
operations to July 31, 1996 is a part of the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants for the Trust, whose report on
the Trust's financial statements for the year ended July 31, 1996 appears in the
Statement of Additional Information. The information for the period ended
January 31, 1997 is unaudited. The Small Cap Fund, Capital Growth Fund, and
Equity Income Fund had not commenced operations as of January 31, 1997. Further
financial data is incorporated by reference into the Statement of Additional
Information.
Equity Fund
-----------
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.62 $16.75 $14.82 $14.38 $13.40
------ ------ ------ ------ ------
Investment Activities
Net investment income 0.16 0.33 0.33 0.28 0.28
Net realized and unrealized gains from investments 2.30 1.48 2.39 0.83 1.48
------ ------ ------ ------ ------
Total from Investment Activities 2.46 1.81 2.72 1.11 1.76
------ ------ ------ ------ ------
Distributions
Net investment income (0.17) (0.33) (0.32) (0.28) (0.29)
Net realized gains (1.04) (0.61) (0.47) (0.39) (0.49)
------ ------ ------ ------ ------
Total Distributions (1.21) (0.94) (0.79) (0.67) (0.78)
------ ------ ------ ------ ------
Net Asset Value, End of Period $18.87 $17.62 $16.75 $14.82 $14.38
====== ====== ====== ====== ======
Total Return (Excludes Sales Charge) 14.32%(c) 11.09% 19.27% 7.90% 13.81%
Ratios/Supplemental Data:
Net Assets at end of period (000) $419,009 $374,622 $275,757 $205,611 $153,074
Ratio of expenses to average net assets 1.01%(b) 1.02% 1.03% 0.94% 0.95%
Ratio of net investment income to average net assets 1.71%(b) 1.86% 2.17% 1.93% 2.08%
Ratio of expenses to average net assets* 1.09%(b) 1.11% 1.11% 1.11% 1.13%
Ratio of net investment income to average net assets* 1.63%(b) 1.77% 2.09% 1.76% 1.90%
Portfolio Turnover 11.94% 19.11% 19.46% 11.37% 15.12%
Average commission rate paid(d) $0.0668 $0.0700 -- -- --
<CAPTION>
Year Ended July 31,
----------------------------
December 1
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.57 $11.99 $12.18 $10.00
------ ------ ------ ------
Investment Activities
Net investment income 0.32 0.36 0.37 0.22
Net realized and unrealized gains from investments 1.20 0.61 (0.17) 2.16
------ ------ ------ ------
Total from Investment Activities 1.52 0.97 0.20 2.38
------ ------ ------ ------
Distributions
Net investment income (0.33) (0.37) (0.35) (0.20)
Net realized gains (0.36) (0.02) (0.04) --
------ ------ ------ ------
Total Distributions (0.69) (0.39) (0.39) (0.20)
------ ------ ------ ------
Net Asset Value, End of Period $13.40 $12.57 $11.99 $12.18
====== ====== ====== ======
Total Return (Excludes Sales Charge) 12.94% 8.46% 1.66% 24.06%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $107,934 $32,406 $14,383 $5,476
Ratio of expenses to average net assets 1.01% 1.15% 1.11% 1.16%(b)
Ratio of net investment income to average net assets 2.50% 3.16% 3.16% 2.91%(b)
Ratio of expenses to average net assets* 1.15% 1.26% 1.41% 2.34%(b)
Ratio of net investment income to average net assets* 2.36% 3.04% 2.86% 1.73%(b)
Portfolio Turnover 113.12% 15.78% 14.89% 4.03%
Average commission rate paid(d) -- -- -- --
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) 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.
-7-
<PAGE> 214
Regional Equity Fund
--------------------
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------------------------
Six Months Ended
January 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.95 $18.94 $16.68 $16.74 $14.86
------ ------ ------ ------ ------
Investment Activities
Net investment income 0.15 0.26 0.23 0.23 0.19
Net realized and unrealized gains from investments 3.79 2.20 2.26 0.58 2.09
------ ------ ------ ------ ------
Total from Investment Activities 3.94 2.46 2.49 0.81 2.28
------ ------ ------ ------ ------
Distributions
Net investment income (0.15) (0.26) (0.23) (0.23) (0.20)
Net realized gains (0.49) (0.19) -- (0.41) (0.20)
In excess of net realized gains -- -- -- (0.23) --
------ ------ ------ ------ ------
Total Distributions (0.64) (0.45) (0.23) (0.87) (0.40)
------ ------ ------ ------ ------
Net Asset Value, End of Period $24.25 $20.95 $18.94 $16.68 $16.74
====== ====== ====== ====== ======
Total Return (Excludes Sales Charge) 18.96%(c) 13.10% 15.10% 4.87% 15.53%
Ratios/Supplemental Data:
Net Assets at end of period (000) $120,448 $93,584 $68,501 $54,744 $41,347
Ratio of expenses to average net assets 1.03%(b) 1.05% 1.07% 0.79% 0.80%
Ratio of net investment income to average net assets 1.22%(b) 1.30% 1.35% 1.36% 1.17%
Ratio of expenses to average net assets* 1.11%(b) 1.13% 1.15% 1.24% 1.28%
Ratio of net investment income to average net assets* 1.14%(b) 1.22% 1.27% 0.90% 0.69%
Portfolio Turnover 7.45% 8.22% 14.25% 5.83% 10.22%
Average commission rate paid(d) $0.0829 $0.0827 -- -- --
<CAPTION>
Year Ended July 31,
----------------------------
December 1,
1988 to
July 31,
1992 1991 1990 1989(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.44 $12.45 $11.64 $10.00
------ ------ ------ ------
Investment Activities
Net investment income 0.23 0.26 0.23 0.14
Net realized and unrealized gains from investments 2.34 1.20 0.84 1.64
------ ------ ------ ------
Total from Investment Activities 2.57 1.46 1.07 1.78
------ ------ ------ ------
Distributions
Net investment income (0.23) (0.26) (0.22) (0.14)
Net realized gains (0.92) (0.21) (0.04) --
In excess of net realized gains -- -- -- --
------ ------ ------ ------
Total Distributions (1.15) (0.47) (0.26) (0.14)
------ ------ ------ ------
Net Asset Value, End of Period $14.86 $13.44 $12.45 $11.64
Total Return (Excludes Sales Charge) 20.66% 12.52% 9.41% 17.79%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $15,707 $7,853 $3,161 $2,523
Ratio of expenses to average net assets 0.91% 0.79% 1.22% 1.41%(b)
Ratio of net investment income to average net assets 1.61% 2.21% 1.92% 1.98%(b)
Ratio of expenses to average net assets* 1.36% 1.58% 2.32% 2.65%(b)
Ratio of net investment income to average net assets* 1.16% 1.42% 0.82% 0.74%(b)
Portfolio Turnover 24.99% 14.41% 14.00% 1.13%
Average commission rate paid(d) -- -- -- --
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) 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.
-8-
<PAGE> 215
Balanced Fund
-------------
<TABLE>
<CAPTION>
Year Ended July 31,
-----------------------------------------
December 19,
Six Months Ended 1991 to
January 31, July 31,
1997 1996 1995 1994 1993 1992(a)
---- ---- ---- ---- ---- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.03 $12.76 $11.81 $11.86 $11.12 $10.00
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income 0.25 0.47 0.47 0.42 0.44 0.27
Net realized and unrealized gains from investments 0.99 0.58 1.24 0.18 0.80 1.09
------ ------ ------ ------ ------ ------
Total from Investment Activities 1.24 1.05 1.71 0.60 1.24 1.36
------ ------ ------ ------ ------ ------
Distributions
Net investment income (0.27) (0.47) (0.46) (0.42) (0.45) (0.24)
Net realized gains (0.58) (0.31) (0.30) (0.23) (0.05) --
------ ------ ------ ------ ------ ------
Total Distributions (0.85) (0.78) (0.76) (0.65) (0.50) (0.24)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $13.42 $13.03 $12.76 $11.81 $11.86 $11.12
====== ====== ====== ====== ====== ======
Total Return (Excludes Sales Charge) 9.73%(c) 8.37% 15.27% 5.13% 11.47% 13.71%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000) $355,980 $338,425 $295,509 $236,306 $179,134 $143,813
Ratio of expenses to average net assets 1.02%(b) 0.98% 0.94% 0.84% 0.84% 0.83%(b)
Ratio of net investment income to average net assets 3.62%(b) 3.61% 3.91% 3.56% 3.90% 4.45%(b)
Ratio of expenses to average net assets* 1.10%(b) 1.11% 1.12% 1.11% 1.12% 1.17%(b)
Ratio of net investment income to average net assets* 3.54%(b) 3.48% 3.73% 3.28% 3.62% 4.10%(b)
Portfolio Turnover 13.57% 20.47% 16.97% 14.43% 11.09% 23.18%
Average commission rate paid (d) $0.0760 $0.0773 -- -- -- --
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) 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.
-9-
<PAGE> 216
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.
-10-
<PAGE> 217
The Advisor will seek to invest in equity securities which are believed to
represent investment value. Factors which the Advisor may consider in selecting
equity securities include industry and company fundamentals, historical price
relationships, and/or underlying asset value.
With respect to the Equity, Regional Equity, and Balanced Funds, the
Advisor will use a variety of economic projections, technical analysis, and
earnings projections in formulating individual stock purchase and sale
decisions. The Advisor 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, the Advisor may therefore be making
investment decisions which could be contrary to the present expectations of
other professional investors. These decisions may involve greater risks compared
to other mutual funds, of either (a) more accurate assessment by other
investors, in which case losses may be incurred by a Fund, or (b) long delay in
investor recognition of the accuracy of the investment decisions of a Fund, in
which case invested capital of a Capital Appreciation Fund in an individual
security or group of securities may not appreciate for an extended period.
In managing the Capital Growth Fund and Small Cap Fund, the Advisor 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 the
Advisor 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),
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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 the Advisor 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 economic factors or possible
physical disasters in the Southern Region area could have a much greater impact
on the Regional Equity Fund's assets than on similar funds whose investments are
geographically more diverse.
The Balanced Fund will normally invest in equity securities consisting of
common stocks but may also invest in other equity-type securities such as
warrants, preferred stocks and convertible debt instruments. The Fund's equity
investments will be in companies with a favorable outlook and believed by the
Advisor 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
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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 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 the
Advisor, 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 the Advisor 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 the
Advisor 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 common stocks and securities convertible
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into common stocks of companies with a market capitalization of greater than $1
billion determined at the time the security is purchased, 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, 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 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.
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 Sub-Advisor's assessment of market
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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."
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
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Appreciation Fund other than the Balanced 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-Advisor's credit analysis than would be the case if the
Equity Income Fund were 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 SubAdvisor 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
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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 the Advisor or Sub-Advisor, 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 Advisor or
Sub-Advisor 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 Advisor or Sub-Advisor
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
"whenissued" basis. When-issued securities are securities purchased for delivery
beyond the normal settlement date at a stated price and yield, and thereby
involve a risk that the yield obtained in the transaction will be less than
those available in the market when delivery takes place. The Capital
Appreciation Funds will generally not pay for such securities or start earning
interest on them until they are received. When a Capital Appreciation Fund
agrees to purchase securities on a "when-issued" basis, the Trust's custodian
will set aside cash or liquid securities equal to the amount of the commitment
in a segregated account. Securities purchased on a "when-issued" basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Each of the Capital Appreciation Funds
expects that commitments to purchase "when-issued" securities will not exceed
25% of the value of its total assets under normal market conditions, and that a
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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
Advisor's or Sub-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 the Advisor or Sub-Advisor deems to be appropriate. Options
are written solely as covered call options (options on securities owned by the
Fund). Such options must be issued by the Options Clearing Corporation and may
or may not be listed on a national securities exchange. 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 the
Advisor 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 Advisor's opinion, present
minimal credit risks.
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Repurchase Agreements
Securities held by the Capital Appreciation Funds may be subject to
repurchase agreements. If the seller under a repurchase agreement were to
default on its repurchase obligation or become insolvent, the Capital
Appreciation Fund would suffer a loss to the extent that the proceeds from a
sale of the underlying portfolio securities were less than the repurchase price
under the agreement, or to the extent that the disposition of such securities by
the Capital Appreciation Fund were delayed pending court action. Additionally,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Capital Appreciation Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Capital
Appreciation Fund is treated as an unsecured creditor and required to return the
underlying security to the seller's estate.
Reverse Repurchase Agreements
Each of the Capital Appreciation Funds may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, a Capital
Appreciation Fund would sell portfolio securities to financial 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 Advisor and the Administrator will reduce
that portion of their usual service fees from each Capital Appreciation Fund by
an amount equal to
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their service fees from the AmSouth Money Market Funds that are attributable to
those Capital Appreciation Fund investments. The 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 which are not affiliated directly or
indirectly with the Trust. 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 other liquid securities. This collateral
will be valued daily by the Advisor or Sub-Advisor 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 the Advisor or Sub-Advisor has determined are
creditworthy under guidelines established by the Trust's Board of Trustees.
Each Capital Appreciation Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such 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 the Advisor or
Sub-Advisor 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.
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Portfolio turnover for the Capital Growth Fund, Small Cap Fund, and Equity
Income Fund is not expected to exceed 200% in the coming year.
INVESTMENT RESTRICTIONS
Each of the Capital Appreciation Funds is subject to a number of
investment restrictions that may be changed only by a vote of a majority of the
outstanding shares of that Fund (see "GENERAL INFORMATION - Miscellaneous" in
this prospectus).
No Capital Appreciation Fund may:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Capital
Appreciation Fund's total assets would be invested in such issuer, or such
Capital Appreciation Fund would hold more than 10% of any class of securities of
the issuer or more than 10% of the outstanding voting securities of the issuer,
except that up to 25% of the value of each Capital Appreciation Fund's total
assets may be invested without regard to such limitations. There is no limit to
the percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause 25% or more of the value of
such Capital Appreciation Fund's total assets at the time of purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities and repurchase agreements
secured by obligations of the U.S. Government or its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission, electric and
gas, electric, and telephone will each be considered a separate industry.
3. Borrow money or issue senior securities, except that each Capital
Appreciation Fund may borrow from banks or enter into reverse repurchase
agreements for temporary purposes in amounts up to 10% of the value of its total
assets at the time of such borrowing; or mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of such
Capital Appreciation Fund's total assets at the time of its borrowing. A Capital
Appreciation Fund will not purchase securities while borrowings (including
reverse repurchase agreements) in excess of 5% of its total assets are
outstanding.
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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 Class, by the
number of the outstanding Shares of that Class. 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.
Each Capital Appreciation Fund has been divided into three classes of
Shares, Premier Shares, Classic Shares and Class B Shares. The three classes of
a particular Fund represent interests in the same investments and are identical
in all respects except that (i) Classic Shares bear the expense of the fee under
the Trust's Shareholder Servicing
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Plan (the "Servicing Plan"), which will cause the Classic Shares to have a
higher expense ratio and to pay lower dividends than those of the Premier
Shares, (ii) Class B Shares bear the expense of the fee under the Trust's
Distribution and Shareholder Services Plan (the "Distribution Plan"), which will
cause the Class B Shares to have a higher expense ratio and to pay a lower
dividend than those of the Classic Shares or Premier Shares, (iii) Classic
Shares have certain exclusive voting rights with respect to the Servicing Plan
and Class B Shares have certain exclusive voting rights with respect to the
Distribution Plan, and (iv) Classic Shares are subject to a front-end sales
charge and Class B Shares are subject to a contingent deferred sales charge. The
following investors qualify to purchase Premier Shares: (i) investors for whom
AmSouth acts in a fiduciary, advisory, custodial, agency or similar capacity
through an account with its Trust Department; (ii) investors who purchase Shares
of a Fund through a 401(k) plan or a 403(b) plan which by its terms permits
purchases of Shares; and (iii) orders placed on behalf of other investment
companies distributed by the Distributor and its affiliated companies. All other
investors are eligible to purchase Classic Shares or Class B Shares only.
Purchases of Classic Shares and Class B 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 financial institutions that provide certain administrative support
services for their customers or account holders (collectively, "Financial
Institutions"). 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 Financial Institution 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 Financial Institutions acting in a fiduciary,
advisory, custodial, agency, or other similar capacity on behalf of Customers
will normally be held of record by the Financial Institutions. With respect to
Shares so sold, it is the responsibility of the particular Financial Institution
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 Financial Institutions and reflected in the account
statements provided by the Financial Institutions to Customers.
Depending upon the terms of a particular Customer account, the Financial
Institutions 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
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obtained from the Financial Institutions. This Prospectus should be read in
conjunction with any such information received from the Financial Institutions.
Investors may also purchase Classic Shares and Class B 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, P.O. Box 182733, Columbus, Ohio 43218-2733.
Subsequent purchases of Classic Shares or Class B 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 Classic Shares and Class B 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 three days of the telephone order. If payment is not received
within three 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 Classic Shares and Class B 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
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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.
Classic Shares and Class B Shares of each Capital Appreciation Fund are
purchased at the public offering price per Share, which is the net asset value
per Share (see "VALUATION OF SHARES") next determined after receipt by the
Distributor of an order in good form to purchase Shares plus the applicable
sales charge at the time of purchase in the case of Classic Shares 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
close of business. 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 Classic
Shares and Class B 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
800-451-8382.
The maximum investment is $250,000 for total purchases of Class B Shares.
There is no limit on the amount of Classic Shares that may be purchased.
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.
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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. In the case of Classic Shares and
Class B Shares held of record by Financial Institutions but beneficially owned
by a Customer, confirmations of purchases, exchanges, and redemptions of Classic
Shares or Class B Shares by a Financial Institution will be sent to the Customer
by the Financial Institution. Shareholders may rely on these statements in lieu
of certificates. Certificates representing Shares will not be issued.
Sales Charge -- Classic Shares
The public offering price of a Classic Share of a Capital Appreciation
Fund equals its net asset value plus a sales charge. BISYS receives this sales
charge as Distributor and may re-allow a portion of it as dealer discounts and
brokerage commissions. However, BISYS , at its sole discretion, may pay certain
dealers all or part of the portion of the sales charges it receives. A broker or
dealer who receives a reallowance in excess of 90% of the sales charge may be
deemed to be an "underwriter" for purposes of the Securities Act of 1933.
<TABLE>
<CAPTION>
Sales Charge as Dealer
a Percentage of Sales Charge as Allowance
Net Amount a Percentage of as a Percentage
Amount of Purchase Invested Offering Price of Offering Price
- ------------------ -------- -------------- -----------------
<S> <C> <C> <C>
Less than $50,000........................... 4.71% 4.50% 4.05%
$50,000 but less than $100,000.............. 4.17% 4.00% 3.60%
$100,000 but less than $250,000............. 3.09% 3.00% 2.70%
$250,000 but less than $500,000............. 2.04% 2.00% 1.80%
$500,000 but less than $1,000,000........... 1.01% 1.00% .90%
$1,000,000 or more.......................... -0- * -0-* -0-
</TABLE>
* Classic Shares are offered at net asset value without an initial sales charge
but are subject to a Contingent Deferred Sales Charge equal to 1% of the lesser
of the value of the Shares redeemed (exclusive of reinvested dividends and
capital gains distributions) or the total cost of such Shares in the event of a
Share redemption within twelve months following the purchase of $1 million or
more in Classic Shares. The Distributor will provide additional compensation in
an amount up to 1.00% of the offering price of Classic Shares of the Funds for
sales of $1 million to $5 million, and 0.50% for sales over $5 million.
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 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
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<PAGE> 233
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 Classic 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) 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;
(4) Investors who purchase Shares of a Fund through a payroll deduction
plan; and
(5) Investors who purchase Shares of a Capital Appreciation Fund through
certain broker-dealers, registered investment advisors and other financial
institutions that have entered into an agreement with the Distributor, which
includes a requirement that such shares be sold for the benefit of clients
participating in a "wrap account," asset allocation or a similar program under
which such clients pay a fee to such broker-dealer, registered investment
advisor or other financial institution.
From time to time, for special promotional purposes, the Distributor may
offer special concessions to enable investors to purchase shares of a Fund
offered by the Trust at net asset value without payment of a front-end charge.
To qualify for a net asset value purchase, the investor must pay for such
purchase with the proceeds from the redemption of shares of a non-affiliated
mutual fund on which a front-end sales charge was paid. A qualifying purchase of
shares must occur within 30 days of prior redemption and must be evidenced by a
confirmation of the redemption transaction. At the time of purchase, the
investment representative must notify the Distributor that the purchase
qualifies for a purchase at net asset value and provide sufficient information
to permit confirmation of qualification. Proceeds from the redemption of shares
on which no front-end sales charge was paid do not qualify for a purchase at net
asset value.
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<PAGE> 234
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 Classic Shares of a Capital Appreciation Fund over a 13-month
period (beginning up to 90 days prior to the date indicated on the account
application). The Trust's Transfer Agent will hold in escrow 5% of the amount
indicated for payment of the higher sales charge if a shareholder does not
purchase the full amount indicated on the account application. Upon completion
of the total minimum investment specified on the account application, the escrow
will be released, and an adjustment will be made to reflect any reduced sales
charge applicable to shares purchased during the 90-day period prior to
submission of the account application. Additionally, if the total purchases
within the 13-month period exceed the amount specified, an adjustment will be
made to reflect further reduced sales charges applicable to such purchases. All
such adjustments will be made at the conclusion of the 13-month period in the
form of additional shares credited to the shareholder's account at the then
current Public Offering Price applicable to a single purchase of the total
amount of the total purchases. If total purchases are less than the amount
specified, escrowed shares may be involuntarily redeemed to pay the additional
sales charge. Checking a Letter of Intent box does not bind an investor to
purchase, or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but an investor must complete the intended
purchase to obtain the reduced sales load.
For further information about Letters of Intent, interested investors
should contact the Trust at (800) 451-8382. This program, however, may be
modified or eliminated at any time or from time to time by the Distributor
without notice.
Concurrent Purchases and Right of Accumulation
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Classic 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 Classic Shares of a Capital Appreciation Fund with prior purchases
of Classic 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.
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<PAGE> 235
Sales Charge -- Class B Shares
Class B Shares are not subject to a sales charge when they are purchased,
but are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B Shares, the full purchase amount is invested
directly in the applicable Fund. Class B Shares of each Fund are subject to an
ongoing distribution and shareholder service fee at an annual rate of 1.00% of
such Fund's average daily net assets as provided in the Distribution Plan
(described below under "The Distributor"). This ongoing fee will cause Class B
Shares to have a higher expense ratio and to pay lower dividends than Classic
Shares. Class B Shares convert automatically to Classic Shares after eight
years, commencing from the end of the calendar month in which the purchase order
was accepted under the circumstances and subject to the qualifications described
in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
shareholder service fees under the Distribution Plan are payable to the
Distributor to defray the expenses of advance brokerage commissions and expenses
related to providing distribution-related and Shareholder services to the Fund
in connection with the sale of the Class B Shares, such as the payment of
compensation to dealers and agents selling Class B Shares. A dealer commission
of 4.00% of the original purchase price of the Class B Shares of the Fund will
be paid to financial institutions and intermediaries. However, the Distributor
may, in its sole discretion, pay a higher dealer commission.
Contingent Deferred Sales Charge
If the Shareholder redeems Class B Shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
Shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on Shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such Shares. Solely for purposes
of determining the number of years from the time of any payment for the purchase
of Shares, all payments during a month are aggregated and deemed to have been
made on the first day of the month.
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<PAGE> 236
Contingent
Deferred
Sales Charge as a
Year(s) Percentage of
Since Dollar Amount
Purchase Subject to Charge
-------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
6-7 None
7-8 None
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Classic
Shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B Shares redeemed first) or Shares representing capital appreciation, next
of Shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other Shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 Shares at $10 per share (a
total cost of $1,000) and prior to the second anniversary after purchase, the
net asset value per share is $12 and during such time you have acquired 10
additional Shares through dividends paid in Shares. If you then make your first
redemption of 50 Shares (proceeds of $600), 10 Shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
Shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of Shares: (i)
following the death or disability (as defined in the Code) of a Shareholder or a
participant or beneficiary of a qualifying retirement plan if redemption is made
within one year of such death or disability; or (ii) to the extent that the
redemption represents a minimum required distribution from an Individual
Retirement Account or other qualifying retirement plan to a Shareholder who has
attained the age of 70 1/2. A Shareholder or his or her representative should
contact the Transfer Agent to determine whether a retirement plan qualifies for
a waiver and must notify the Transfer Agent prior to the time of redemption if
such circumstances exist and the Shareholder is eligible for
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<PAGE> 237
this waiver. In addition, the following circumstances are not deemed to result
in a "redemption" of Class B Shares for purposes of the assessment of a
Contingent Deferred Sales Charge, which is therefore waived: (i) plans of
reorganization of the Fund, such as mergers, asset acquisitions and exchange
offers to which the Fund is a party; or (ii) exchanges for Class B Shares of
other Funds of the Trust as described under "Exchange Privilege."
Conversion Feature
Class B Shares include all Shares purchased pursuant to the Contingent
Deferred Sales Charge which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
purchased. At the end of this period, Class B Shares will automatically convert
to Classic Shares and will be subject to the lower distribution and Shareholder
service fees charged to Classic Shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales charge, fee or other charge. The conversion is not a taxable event to a
Shareholder.
For purposes of conversion to Classic Shares, shares received as dividends
and other distributions paid on Class B Shares in a Shareholder's Fund account
will be considered to be held in a separate sub-account. Each time any Class B
Shares in a Shareholder's Fund account (other than those in the sub-account)
convert to Classic Shares, a pro-rata portion of the Class B Shares in the
sub-account will also convert to Classic Shares.
If a Shareholder effects one or more exchanges among Class B Shares of the
Funds of the Trust during the eight-year period, the Trust will aggregate the
holding periods for the shares of each Fund of the Trust for purposes of
calculating that eight-year period. Because the per share net asset value of the
Classic Shares may be higher than that of the Class B Shares at the time of
conversion, a Shareholder may receive fewer Classic Shares than the number of
Class B Shares converted, although the dollar value will be the same.
Additional Information Regarding Broker Compensation
The Distributor, at its expense, will also provide additional compensation
to dealers in connection with sales of Classic Shares and Class B 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 dealersponsored 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
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<PAGE> 238
of their families to locations 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.
Exchange Privilege
Classic Shares
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Classic Shares (with certain exceptions and
subject to the terms and conditions described in this prospectus). Classic
Shares may not be exchanged for Class B Shares of the other Funds, and may be
exchanged for Premier Shares of the other Funds only if the Shareholder becomes
eligible to purchase Premier Shares. Shareholders may exchange their Classic
Shares for Classic Shares of a Fund with the same or lower sales charge on the
basis of the relative net asset value of the Classic Shares exchanged.
Shareholders may exchange their Classic Shares for Classic Shares of a Fund with
a higher sales charge by paying the difference between the two sales charges.
Shareholders may also exchange Classic Shares of a Money Market Fund, for which
no sales load was paid, for Classic Shares of a variable net asset value Fund
("Variable NAV Fund"). Under such circumstances, the cost of the acquired
Classic Shares will be the net asset value per share plus the appropriate sales
load. If Classic Shares of a Money Market Fund were acquired in a previous
exchange involving Shares of a Variable NAV Fund, then such Shares of the Money
Market Fund may be exchanged for Shares of a Variable NAV Fund without payment
of any additional sales load within a twelve month period. Under such
circumstances, the Shareholder must notify the Distributor that a sales load was
originally paid. Depending upon the terms of a particular Customer account, a
Participating Organization may charge a fee with regard to such an exchange.
Information about such charges will be supplied by the Participating
Organization.
Class B
Class B Shares of each Fund may be exchanged for Class B Shares of the
other Funds on the basis of relative net asset value per Class B Share, without
the payment of any Contingent Deferred Sales Charge which might otherwise be due
upon redemption of the outstanding Class B Shares. Investors should note that,
as of the date of this
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<PAGE> 239
prospectus, Class B Shares were not yet being offered in the AmSouth U.S.
Treasury Fund, Tax Exempt Fund, Government Income Fund, Limited Maturity Fund,
Florida Fund, and Municipal Bond Fund, thus, no exchanges may be effected for
Class B Shares of these Funds. For purposes of computing the Contingent Deferred
Sales Charge that may be payable upon a disposition of the newly acquired Class
B Shares, the holding period for outstanding Class B Shares of the Fund from
which the exchange was made is "tacked" to the holding period of the newly
acquired Class B Shares. For purposes of calculating the eight-year holding
period applicable to the newly acquired Class B Shares, the newly acquired Class
B Shares shall be deemed to have been issued on the date of receipt of the
Shareholder's order to purchase the outstanding Class B Shares of the Fund from
which the exchange was made.
Class B Shares may not be exchanged for Classic Shares of the other Funds,
and may be exchanged for Premier Shares of the other Funds only if the
Shareholder becomes eligible to purchase Premier Shares. A Contingent Deferred
Sales Charge will apply as described in "How To Purchase and Redeem Shares" --
"Class B Shares" to exchanges of Class B Shares for Premier Shares.
Additional Information About Exchanges
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 and class 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.
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<PAGE> 240
Auto Exchange
AmSouth Mutual Funds Auto Exchange enables Shareholders to make regular,
automatic withdrawals from Classic Shares and Class B Shares of the AmSouth
Prime Obligations Fund and use those proceeds to benefit from
dollar-cost-averaging by automatically making purchases of shares of the same
Class of another AmSouth Mutual Fund. With shareholder authorization, the
Trust's transfer agent will withdraw the amount specified (subject to the
applicable minimums) from the shareholder's Prime Obligations Fund account and
will automatically invest that amount in Classic Shares or Class B Shares of the
AmSouth Mutual Fund designated by the Shareholder at the public offering price
on the date of such deduction. In order to participate in the Auto Exchange,
Shareholders must have a minimum initial purchase of $10,000 in their Prime
Obligations Fund account and maintain a minimum account balance of $1,000.
To participate in the Auto Exchange, Shareholders should complete the
appropriate section of the Account Registration Form, which can be acquired by
calling the Distributor. To change the Auto Exchange instructions or to
discontinue the feature, a Shareholder must send a written request to the
AmSouth Mutual Funds, P.O. Box 182733, Columbus, OH 43218-2733. The Auto
Exchange may be amended or terminated without notice at any time by the
Distributor.
Directed Dividend Option
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice.
In addition, the Trust may suspend a shareholder's Directed Dividend Option
without notice if the account balance is less than the minimum $1,000.
Participation in the Option may be terminated or changed by the shareholder at
anytime by writing the Distributor. The Directed Dividend Option is not
available to participants in an AmSouth Mutual Funds IRA.
Redemption of Shares
Shareholders may redeem their Classic Shares without charge, and their
Class B Shares subject to the applicable Contingent Deferred Sales Charge, on
any day that net asset value is calculated (see "VALUATION 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 Financial Institution. For
example, if a Customer has agreed with a Financial Institution
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to maintain a minimum balance in his or her account with the Financial
Institution, and the balance in that account falls below that minimum, the
Customer may be obliged to redeem, or the Financial Institution may redeem for
and on behalf of the Customer, all or part of the Customer's Shares of a Fund of
the Trust to the extent necessary to maintain the required minimum balance.
Redemption by Mail
A written request for redemption must be received by the Transfer Agent in
order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record; and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
Redemption by Telephone
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic 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 then maximum wire redemption
charge . 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.
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During periods of significant economic or market change, telephone
redemptions may be difficult to complete. If a Shareholder is unable to contact
the Distributor by telephone, a Shareholder may also mail the redemption request
to the Distributor at the address listed above under "HOW TO REDEEM
SHARES--Redemption by Mail."
Payments to Shareholders
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. The proceeds paid upon redemption of Shares in a Capital Appreciation
Fund may be more or less than the amount invested. Payment to Shareholders for
Shares redeemed will be made within seven days after receipt by the Transfer
Agent of the request for redemption. However, to the greatest extent possible,
the Trust will attempt to honor requests from Shareholders for next Business Day
payments upon redemption of Shares if the request for redemption is received by
the Transfer Agent before the Valuation Time on a Business Day or, if the
request for redemption is received after the Valuation 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.
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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 at least annually to Shareholders of
record. A Shareholder will automatically receive all income dividends and
capital gains distributions in additional full and fractional Shares unless the
Shareholder elects to receive such dividends or distributions in cash. Dividends
and distributions are reinvested without a sales charge as of the ex-dividend
date using the net asset value determined on that date and are credited to a
Shareholder's account on the payment date. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash. Dividends are generally taxable when received. However, dividends
declared in October, November, or December to Shareholders of record during
those months and paid during the following January are treated for tax purposes
as if they were received by each Shareholder on December 31 of the prior year.
Elections to receive dividends or distributions in cash, or any revocation
thereof, must be made in writing to the Transfer Agent at 3435 Stelzer Road,
Columbus, Ohio 43219, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.
Each of the Capital Appreciation Funds is treated as a separate entity for
Federal income tax purposes. Each of the Capital Appreciation Funds intends to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). If they so qualify, the Capital Appreciation
Funds will not have to pay federal income taxes on net income and net capital
gain income that they distribute to shareholders. Regulated investment companies
are also subject to a federal excise tax if they do not distribute their income
on a timely basis. The Capital Appreciation Funds intend to avoid paying federal
income and excise taxes by timely distributing substantially all their net
income and net investment capital gain income.
A distribution to a Shareholder of net investment income (generally the
Fund's ordinary income) and the excess, if any, of net short-term capital gain
over net long-term loss will be taxable to the Shareholder as ordinary income.
The 70% dividends-received deduction for corporations generally will apply to
the Fund's distributions to corporations to the extent such distributions
represent amounts that would qualify for the dividends-received deduction when
received by the Fund if the Fund were a regular corporation and are designated
by the Fund as qualifying for the dividends-received deduction.
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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.
The amount of dividends payable with respect to the Premier Shares will
exceed dividends on Classic Shares, and the amount of dividends on Classic
Shares will exceed the dividends on Class B Shares, as a result of the
Shareholder Services Plan fee applicable to Classic Shares and the Distribution
and Shareholder Services Plan fee applicable to Class B Shares.
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 advisor 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 advisors concerning their own
tax situation and concerning the application of state and local taxes which may
differ from the federal income tax consequences described above.
Shareholders will be advised at least annually as to the character for
federal income tax purposes of distributions made during the year.
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Additional Information regarding federal taxes is contained in the Statement of
Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION --Additional Tax Information."
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):
Position(s) Held Principal Occupation
Name and Address With the Trust During the Past 5 Years
- ---------------- -------------- -----------------------
George R. Landreth* Chairman From December 1992 to present,
BISYS Fund Services employee of BISYS Fund Services,
3435 Stelzer Road Limited Partnership; from July 1991
Columbus, Ohio 43219 to December 1992, employee of PNC
Financial Corp.; from October 1984
to July 1991, employee of The
Central Trust Co., N.A.
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present, Professor
459 DER Building and Vice Chairman, Dept. of
1808 7th Avenue South Medicine, Univ. of Alabama at
UAB Medical Center Birmingham School of Medicine;
Birmingham, Alabama 35294 from December 1995 to present,
Physician, 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
209 Lakewood Drive, West present, retired; from December,
Mobile, Alabama 36608 1988 to August, 1993, Executive
Vice President, Chief Operating
Officer and Director, Mobile Gas
Service Corporation
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J. David Huber* Trustee From June 1987 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services, Limited Partnership
Homer H. Turner, Jr. Trustee
729 Cary Drive From June 1991 to present,
Auburn, Alabama 36830 retired; until June 1991, Vice
President, Birmingham Division,
Alabama Power Company
James H. Woodward, Jr. Trustee From July 1989 to present,
The University of North Chancellor, The University of
Carolina at Charlotte North Carolina at Charlotte;
Charlotte, North Carolina until July 1989, Senior Vice
28223 President, University College,
University of Alabama at
Birmingham
- --------------------------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
providing fund accounting services to the Trust. Messrs. Huber and Landreth are
executive officers and employees of BISYS Fund Services.
Investment Advisor
AmSouth is the Advisor of each Fund of the Trust. AmSouth is the 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,
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the Advisor manages the Capital Appreciation Funds (except for the Equity Income
Fund), and therefore 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 the Advisor,
the fee payable to the Advisor 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
the Advisor. The fee payable for the Advisor 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 the Advisor. 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 the Advisor 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 , the Advisor received
investment advisory fees amounting to .80% of the Equity Fund's average daily
net assets, .80% of the Regional Equity Fund's average daily net assets and .75%
of the Balanced Fund's average daily net assets after voluntary fee reductions
with respect to the Balanced Fund.
Investment Sub-Advisor
Rockhaven Asset Management, LLC ("Rockhaven") serves as Sub-Advisor to the
Equity Income Fund pursuant to a Sub-Advisory Agreement with the Advisor. Under
the Sub-Advisory Agreement, the Sub-Advisor 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 the Advisor 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 for
investment companies and has its principal offices at 100 First Avenue, Suite
1050, Pittsburgh, PA 15222.
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For its services and expenses incurred under the Sub-Advisory Agreement,
the Sub- Advisor is entitled to a fee, payable by the Advisor. 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 the Advisor and Sub-Advisor.
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 August 1, 1991 to January 31, 1997, he was the portfolio manager of the
Federated Equity Income Fund.
The cumulative total return for the Federated Equity Income Fund from
August 1, 1991 through January 31, 1997 was 138.72%. The cumulative total return
for the same period for the Standard & Poor's Composite Stock Price Index ("S&P
500 Index") was 135.09%. At January 31, 1997, the Fund had approximately $970
million in net assets. As portfolio manager of the Federated Equity Income Fund,
Mr. Wiles had full discretionary authority over the selection of investments for
that Fund. Average annual returns for the one-year, three-year, and five-year
periods ended January 31, 1997 and for the entire period during which Mr. Wiles
managed that fund compared with the performance of the S&P 500 Index were:
<TABLE>
<CAPTION>
Federated S&P 500 Lipper Equity
Equity Income Fund(a)(b) Index (c) Income Fund Index(d)
------------------------ --------- --------------------
<S> <C> <C> <C>
One Year 23.03% 26.34% 19.48
Three Years 16.93% 20.72%
Five Years 16.38% 17.02%
August 1, 1991 through
January 31, 1997 17.11% 16.78%
</TABLE>
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(b) During the period from August 1, 1991 through January 3,1 1997, the
operating expense ratio of the Federated Equity Income Fund ranged from
.95% to 1.05% of the Fund's average daily net assets.
(c) The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock
market. The Index is adjusted to reflect reinvestment of dividends.
(d) The Lipper Equity Income Fund Index is equally weighted and composed of
the largest mutual funds within its investment objective. These funds seek
high
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<PAGE> 249
current income and growth of income through investing 60% or more of their
respective portfolios in equity securities.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The
Federated Equity Income Fund is a separate fund and its historical performance
is not indicative of the potential performance of the AmSouth Equity Income
Fund. Share prices and investment returns will fluctuate reflecting market
conditions, as well as changes in company-specific fundamentals of portfolio
securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager
from August 1, 1991 to January 31, 1997. Mr. Wiles joined Federate Investors in
1990 and served as a Vice President of the Fund's investment advisor from 1992
and Senior Vice President from October, 1996 to January 31, 1997. Mr. Wiles
served as Assistant Vice President of the Fund's investment advisor in 1991. Mr.
Wiles is a Chartered Financial Analyst and received his M.B.A. in Finance from
Cleveland State University.
Administrator
ASO Services Company ("ASC") is the administrator for each Fund of the
Trust (the "Administrator"). 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 .11% of the Equity Fund's average
daily net assets, .12% of the Regional Equity Fund's average daily net assets
and .11%of the Balanced Fund's average daily net assets.
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Sub-Administrators
AmSouth serves as a 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 daily net assets.
BISYS Fund Services serves as a 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.
Distributor
BISYS Fund Services acts as the Trust's principal underwriter and
distributor (the "Distributor") pursuant to a Distribution Agreement under which
shares are sold on a continuous basis.
Classic Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (.25%) of the average
daily net assets of the Classic Shares of each Fund.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class B Shares of a Fund will pay a monthly distribution
fee to the Distributor as compensation for its services in connection with the
Distribution Plan at an annual rate equal to one percent (1.00%) of the average
daily net assets of Class B Shares of each Fund which includes Shareholder
Servicing fee of .25% of the average daily net assets of the Class B Shares of
each Fund. The Distributor may periodically waive all or a portion of the fee
with respect to a Fund in order to increase the net investment income of the
Fund available for distribution as dividends. The Distributor may apply the B
Share Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's B Shares;
(ii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors)
as brokerage commissions in connection with the sale of such Fund's B Shares;
and (iii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
B Shares.
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<PAGE> 251
All payments by the Distributor for distribution assistance or shareholder
services under the Distribution Plan will be made pursuant to an agreement (a
"Servicing Agreement") between the Distributor and such bank, other financial
institution or intermediary, broker-dealer, or affiliate or subsidiary of the
Distributor (hereinafter referred to individually as "Participating
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares to the Participating Organization's customers on whose behalf the
investment in such Shares is made and/or to the provision of shareholder
services to the Participating Organization's customers owning a Fund's Class B
Shares. Under the Distribution Plan, a Participating Organization may include
AmSouth or a subsidiary bank or nonbank affiliates, or the subsidiaries or
affiliates of those banks. A Servicing Agreement entered into with a bank (or
any of its subsidiaries or affiliates) will contain a representation that the
bank (or subsidiary or affiliate) believes that it possesses the legal authority
to perform the services contemplated by the Servicing Agreement without
violation of applicable banking laws (including the Glass-Steagall Act) and
regulations.
The distribution fee will be payable without regard to whether the amount
of the fee is more or less than the actual expenses incurred in a particular
year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks generally
from engaging in the business of underwriting securities, but in general do not
prohibit banks from purchasing securities as agent for and upon the order of
customers. Accordingly, the Trust will require banks acting as Participating
Organizations to provide only those services which, in the banks' opinion, are
consistent with the then current legal requirements. It is possible, however,
that future legislative, judicial or administrative action affecting the
securities activities of banks will cause the Trust to alter or discontinue its
arrangements with banks that act as Participating Organizations, or change its
method of operations. It is not anticipated, however, that any change in a
Fund's method of operations would affect its net asset value per share or result
in financial loss to any customer.
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<PAGE> 252
Expenses
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as 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.
As a general matter, expenses are allocated to the Premier, Classic, and
Class B Shares of a Fund on the basis of the relative net asset value of each
class. At present, the only expenses that will be borne solely by Classic and
Class B Shares, other than in accordance with the relative net asset value of
the class, are expenses under the Servicing Plan which relates only to the
Classic Shares and the Distribution Plan which relates only to the Class B
Shares.
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-
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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
Fund offers three classes of Shares: Premier, Classic and Class B Shares, except
for the AmSouth U.S. Treasury Fund and Tax Exempt Fund which offer only Premier
Shares and Classic Shares. As of the date of this Prospectus, however, Class B
Shares were not offered in Government Income Fund, Limited Maturity Fund,
Florida Fund, and Municipal Bond Fund. Each Share represents an equal
proportionate interest in a Fund with other Shares of the same series, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared at the discretion of the Trustees
(see "Miscellaneous" below).
Shares of the Trust are entitled to one vote per share (with proportional
voting for fractional shares) on such matters as Shareholders are entitled to
vote. Shareholders vote in the aggregate and not by series or class on all
matters except (i) when required by the Investment Company Act of 1940, shares
shall be voted by individual series or class, (ii) when the Trustees have
determined that the matter affects only the interests of one or more series or
class, and (iii) only the holders of Classic Shares will vote on matters
submitted to shareholder vote with regard to the Servicing Plan and (iv) only
the holders of Class B Shares will vote on matters submitted to shareholder vote
with regard to the Distribution Plan.
Overall responsibility for the management of the Trust is vested in the
Board of Trustees. See "MANAGEMENT OF AmSouth Mutual Funds - Trustees of the
Trust." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION - Miscellaneous" in
the Statement of Additional Information for further information.
As of May 20, 1997, AmSouth Bank , 1901 Sixth Avenue North, Birmingham, AL
35203, was the Shareholder of record of approximately 91.55% of the outstanding
shares of the Equity Fund, 67.67% of the outstanding shares of the Regional
Equity Fund, and 87.49% of the outstanding shares of the Balanced Fund. AmSouth
Bank was the beneficial owner of approximately 61.73% of the outstanding shares
of the Equity Fund, 54.68% of the outstanding shares of the Regional Equity
Fund, and 81.58% of the outstanding shares of the Balanced Fund, and may be
deemed to be a "controlling person" of each of the above-mentioned Funds within
the meaning of the Investment Company Act of 1940.
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Custodian
As of April 17, 1997, AmSouth serves as custodian for the Trust
("Custodian"). Pursuant to the Custodian Agreement with the Trust, the Custodian
receives compensation from each Fund for such services in an amount equal to an
asset-based fee.
Transfer Agent and Fund Accounting
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 the Classic Shares and Class
B Shares of 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, five years (if applicable) and the
period since the establishment of a 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.
Yield, effective yield, and total return will be calculated separately for
each Class of Shares. Because Classic Shares are subject to lower Shareholder
Services fees than Class B Shares, the yield and total return for Classic Shares
will be higher than that of the Class B Shares for the same period. Because
Premier Shares are not subject to the Distribution and Shareholder Services
fees, the yield and total return for Premier Shares will be higher than that of
the Classic and Class B Shares for the same period.
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
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<PAGE> 255
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 Financial
Institution with respect to customer accounts investing in Shares of a Capital
Appreciation Fund will not be included in performance calculations.
Miscellaneous
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Trust upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not 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
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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
P.O. Box 182733, Columbus, Ohio 43218-2733, or by calling toll free (800)
451-8382.
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AMSOUTH MUTUAL FUNDS
INVESTMENT ADVISOR
AmSouth Bank
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
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TABLE OF CONTENTS
Page
----
The Trust..............................................................
Fee Table .............................................................
Financial Highlights ..................................................
Investment Objective and Policies .....................................
Investment Restrictions ...............................................
Valuation of Shares ...................................................
How to Purchase and Redeem Shares .....................................
Dividends and Taxes ...................................................
Management of AmSouth Mutual Funds ....................................
General Information ...................................................
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.
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AMSOUTH MUTUAL FUNDS
CAPITAL APPRECIATION FUNDS
AMSOUTH BANK
Investment Advisor
BISYS FUND SERVICES, LIMITED PARTNERSHIP
Prospectus dated September 1, 1997
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CROSS REFERENCE SHEET
Part B
Form N-1A Item No. Caption
- ------------------ -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information -
Description of Shares
13. Investment Objectives and Policies Investment objectives and
policies
14. Management of the Trust Management of the Trust
15. Control Persons and Principal
Holders of Securities Miscellaneous
16. Investment Advisory and
Other Services Management of the Trust
17. Brokerage Allocation Management of the Trust
18. Capital Stock and Other
Securities Valuation; Additional Purchase
and Redemption Information;
Management of the Trust;
Redemptions; Additional
Information
19. Purchase, Redemption and Pricing Valuation; Additional Purchase
of Securities Being Offered and Redemption Information;
Management of the Trust
20. Tax Status Additional Purchase and
Redemption Information
21. Underwriters Management of the Trust
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
<PAGE> 261
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
September 1, 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,
AmSouth Florida Tax-Free Fund , 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 P.O. Box 182733, Columbus,
Ohio 43218-2733, or by telephoning toll free (800) 451-8382.
<PAGE> 262
TABLE OF CONTENTS
Page
----
AMSOUTH MUTUAL FUNDS.................................................... 1
INVESTMENT OBJECTIVES AND POLICIES...................................... 1
Additional Information on Portfolio Instruments..................... 1
Investment Restrictions............................................. 13
Additional Investment Restrictions.................................. 14
Portfolio Turnover.................................................. 14
VALUATION............................................................... 15
Valuation of the Money Market Funds................................. 15
Valuation of the Capital Appreciation Funds and the Income Funds.... 16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.......................... 16
Purchase of Shares.................................................. 17
Matters Affecting Redemption........................................ 18
Additional Tax Information.......................................... 18
Additional Tax Information Concerning the Tax Exempt Fund and
Tax-Free Funds.................................................... 20
MANAGEMENT OF THE TRUST................................................. 22
Officers ........................................................... 22
Investment Advisor.................................................. 24
Portfolio Transactions.............................................. 28
Glass-Steagall Act.................................................. 29
Administrator....................................................... 30
Expenses ........................................................... 32
Sub-Administrators.................................................. 33
Distributor......................................................... 33
Custodian........................................................... 34
Transfer Agent and Fund Accounting Services......................... 35
Auditors ........................................................... 35
Legal Counsel....................................................... 36
PERFORMANCE INFORMATION................................................. 36
Yields of the Money Market Funds.................................... 36
Yields of the Capital Appreciation Funds, the Income Funds,
and the Tax-Free Funds..................................... 38
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Calculation of Total Return......................................... 39
Performance Comparisons............................................. 40
ADDITIONAL INFORMATION.................................................. 41
Organization and Description of Shares.............................. 41
Shareholder Liability............................................... 42
FINANCIAL STATEMENTS.................................................... 46
APPENDIX................................................................ 47
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<PAGE> 264
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 "AmSouth 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 Small Cap Fund is
not currently offering Shares. The Funds offer three classes of Shares: Premier
Shares, Classic Shares, and Class B Shares, except for the AmSouth U.S. Treasury
Fund and Tax Exempt Fund which offers two classes of Shares: Premier Shares and
Classic Shares. Currently, Class B Shares are not being offered in the Limited
Maturity Fund, the Government Income Fund, the Florida Fund and the Municipal
Bond Fund. 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 Bank, Birmingham, Alabama ("AmSouth") the
investment advisor
<PAGE> 265
to the Trust ("Advisor") to present minimal credit risks under guidelines
adopted by the Trust's Trustees.
With regard to the Prime Obligations Fund, investments will be limited to
those obligations which, at the time of purchase, (i) possess the highest
short-term ratings from at least two NRSROs; or (ii) do not possess a rating,
(i.e., are unrated) but are determined by the Advisor 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 the Advisor 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 the Advisor 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 the Advisor 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 the Advisor. 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.
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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"), the
Advisor may be required promptly to dispose of an obligation held in a Fund's
portfolio in the event of certain developments that indicate a diminishment of
the instrument's credit quality, such as where an NRSRO downgrades an obligation
below the second highest rating category, or in the event of a default relating
to the financial condition of the issuer.
The Appendix to this Statement of Additional Information identifies each
NRSRO that may be utilized by the Advisor 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 AmSouth 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.
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Variable Amount Master Demand Notes. Variable amount master demand notes,
in which the Prime Obligations Fund, the Capital Appreciation Funds, and the
Income Funds may invest, are unsecured demand notes that permit the indebtedness
thereunder to vary and provide for periodic readjustments in the interest rate
according to the terms of the instrument. They are also referred to as variable
rate demand notes. Because these notes are direct lending arrangements between a
Fund and the issuer, they are not normally traded. Although there may be no
secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time or during specified periods not exceeding one year,
depending upon the instrument involved, and may resell the note at any time to a
third party. 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. The Advisor or Sub-Advisor 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 AmSouth 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
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that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore many securities traded in
these markets may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks. A Fund will acquire
such securities only when the Advisor or Sub-Advisor 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 the Advisor or Sub-Advisor
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 the Advisor or Sub-Advisor
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
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selling securities during unfavorable market conditions to meet redemptions. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Such assets will include U.S. Government
securities or other liquid high quality debt securities in the case of the Money
Market Funds and the Income Funds or other liquid, high-grade debt securities,
in the case of the Capital Appreciation Funds. Reverse repurchase agreements
involve the risk that the market 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 AmSouth 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 the Advisor or
Sub- Advisor 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 the Advisor under guidelines established by the Trust's
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Advisor 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
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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.
For purposes of the Tax-Exempt Fund, the Bond Fund, the Limited Maturity
Fund and the Tax-Free Funds, the maturities of the variable and floating rate
notes will be determined in accordance with Rule 2a-7 under the 1940 Act.
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
will invest at least 80% of its total assets, the Municipal Bond Fund will
invest at least 80% of its net assets, and the Florida Fund may invest up to 20%
of its net assets in Municipal Securities, the interest on which is not treated
as a preference item for purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from both federal income tax and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax.
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.
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As described in the prospectuses of the Tax Exempt Fund and the Tax-Free
Funds, the two principal classifications of Municipal Securities consist of
"general obligation" and "revenue" issues. A Fund permitted to invest in
Municipal Securities may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities. There are, of course, variations
in the quality of Municipal Securities, both within a particular classification
and between classifications, and the yields on Municipal Securities depend upon
a variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of NRSROs represent their opinions as to the quality of
Municipal Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Municipal Securities with the
same maturity, interest rate and rating may have different yields, while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to purchases by the Tax Exempt Fund,
an issue of Municipal Securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Tax Exempt Fund.
Neither event would under all circumstances require the elimination of such an
obligation from the Fund's investment portfolio. However, the obligation
generally would be retained only if such retention was determined by the Board
of Trustees to be in the best interests of the Fund.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
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
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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 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 the Advisor or
Sub-Advisor 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 issued by the Options
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Clearing Corporation and may or may not be listed on a National Securities
Exchange. 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 the Advisor's or Sub-Advisor'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 a Fund will only write a call option on a
security which it already owns.
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
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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, the Advisor or Sub-Advisor, 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 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.
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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 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).
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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
the Advisor's opinion, present minimal credit risks.
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 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;
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5. Purchase or retain securities of any issuer if the officers or Trustees
of the Trust or the officers or directors of its investment advisor 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.
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.
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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 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 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
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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.
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 or
AmSouth or financial institutions that provide certain support services for
their customers or account holders ("Financial Institutions"). Customers
purchasing Shares
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of the Trust may include officers, directors, or employees of AmSouth or
AmSouth's correspondent banks.
Purchase of Shares
As stated in the relevant Prospectuses, the public offering price of
Classic 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.
Classic Shares of the Money Market Funds are sold at their net asset value
per share, as next computed after an order is received. However, as discussed in
the Classic and Class B Shares Prospectus, the Class B Shares are subject to a
Contingent Deferred Sales Charge if they are redeemed prior to the sixth
anniversary of purchase. Class B Shares of the Prime Obligations Fund only are
available to Shareholders of Class B Shares of another Fund who wish to exchange
their Class B Shares of such other Fund for Class B Shares of the Prime
Obligations Fund.
Certain sales of Classic Shares 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
Classic Shares and Class B 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 Classic Shares and Class B Shares
Prospectuses (see "How to Purchase and Redeem Shares"). From time to time, BISYS
may make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
In some instances, promotional incentives to dealers may be offered only to
certain dealers who have sold or may sell significant amounts of Group shares.
Neither BISYS nor dealers are permitted to delay the placement of orders to
benefit themselves by a price change.
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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 any class of 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 or other
disposition 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 total assets is represented
by cash, cash items (including receivables), 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 total assets is invested
in the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar, or related trades or
businesses. The 30% of gross income test described above may restrict a Fund's
ability to sell certain assets held (or considered under Code rules to have been
held) for less than three months and to engage in certain hedging transactions
(including hedging transactions in options and futures) that in some
circumstances could cause certain Fund assets to be treated as held for less
than three months.
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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 the sum of (i) the deduction for dividends paid (defined in
Section 561 of the Code) during such calendar year, and (ii) 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.
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.
However, if for any taxable year the Funds do not qualify for the special
federal tax treatment afforded regulated investment companies, all of their
taxable income will be subject to federal income tax at regular corporate rates
at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders will be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
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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 advisors 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 advisor with
respect to whether exempt- interest dividends would retain the exclusion under
Section 103 of the Code if the Shareholder were treated as a "substantial user"
or a "related person."
The Code permits a regulated investment company which invests at least 50%
of its assets in tax-free Municipal Securities to pass through to its investors,
tax-free, net Municipal Securities interest income. The policy of the Tax Exempt
Fund and the Tax-Free Funds is to pay each year as dividends substantially all
such Fund's Municipal Securities interest income
B-20
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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-Free Funds were not treated as
the owner of the Municipal Securities, income from such securities would
probably not be tax-exempt.
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<PAGE> 285
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
advisors 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>
George R. Landreth Chairman and 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).
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.
</TABLE>
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<PAGE> 286
<TABLE>
<CAPTION>
<S> <C> <C>
John F. Calvano President and 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>
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. Calvano, Line, Landreth, Grimm, Englehart, and
Martinez and Mme. Metz are employees of BISYS Fund Services, Limited
Partnership.
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<PAGE> 287
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 the Advisor 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 the Advisor 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
(except for the Equity Income Fund), the Advisor 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. The Advisor'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.
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<PAGE> 288
In selecting investments for each of the Income Funds and the Balanced
Fund, the Advisor attempts to anticipate interest rates, thereby capitalizing on
cyclical movements in the bond markets. The Advisor 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 the Advisor 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 the Advisor 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 the Advisor 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, the Advisor 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, the Advisor 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, the Advisor 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 the Advisor 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, the Advisor 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 the
Advisor reflect voluntary fee reductions of $962, $165,186, $87,670, $169,405,
$61,522, and $171,316, for the Regional Equity Fund, the
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<PAGE> 289
Bond Fund, the Limited Maturity Fund, the Balanced Fund, the Government Income
Fund, and Florida Fund, respectively.
For the fiscal year ended July 31, 1995, the Advisor 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 the Advisor 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, the
Advisor 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, the Advisor 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 the Advisor 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, the
Advisor received $0 from the Government Income Fund, which reflects a voluntary
reduction in fees of $117,065.
Each of the Advisory Agreements provides that the Advisor 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 the Advisor in the performance of its
duties, or from reckless disregard by the Advisor 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.
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<PAGE> 290
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 the Advisor. 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") ("Sub-Advisor") pursuant to a Sub-
Advisory Agreement dated as of March 12, 1997 between the Advisor and
Sub-Advisor ("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 Advisor, the Trust or the Fund in
connection with the matters to which Agreement relates, except that Sub-Advisor
shall be liable to the Advisor for a loss resulting from a breach of fiduciary
duty by Sub-Advisor under the 1940 Act with respect to
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<PAGE> 291
the receipt of compensation for services or a loss resulting from willful
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 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, the Advisor determines and, with
respect to the Equity Income Fund the Sub-Advisor 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 the Advisor and Sub-Advisor generally
seek competitive spreads or commissions, the Trust may not necessarily pay the
lowest spread or commission available on each transaction, for reasons discussed
below.
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Allocation of transactions, including their frequency, to various dealers
is determined by the Advisor and the Sub-Advisor in their 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 the Advisor or Sub-Advisor 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 the Advisor or Sub-Advisor and does not
reduce the advisory fees payable to the Advisor or the Sub-Advisor. Such
information may be useful to the Advisor or Sub-Advisor 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 the Advisor or
Sub-Advisor 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 the Advisor, BISYS, the
Sub-Advisor, 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 the Advisor or Sub- Advisor. 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 the Advisor or Sub-Advisor 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,
the Advisor or Sub-Advisor 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 and the Sub-Advisory Agreement, in making
investment recommendations for the Trust, the Advisor or Sub-Advisor will not
inquire or take into consideration whether an issuer of securities proposed for
purchase or sale by the Trust is a customer of the Advisor or Sub-Advisor, its
parent or its subsidiaries or affiliates and, in dealing with its customers, the
Advisor or Sub-Advisor, 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.
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During the fiscal year ended July 31, 1996, the Balanced Fund paid aggregate
brokerage commissions in the amount of $489,564.65.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment advisor, 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 in connection with customer
purchases of Shares of the Trust, AmSouth 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
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operations would affect its net asset value per Share or result in financial
losses to any customer.
Administrator
ASO Services Company ("ASC") serves as 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 ASC succeeded BISYS Fund Services LP
("BISYS") as Administrator on April 1, 1996. ASC is a wholly-owned subsidiary of
BISYS which is a wholly-owned subsidiary of 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. The Administrator assists in supervising all operations
of each Fund (other than those performed by the Advisor under the Advisory
Agreements, the Sub-Advisor under the Sub-Advisory Agreement, those performed by
AmSouth 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 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 the Advisor
under the Advisory Agreements, the Sub-Advisor under the Sub-Advisory Agreement,
those by AmSouth 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.
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For the fiscal years ended July 31, 1996, July 31, 1995 and July 31, 1994,
BISYS and ASC 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 ASC 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 ASC 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 ASC 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,
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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.
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 ASC 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 was retained by the Administrator as a 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.
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Distributor
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of March 12, 1997 (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.
A Shareholder Servicing Plan regarding the Classic Shares 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.
The Shareholder Servicing Plan may be terminated with respect to any 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 Fund. The Shareholder Servicing Plan
may be amended by vote of the Trust's Board of Trustees, including a majority of
the Independent Trustees, cast in person at a meeting called for such purpose,
except that any change in the Shareholder Servicing Plan that would materially
increase the shareholder servicing fee with respect to a Fund requires the
approval of the holders of that 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
Fund payable under the Trust's Shareholder Servicing Plan, to which Classic
Shares of each Fund of the Trust are subject, is described in the Classic Shares
Prospectuses. 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
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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.
The Shareholder Servicing and Distribution Plan regarding the Class B
Shares of the Funds (the "Distribution Plan") was initially approved on March
12, 1997 by the Trust's Board of Trustees, including a majority of the trustees
who are not interested persons of the Fund (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the Distribution Plan (the
"Independent Trustees"). The Distribution Plan provides for fees only upon the
Class B Shares of each Fund, as described in the Class B Shares Prospectuses.
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class B
Shares of that Fund. The Distribution Plan may be amended by vote of the Fund's
Board of Trustees, including a majority of the Independent Trustees, cast in
person at a meeting called for such purpose, except that any change in the
Distribution Plan that would materially increase the distribution fee with
respect to a Fund requires the approval of the holders of that Fund's Class B
Shares. The Trust's Board of Trustees will review on a quarterly and annual
basis written reports of the amounts received and expended under the
Distribution Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Distribution Plan) indicating the purposes for which such expenditures
were made.
Custodian
As of April 17, 1997, AmSouth serves as custodian of the Trust pursuant to
a Custodial Services Agreement with the Trust (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments.
Transfer Agent and Fund Accounting Services.
BISYS Fund Services Ohio, Inc. ("BISYS Ohio") serves as transfer agent to
each Fund of the Trust pursuant to a Transfer Agency and Shareholder Service
Agreement with the Trust. BISYS Ohio is a wholly-owned subsidiary of The BISYS
Group, Inc.
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
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subject to an additional fee of $10,000 for each Class. For the fiscal years
ended July 31, 1996, July 31, 1995 and July 31, 1994, BISYS Ohio received
$254,753 and $289,092, respectively, from the Prime Obligations Fund. For the
fiscal years ended July 31, 1996, July 31, 1995 and July 31, 1994, BISYS Ohio
received $147,544 and $179,572, respectively, from the U.S. Treasury Fund. For
the fiscal years ended July 31, 1996, July 31, 1995 and July 31, 1994, BISYS
Ohio received $32,145 and $59,090, respectively, from the Tax Exempt Fund. For
the fiscal years ended July 31, 1996, July 31, 1995, and July 31, 1994, BISYS
Ohio received $145,583, $114,437, and $120,225 respectively, from the Equity
Fund. For the fiscal years ended July 31, 1996, July 31, 1995, and July 31,
1994, BISYS Ohio received $36,049, $30,766, and $79,071, respectively, from the
Regional Equity Fund. For the fiscal years ended July 31, 1996, July 31, 1995,
and July 31, 1994, BISYS 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 incorporated
by reference into this Statement of Additional Information which have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their report incorporated by reference 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.
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PERFORMANCE INFORMATION
General
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with 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
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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 January 31, 1997, the yield and effective
yield of the Premier Class of each Money Market Fund calculated as described
above was as follows:
Effective
Fund Yield Yield
---- ----- -----
Prime Obligations Fund 4.88% 5.00%
U.S. Treasury Fund 4.62% 4.72%
Tax Exempt Fund 3.22% 3.28%
For the seven-day period ending January 31, 1997, the tax equivalent
yield and the tax equivalent effective yield of the Premier Class of the Tax
Exempt Fund were 5.33% and 5.43%, respectively, and the tax equivalent yield and
the tax-equivalent effective yield of the Classic Class of the Tax Exempt Fund
was 5.17% and 5.25%, 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 January 31, 1997, the yield and
effective yield of the Classic Class of each Money Market Fund calculated as
described above was as follows:
Effective
Fund Yield Yield
---- ----- -----
Prime Obligations Fund 4.78% 4.89%
U.S. Treasury Fund 4.52% 5.62%
Tax Exempt Fund 3.12% 3.17%
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
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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 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 January 31, 1997, the Equity Fund had a yield
of 4.53%, the Regional Equity Fund had a yield of 1.03%, the Balanced Fund had a
yield of 3.42%, the Bond Fund had a yield of 5.85%, the Limited Maturity Fund
had a yield of 5.35%, the Government Income Fund had a yield of 6.32% and the
Florida Fund had a yield of 3.97%.
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
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$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.
For the one-year period ended January 31, 1997, annual total return was
4.70%, 4.67% and 3.04% for the Premier Shares and 4.82%, 4.58% and 2.96% for
the Classic Shares of the Prime Obligations Fund, the U.S. Treasury Fund, and
the Tax Exempt Fund, respectively.
For the one-year period ended January 31, 1997, annual total return was
14.32%, 18.96%, 4.53%, 3.29%, 9.73%, 4.95% and 2.71% 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 January 31, 1997, the average annual total
return was 4.04% for the Premier Shares and 4.02% for the Classic Shares of the
Prime Obligations Fund; 2.66% for the Premier Shares and 2.65% for the Classic
Shares of the U.S. Treasury Fund; and 3.88% for the Premier Shares and 3.87%
for the Classic Shares of the Tax Exempt Fund.
For the five-year period ended January 31, 1997, the average annual total
return was 13.65%, 6.46%, 4.94%, 13.50% and 10.33% for the Equity Fund, the Bond
Fund, the Limited Maturity Fund, the Regional Equity Fund, and the Balanced
Fund, respectively.
For the period from December 1, 1988 (commencement of operations of the
Equity Fund, the Regional Equity Fund and the Bond Fund) through January 31,
1997, average annual total return was 13.15%, 15.00% and 8.03% for the Equity
Fund, the Regional Equity Fund and the Bond Fund, respectively. For the period
from February 1, 1989 (commencement of operations) through January 31, 1997, the
average annual total return for the Limited Maturity Fund was 6.74%. For the
period from August 8, 1988 (commencement of operations) through January 31,
1997, average annual total return was 5.45% for the Premier Shares and 5.44% for
the Classic Shares of the Prime Obligations Fund. For the period from September
8, 1988 (commencement of operations) through January 31, 1997, average annual
total return was 5.24% for the Premier Shares and 5.23% for the Classic Shares
of the U.S. Treasury Fund. For the period from June 27, 1990 (commencement of
operations) through January 31, 1997, average annual total return of the Tax
Exempt Fund Premier Shares and Classic Shares was 3.08% and 3.07%, respectively.
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return was 4.41% for the Government Income Fund. For the period from September
30, 1994 (commencement of operations) through January 31,, 1997, average annual
total return was 4.41% for the Florida Fund.
Performance Comparisons
Yield and Total Return. From time to time, performance information for the
Funds showing their average annual total return and/or yield may be included in
advertisements or in information furnished to present or prospective
Shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.
Total return and/or yield may also be used to compare the performance of
the Funds against certain widely acknowledged standards or indices for stock and
bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-weighted
and unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies traded
over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million,
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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
Financial Institutions for cash management services will reduce a Fund's
effective yield to Customers.
ADDITIONAL INFORMATION
Organization and Description of Shares
The Trust was organized as a Massachusetts business trust by the Agreement
and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988 and to "AmSouth Mutual Funds" as of August 19, 1993 by
amendments to the Agreement and Declaration of Trust. A copy of the Trust's
Agreement and Declaration of Trust, as amended (the "Declaration of Trust") is
on file with the Secretary of State of The Commonwealth of Massachusetts. The
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest. The Trust presently
has 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 Balanced
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
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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, (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, and (iv) only the holders of Class B Shares will be entitled to vote on
matters submitted to Shareholder vote with regard to the Distribution Plan.
There will normally be no meetings of Shareholders for the purposes of electing
Trustees unless and until such time as less than a majority of the Trustees have
been elected by the Shareholders, at which time the Trustees then in office will
call a Shareholders' meeting for the election of Trustees. In addition, Trustees
may be removed from office by a written consent signed by the holders of
two-thirds of the outstanding voting Shares of the Trust and filed with the
Trust's custodian or by vote of the holders of two-thirds of the outstanding
voting Shares of the Trust at a meeting duly called for the purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding voting Shares of any Fund. Except as set forth above, the
Trustees shall continue to hold office and may appoint their successors.
Shareholder Liability
Under Massachusetts law, Shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust
disclaims Shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in every agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of a Fund's property for
all loss and expense of any Shareholder of such Fund held liable on account of
being or having been a Shareholder. Thus, the risk of a Shareholder incurring
financial loss on account of Shareholder liability is limited to circumstances
in which a Fund would be unable to meet its obligations.
The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such registration does not involve supervision by
the Securities and Exchange Commission of the management or policies of the
Trust.
As of May 20, 1997, 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 of
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, the Florida Fund, and the Equity Income Fund.
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As of May 20, 1997, AmSouth, 1901 Sixth Avenue-North, Birmingham, Alabama,
was the Shareholder of record of 92.44% of the outstanding voting Shares of the
Premier Shares of the Prime Obligations Fund, 98.20% of the outstanding voting
Shares of the Premier Shares of the U.S. Treasury Fund, 99.36% of the
outstanding voting Shares of the Premier Shares of the Tax Exempt Fund, 91.55%
of the outstanding voting Shares of the Equity Fund, 67.67% of the outstanding
voting Shares of the Regional Equity Fund, 95.88% of the outstanding voting
Shares of the Bond Fund, 90.99% of the outstanding voting Shares of the Limited
Maturity Fund, 87.49% of the outstanding voting Shares of the Balanced Fund,
87.86% of the outstanding voting Shares of the Florida Fund, and 20.60% of the
outstanding voting Shares of the Equity Income Fund. 76.79% of the outstanding
voting Shares of the Premier Class of the Prime Obligations Fund, 11.55% of the
outstanding voting Shares of the Premier Class of the U.S. Treasury Fund, 70.23%
of the outstanding voting Shares of the Premier Class of the Tax Exempt Fund,
61.73% of the outstanding voting Shares of the Equity Fund, 54.68% of the
outstanding voting Shares of the Regional Equity Fund, 71.48% of the outstanding
voting Shares of the Bond Fund, 55.14% of the outstanding voting Shares of the
Limited Maturity Fund, and 81.58% of the outstanding voting Shares of the
Balanced Fund, were also owned beneficially by AmSouth because it possessed or
shared investment or voting power with respect to such Shares. Under the 1940
Act, AmSouth may be deemed to be a controlling person of the Premier Class of
the Prime Obligations Fund, the Premier Class of the Tax Exempt Fund, the Equity
Fund, the Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, and
the Balanced Fund. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of May 20, 1997 National Financial Services Corporation, One World
Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of 94.20% of the outstanding voting Shares of the
Classic Shares of the Prime Obligations Fund, 81% of the outstanding Shares
of the Classic Shares of the Treasury Fund, 91.47% of the outstanding voting
Shares of the Classic Shares of the Tax Exempt Fund, and 18.44% 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 May 20,
1997:
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U.S. Treasury Fund -- Classic Shares
Number of
Name and Address Shares Percentage
- ---------------- --------- ----------
Association of Edison 812,653,270 8.57%
Illumination
600 18th Street North
Birmingham, AL 35291
Shredders Inc. 629,382,570 6.64%
3353 27th Avenue N.
Birmingham, AL 35202
The Prospectuses of the Funds and this Statement of Additional Information
omit certain of the information contained in the Registration Statement filed
with the Securities and Exchange Commission. Copies of such information may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.
The Prospectuses of the Funds and this Statement of Additional Information
are not an offering of the securities herein described in any state in which
such offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses of the Funds and this Statement of Additional
Information.
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FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 21, 1996,
Financial Statements for the AmSouth Mutual Funds for the period ended July 31,
1996, and Financial Statements for the period ended January 31, 1997, are all
incorporated by reference to the Annual and Semi-Annual Reports of the AmSouth
Mutual Funds, dated as of such dates, which have been previously sent to
Shareholders of each Fund pursuant to the 1940 Act and previously filed with the
Securities and Exchange Commission. A copy of each such report may be obtained
without charge by contacting the Distributor, BISYS Fund Services at 3435
Stelzer Road, Columbus, Ohio 43219 or by telephone toll-free at 800-451-8382.
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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.
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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
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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.
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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.
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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.
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Part C of Post-Effective Amendment No. 23
to
Registration Statement
of
AMSOUTH MUTUAL FUNDS
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Included in Part A:
-- Financial Highlights.
Included in Part B:
The following financial statements have been incorporated into the
Statement of Additional Information by reference to AmSouth Mutual
Funds' Annual Report to Shareholders, dated July 31, 1996 and
Semi-Annual Report to Shareholders, dated January 31, 1997:
-- Report of Independent Accountants for AmSouth Mutual Funds dated
September 23, 1996.
-- Statements of Assets and Liabilities at July 31, 1996
(audited).
-- Statements of Assets and Liabilities at January 31, 1997
(unaudited).
-- Statements of Operations for the year ended July 31,
1996 (audited).
-- Statements of Operations for the six months ended
January 31, 1997 (unaudited).
-- Statements of Changes in Net Assets for the year ended
July 31, 1996 (audited).
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-- Statements of Changes in Net Assets for the six months
ended January 31, 1997 (unaudited).
-- Schedules of Portfolio Investments at July 31, 1996
(audited).
-- Schedules of Portfolio Investments at January 31, 1997
(unaudited).
-- Notes to Financial Statements dated July 31, 1996
(audited).
-- Notes to Financial Statements dated January 31, 1997
(unaudited).
-- Financial Highlights for the six months ended January
31, 1997 (unaudited) and for the periods or years ended
July 31, 1992, July 31, 1993, July 31, 1994, July 31,
1995 and July 31, 1996 (audited).
(b) Exhibits:
(1) Amended Declaration of Trust, dated as of June 25, 1993
and filed on August 19, 1993 -- incorporated by
reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-21660).
(2) (a) By-laws -- incorporated by reference to the
Registrant's initial Registration Statement on
Form N-1A (File No. 33-21660).
(b) Amendment No. 1 to By-laws -- incorporated by
reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(3) None.
(4) (a) Article III, Sections 4 and 5; Article IV,
Sections 1 and 6; Article V; Article VIII, Section
4; and Article IX, Sections 1, 4 and 7 of the
Amended Declaration of Trust -- incorporated by
reference to Post-Effective Amendment No. 11 to
the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
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(b) Article 11 of the By-laws -- incorporated by
reference to the Registrant's initial Registration
Statement on Form N-1A (File No. 33-21660).
(c) Amendment No. 1 to By-laws -- incorporated by
reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(5) (a) Investment Advisory Agreement dated as of
August 1, 1988 between the Registrant and AmSouth
Bank N.A. -- incorporated by reference to
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(b) Amendment No. 1 dated as of December 5, 1989 to
Investment Advisory Agreement dated as of August
1, 1988 between the Registrant and AmSouth Bank
N.A.--incorporated by reference to Post-Effective
Amendment No. 4 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(c) Amended Schedule A to the Investment Advisory
Agreement between the Registrant and AmSouth Bank,
N.A. is filed herewith.
(d) Investment Advisory Agreement between the Group
and AmSouth Bank N.A. dated as of January 20, 1989
with respect to The ASO Outlook Group Limited
Maturity Fund -- incorporated by reference to
Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(e) Amendment No. 1 dated as of December 5, 1989 to
the Investment Advisory Agreement dated as of
January 20, 1989 between the Registrant and
AmSouth Bank, N.A. --incorporated by reference to
Post-Effective Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(f) Investment Sub-Advisory Agreement dated as of
March 12, 1997 between AmSouth Bank and Rockhaven
Asset Management is filed herewith.
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(6) (a) Distribution Agreement dated as of March 12,
1997 between the Registrant and BISYS Fund
Services, LP is filed herewith.
(b) Form of Distribution Agreement between the
Registrant and BISYS Fund Services, LP is filed
herewith.
(c) Dealer Agreement between The Winsbury Company and
AmSouth Investment Services, Inc. -- incorporated
by reference to Post-Effective Amendment No. 5 to
the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(d) Dealer Agreement between The Winsbury Company and
National Financial Services Corporation --
incorporated by reference to Post-Effective
Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(e) Dealer Agreement between The Winsbury Company and
AmSouth Bank N.A. -- incorporated by reference to
Post- Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(7) None.
(8) (a) Custodian Agreement dated as of April 17,
1997 between the Registrant and AmSouth Bank
is filed herewith.
(9) (a) Management and Administration Agreement dated
as of April 1, 1996 between the Registrant and ASO
Services Company -- incorporated by reference to
Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(b) Amended Schedule A to the Management and
Administration Agreement between the Registrant
and ASO Services Company is filed herewith.
(c) Sub-Administration Agreement between ASO Services
Company and AmSouth Bank -- incorporated by
reference to
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Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(d) Amended Schedules A and B to the
Sub-Administration Agreement between ASO Services
Company and AmSouth Bank are filed herewith.
(e) Sub-Administration Agreement between ASO Services
Company and BISYS Fund Services, LP --
incorporated by reference to Post-Effective
Amendment No. 19 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(f) Amended Schedules A and B to the
Sub-Administration Agreement between ASO Services
Company and BISYS Fund Services, LP are filed
herewith.
(g) Transfer Agency and Shareholder Service Agreement
dated as of January 16, 1989 between the
Registrant and BISYS Fund Services Ohio, Inc.
(formerly, The Winsbury Service Corporation) --
incorporated by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(h) Amended Schedule D dated as of April 5, 1993 to
the Transfer Agency and Shareholder Services
Agreement between the Registrant and BISYS Fund
Services Ohio, Inc. (formerly, The Winsbury
Service Corporation) --incorporated by reference
to Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
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(i) Amended Schedule A to the Transfer Agency and
Shareholder Services Agreement between
Registrant and BISYS Fund Services Ohio, Inc.
(formerly, The Winsbury Service Corporation) is
filed herewith.
(j) Fund Accounting Agreement dated as of April 1,
1996 between the Registrant and BISYS Fund
Services --incorporated by reference to
Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(k) Amended Schedule A to the Fund Accounting
Agreement between the Registrant and BISYS Fund
Services is filed herewith.
(10) Opinion of Ropes & Gray is filed herewith.
(11) (a) Consent of Coopers & Lybrand L.L.P. is filed
herewith.
(b) Consent of Ropes & Gray is filed herewith.
(12) None.
(13) (a) Purchase Agreement between the Registrant and
Winsbury Associates incorporated by reference to
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(b) Purchase Agreement between the Registrant and
Winsbury Associates dated October 31, 1991
incorporated by reference to Post-Effective
Amendment No. 7 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(c) Purchase Agreement between the Registrant and
Winsbury Associates relating to the Alabama
Tax-Free Fund and the Government Income Fund is
incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(d) Purchase Agreement between the Registrant and
Winsbury Service Corporation relating to the
Florida Tax-Free Fund is
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incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(14) None.
(15) None.
(16) (a) Performance Calculation Schedules are
incorporated by reference to Post-Effective
Amendment No. 16 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(b) Performance Calculation Schedules for the
Municipal Bond Fund and Equity Income Fund are
filed herewith.
(17) (a) Financial Data Schedule for the AmSouth Prime
Obligations Fund - Premier Shares
(b) Financial Data Schedule for the AmSouth U.S.
Treasury Fund - Premier Shares
(c) Financial Data Schedule for the AmSouth Tax Exempt
Fund - Premier Shares
(d) Financial Data Schedule for the AmSouth Prime
Obligations Fund -- Classic Shares
(e) Financial Data Schedule for the AmSouth U.S.
Treasury Fund -- Classic Shares
(f) Financial Data Schedule for the AmSouth Tax-Exempt
Fund -- Classic Shares
(g) Financial Data Schedule for the AmSouth Equity
Fund
(h) Financial Data Schedule for the AmSouth Regional
Equity Fund
(i) Financial Data Schedule for the AmSouth Balanced
Fund
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(j) Financial Data Schedule for the AmSouth Bond Fund
(k) Financial Data Schedule for the AmSouth Limited
Maturity Fund
(l) Financial Data Schedule for the AmSouth Government
Income Fund
(m) Financial Data Schedule for the AmSouth Florida
Tax-Free Fund
(18) (a) Multiple Class Plan for AmSouth Mutual Funds
adopted by the Board of Trustees on December 6,
1995, as amended and restated March 12, 1997, is
filed herewith.
(b) Form of Multiple Class Plan for AmSouth Mutual
Funds is filed herewith.
(c) Shareholder Servicing Plan for AmSouth Mutual
Funds adopted by the Board of Trustees on December
6, 1995 is incorporated by reference to Exhibit
18(b) to Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(d) Amended Schedule I to the Shareholder Servicing
Plan is filed herewith.
(e) Model Shareholder Servicing Agreement for AmSouth
Mutual Funds adopted by the Board of Trustees on
December 6, 1995 is incorporated by reference to
Exhibit 18(c) to Post-Effective Amendment No. 18
to the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
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(f) Distribution and Shareholder Services Plan between
the Registrant and BISYS Fund Services, LP, dated
as of March 12, 1997, is filed herewith.
18 (g) Form of Schedule A to the Distribution and
Shareholder Services Plan between the Registrant
and BISYS Fund Services, LP, dated as of March 12,
1997, is filed herewith.
- ----------
Item 25. Persons Controlled By or Under Common Control with Registrant
As of the effective date of this Registration Statement, there
are no persons controlled by or under common control with the
Registrant's Prime Obligations Fund, Equity Fund, Regional Equity
Fund, U.S. Treasury Fund, Tax Exempt Fund, Bond Fund, Limited
Maturity Fund, Municipal Bond Fund, Government Income Fund,
Florida Tax-Free Fund, Balanced Fund, and Equity Income Fund.
Item 26. Number of Holders of Securities
As of May 31, 1997, the number of record holders of the
Registrant's respective series of shares were as follows:
Number of
Title of Series Record Holders
--------------- --------------
Prime Obligations Fund -- Premier Shares 9
U.S. Treasury Fund -- Premier Shares 8
Tax Exempt Fund -- Premier Shares 4
Prime Obligations Fund -- Classic Shares 22
U.S. Treasury Fund -- Classic Shares 12
Tax-Exempt Fund -- Classic Shares 16
Equity Fund 3,027
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Regional Equity Fund 3,413
Equity Income Fund 511
Bond Fund 340
Limited Maturity Fund 135
Municipal Bond Fund 0
Balanced Fund 2,686
Government Income Fund 438
Florida Tax-Free Fund 54
Item 27. Indemnification
Article VIII, Sections 1 and 2 of the Registrant's Declaration of
Trust provides as follows:
"Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all
liabilities and expenses, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered
Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or
with which such Covered Person may be or may have been threatened,
while in office or thereafter, by reason of being or having been
such a Covered Person except with respect to any matter as to which
such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel
fees so incurred by any such Covered Person (but
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excluding amounts paid in satisfaction of judgments, in compromise
or as fines or penalties), shall be paid from time to time by the
Trust in advance of the final disposition of any such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article, provided, however, that either (a)
such Covered Person shall have provided appropriate security for
such undertaking, (b) the Trust shall be insured against losses
arising from any such advance payments or (c) either a majority of
the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the
proceeding was brought, that such Covered Person either (a) did not
act in good faith in the reasonable belief that his action was in
the best interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, indemnification shall be provided if
(a) approved as in the best interests of the Trust, after notice
that it involves such indemnification, by at least a majority of the
disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry) that such
Covered Person acted in good faith in the reasonable belief that his
action was in the best interests of the Trust and is not liable to
the Trust or its Shareholders by reasons of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his or her office, or (b) there has been obtained
an opinion in writing of independent legal counsel, based upon a
review of readily available facts (as opposed to a full trial type
inquiry) to the effect that such Covered Person appears to have
acted in good faith in the reasonable belief that his action was in
the best interests of the Trust and that such indemnification would
not protect such Person against any liability to the Trust to which
he would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office. Any approval pursuant to this Section
shall not prevent the recovery from any Covered Person of any amount
paid to
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such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer,
or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Indemnification for the Group's principal underwriter is provided
for in the Distribution Agreement incorporated herein by reference
as Exhibits 6(a).
In addition, the Trust maintains a directors and officer liability
insurance policy with a maximum coverage of $3,000,000.
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Item 28. Business and Other Connections of Investment Advisor and Investment
Sub-Advisor.
AmSouth Bank ("AmSouth") is the investment advisor of each Fund of
the Trust. AmSouth is the 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.
There is set forth below information as to any other business,
vocation or employment of a substantial nature (other than service
in wholly-owned subsidiaries or the parent corporation of AmSouth
Bank) in which each director or senior officer of the Registrant's
investment advisor is, or at any time during the past two fiscal
years has been, engaged for his own account or in the capacity of
director, officer, employee, partner or trustee.
Name and Position with Other business, profession,
AmSouth Bank AmSouth Bank vocation, or employment
- ------------ ------------------------------------
George W. Barber, Jr. Chairman of the Board, Barber Dairies, Inc.,
Director 39 Barber Ct., Birmingham, Alabama
William D. Biggs Real Estate Investments
Director
William J. Cabaniss, Jr. President, Precision Grinding Inc.,
Director P.O. Box 19925, Birmingham, Alabama
M. Miller Gorrie President and Chief Executive Officer,
Director Brasfield and Gorrie General Contractor
Inc., 729 30th Street South, Birmingham,
Alabama
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James I. Harrison, Jr. President and Chief Executive Officer,
Director Harco, Inc., 3925 Rice Mine Road,
Tuscaloosa, Alabama
Mrs. H. Taylor Morrisette HTM Investment & Development, Inc., 3 Taylor
Director Place, Mobile, Alabama
C. Dowd Ritter None
Director, Chairman, President and
Chief Executive Officer
Michael C. Baker None
Senior Executive Vice President
David B. Edmonds None
Executive Vice President
James W. Emison None
Executive Vice President
Sloan D. Gibson, IV None
Senior Executive Vice President
O.B. Grayson Hall, Jr. None
Executive Vice President
Kristen M. Hudak None
Senior Executive Vice President
and Chief Financial Officer
John D. Kottmeyer None
Executive Vice President
and Treasurer
W. Charles Mayer, III None
Director and Senior Executive Vice
President
Candice W. Rogers None
Senior Executive Vice President
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Robert R. Windelspecht None
Executive Vice President
and Controller
Stephen A. Yoder None
Executive Vice President
and General Counsel
Rockhaven Asset Management, LLC ("Rockhaven") is the sub-advisor of the
AmSouth Equity Income Fund. Rockhaven is jointly owned by Christopher H. Wiles
(50%) and AmSouth Bank (50%), and is headquartered in Pittsburgh, Pennsylvania.
As of May, 1997, the AmSouth Equity Income Fund is by far the predominate client
of Rockhaven. In the future, Rockhaven intends to advise on other mutual funds
and separate accounts.
There is set forth below information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's sub-advisor is, or at any time during the
past two fiscal years has been, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
Name and Position with Other business, profession,
Rockhaven Asset Management vocation, or employment
- -------------------------- -----------------------
Christopher H. Wiles. Prior to February 7, 1997, Senior Vice
President and Chief President, Federated Investors, Pittsburgh,
Investment Officer PA
Item 29. Principal Underwriter.
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund Services") acts
as distributor for the Registrant. BISYS Fund Services also distributes
the securities of HighMark Funds, The Parkstone Group of Funds, The
Victory Portfolios, The Sessions Group, the American Performance Funds,
The Arch Fund, Inc., the BB&T Mutual Funds Group, the Marketwatch Funds,
The Coventry Group, The Pacific Capital Funds, the MMA Praxis Mutual
Funds, The Riverfront Funds, Inc., the
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Qualivest Funds and the Summit Investment Trust, the Barr Rosenberg Funds,
the BNY Hamilton Funds, the Century Funds, the Emerald Funds, the Empire
Builder, ESC Strategic Funds, Evergreen Funds. First Choice Funds, Five
Arrows Funds, Fountain Square Funds, Gabelli Funds, the HSBC Funds, Hirtle
Callaghan, IBS Funds, Infinity Funds, Intrust Funds, Kent Funds, Key
Mutual Funds Lifecycle Funds, Magna Funds, Meyers Sheppard Funds, the
Minerva Funds, The One Group, the Pacific Horizon Funds, The Performance
Funds, the Pegasus Funds, the Republic Funds, the Sessions Funds, the
Sefton Funds, the Summit Group, the Treasurers Funds, the Vista Funds, and
the Westwood Fund, each of which is a management investment company. The
parent of BISYS Fund Services is The BISYS Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this filing are as
follows:
Positions and Offices with Positions and
Name and Principal BISYS Fund Services, Offices with
Business Addresses Limited Partnership The Registrant
- ------------------ ------------------- --------------
BISYS Fund Services, Sole General None
Limited Partnership Partner
3435 Stelzer Road
Columbus, OH 43219
WC Subsidiary Sole Limited None
Corporation Partner
150 Clove Road
Little Falls, NJ 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, NJ 07424
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder
are as follows:
(1) AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Attention: Secretary
(Registrant)
(2) AmSouth Bank
1901 Sixth Avenue - North
Birmingham, Alabama 35203
Attention: Trust Investments
(Investment Advisor and Custodian)
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(3) BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
(Distributor)
(4) ASO Services Company
3435 Stelzer Road
Columbus, Ohio 43219
(Administrator)
(5) Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, Pennsylvania 15222
(Sub-Advisor to the Equity Income Fund)
(6) BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
(Transfer and Shareholder Servicing Agent, Provider of Fund
Accounting Services)
Item 31. Management Services
None.
Item 32. Undertakings
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of
removal of one or more trustees when requested to do so by the
holders of at least 10% of the outstanding voting shares of any
series of the Trust and will assist in shareholder communication
in connection with calling a meeting for the purpose of removing
one or more trustees.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it has duly
caused this Amendment No. 23 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Washington,
District of Columbia on the 3rd day of July, 1997.
AMSOUTH MUTUAL FUNDS,
Registrant
*/s/ George R. Landreth
-----------------------
George R. Landreth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
23 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the 3rd day of July,
1997.
Signature Title Date
- --------- ----- ----
*/s/ J. David Huber Trustee July 3, 1997
----------------------------
J. David Huber
*/s/ George R. Landreth Vice President July 3, 1997
----------------------------
George R. Landreth
*/s/ Thomas E. Line Treasurer July 3, 1997
----------------------------
Thomas E. Line
*/s/ James H. Woodward, Jr. Trustee July 3, 1997
----------------------------
James H. Woodward, Jr.
*/s/ Homer H. Turner, Jr. Trustee July 3, 1997
----------------------------
Homer H. Turner, Jr.
*/s/ Wendell D. Cleaver Trustee July 3, 1997
----------------------------
Wendell D. Cleaver
*/s/ Dick D. Briggs, Jr. Trustee July 3, 1997
----------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest July 3, 1997
------------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
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<PAGE> 333
POWER OF ATTORNEY
Dick D. Briggs, Jr. whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Dick D. Briggs, Jr. and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 12 October 1993 /s/ Dick D. Briggs, Jr.
-----------------------
Dick D. Briggs, Jr.
<PAGE> 334
POWER OF ATTORNEY
Wendell D. Cleaver whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Wendell D. Cleaver and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: October 7, 1993 /s/ Wendell Cleaver
-----------------------
Wendell D. Cleaver
<PAGE> 335
POWER OF ATTORNEY
J. David Huber whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee J. David Huber and/or officer of the Trust any and all
such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ J. David Huber
-----------------------
J. David Huber
<PAGE> 336
POWER OF ATTORNEY
George R. Landreth whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Maryellen M. Lundquist,
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee George R. Landreth and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 6/10/97 /s/ George R. Landreth
-----------------------
George R. Landreth
<PAGE> 337
POWER OF ATTORNEY
James H. Woodward, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee James H. Woodward, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ James H. Woodward, Jr.
---------------------------
James H. Woodward, Jr.
<PAGE> 338
POWER OF ATTORNEY
Homer H. Turner, Jr. whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Homer H. Turner, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 25, 1992 /s/ Homer H. Turner, Jr.
-------------------------
Homer H. Turner, Jr.
<PAGE> 339
POWER OF ATTORNEY
Thomas E. Line whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Francoise M. Haan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
Dated: 3/25/97 /s/ Thomas E. Line
-------------------------
Thomas E. Line
<PAGE> 340
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
5(c) Amended Schedule A to the Investment Advisory Agreement
5(f) Investment Sub-Advisory Agreement
6(a) Distribution Agreement
6(b) Form of Distribution Agreement
8(a) Custodian Agreement
9(b) Amended Schedule A to the Management and Administration Agreement
9(d) Amended Schedules A and B to the Sub-Administration Agreement
9(f) Amended Schedules A and B to the Sub-Administration Agreement
9(i) Amended Schedule A to the Transfer Agency and Shareholder Services
Agreement
9(k) Amended Schedule A to the Fund Accounting Agreement
(10) Opinion of Ropes & Gray
11(a) Consent of Coopers & Lybrand L.L.P.
11(b) Consent of Ropes & Gray
16(b) Performance Calculation Schedules for the Municipal Bond Fund and
Equity Income Fund
18(a) Multiple Class Plan for AmSouth Mutual Funds
18(b) Form of Multiple Class Plan for AmSouth Mutual Funds
18(d) Amended Schedule I to the Shareholder Servicing Plan
18(f) Distribution and Shareholder Services Plan
-1-
<PAGE> 341
Exhibit No. Description Page
- ----------- ----------- ----
18(g) Form of Schedule A to the Distribution and Shareholder Services Plan
27(a) Financial Data Schedule for the AmSouth Prime Obligations Fund --
Premier Shares
27(b) Financial Data Schedule for the AmSouth U.S. Treasury Fund --Premier
Shares
27(c) Financial Data Schedule for the AmSouth Tax Exempt Fund --Premier
Shares
27(d) Financial Data Schedule for the AmSouth Prime Obligations Fund --
Classic Shares
27(e) Financial Data Schedule for the AmSouth U.S. Treasury Fund -- Classic
Shares
27(f) Financial Data Schedule for the AmSouth Tax-Exempt Fund -- Classic
Shares
27(g) Financial Data Schedule for the AmSouth Equity Fund
27(h) Financial Data Schedule for the AmSouth Regional Equity Fund
27(i) Financial Data Schedule for the AmSouth Balanced Fund
27(j) Financial Data Schedule for the AmSouth Bond Fund
27(k) Financial Data Schedule for the AmSouth Limited Maturity Fund
27(l) Financial Data Schedule for the AmSouth Government Income Fund
27(m) Financial Data Schedule for the AmSouth Florida Tax-Free Fund
-2-
<PAGE> 1
EXHIBIT 5(c)
Amended Schedule A to the Investment Advisory Agreement
<PAGE> 2
SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
DATED AS OF AUGUST 1, 1988 BETWEEN
THE ASO OUTLOOK GROUP
AND
AMSOUTH BANK, N.A.
AS OF MARCH 12, 1997
Name of Fund
- ----------------------
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent
Prime Obligations Fund (.40%) of AmSouth Mutual Funds Prime Obligations
Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent
Equity Fund (.80%) of AmSouth Mutual Funds Equity Fund's average
daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent
Regional Equity Fund (.80%) of AmSouth Mutual Funds Regional Equity
Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent
U.S. Treasury Fund (.40%) of AmSouth Mutual Funds U.S. Treasury Fund's
average daily net assets.
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent
Tax Exempt Fund (.40%) of AmSouth Mutual Funds Tax Exempt Fund's
average daily net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one
Bond Fund percent (.65%) of AmSouth Mutual Funds Bond Fund's
average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent
Balanced Fund (.80%) of AmSouth Mutual Funds Balanced Fund's
average daily net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one
Municipal Bond Fund percent (.65%) of AmSouth Mutual Funds Municipal Bond
Fund's average daily net assets.
A-1
<PAGE> 3
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one
Government Income Fund percent (.65%) of AmSouth Mutual Funds Government
Income Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one
Florida Tax-Free Fund percent (.65%) of AmSouth Mutual Funds Florida
Tax-Free Fund's average daily net assets.
AmSouth Mutual Funds Annual Basic Rate of eighty one-hundredths of one
Capital Growth Fund percent (.80%) of AmSouth Mutual Funds Capital
Growth Fund's average daily net assets.
AmSouth Mutual Funds Annual Basic Rate of eighty one-hundredths of one
Small Cap Fund percent (.80%) of AmSouth Mutual Funds Small Cap
Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent
Equity Income Fund (.80%) of AmSouth Mutual Funds Equity Income Fund's
average daily net assets.
AMSOUTH BANK OF ALABAMA AMSOUTH MUTUAL FUNDS
By: /s/ Michael Baker By: /s/ John Calvano
---------------------------- ----------------------------
Name: Michael Baker Name: John Calvano
Title: Title: Secretary
--------------------------
A-2
<PAGE> 1
EXHIBIT 5(f)
Investment Sub-Advisory Agreement
<PAGE> 2
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of March 12, 1997, between AmSouth Bank of Alabama, an
Alabama banking association with its principal place of business in Alabama
(herein called the "Investment Adviser") and Rockhaven Asset Management, LLC, a
Delaware limited liability corporation with its principal place of business in
Pennsylvania (herein called the "Sub-Adviser").
WHEREAS, the Investment Adviser is the investment adviser to AmSouth
Mutual Funds, a Massachusetts business trust (herein called the "Trust"), an
open-end management investment company registered under the Investment Company
Act of 1940, as amended ("40 Act"); and
WHEREAS, the Investment Adviser wishes to retain the Sub-Adviser to assist
the Investment Adviser in providing investment advisory services in connection
with such portfolios of the Trust as now or hereafter may be identified on
Schedule A hereto as such Schedule may be amended from time to time with the
consent of the parties hereto (each herein called a "Fund").
WHEREAS, the Sub-Adviser is willing to provide such services to the
Investment Adviser upon the terms and conditions and for the compensation set
forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser its
sub-adviser with respect to the Fund as provided for in the Investment Advisory
Agreement between the Investment Adviser and the Trust dated as of August 1,
1988 (such Agreement or the most recent successor advisory agreement between
such parties is herein called the "Advisory Agreement"). The Sub-Adviser accepts
such appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Investment Adviser shall provide to the
Sub-Adviser copies of the Trust's most recent prospectus and statement of
additional information (including supplement thereto) which relate to any class
of shares representing interests in the Fund (each such prospectus and statement
of additional information as presently in effect, and as they shall from time to
time be amended and supplemented, is herein respectively called a "Prospectus"
and a "Statement of Additional Information").
3. Sub-Advisory Services to the Funds.
(a) Subject to the supervision of the Investment Adviser, the
Sub-Adviser will supervise the day-to-day operations of the Fund and perform the
following services: (i) provide investment research and credit analysis
concerning the Fund's investments; (ii) conduct a continual
<PAGE> 3
program of investment of the Fund's assets; (iii) place orders for all purchases
and sales of the investments made for the Fund; (iv) maintain the books and
records required in connection with its duties hereunder; and (v) keep the
Investment Adviser informed of developments materially affecting the Fund.
(b) The Sub-Adviser will use the same skill and care in providing
such services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities; provided that, notwithstanding this
Paragraph 3(b), the liability of the Sub-Adviser for actions taken and
non-actions with respect to the performance of services under this Agreement
shall be subject to the limitations set forth in Paragraph 11(a) of this
Agreement.
(c) The Sub-Adviser will communicate to the Investment Adviser and
to the Trust's custodian and Fund accountants as instructed by the Investment
Adviser on each day that a purchase or sale of a security is effected for the
Fund (i) the name of the issuer, (ii) the amount of the purchase or sale, (iii)
the name of the broker or dealer, if any, through which the purchase or sale
will be affected, (iv) the CUSIP number of the security, if any, and (v) such
other information as the Investment Adviser may reasonably require for purposes
of fulfilling its obligations to the Trust under the Advisory Agreement.
(d) The Sub-Adviser will provide the services rendered by it
hereunder in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus and Statement of Additional
Information.
(e) The Sub-Adviser will maintain records of the information set
forth in Paragraph 3(c) hereof with respect to the securities transactions of
the Fund and will furnish the Trust's Board of Trustees with such periodic and
special reports as the Board may reasonably request.
(f) The Sub-Adviser will promptly review all (1) reports of current
security holdings in the Fund, (2) summary reports of transactions and pending
maturities (including the principal, cost and accrued interest on each portfolio
security in maturity date order) and (3) current cash position reports
(including cash available from portfolio sales and maturities and sales of the
Fund's shares less cash needed for redemptions and settlement of portfolio
purchases), all within a reasonable time after receipt thereof from the Trust
and will report any errors or discrepancies in such reports to the Trust or its
designee within three (3) business days after discovery of such discrepancies.
4. Brokerage. The Sub-Adviser may place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer. In placing orders, the Sub-Adviser will consider the experience and
skill of the firm's securities traders, as well as the firm's financial
responsibility and administrative efficiency. The Sub-Adviser will attempt to
obtain the best price and the most favorable execution of its orders. Consistent
with these obligations, the Sub-Adviser may, subject to the approval of the
Board of
-2-
<PAGE> 4
Trustees of the Trust, select brokers on the basis of the research, statistical
and pricing services they provide to the Fund. A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Sub-Adviser determines in good
faith that such transaction is reasonable in terms either of the transaction or
the overall responsibility of the Sub-Adviser to the Fund and its other clients
and that the total commissions paid by the Fund will be reasonable in relation
to the benefits in the Fund over the long term. In no instance will portfolio
securities be purchased from or sold to the Trust's principal distributor, the
Investment Adviser or any affiliate thereof (as the term "affiliate" is defined
in the 40 Act), except to the extent permitted by SEC exemptive order or by
applicable law.
5. Compliance with Laws: Confidentiality: Conflicts of Interest.
(a) The Sub-Adviser agrees that it will comply with all applicable
laws, rules and regulations of all federal and state regulatory agencies having
jurisdiction over the Sub-Adviser in performance of its duties hereunder
(herein called the "Rules").
(b) The Sub-Adviser will treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
(c) The Sub-Adviser will maintain a policy and practice of
conducting sub-advisory services hereunder independently of the banking
operations of its affiliates. In making investment recommendations for the Fund,
the Sub-Adviser's personnel will not inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Fund's account
are bank customers of the Sub-Adviser's affiliates unless so required by
applicable law. In dealing with their bank customers, affiliates of Sub-Adviser
will not inquire or take into consideration whether securities of those
customers are held by the Fund.
6. Control by Trust's Board of Trustees. Any recommendations concerning
the Fund's investment program proposed by the Sub-Adviser to the Fund and the
Investment Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto shall at
all times be subject to any applicable directives of the Board of Trustees of
the Trust.
7. Services Not Exclusive. The Sub-Adviser's services hereunder are not
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
dissimilar services to others so long as its services under this Agreement are
not impaired thereby.
-3-
<PAGE> 5
8. Books and Records. In compliance with the requirements of Rule 31a-3 of
the Rules, and any other applicable Rule, the Sub-Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 and any other applicable Rule, the records required to
be maintained by the Sub-Adviser hereunder pursuant to Rule 31a-1 and any other
applicable Rule.
9. Expenses. During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in connection with the performance of its services
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund. Notwithstanding the foregoing, the
Sub-Adviser shall not bear expenses related to the operation of the Trust or any
Fund including, but not limited to, taxes, interest, brokerage fees and
commissions and any extraordinary expense items.
10. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month equal to the
lesser of (i) the fee at the applicable annual rates set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Investment Adviser and the Sub-Adviser. If the fee payable to the
Sub-Adviser pursuant to this paragraph begins to accrue after the beginning of
any month or if this Agreement terminates before the end of any month, the fee
for the period from such date to the end of such month or from the beginning of
such month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating fees, the
value of a Fund's net assets shall be computed in the manner specified in the
Prospectus and the Trust's Declaration of Trust for the computation of the value
of the Fund's net assets in connection with the determination of the net asset
value of the Fund's shares. Payment of said compensation shall be the sole
responsibility of the Investment Adviser and shall in no way be an obligation of
the Fund or of the Trust.
11. Limitation of Liability.
(a) The Sub-Adviser 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-Adviser shall be liable to the Investment Adviser for a loss resulting
from a breach of fiduciary duty by Sub-Adviser under the 40 Act 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 Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations or
duties under this Agreement. In no case shall the Sub-Adviser be liable for
actions taken or non-actions with respect to the performance of services under
this Agreement based upon specific information, instructions or requests given
or made to the Sub-Adviser by the Investment Adviser.
-4-
<PAGE> 6
(b) The Investment Adviser shall be responsible at all times for
supervising the Sub-Adviser, and this Agreement does not in any way limit the
duties and responsibilities that the Investment Adviser has agreed to under the
Advisory Agreement.
12. Duration and Termination. This Agreement shall become effective as of
the date hereof provided that it shall have been approved by vote of a majority
of the outstanding voting securities of the Fund and, unless sooner terminated
as provided herein, shall continue with respect to the Fund until January 31,
1998. Thereafter, if not terminated, this Agreement shall continue in effect for
successive 12-month periods ending on January 31st of each year, provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Trustees of the Trust who are not
parties to this Agreement or interested persons of the Trust or any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; provided, however, that this
Agreement may be terminated with respect to the Fund (i) by the Trust at any
time without the payment of any penalty by the Board of Trustees of the Trust,
(ii) by vote of a majority of the outstanding voting securities of the Fund,
(iii) by the Investment Adviser on 60 days written notice to the Sub-Adviser or
(iv) by the Sub-Adviser on 60 days written notice to the Investment Adviser.
This Agreement will also immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities", "interested person" and "assignment" shall have the same meaning as
such terms have in the 40 Act.)
13. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be effected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties herein and their respective successors and shall be governed by
Massachusetts law.
The names "AmSouth Mutual Funds" and Trustees of AmSouth Mutual Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Amended Agreement
and Declaration of Trust dated as of June 25, 1993 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
The Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"AmSouth Mutual Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of shares of the Trust must look
-5-
<PAGE> 7
solely to the assets of the Trust belonging to such series for the enforcement
of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
(SEAL) AmSouth Bank of Alabama
By: /s/ Michael Baker
--------------------------
Title:
-----------------------
(SEAL) Rockhaven Asset Management, LLC
By: /s/ Chris Wiles
--------------------------
Title:
-6-
<PAGE> 8
SCHEDULE A
TO SUB-ADVISORY AGREEMENT DATED AS OF MARCH 12, 1997 BETWEEN AMSOUTH BANK OF
ALABAMA AND ROCKHAVEN ASSET MANAGEMENT, LLC.
NAME OF FUND COMPENSATION
AmSouth Equity Income Fund Annual rate of
forty-eight one-hundredths of one
percent (.48%) of the AmSouth Equity
Income Fund's average daily net
assets
Consented to by:
Date ---------------- AmSouth Bank of Alabama
By: /s/ Michael Baker
--------------------------
Date: 3/12/97 Rockhaven Asset Management, LLC
By: /s/ Chris Wiles
--------------------------
A-1
<PAGE> 1
EXHIBIT 6(a)
Distribution Agreement
<PAGE> 2
DISTRIBUTION AGREEMENT
As of March 12, 1997
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, AmSouth Mutual Funds (the "Trust"), a Massachusetts
business trust, has agreed that BISYS Fund Services Limited Partnership d/b/a
BISYS Fund Services (the "Distributor") shall be, for the period of this
Agreement, the distributor of the units of beneficial interest of the investment
portfolios of the Trust identified on Schedule A hereto (the "Funds"). Such
units of beneficial interest are hereinafter called "Shares."
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933 as amended.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor may, in the future, be the distributor of the shares of several
investment companies or series (together, "Companies") including Companies
having investment objectives similar to those of the Trust. The Trust further
understands that investors and potential investors in the Trust may invest in
shares of such other Companies. The Trust agrees that Distributor's duties to
such Companies shall not be deemed in conflict with its duties to the Trust
under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate activities
which it deems reasonable which are primarily intended to result in the sale of
the Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 All activities by Distributor and its partners, agents, and employees
as distributor of the Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940 (the "1940 Act") by the
Securities and Exchange Commission or any securities association registered
under the Securities Exchange Act of 1934.
<PAGE> 3
1.4 Distributor will provide one or more persons, during normal business
hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of the
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it chooses
to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Fund's books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration statements
and prospectuses filed by the Trust with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, with respect to the Shares have
been carefully prepared in conformity with the requirements of said Act and
rules and regulations of the Securities and Exchange Commission thereunder. As
used in this agreement the terms "registration statement" and "prospectus" shall
mean any registration statement and any prospectus and Statement of Additional
Information relating to the Funds filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with the same Commission. The Trust represents and warrants to
Distributor that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein in conformity with said Act and the rules and regulations
of said Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or
- 2 -
<PAGE> 4
necessary to make the statements therein not misleading to a purchaser of the
Shares. The Trust may but shall not be obligated to propose from time to time
such amendment or amendments to any registration statement and such supplement
or supplements to any prospectus as, in the light of future developments, may,
in the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its several partners
and employees, and any person who controls Distributor within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act of 1933, as amended, or under common law or otherwise, arising out of or
based upon any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any prospectus or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in either any registration statement or any prospectus or necessary
to make the statements in either thereof not misleading; provided, however, that
the Trust's agreement to indemnify Distributor, its partners or employees, and
any such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations as are
contained in any prospectus and in such financial and other statements as are
furnished in writing to the Trust by Distributor and used in the answers to the
registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission or alleged omission to
state a material fact in connection with the giving of such information required
to be stated in such answers or necessary to make the answers not misleading;
and further provided that the Trust's agreement to indemnify Distributor and the
Trust's representations and warranties hereinbefore set forth in paragraph 1.10
shall not be deemed to cover any liability to the Trust or its Shareholders to
which Distributor would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
agreement. The Trust's agreement to indemnify Distributor, its partners and
employees, and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust's being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Columbus, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the
- 3 -
<PAGE> 5
summons or other first legal process shall have been served. The failure to so
notify the Trust of any such action shall not relieve the Trust from any
liability which the Trust may have to the person against whom such action is
brought by reason of any such untrue, or allegedly untrue, statement or
omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Distributor, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing approved by
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.11 and the Trust's
representations and warranties in this agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to Distributor's benefit, to the benefit of its several partners and
employees, and their respective estates, and to the benefit of the controlling
persons and their successors. The Trust agrees promptly to notify Distributor of
the commencement of any litigation or proceedings against the Trust or any of
its officers or Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Trust, its officers or Trustees or any such controlling person, may incur under
the Securities Act of 1933, as amended, or under common law or otherwise, but
only to the extent that such liability or expense incurred by the Trust, its
officers or Trustees or such controlling person resulting from such claims or
demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
Distributor to the Trust and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the
prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against
- 4 -
<PAGE> 6
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. Distributor shall have the right of first
control of the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Trust, its officers or Trustees or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the Trust,
its officers or Trustees, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of Distributor's indemnity agreement contained in this paragraph
1.12.
1.13 No Shares shall be offered by either Distributor or the Trust under
any of the provisions of this agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10(b)(2) of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.13 shall in any way restrict or have an application to or
bearing upon the Trust's obligation to repurchase Shares from any Shareholder in
accordance with the provisions of the Trust's prospectus, Declaration of Trust,
or By-laws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation by
service of process on the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Securities and Exchange Commission with
respect to any amendment to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange
Commission.
- 5 -
<PAGE> 7
For purposes of this section, informal requests by or acts of the Staff of
the Securities and Exchange Commission shall not be deemed actions of or
requests by the Securities and Exchange Commission.
1.15 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Distributor may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
1.16 This agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
2. Fees
2.1 The Distributor shall receive from certain classes of the Funds
identified on Schedule B hereto a distribution fee or a shareholder services fee
at the rate and upon the terms and conditions set forth in the Distribution and
Shareholder Servicing Plan dated March 12, 1997 (the "Distribution Plan"), or
the Shareholder Servicing Plan dated March 20, 1996 (the "Servicing Plan")
entered into between the Group and the Distributor on behalf of such classes.
The distribution fee shall be accrued daily and shall be paid on the first
business day of each month, or at such time(s) as the Distributor shall
reasonably request.
3. Front-End Load Shares -- Sale and Payment
Pursuant to the Declaration of Trust, dated June 25, 1993, as amended,
each Fund may be divided into separate classes of Shares in which case the
Shares of one or more classes may be subject to a front-end sales load and may
be subject to the imposition of a shareholder services fee pursuant to the
Servicing Plan referred to above. To the extent that all Shares of a Fund are
sold at an offering price which includes a sales load or that Shares of one or
more classes of a Fund are sold at such an offering price, such Shares shall
hereinafter be referred to collectively as "Front-End Load Shares" and
individually as a "Front-End Load Share." Funds that contain Front-End Load
Shares shall hereinafter be referred to collectively as "Front-End Load Funds"
and individually as a "Front-End Load Fund." Under this Agreement, the following
provisions shall apply with respect to the sale of, and payment for, Front-End
Load Shares of the Front-End Load Funds identified on Schedule C hereto.
(a) The Distributor shall have the right, as principal, to purchase
Front-End Load Shares at their net asset value and to sell such Front-End Load
Shares to the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. The Distributor
- 6 -
<PAGE> 8
shall also have the right, as principal, to sell Front-End Load Shares to
dealers against orders therefor at the public offering price less a concession
determined by the Distributor, which concession shall not exceed the amount of
the sales charge or underwriting discount, if any, referred to in Section 4
below.
(b) Prior to the time of delivery of any Front-End Load Shares by a
Front-End Load Fund to, or on the order of, the Distributor, the Distributor
shall pay or cause to be paid to the Front-End Load Fund or to its order an
amount in Boston or New York clearing house funds equal to the applicable net
asset value of such Shares. The Distributor may retain so much of any sales
charge or underwriting discount as is not allowed by the Distributor as a
concession to dealers.
4. Front-End Load Shares -- Public Offering Price
The public offering price of a Front-End Load Share shall be the asset
value of such Front-End Load Share, plus any applicable sales charge, all as
set forth in the current prospectus of the Front-End Load Fund. The net asset
value of Shares shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust and By-Laws of the Trust and the then current
prospectus of the Front-End Load Fund.
5. Front-End Load Shares -- Issuance of Shares
The Trust reserves the right to issue, transfer or sell Front-End Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Trust or the Front-End Load Fund(s) with any other investment company or the
acquisition by the Trust or the Front-End Load Fund(s) of all or substantially
all of the assets or of the outstanding Shares of any other investment company;
(b) in connection with a pro rata distribution directly to the holders of Shares
in the nature of a stock dividend or split; (c) upon the exercise of
subscription rights granted to the holders of Shares on a pro rata basis; (d) in
connection with the issuance of Front-End Load Shares pursuant to any exchange
and reinvestment privileges described in any then current prospectus of the
Front-End Load Fund; and (e) otherwise in accordance with any then current
prospectus of the Front-End Load Fund.
6. Sale of Shares Subject to a Contingent Deferred Sales Charge
6.1. The Trust may offer Shares subject to a contingent deferred sales
charge (a "CDSC"). The Distributor may pay brokers, dealers and other financial
institutions and intermediaries commissions with regard to the sale of CDSC
Shares. Under this Agreement, the following provisions shall apply with respect
to Shares of a Class featuring a CDSC (a "CDSC Class") as described in the
prospectus(es) of the Funds and identified on Schedule D hereto.
(a) The Distributor shall be entitled to receive all CDSC payments on
Shares of a CDSC Class. The Distributor may assign or sell to a third party (a
"CDSC Financing Entity")
- 7 -
<PAGE> 9
all or a part of the CDSC payments on Shares of a CDSC Class that the
Distributor is entitled to receive under this Agreement. The Distributor's right
to payment on such Shares, if assigned or sold to a CDSC Financing Entity, shall
continue after termination of this Agreement.
(b) (i) The Distributor shall be entitled to receive all distribution and
service fees at the rate and under the terms and conditions set forth in the
Distribution Plan adopted by a CDSC Class on all Shares of such CDSC Class so
long as the Plan is in effect. The Distributor may assign or sell to a CDSC
Financing Entity all or a part of the distribution fees the Distributor is
entitled to receive from the Trust under the Distribution Plan. The
Distributor's right to payment of distribution fees on such Shares, if assigned
or sold to a CDSC Financing Entity, shall continue after termination of this
Agreement. Otherwise, the right to receive all distribution and service fee
payments in respect of periods subsequent to the termination of this Agreement
shall terminate upon termination of this Agreement. In the event Distributor
assigns or sells all or a part of the CDSC payments or the distribution and
service fees referenced above to a CDSC Financing Entity and this Agreement is
subsequently terminated, Distributor shall have no obligation to assist the CDSC
Financing Entity in connection with such Entity's right to receive such payments
or fees subsequent to such termination.
(ii) The Distributor shall not be required to offer or sell Shares
of a CDSC Class unless and until it has received a binding commitment from a
CDSC Financing Entity (a "Commitment") satisfactory to the Distributor which
Commitment shall cover all expenses and fees related to the offer and sale of
such Shares of the CDSC Class including but not limited to dealer reallowances,
financing commitment fees, and legal fees. If at any time during the term of
this Agreement the then-current CDSC financing is terminated through no fault of
the Distributor, the Distributor shall have the right to immediately cease
offering or selling CDSC Shares until substitute financing becomes effective.
(c) The Distributor and the Trust hereby agree that the terms and
conditions set forth herein regarding the offer and sale of Shares of a CDSC
Class may be amended upon approval of both parties in order to comply with the
terms and conditions of any agreement with a CDSC Financing Entity to finance
the costs for the offer and sale of Shares of a CDSC Class so long as such terms
and conditions are in compliance with the Plan.
7. Term and Matters Relating to the Trust as a Massachusetts Business
Trust.
This agreement shall become effective on the date above first written and,
unless sooner terminated as provided herein, shall continue until January 31,
1998 and thereafter shall continue automatically for successive annual periods
ending on January 31 of each year, provided such continuance is specifically
approved at least annually by (i) the Trust's Board of Trustees or (ii) by "vote
of a majority of the outstanding Shares" (as defined below) of the Fund,
provided, however, that in either event the continuance is also approved by the
majority of the Trust's Trustees who are not parties to the agreement or
interested persons (as defined in the 1940 Act)
- 8 -
<PAGE> 10
of any party to this agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This agreement is terminable without
penalty, on not less than sixty days' notice, by the Trust's Board of Trustees,
by "vote of a majority of the outstanding Shares" (as defined below) of the Fund
or by Distributor. This agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act). For purposes of this Agreement,
the term "vote of a majority of the outstanding Shares" shall mean the approval,
at a meeting of Shareholders duly called, of the lesser of (i) the holders of
67% or more of the votes present at any such meeting, if the holders of more
than 50% of the outstanding votes are present or represented by proxy thereat;
or (ii) the holders of more than 50% of the outstanding votes.
The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of October 1, 1987 to which reference is hereby made and a copy
of which is on file at the office of the Secretary of State of The Commonwealth
of Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "AmSouth Mutual Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of Shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims against the
Trust.
Please confirm that the foregoing is in accordance with your understanding
by indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us.
Yours very truly,
AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
--------------------------
Name: John Calvano
Title: Secretary
Accepted:
BISYS FUND SERVICES LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: /s/ John Calvano
---------------------------------
Name:
-------------------------------
Title:
------------------------------
- 9 -
<PAGE> 11
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC.
DATED March 12, 1997
NAME OF FUND
------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Bond Fund
AmSouth Limited Maturity Fund
AmSouth Municipal Bond Fund
AmSouth Balanced Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
--------------------------
Name: John Calvano
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
--------------------------
Name:
------------------------
Title:
-----------------------
A-1
<PAGE> 12
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC.
DATED MARCH 12, 1997
Servicing Plan Funds Distribution Plan Funds
-------------------- -----------------------
Class A Shares of the AmSouth Class B Shares of the AmSouth
Prime Obligations Fund Equity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
U.S. Treasury Fund Regional Equity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Tax Exempt Fund Bond Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Equity Fund Limited Maturity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Regional Equity Fund Municipal Bond Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Bond Fund Balanced Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Limited Maturity Fund Government Income Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Municipal Bond Fund Florida Tax-Free Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Balanced Fund Capital Growth Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Government Income Fund Small Cap Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Florida Tax-Free Fund Equity Income Fund
Class A Shares of the AmSouth
Capital Growth Fund
B-1
<PAGE> 13
Servicing Plan Funds
--------------------
Class A Shares of the AmSouth
Small Cap Fund
Class A Shares of the AmSouth
Equity Income Fund
AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
-------------------------
Name: John Calvano
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
--------------------------
Name:
------------------------
Title:
-----------------------
B-2
<PAGE> 14
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC.
DATED MARCH 12, 1997
Class A Shares of the AmSouth
Equity Fund
Class A Shares of the AmSouth
Regional Equity Fund
Class A Shares of the AmSouth
Bond Fund
Class A Shares of the AmSouth
Limited Maturity Fund
Class A Shares of the AmSouth
Municipal Bond Fund
Class A Shares of the AmSouth
Balanced Fund
Class A Shares of the AmSouth
Government Income Fund
Class A Shares of the AmSouth
Florida Tax-Free Fund
Class A Shares of the AmSouth
Capital Growth Fund
Class A Shares of the AmSouth
Small Cap Fund
Class A Shares of the AmSouth
Equity Income Fund
C-1
<PAGE> 15
AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
--------------------------
Name: John Calvano
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
--------------------------
Name:
------------------------
Title:
-----------------------
C-2
<PAGE> 16
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC.
DATED MARCH 12, 1997
Class B Shares of the AmSouth
Equity Fund
Class B Shares of the AmSouth
Regional Equity Fund
Class B Shares of the AmSouth
Bond Fund
Class B Shares of the AmSouth
Limited Maturity Fund
Class B Shares of the AmSouth
Municipal Bond Fund
Class B Shares of the AmSouth
Balanced Fund
Class B Shares of the AmSouth
Government Income Fund
Class B Shares of the AmSouth
Florida Tax-Free Fund
Class B Shares of the AmSouth
Capital Growth Fund
Class B Shares of the AmSouth
Small Cap Fund
Class B Shares of the AmSouth
Equity Income Fund
D-1
<PAGE> 17
AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
-------------------------
Name: John Calvano
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
--------------------------
Name:
------------------------
Title:
-----------------------
D-2
<PAGE> 1
EXHIBIT 6(b)
Form of Distribution Agreement
<PAGE> 2
FORM OF DISTRIBUTION AGREEMENT
As of __________, 1997
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, AmSouth Mutual Funds (the "Trust"), a Massachusetts
business trust, has agreed that BISYS Fund Services Limited Partnership d/b/a
BISYS Fund Services (the "Distributor") shall be, for the period of this
Agreement, the distributor of the units of beneficial interest of the investment
portfolios of the Trust identified on Schedule A hereto (the "Funds"). Such
units of beneficial interest are hereinafter called "Shares."
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectuses of the Trust then in
effect under the Securities Act of 1933 as amended.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor may, in the future, be the distributor of the shares of several
investment companies or series (together, "Companies") including Companies
having investment objectives similar to those of the Trust. The Trust further
understands that investors and potential investors in the Trust may invest in
shares of such other Companies. The Trust agrees that Distributor's duties to
such Companies shall not be deemed in conflict with its duties to the Trust
under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate activities
which it deems reasonable which are primarily intended to result in the sale of
the Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 All activities by Distributor and its partners, agents, and employees
as distributor of the Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940 (the "1940 Act") by the
Securities and Exchange Commission or any securities association registered
under the Securities Exchange Act of 1934.
- 1 -
<PAGE> 3
1.4 Distributor will provide one or more persons, during normal business
hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of the
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it chooses
to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Fund's books and
accounts prepared by the Trust, (b) quarterly earnings statements prepared by
the Trust, (c) a monthly itemized list of the securities in the Funds, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional information regarding the financial
condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that all registration statements
and prospectuses filed by the Trust with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, with respect to the Shares have
been carefully prepared in conformity with the requirements of said Act and
rules and regulations of the Securities and Exchange Commission thereunder. As
used in this agreement the terms "registration statement" and "prospectus" shall
mean any registration statement and any prospectus and Statement of Additional
Information relating to the Funds filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with the same Commission. The Trust represents and warrants to
Distributor that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein in conformity with said Act and the rules and regulations
of said Commission; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Shares. The Trust may but shall not be
obligated to propose from time to time such amendment or amendments to
- 2 -
<PAGE> 4
any registration statement and such supplement or supplements to any prospectus
as, in the light of future developments, may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
without giving Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its several partners
and employees, and any person who controls Distributor within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act of 1933, as amended, or under common law or otherwise, arising out of or
based upon any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any prospectus or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in either any registration statement or any prospectus or necessary
to make the statements in either thereof not misleading; provided, however, that
the Trust's agreement to indemnify Distributor, its partners or employees, and
any such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations as are
contained in any prospectus and in such financial and other statements as are
furnished in writing to the Trust by Distributor and used in the answers to the
registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission or alleged omission to
state a material fact in connection with the giving of such information required
to be stated in such answers or necessary to make the answers not misleading;
and further provided that the Trust's agreement to indemnify Distributor and the
Trust's representations and warranties hereinbefore set forth in paragraph 1.10
shall not be deemed to cover any liability to the Trust or its Shareholders to
which Distributor would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
agreement. The Trust's agreement to indemnify Distributor, its partners and
employees, and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust's being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Columbus, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity
- 3 -
<PAGE> 5
agreement contained in this paragraph 1.11. The Trust will be entitled to assume
the defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of good standing
chosen by the Trust and approved by Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain counsel of good standing approved by Distributor, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Trust does not elect
to assume the defense of any such suit, or in case Distributor reasonably does
not approve of counsel chosen by the Trust, the Trust will reimburse
Distributor, its partners and employees, or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by Distributor or them. The Trust's indemnification agreement
contained in this paragraph 1.11 and the Trust's representations and warranties
in this agreement shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of Distributor, its partners and
employees, or any controlling person, and shall survive the delivery of any
Shares. This agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Trust, its officers or Trustees or any such controlling person, may incur under
the Securities Act of 1933, as amended, or under common law or otherwise, but
only to the extent that such liability or expense incurred by the Trust, its
officers or Trustees or such controlling person resulting from such claims or
demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
Distributor to the Trust and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the
prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of
- 4 -
<PAGE> 6
any such action shall not relieve Distributor from any liability which
Distributor may have to the Trust, its officers or Trustees, or to such
controlling person by reason of any such untrue or alleged untrue statement, or
omission or alleged omission, otherwise than on account of Distributor's
indemnity agreement contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust under
any of the provisions of this agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10(b)(2) of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.13 shall in any way restrict or have an application to or
bearing upon the Trust's obligation to repurchase Shares from any Shareholder in
accordance with the provisions of the Trust's prospectus, Declaration of Trust,
or By-laws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation by
service of process on the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Securities and Exchange Commission with
respect to any amendment to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange
Commission.
For purposes of this section, informal requests by or acts of the Staff of
the Securities and Exchange Commission shall not be deemed actions of or
requests by the Securities and Exchange Commission.
1.15 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval
- 5 -
<PAGE> 7
shall not be unreasonably withheld and may not be withheld where Distributor may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
1.16 This agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
2. Fees
2.1 The Distributor shall receive from certain classes of the Funds
identified on Schedule B hereto a distribution fee or a shareholder services fee
at the rate and upon the terms and conditions set forth in the Distribution and
Shareholder Servicing Plan dated March 12, 1997 (the "Distribution Plan"), or
the Shareholder Servicing Plan dated March 20, 1996 (the "Servicing Plan")
entered into between the Group and the Distributor on behalf of such classes.
The distribution fee shall be accrued daily and shall be paid on the first
business day of each month, or at such time(s) as the Distributor shall
reasonably request.
3. Front-End Load Shares -- Sale and Payment
Pursuant to the Declaration of Trust, dated June 25, 1993, as amended,
each Fund may be divided into separate classes of Shares in which case the
Shares of one or more classes may be subject to a front-end sales load and may
be subject to the imposition of a shareholder services fee pursuant to the
Servicing Plan referred to above. To the extent that all Shares of a Fund are
sold at an offering price which includes a sales load or that Shares of one or
more classes of a Fund are sold at such an offering price, such Shares shall
hereinafter be referred to collectively as "Front-End Load Shares" and
individually as a "Front-End Load Share." Funds that contain Front-End Load
Shares shall hereinafter be referred to collectively as "Front-End Load Funds"
and individually as a "Front-End Load Fund." Under this Agreement, the following
provisions shall apply with respect to the sale of, and payment for, Front-End
Load Shares of the Front-End Load Funds identified on Schedule C hereto.
(a) The Distributor shall have the right, as principal, to purchase
Front-End Load Shares at their net asset value and to sell such Front-End Load
Shares to the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. The Distributor shall also have the
right, as principal, to sell Front-End Load Shares to dealers against orders
therefor at the public offering price less a concession determined by the
Distributor, which concession shall not exceed the amount of the sales charge or
underwriting discount, if any, referred to in Section 4 below.
(b) Prior to the time of delivery of any Front-End Load Shares by a
Front-End Load Fund to, or on the order of, the Distributor, the Distributor
shall pay or cause to be paid to the Front-End Load Fund or to its order an
amount in Boston or New York clearing house funds equal to the applicable net
asset value of such Shares. The Distributor may retain so much of any sales
charge or underwriting discount as is not allowed by the Distributor as a
concession to dealers.
- 6 -
<PAGE> 8
4. Front-End Load Shares -- Public Offering Price
The public offering price of a Front-End Load Share shall be the asset
value of such Front-End Load Share, plus any applicable sales charge, all as
set forth in the current prospectus of the Front-End Load Fund. The net asset
value of Shares shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust and By-Laws of the Trust and the then current
prospectus of the Front-End Load Fund.
5. Front-End Load Shares -- Issuance of Shares
The Trust reserves the right to issue, transfer or sell Front-End Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Trust or the Front-End Load Fund(s) with any other investment company or the
acquisition by the Trust or the Front-End Load Fund(s) of all or substantially
all of the assets or of the outstanding Shares of any other investment company;
(b) in connection with a pro rata distribution directly to the holders of Shares
in the nature of a stock dividend or split; (c) upon the exercise of
subscription rights granted to the holders of Shares on a pro rata basis; (d) in
connection with the issuance of Front-End Load Shares pursuant to any exchange
and reinvestment privileges described in any then current prospectus of the
Front-End Load Fund; and (e) otherwise in accordance with any then current
prospectus of the Front-End Load Fund.
6. Sale of Shares Subject to a Contingent Deferred Sales Charge
6.1. The Trust may offer Shares of a class subject to both a contingent
deferred sales charge (a "CDSC") and a Distribution Plan (a "CDSC Class").
Additionally, shares of a class generally subject to a front-end load may be
offered by the Trust without the imposition of a front end sales load under
circumstances described in the Trust's prospectuses (hereinafter, "Front End
Load Exempt Shares"). Front End Load Exempt Shares may be subject to a CDSC
under circumstances described in the Trust's prospectuses. The Distributor may
pay brokers, dealers and other financial institutions and intermediaries
commissions with regard to the sale of CDSC and Front End Load Exempt Shares.
Under this Agreement, the following provisions shall apply with respect to
Shares of a CDSC Class as described in the prospectus(es) of the Funds and
identified on Schedule D hereto, as well as to Front End Load Exempt Shares.
(a) The Distributor shall be entitled to receive all CDSC payments on
Front End Load Exempt Shares and Shares of a CDSC Class. The Distributor may
assign or sell to a third party (a "CDSC Financing Entity") all or a part of the
CDSC payments that the Distributor is entitled to receive under this Agreement.
The Distributor's right to payment on such Shares, if assigned or sold to a CDSC
Financing Entity, shall continue after termination of this Agreement.
(b) (i) The Distributor shall be entitled to receive all distribution and
service fees at the rate and under the terms and conditions set forth in the
Distribution Plan adopted by a CDSC Class on all Shares of such CDSC Class so
long as the Plan is in effect. The Distributor may assign or sell to a CDSC
Financing Entity all or a part of the distribution fees the Distributor is
entitled to receive from the Trust under the Distribution Plan. The
Distributor's right to payment
- 7 -
<PAGE> 9
of distribution fees on such Shares, if assigned or sold to a CDSC Financing
Entity, shall continue after termination of this Agreement. Otherwise, the right
to receive all distribution and service fee payments in respect of periods
subsequent to the termination of this Agreement shall terminate upon termination
of this Agreement. In the event Distributor assigns or sells all or a part of
the CDSC payments or the distribution and service fees referenced above to a
CDSC Financing Entity and this Agreement is subsequently terminated, Distributor
shall have no obligation to assist the CDSC Financing Entity in connection with
such Entity's right to receive such payments or fees subsequent to such
termination.
(ii) The Distributor shall not be required to offer or sell Shares
of a CDSC Class unless and until it has received a binding commitment from a
CDSC Financing Entity (a "Commitment") satisfactory to the Distributor which
Commitment shall cover all expenses and fees related to the offer and sale of
such Shares of the CDSC Class including but not limited to dealer reallowances,
financing commitment fees, and legal fees. If at any time during the term of
this Agreement the then-current CDSC financing is terminated through no fault of
the Distributor, the Distributor shall have the right to immediately cease
offering or selling CDSC Shares until substitute financing becomes effective.
(c) The Distributor and the Trust hereby agree that the terms and
conditions set forth herein regarding the offer and sale of Shares of a CDSC
Class may be amended upon approval of both parties in order to comply with the
terms and conditions of any agreement with a CDSC Financing Entity to finance
the costs for the offer and sale of Shares of a CDSC Class so long as such terms
and conditions are in compliance with the Plan.
7. Term and Matters Relating to the Trust as a Massachusetts Business
Trust.
This agreement shall become effective on the date above first written and,
unless sooner terminated as provided herein, shall continue until January 31,
1998 and thereafter shall continue automatically for successive annual periods
ending on January 31 of each year, provided such continuance is specifically
approved at least annually by (i) the Trust's Board of Trustees or (ii) by "vote
of a majority of the outstanding Shares" (as defined below) of the Fund,
provided, however, that in either event the continuance is also approved by the
majority of the Trust's Trustees who are not parties to the agreement or
interested persons (as defined in the 1940 Act) of any party to this agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. This agreement is terminable without penalty, on not less than sixty
days' notice, by the Trust's Board of Trustees, by "vote of a majority of the
outstanding Shares" (as defined below) of the Fund or by Distributor. This
agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). For purposes of this Agreement, the term "vote of a
majority of the outstanding Shares" shall mean the approval, at a meeting of
Shareholders duly called, of the lesser of (i) the holders of 67% or more of the
votes present at any such meeting, if the holders of more than 50% of the
outstanding votes are present or represented by proxy thereat; or (ii) the
holders of more than 50% of the outstanding votes.
- 8 -
<PAGE> 10
The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of October 1, 1987 to which reference is hereby made and a copy
of which is on file at the office of the Secretary of State of The Commonwealth
of Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "AmSouth Mutual Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of Shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims against the
Trust.
Please confirm that the foregoing is in accordance with your understanding
by indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us.
Yours very truly,
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
Accepted:
BISYS FUND SERVICES LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By:
------------------------------
Name: --------------------------
Title: --------------------------
- 9 -
<PAGE> 11
FORM OF
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED ________, 1997
NAME OF FUND
------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Bond Fund
AmSouth Limited Maturity Fund
AmSouth Municipal Bond Fund
AmSouth Balanced Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
------------------------------
Name: --------------------------
Title: --------------------------
<PAGE> 12
FORM OF SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED ____________, 1997
Servicing Plan Funds Distribution Plan Funds
-------------------- -----------------------
Class A Shares of the AmSouth Class B Shares of the AmSouth
Prime Obligations Fund Prime Obligations Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
U.S. Treasury Fund Equity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Tax Exempt Fund Regional Equity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Equity Fund Bond Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Regional Equity Fund Limited Maturity Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Bond Fund Municipal Bond Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Limited Maturity Fund Balanced Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Municipal Bond Fund Government Income Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Balanced Fund Florida Tax-Free Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Government Income Fund Capital Growth Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Florida Tax-Free Fund Small Cap Fund
Class A Shares of the AmSouth Class B Shares of the AmSouth
Capital Growth Fund Equity Income Fund
C-1
<PAGE> 13
Servicing Plan Funds
--------------------
Class A Shares of the AmSouth
Small Cap Fund
Class A Shares of the AmSouth
Equity Income Fund
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
------------------------------
Name: --------------------------
Title: --------------------------
C-2
<PAGE> 14
FORM OF
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED _____________, 1997
Class A Shares of the AmSouth
Equity Fund
Class A Shares of the AmSouth
Regional Equity Fund
Class A Shares of the AmSouth
Bond Fund
Class A Shares of the AmSouth
Limited Maturity Fund
Class A Shares of the AmSouth
Municipal Bond Fund
Class A Shares of the AmSouth
Balanced Fund
Class A Shares of the AmSouth
Government Income Fund
Class A Shares of the AmSouth
Florida Tax-Free Fund
Class A Shares of the AmSouth
Capital Growth Fund
Class A Shares of the AmSouth
Small Cap Fund
Class A Shares of the AmSouth
Equity Income Fund
<PAGE> 15
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
------------------------------
Name: --------------------------
Title: --------------------------
C-2
<PAGE> 16
FORM OF
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED ___________, 1997
Class B Shares of the AmSouth
Prime Obligations Fund
Class B Shares of the AmSouth
Equity Fund
Class B Shares of the AmSouth
Regional Equity Fund
Class B Shares of the AmSouth
Bond Fund
Class B Shares of the AmSouth
Limited Maturity Fund
Class B Shares of the AmSouth
Municipal Bond Fund
Class B Shares of the AmSouth
Balanced Fund
Class B Shares of the AmSouth
Government Income Fund
Class B Shares of the AmSouth
Florida Tax-Free Fund
Class B Shares of the AmSouth
Capital Growth Fund
Class B Shares of the AmSouth
Small Cap Fund
Class B Shares of the AmSouth
Equity Income Fund
<PAGE> 17
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
------------------------------
Name: --------------------------
Title: --------------------------
<PAGE> 1
EXHIBIT 8(a)
Custodian Agreement
<PAGE> 2
CUSTODY AGREEMENT
This Agreement is entered into as of April 17, 1997 between the AmSouth
Mutual Funds (the "Fund"), a Massachusetts business trust, having its principal
office and place of business at 3435 Stelzer Road, Columbus, Ohio 43219 and
AmSouth Bank of Alabama (the "Bank"), an Alabama banking association with its
principal place of business at 1901 6th Avenue, North, Birmingham, Alabama
35203.
In consideration of the mutual promises set forth below, the Fund and the Bank
agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the
words and phrases set forth below shall have the following meanings, unless the
context otherwise requires:
1.1 "Authorized Person" shall be deemed to include the President, and any
Vice President, the Secretary, the Assistant Secretary, the Treasurer and any
Assistant Treasurer of the Fund, or any other person, including persons employed
by the Investment Manager, whether or not any such person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund and listed in
Schedule C, Part II or such other certification as may be received by the Bank
from time to time.
1.2 "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
1.3 "Declaration of Trust" shall mean the Declaration of Trust of the Fund
as now in effect and as the same may be amended from time to time.
1.4 "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions authorized
to act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
1.5 "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
and repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities, commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in federal funds on the
same day as such purchase or sale.
<PAGE> 3
1.6 "Prospectus" shall mean the Series' current prospectuses and statement
of additional information relating to the registration of the Series' Shares
under the Securities Act of 1933, as amended.
1.7 "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by each Series.
1.8 "Shares" refers to the shares of beneficial interest of a Series of
the Trust.
1.9 "Series" refers to Funds shown on Schedule A, attached hereto and made
a part hereof by this reference, and any such other Series as may from time to
time be created and designated in accordance with the provisions of the
Declaration of Trust.
1.10 "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Fund.
1.11 "Written Instructions" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.12 The "1940 Act" refers to the Investment Company Act of 1940, and the
rules and regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
2.1 The Fund hereby constitutes and appoints the Bank as custodian of all
the securities and moneys owned by or in the possession of the Fund during the
period of this Agreement.
2.2 The Bank hereby accepts appointment as custodian for the Fund and
agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
3.1 The Fund will compensate the Bank for its services rendered under this
Agreement in accordance with the fees set forth in the Fee Schedule attached as
Schedule B and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Series hereafter established and designated, and at
the time that the Bank commences serving as such for said Series, such agreement
shall be reflected in a Fee Schedule for the Fund, which shall be attached to
Schedule B of this Agreement.
2
<PAGE> 4
3.3 Any compensation agreed to hereunder may be adjusted from time to time
by not less than 90 days advance written notice of such fee increase from Bank
to Fund. Any such increase shall take effect upon approval of the Board of
Trustees of the Fund.
3.4 The Bank will bill the Fund as soon as practicable after the end of
the month, and said billings will be detailed in accordance with the Fee
Schedule. The Fund will pay to the Bank the amount of such billing within 45
days after receipt. In the event such bill is not promptly paid, the Bank may
charge against any money specifically allocated to the Fund such compensation
and any expenses incurred by the Bank in the performance of its duties pursuant
to such agreement. The Bank shall also be entitled to charge against any money
held by it and specifically allocated to the Fund the amount of any loss,
damage, liability or expense incurred with respect to such Fund, including
counsel fees, for which it shall be entitled to reimbursement under provision
10.4 of this Agreement.
The expenses which the Bank may charge against such account include, but
are not limited to, the expenses of Sub-Custodians and foreign branches of the
Bank incurred in settling transactions outside of Birmingham or New York City
involving the purchase and sale of Securities of the Fund.
4. Custody of Cash and Securities.
4.1 Receipt and Holding of Assets. The Fund will deliver or cause to be
delivered to the Bank all securities and moneys owned by it, including cash
received from the issuances of its Shares, at any time during the period of this
Agreement and shall specify the Series to which the Securities and moneys are to
be specifically allocated. The Bank shall physically segregate and keep apart on
its books, the assets of each Series, including separate identification of
securities held in the Book-Entry System. The Bank will not be responsible for
such securities and moneys until actually received by it. The Fund shall
instruct the Bank from time to time in its sole discretion, by means of Written
Instructions as to the manner in which and in what amounts Securities and moneys
of a Series are to be deposited on behalf of such Series in the Book-Entry
System or the Depository and specifically allocated on the books of the Bank to
such Series. Securities and moneys of the Fund deposited in the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Bank for customers, including but not limited to accounts in
which the Bank acts in a fiduciary or representative capacity.
4.2 Accounts and Disbursement. The Bank shall establish and maintain a
separate account for each Series and shall credit to the separate account of
each Series all moneys received by it for the account of such Series and shall
disburse the same only:
4.2.1 In payment for securities purchased for such Series, as
provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect to the
Shares of such Series;
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4.2.3 In payment of original issue or other taxes with respect to
the Shares of such Series;
4.2.4 In payment for Shares which have been redeemed by such Series;
4.2.5 Pursuant to Written Instructions, setting forth the name of
such Series, the name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the expenses and
liabilities of the Bank attributable to such Series.
4.3 Confirmations and Statements. Promptly after the close of business
each day, the Bank shall make available to the Fund information with respect to
all transfers to and from the account of a Series during that day. The Bank need
not send written confirmation or a summary of all such transfers to or from the
account of each Series. Provided, however, that upon the written request of
Fund, Bank shall provide within 5 business days of such written request a copy
of any confirmations which include transactions of the Fund. Where securities
purchased by a Series are in a fungible bulk of Securities registered in the
name of the Bank (or its nominee) or shown on the Bank's account on the books of
the Depository or the Book-Entry System, the Bank shall by book entry or
otherwise identify the quantity of those securities belonging to such Series. At
least monthly, the Bank shall furnish the Fund with a detailed statement of the
Securities and moneys held for each Series under this Agreement.
4.4 Registration of Securities and Physical Separation.
All Securities held for a Series which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Bank in that form; all other Securities held for a Series may be
registered, in the name of any duly appointed registered nominee of the Bank as
the Bank may from time to time determine, or in the name of the Book-Entry
System or the Depository of their successor or successors, or their nominee or
nominees. When a reference is made in this Agreement to an action to be taken by
Bank it is understood by the parties that the action may be taken directly or,
in the case of book-entry securities, through the appropriate depository. The
Fund agrees to furnish to the Bank appropriate instruments to enable the Bank to
hold or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository,
any Securities which it may hold for the account of a Series. The Bank (or its
sub-custodians) shall hold all such Securities specifically allocated to a
Series which are not held in the Book-Entry System or the Depository in a
separate account for such series in the name of such Series physically
segregated at all times from those of any other person or persons.
4.5 Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the Bank shall
with respect to all Securities held for a Series in accordance with this
Agreement:
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4.5.1 Collect all income due or payable and credit such income
promptly on the contractual settlement date, whether or not actually received,
to the account of the appropriate Series, except for income from foreign issues.
Income which has not been collected after reasonable effort, within a time
agreed upon between the parties, shall be repaid to the Bank pending final
collection at such date as may be mutually agreed upon by the Trust and the
Bank;
4.5.2 Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or otherwise
become payable. Bank shall make a good faith effort to inform Fund of any call,
redemption or retirement date with respect to securities which are owned by a
Series and held by the Bank or its nominee. Notwithstanding the foregoing, the
Bank shall have no responsibility to the Fund or a Series for monitoring or
ascertaining of any call, redemption or retirement date with respect to
securities which are held by a Series and held by Bank or its nominee. Nor shall
the Bank have any responsibility or liability to the Fund or to a Series for any
loss by a Series for any missed payment or other default resulting therefrom
unless the Bank received timely general notification, which shall not be less
than 5 business days, from the Fund or the Series specifying the time, place and
manner for the presentment of any put bond owned by a Series and held by the
Bank or its nominee. The Bank shall not be responsible and assumes no liability
to the Fund or a Series for the accuracy or completeness of any notification the
Bank shall provide to the Fund or a series with respect to put securities;
4.5.3 Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
4.5.4 Hold for the account of each Series all rights and other
Securities issued with respect to any Securities held by the Bank hereunder for
such Series.
4.6 Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Written Instructions, proxies,
consents, authorization, and any other instruments whereby the authority of the
Fund as owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held for a
Series in exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
4.6.3 Deliver or cause to be delivered any Securities held for a
Series to any protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate (bookkeeping)
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account for each Series such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such delivery;
4.6.4 Make or cause to be made such transfers or exchanges of the
assets and take such steps as shall be stated in said Written Instructions to be
for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
4.6.5 Deliver Securities owned by any Series upon sale of such
Securities for the account of such Series pursuant to Section 5;
4.6.6 Deliver Securities owned by any Series upon the receipt of
payment in connection with any repurchase agreement related to such Securities
entered into by such Series;
4.6.7 Deliver Securities owned by any Series to the issuer thereof
or its agent when such Securities are called, redeemed, retired or otherwise
become payable; provided, however, that in any such case the cash or other
consideration is be delivered to the Bank.
4.6.8 Deliver Securities owned by any Series in connection with any
loans of Securities made by such Series but only against receipt of adequate
collateral as agreed upon from time to time by the Bank and the Fund which may
be in any form permitted under the 1940 Act or any interpretations thereof
issued by the Securities and Exchange Commission or its staff;
4.6.9 Deliver Securities owned by any Series for delivery as
security in connection with any borrowings by such Series requiring a pledge of
Series assets, but only against receipt of amount borrowed;
4.6.10 Deliver Securities owned by any Series upon receipt of
instructions from such Series for delivery to the Transfer Agent or to the
holders of Shares of such Series in connection with distributions in kind, as
may be described from time to time in the Series' Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption; and
4.6.11 Deliver Securities owned by any Series for any other proper
business purpose, but only upon receipt of, in addition to Written Instructions,
a certified copy of a resolution of the Board of Trustees signed by an
Authorized Person and certified by the Secretary or Assistant Secretary of the
Fund, specifying the Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such Purpose to be a proper
business purpose, and naming the person or persons to whom delivery of such
Securities shall be made.
4.7 Endorsement and Collection of Checks, Etc. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of a Series.
5. Purchase and Sale of Investments of the Series.
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5.1 Promptly after each purchase of Securities for a Series, the Fund
shall deliver to the Bank Written Instructions specifying with respect to each
purchase: (1) the name of the Series to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Series and upon receipt of such
Securities shall pay out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Written Instructions.
5.2 Promptly after each sale of Securities of a Series, the Fund shall
deliver to the Bank Written Instructions specifying with respect to such sale:
(1) the name of the Series to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount payable to the
Series upon such sale; (7) the name of the broker through whom or the person to
whom the sale was made; and (8) whether or not such sale is to be settled
through the Book-Entry System or the Depository. The Bank shall deliver or cause
to be delivered the Securities to the broker or other person designated by the
Fund upon receipt of the total amount payable to such Series upon such sale,
provided that the same conforms to the total amount payable to such Series as
set forth in such Written Instructions. Subject to the foregoing, the Bank may
accept payment in such form as shall be reasonably satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
6. Payment of Dividends or Distributions.
6.1 The Fund shall furnish to the Bank the resolution of the Board of
Trustees of the Fund certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distribution with respect to a
Series on a specified periodic basis and authorizing the Bank to rely on Written
Instructions specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Series, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the shareholders of
record as of the record date and the total amount payable to the Transfer Agent
on the payment date.
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Series the total amount payable to the
Transfer Agent of the Fund.
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7. Sale and Redemption of Shares of a Series.
7.1 Whenever the Fund shall sell or redeem any Shares of a Series, the
Fund shall deliver or cause to be delivered to the Bank Written Instructions
duly specifying:
7.1.1 The name of the Series whose Shares were sold or redeemed;
7.1.2 The number of Shares sold or redeemed, trade date, and price;
and
7.1.3 The amount of money to be received or paid by the Bank for the
sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Series.
7.3 Upon issuance of any Shares of a Series in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
specifically allocated and held for the account of such Series, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Series received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the Bank shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Series.
8. Indebtedness.
8.1 The Fund will cause to be delivered to the Bank by any bank (excluding
the Bank) from which the Fund borrows money for temporary administrative or
emergency purposes using Securities as collateral for such borrowings, a notice
or undertaking in the form currently employed by any such bank setting forth the
amount which such bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Bank Written Instructions
stating with respect to each such borrowing: (1) the name of the Series for
which the borrowing is to be made; (2) the name of the bank; (3) the amount and
terms of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement;
(4) the time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (5) the date on which the loan becomes due and payable; (6)
the total amount payable to the Fund for the separate account of the Series on
the borrowing date; (7) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities; (8)
whether the Bank is to deliver such collateral through the Book-Entry System or
the Depository; and (9) a statement that such loan is in conformance with the
1940 Act and the Series' Prospectus.
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8.2 Upon receipt of the Written Instructions referred to above, the Bank
shall deliver on the borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Written Instructions. The Bank may, at the option of
the lending bank keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Bank shall deliver as additional
collateral in the manner directed by the Fund from time to time such Securities
specifically allocated to such Series as may be specified in Written
Instructions to collateralize further any transaction described in this Section
8. The Fund shall cause all Securities released from collateral status to be
returned directly to the Bank, and the Bank shall receive from time to time such
return of collateral as may be tendered to it. In the event that the Fund fails
to specify in Written Instructions all of the information required by this
Section 8, the Bank shall not be under any obligation to deliver any Securities.
Collateral returned to the Bank shall be held hereunder as it was prior to being
used as collateral.
9. Persons Having Access to Assets of the Series.
9.1 No Trustee, officer, employee or agent of the Fund, and no officer,
director, employee or agent of the Advisor, shall have physical access to the
assets of the Fund held by the Bank or be authorized or permitted to withdraw
any investments of the Fund, nor shall the Bank deliver any assets of the Fund
to any such person. No officer, director, employee or agent of the Bank who
holds any similar position with the Fund, the Advisor shall have access to the
assets of the Fund.
9.2 The individual employees of the Bank initially duly authorized by the
Board of Directors of the Bank to have access to the assets of the Fund are
listed on Schedule C, Part I, which is attached and made a part of this
Agreement by this reference. The Bank shall advise the Fund of any change in the
individuals authorized to have access to the assets of the Fund by written
notice to the Fund.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Fund, or any officer, director, employee or agent of the Advisor,
from giving Written Instructions to the Bank so long as it does not result in
delivery of or access to assets of the Fund prohibited by this Section 9.
10. Concerning the Bank.
10.1 Standard of Conduct. The Bank shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this Agreement and reasonably believed by it
to be valid or genuine and shall be held harmless in acting upon proper
instructions, resolutions, any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder, a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Fund. The Bank may receive and accept a resolution as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any
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determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Bank of written notice from the
Secretary or an Assistant Secretary to the contrary.
The Bank shall be entitled to rely on and may act upon advice of counsel
(who shall either be counsel for the Fund, or other counsel selected by the Bank
with expertise in the 1940 Act) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice. Provided,
however, that if such reliance involves a potential material loss to the Fund,
the Bank shall advise the Fund of any such actions to be taken in accordance
with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement but shall be liable only for its own negligent
or bad faith acts, wilful misconduct, or negligent or wilful failures to act by
the Bank and its agents or Employees. Bank shall have no responsibility for
reviewing or questioning the acts or records of any prior custodian. The Fund
shall indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes with
respect to each Series which the Bank may suffer or incur on account of being
Bank hereunder except to the extent that such losses, liabilities, demands,
claims, actions, expenses, attorneys fees or taxes arise from the Bank's own
negligence or bad faith. Notwithstanding the foregoing the Bank shall be liable
to the Fund for any loss or damage resulting from the use of the Book-Entry
System or the Depository arising by reason of any negligence, misfeasance or
misconduct on the part of the Bank or any of its employees or agents.
If a Series requires the Bank to take any action with respect to
Securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to such
Series being liable for the payment of money or incurring liability of some
other form, such Series, as a prerequisite to requiring the Bank to take such
action, shall, prior to the Bank taking such action, provide indemnity in
writing to the Bank in an amount and form reasonably satisfactory to it.
10.2 Limit of Duties. Without limiting the generality of the foregoing,
the Bank shall be under no duty or obligation to inquire into, and shall not be
liable for:
10.2.1 The validity of the issue of any Securities purchased by any
Series, the legality of the purchase thereof, the permissibility of the purchase
thereof under the Fund's governing documents, or the propriety of the amount
paid therefor;
10.2.2 The legality of the sale of any Securities by any Series, the
permissibility of such sale under the fund's governing documents, or the
propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of any Shares, or the
sufficiency of the amount to be received therefor;
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10.2.4 The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any dividend or
other distribution of any Series;
10.2.6 The legality of any borrowing for temporary or emergency
administrative purposes.
10.3 No Liability until Receipt. The Bank shall not be liable for, or
considered to be the custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Series until the Bank actually receives and collects such money
directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
10.4 Collection Where Payment Refused. The Bank shall not be under any
duty or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by Written Instructions and (b) it shall be assured
to its satisfaction of reimbursement of its costs and expenses in connection
with any such action.
10.5 Appointment of Agents and Sub-Custodians. The Bank may appoint one or
more banking institutions, including but not limited to banking institutions
located in foreign countries, to act as Depository or Depositories or as
Sub-Custodian or as Sub-Custodians of Securities and moneys at any time owned by
any Series, upon terms and conditions specified in Written Instructions. The
Bank shall use reasonable care in selecting a Depository and/or Sub-Custodian
located in a country other than the United States ("Foreign Sub-Custodian"), and
shall oversee the maintenance of any Securities or moneys of the Trust by any
Foreign Sub-Custodian in accordance with the provisions of Rule 17f-5 of the
Act.
10.6 No Duty to Ascertain: Authority. The Bank shall not be under any duty
or obligation to ascertain whether any Securities at any time delivered to or
held by it for the Fund and specifically allocated to a Series are such as may
properly be held by the Series and specifically allocated to such Series under
the provisions of the Declaration of Trust and the Series' Prospectus.
10.7 Reliance on Certificates and Instructions. The Bank shall be entitled
to rely upon any Written Instructions or Oral Instructions actually received by
the Bank pursuant to the applicable Sections of this Agreement and reasonably
believed by the Bank to be genuine and to be given by an Authorized Person. The
Fund agrees to forward to the Bank Written Instructions from an Authorized
Person confirming such Oral Instructions in such manner so that such Written
Instructions are received by the Bank, whether by hand delivery, telex, or
otherwise, by the close of business on the same day that such Oral Instructions
are given to the Bank. The Fund agrees that the fact that such confirming
instructions are not received by the Bank shall in no way affect
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the validity for the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Bank shall incur no liability
to the Fund in acting upon Oral Instructions given to the Bank hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from a duly Authorized Person.
10.8 Inspection of Books and Records. The books and records of the Bank
regarding the Fund shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Fund and by employees of the Securities
and Exchange Commission. The Bank shall provide the Fund, upon request, with any
report obtained by the Bank on the system of internal accounting control of the
Book-Entry System or the Depository and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time. Provided, however, that in the event that the Fund shall require a report
of internal accounting control produced by the auditors of the Series rather
than of the Bank, then such report shall be prepared at the expense of the
Series, and the Series agrees to pay for the time expended by Bank on such audit
and report at the hourly rate set forth on the Fee agreement.
11. Term and Termination.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 The Bank may terminate this Agreement with respect to the Fund and
the Fund may terminate this Agreement with respect to any Series by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than 90 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall designate a successor
custodian or custodians, which shall be a person qualified to so act under the
1940 Act. In the event such notice is given by the Bank, the Fund shall, on or
before the termination date, deliver to the Bank, Written Instructions
designating a successor Custodian or Custodians. In the absence of such
designation by the Fund, the Bank may designate a successor Custodian, which
shall be a person qualified to so act under the 1940 Act. If the Fund fails to
designate a successor Custodian for any Series, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Bank of all Securities (other than Securities held in the Book-Entry
Systems which cannot be delivered to the Trust) and moneys then owned by such
Series, be deemed to be its own Custodian and the Bank shall thereby be relieved
of all duties and responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book-Entry system which cannot be
delivered to the Trust.
11.3 Upon the date set forth in such notice under paragraph (2) of this
Section, this Agreement shall terminate to the extent specified in such notice,
and the Bank shall upon receipt of a notice of acceptance by the successor
Custodian on that date deliver directly to the successor Custodian all
Securities and moneys then held by the Bank and specifically allocated to the
Series specified, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled with respect to such
Series.
12. Additional Services by Bank.
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12.1 If allowed by the prospectus, the investment adviser of each Series
may direct that the assets of that Series be invested in deposits in the Bank or
its affiliates bearing a reasonable rate of interest.
12.2 Other Bank Services. Any authorized person may direct the Bank to
utilize other services or facilities provided by the Bank or its affiliates.
Such services shall include, but not be limited to (1) the placing of orders for
the purchase, sale exchange, investment or reinvestment of securities through
any brokerage service conducted by the Bank or its affiliates, or (2) the
purchase of units of any investment company managed or advised by the Bank or
its affiliates and/or for which the Bank or its affiliates act as custodian or
provide investment advice or other services for a fee. The Fund hereby
acknowledges that the Bank or its affiliates will receive fees for such services
in addition to the fees payable under this Agreement. Fee Schedules for such
additional directed services shall be delivered to the Authorized Person before
provision of such services.
13. Miscellaneous.
13.1 Annexed hereto is Schedule C, Part II setting forth the names of the
present Authorized Persons. The Fund agrees to furnish to the Bank a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certification.
13.2 Annexed hereto is Schedule C, Part III setting forth the names of the
present Trustees of the Fund. The Fund agrees to furnish to the Bank a new
certification in similar form in the event any such present Trustee ceases to be
a Trustee of the Fund or in the event that other or additional Trustees are
elected or appointed. Until such new certification shall be received, the Bank
shall be fully protected in acting under the provisions of this Agreement upon
the signature of the officers as set forth in the last delivered certification.
13.3 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Bank, shall be sufficiently given if addressed
to the Bank and mailed or delivered to it at its offices at:
AmSouth Bank of Alabama
1901 6th Avenue, North
Birmingham, Alabama 35203
or such other place as the Bank may from time to time designate in writing.
13.4 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its offices at 3435 Stelzer Road,
Columbus, Ohio 43219 or at such other place as the Fund may from time to time
designate in writing.
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13.5 This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
13.6 This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Bank, or by the Bank without the written consent of the Fund authorized
or approved by a resolution of the Board of Trustees of the Fund, and any
attempted assignment without such written consent shall be null and void.
13.7 This Agreement shall be construed in accordance with the laws of the
State of Massachusetts.
13.8 It is expressly agreed to that the obligations of the Fund hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Fund, personally, but bind only the property of the
Fund, as provided in the Declaration of Trust of the Fund. The execution and
delivery of this Agreement have been authorized by the Trustees of the Fund and
signed by an authorized officer of the Fund, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Fund as provided in its Declaration of Trust.
13.9 The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.10 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
The AmSouth Mutual Funds
By: /s/ John F. Calvano
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
AmSouth Bank of Alabama
By: /s/ D. Lee Weathers
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
14
<PAGE> 16
Schedule A - Funds
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
The AmSouth Mutual Funds
By: /s/ John F. Calvano
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
AmSouth Bank of Alabama
By: /s/ D. Lee Weathers
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
A-1
<PAGE> 17
Schedule B
Mutual Fund Services
Schedule of Fees
Custody
For custody services the Bank will charge for the first year of services
hereunder a fee equal to .60 b.p (.0060%) of net asset value per annum. This
charge will be reviewed thereafter, but will continue in effect until a
modification of this Schedule B is mutually agreed upon.
The AmSouth Mutual Funds
By: /s/ John F. Calvano
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
AmSouth Bank of Alabama
By: /s/ D. Lee Weathers
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
B-1
<PAGE> 18
Schedule C
Authorized Persons
Part I - Access Persons of Bank
Part II - Authorized Persons of the Fund
Refer to the current resolution of the Board of Directors of the Fund.
Part III - Trustees
Homer M. Turner, Jr.
James H. Woodward, Jr.
Dick D. Briggs, Jr.
Wendell D. Cleaver
J. David Huber
The AmSouth Mutual Funds
By: /s/ John F. Calvano
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
AmSouth Bank of Alabama
By: /s/ D. Lee Weathers
--------------------------------
Title:
-----------------------------
Date: April 17, 1997
C-1
<PAGE> 1
EXHIBIT 9(b)
Amended Schedule A to the
Management and Administration Agreement
<PAGE> 2
Dated: As of March 12, 1997
Schedule A
to the
Management and Administration Agreement
between AmSouth Mutual Funds and
ASO Services Company
Name of Fund Compensation* Date
- ------------ ------------- ----
AmSouth Prime Annual Rate of twenty As of March 12, 1997
Obligations, U.S. Treasury, hundredths of one-percent
Tax Exempt, Equity, (.20%) of each such Fund's
Regional Equity, Balanced, average daily net assets
Bond, Limited Maturity,
Municipal Bond,
Government Income,
Florida Tax-Free, Capital
Growth, Small Cap, and
Equity Income Funds.
AMSOUTH MUTUAL FUNDS
By: /s/ John F. Calvano
----------------------------
Title: Secretary
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
----------------------------
Title:
-----------------------------
- ----------
*All fees are computed daily and paid periodically.
A-1
<PAGE> 1
EXHIBIT 9(d)
Amended Schedules A and B to the
Sub-Administration Agreement between
ASO Services Company and AmSouth Bank
<PAGE> 2
Dated: March 12, 1997
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK OF ALABAMA
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title:
-----------------------------
AMSOUTH BANK OF ALABAMA
By: /s/ Michael Baker
--------------------------------
Title:
-----------------------------
A-1
<PAGE> 3
Dated: March 12, 1997
SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK OF ALABAMA
Name of Fund Compensation*
AmSouth Prime Obligations Fund Such percentage of ASC's compensation
AmSouth U.S. Treasury Fund received pursuant to the Management and
AmSouth Tax Exempt Fund Administration Agreement with the Trust as
AmSouth Equity Fund shall be agreed upon from time to time
AmSouth Regional Equity Fund between the parties, but in no event to
AmSouth Balanced Fund exceed an annual rate of ten
AmSouth Bond Fund one-hundredths of one percent (.10%) of
AmSouth Municipal Bond Fund each such Fund's average daily net assets.
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title:
-----------------------------
AMSOUTH BANK OF ALABAMA
By: /s/ Michael Baker
--------------------------------
Title:
-----------------------------
- ----------
*All fees are computed daily and paid periodically
B-1
<PAGE> 1
EXHIBIT 9(f)
Amended Schedules A and B to the
Sub-Administration Agreement between
ASO Services Company and BISYS Fund Services, LP
<PAGE> 2
Dated: March 12, 1997
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title:
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ J. David Huber
--------------------------------
Title:
-----------------------------
A-1
<PAGE> 3
Dated: March 12, 1997
SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund Such percentage of ASC's compensation
AmSouth U.S. Treasury Fund received pursuant to the Management and
AmSouth Tax Exempt Fund Administration Agreement with the Trust as
AmSouth Equity Fund shall be agreed upon from time to time
AmSouth Regional Equity Fund between the parties.
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title:
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ J. David Huber
--------------------------------
Title:
-----------------------------
- ----------
*All fees are computed daily and paid periodically
B-1
<PAGE> 1
EXHIBIT 9(i)
Amended Schedule A to the
Transfer Agency and Shareholder Services Agreement
<PAGE> 2
As of March 12, 1997
SCHEDULE A
TO THE TRANSFER AGENCY
AND SHAREHOLDER SERVICE AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS
AND THE WINSBURY SERVICE CORPORATION
NAME OF FUND
------------
The Prime Obligations Fund
The U.S. Treasury Fund
The Tax Exempt Fund
The Bond Fund
The Equity Fund
The Regional Equity Fund
The Limited Maturity Fund
The Government Income Fund
The Florida Tax-Free Fund
The Capital Growth Fund
The Small Capital Fund
The Equity Income Fund
A-1
<PAGE> 1
EXHIBIT 9(k)
Amended Schedule A to the Fund Accounting Agreement
<PAGE> 2
Dated: March 12, 1997
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC.
FEES
----
BISYS Ohio shall be entitled to receive a fee from each Fund at the annual
rate of three one-hundredths of one percent (.03%) of each Fund's average daily
net assets plus BISYS Ohio's reasonable out-of-pocket expenses incurred in the
performance of its services as provided in Section 4 of the Fund Accounting
Agreement to which this Schedule A is attached. In its sole discretion, BISYS
may impose a minimum annual fee of up to $30,000 per taxable Fund and $40,000
per tax-exempt Fund. Funds that have two or more classes of shares each having
different net asset values or paying different daily dividends may be subject to
an additional annual fee of $10,000 per additional class.
AMSOUTH MUTUAL FUNDS BISYS FUND SERVICES, INC.
By: /s/ John F. Calvano By: /s/ J. David Huber
------------------------ -----------------------
A-1
<PAGE> 1
EXHIBIT (10)
Opinion of Ropes & Gray
<PAGE> 2
ROPES & GRAY
1301 K STREET, N.W.
SUITE 800 EAST
WASHINGTON, D.C. 20005-3333
(202) 626-3900
TELECOPIER (202) 626-3961
ONE INTERNATIONAL PLACE 30 KENNEDY PLAZA
BOSTON, MASSACHUSETTS 02110-2624 PROVIDENCE, R.I. 02328-2328
(617) 951-7000 (401) 455-4400
TELECOPIER: (617) 951-7050 TELECOPIER (401) 455-4401
July 3, 1997
AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest of the AmSouth
Mutual Funds ("Trust"), as permitted by Rule 24f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). You propose to file a post-effective
amendment on Form N-1A (the "Post-Effective Amendment") to your Registration
Statement as required by Section 10(a)(3) with respect to certain units of
beneficial interest of the Trust ("Shares").
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale of
the Shares have been duly authorized under Massachusetts law. Upon the original
issue and sale of the Shares and upon receipt of the authorized consideration
therefor in an amount not less than the net asset value of the Shares
established and in force at the time of their sale, the Shares will be validly
issued, fully paid and non-assessable.
The AmSouth Mutual Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of Shares for all
loss and expenses of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
<PAGE> 3
We understand that this opinion is to be used in connection with the
filing of the Post-Effective Amendment. We consent to the filing of this opinion
with and as part of your Post-Effective Amendment.
Sincerely,
/s/ Ropes Gray
`
Ropes & Gray
2
<PAGE> 1
EXHIBIT 11(a)
Consent of Coopers & Lybrand L.L.P.
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A (File No. 33-21660) of the
AmSouth Mutual Funds of our report dated September 23, 1996 on our audits of the
financial statements and financial highlights of the Prime Obligations Fund, the
U.S. Treasury Fund, the Tax-Exempt Fund, the Bond Fund, the Limited Maturity
Fund, the Government Income Fund, the Florida Tax-Free Fund, the Equity Fund,
the Regional Equity Fund, and the Balanced Fund constituting the AmSouth Mutual
Funds as of July 31, 1996 and for the periods then ended referred to in our
report included in the Statement of Additional Information.
We also consent to the references to our firm under the caption "Financial
Highlights" in the Prospectuses for the Classic Shares and Class B Shares of the
Capital Appreciation Funds, the Income Funds, and the Municipal Bond Funds, in
the Prospectus for Premier Shares, and under the caption "Auditors" in the
Statement of Additional Information of AmSouth Mutual Funds incorporated by
reference in Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A (File No. 33-21660).
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
July 3, 1997
4
<PAGE> 1
EXHIBIT 11(b)
Consent of Ropes & Gray
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our firm
under the caption "Legal Counsel" included in or made a part of the
Post-Effective Amendment No. 23 to the Registration Statement of AmSouth Mutual
Funds on Form N-1A under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
July 3, 1997
<PAGE> 1
AMSOUTH MUTUAL FUNDS
EXHIBIT 16
TOTAL RETURN
AMSOUTH MUNICIPAL BOND FUND
PREMIER SHARES
AVERAGE ANNUAL TOTAL RETURN
---------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 08/01/75 TO 04/30/97 ):
(( 3,840.47 /1,000 (1/( 7944 /365))-1) = 6.38%
1 YEAR ( 04/30/96 TO 04/30/97 ):
(( 1,039.27 /1,000 (1/( 365 /365))-1) = 3.93%
2 YEAR ( 04/30/95 TO 04/30/97 ):
(( 1,100.43 /1,000 (1/( 730 /365))-1) = 4.90%
3 YEAR ( 04/30/94 TO 04/30/97 ):
(( 1,155.85 /1,000 (1/( 1095 /365))-1) = 4.95%
5 YEAR ( 04/30/92 TO 04/30/97 ):
(( 1,284.55 /1,000 (1/( 1825 /365))-1) = 5.14%
10 YEAR ( 04/30/87 TO 04/30/97 ):
(( 1,844.45 /1,000 (1/( 3650 /365))-1) = 6.31%
<PAGE> 2
AMSOUTH MUTUAL FUNDS
EXHIBIT 16
TOTAL RETURN
AMSOUTH MUNICIPAL BOND FUND
CLASSIC SHARES
AVERAGE ANNUAL TOTAL RETURN
---------------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: ( 08/01/75 TO 04/30/97 ):
(( 3,646.03 /1,000 (1/( 7944 /365))-1) = 6.12%
1 YEAR ( 04/30/96 TO 04/30/97 ):
(( 1,036.78 /1,000 (1/( 365 /365))-1) = 3.68%
2 YEAR ( 04/30/95 TO 04/30/97 ):
(( 1,095.18 /1,000 (1/( 730 /365))-1) = 4.65%
3 YEAR ( 04/30/94 TO 04/30/97 ):
(( 1,147.59 /1,000 (1/( 1095 /365))-1) = 4.70%
5 YEAR ( 04/30/92 TO 04/30/97 ):
(( 1,269.29 /1,000 (1/( 1825 /365))-1) = 4.88%
10 YEAR ( 04/30/87 TO 04/30/97 ):
(( 1,800.94 /1,000 (1/( 3650 /365))-1) = 6.06%
<PAGE> 3
AMSOUTH MUTUAL FUNDS
EXHIBIT 16
TOTAL RETURN
AMSOUTH EQUITY INCOME FUND
AGGREGATE TOTAL RETURN
----------------------
T = ((ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 03/20/97 TO 04/30/97 ):
( 1,017.53 /1,000)-1) = 1.75%
MONTHLY: ( 03/31/97 TO 04/30/97 ):
( 1,034.95 /1,000)-1) = 3.49%
<PAGE> 4
AMSOUTH MUTUAL FUNDS
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
AMSOUTH EQUITY INCOME FUND
(a-b)
30-Day S.E.C. Yield Equation = 2 ([( --------------- +1)6]-1)=
(cd)
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
( 14,468.19 = 8,679.34)
30-Day S.E.C. Yield = 2 ([( --------------------------- +1)6]-1)= 1.09%
( 598,237.977 = 10.64)
The performance was computed based on the thirty day period ending
April 30, 1997
<PAGE> 1
EXHIBIT 18(a)
Multiple Class Plan for AmSouth Mutual Funds
<PAGE> 2
MULTIPLE CLASS PLAN
FOR AMSOUTH MUTUAL FUNDS
This constitutes a MULTIPLE CLASS PLAN (the "Plan") of AmSouth Mutual
Funds, a Massachusetts business trust (the "Trust"), adopted pursuant to Rule
18f-3(d) under the Investment Company Act of 1940, as amended (the "1940 Act").
The Plan is applicable to each series of the Trust's units of beneficial
interest (each a "Fund" and collectively the "Funds") set forth in Schedule I,
as amended from time to time.
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and shareholder servicing needs of its current and future
investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust, as such term is defined by the 1940 Act, mindful of the requirements
imposed by Rule 18f-3(d) under the 1940 Act, has determined to adopt this Plan
to enable the Funds to provide appropriate services to certain designated
classes of shareholders of the Funds;
NOW, THEREFORE, the Trust designates the Plan as follows:
1. Designation of Classes. Each Fund shall offer its units of beneficial
interest ("Shares") in three classes: Premier Shares, Classic Shares, and Class
B Shares.
2. Redesignation of Existing Shares. The Shares of the Trust outstanding
as of September 21, 1995 were redesignated as of that date as Premier Shares.
3. Purchases. Classic Shares and Class B Shares are distributed to the
general public pursuant to procedures outlined in the Trust's Registration
Statement. Premier Shares may be purchased through procedures established by the
distributor in connection with the requirements of fiduciary, advisory, agency,
custodial and other similar accounts maintained by or on behalf of Customers of
AmSouth Bank of Alabama or one of its affiliates, as outlined in the Trust's
Registration Statement. Classic Shares and Class B Shares are subject to a
minimum initial purchase amount. A minimum initial purchase amount does not
apply to purchases of Premier Shares.
4. Shareholder Services. Classic and Class B Shareholders may make
automatic investments in a Fund from their bank accounts. Classic and Class B
Shareholders may also make regular exchanges and redemptions of Classic or Class
B Shares. These services are not offered to Shareholders of Premier Shares.
<PAGE> 3
5. Sales Charges.
Premier Shares
Premier Shares are not subject to a sales charge at the time of purchase
or upon redemption.
Classic Shares
Classic Shares, except Classic Shares of any money market funds, are
subject to a sales charge at the time of purchase. The sales charge is based on
a percentage of the offering price and may vary based on the amount of purchase.
Sales charges may be waived in accordance with the current Registration
Statement.
Class B Shares
If a Shareholder redeems Class B Shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge assessed
on an amount equal to the lesser of the then current market value or the cost of
the Shares being redeemed. Accordingly, no Contingent Deferred Sales Charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on Shares derived from the reinvestment of
dividends or capital gain distributions. The amount of the Contingent Deferred
Sales Charge, if any, varies depending on the number of years from the time of
payment for the purchase of Class B Shares until the time of redemption of such
Shares. The schedule of Contingent Deferred Sales Charges shall be disclosed in
the Trust's Registration Statement and may be waived in accordance with the
Registration Statement.
6. Shareholder Services Fee.
Premier Shares
Premier Shares are not subject to a shareholder services fee.
Classic Shares
Classic Shares are subject to a shareholder services fee assessed in
accordance with the Shareholder Services Plan adopted by the Trust (the
"Services Plan") (the "Classic Share Fee").
2
<PAGE> 4
7. Distribution and Shareholder Services Fee.
Class B Shares
Class B Shares of the Fund are subject to a distribution and shareholder
services fee assessed in accordance with the Distribution and Shareholder
Services Plan adopted by the Trust (the "Distribution Plan") (the "B Share
Fee"). The Classic Share Fee is lower than the B Share Fee.
8. Exchanges
Premier Shares
Premier Shares of a Fund may be exchanged for Premier Shares of another
Fund. Premier Shares may also be exchanged for Classic Shares, if the
Shareholder ceases to be eligible to purchase Premier Shares.
Classic Shares
Classic Shares may be exchanged for Classic Shares of another Fund.
Classic Shares may be exchanged for Premier Shares only if the Shareholder
becomes eligible to purchase Premier Shares.
Class B Shares
Class B Shares of a Fund may be exchanged for Class B Shares of another
Fund. Class B Shares may not be exchanged for Classic Shares and may be
exchanged for Premier Shares only if the Shareholder becomes eligible to
purchase Premier Shares.
9. Redemptions. Premier Shares and Classic Shares may be redeemed without
charge. Class B Shares may be subject to a Contingent Deferred Sales Charge as
outlined in Section 5.
10. Voting Rights. Each Share held entitles the Shareholder of record to
one vote. Each Fund will vote separately on matters relating solely to that
Fund. Each class of a Fund shall have exclusive voting rights on any matter
submitted to Shareholders that relates solely to that class, and shall have
separate voting rights on any matter submitted to Shareholders in which the
interests of one class differ from the interests of any other class. However,
all Fund Shareholders will have equal voting rights on matters that affect all
Fund Shareholders equally.
11. Expense Allocation. Classic Shares shall pay the expenses associated
with the Services Plan and Class B Shares shall pay the expenses associated with
the Distribution Plan. Each class may, at the Board's discretion, also pay a
different share of other expenses, not including advisory or custodial fees or
other expenses related to the management of the Trust's assets, if these
expenses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than other
classes. All other expenses will be allocated
3
<PAGE> 5
to each class on the basis of the relative net asset value of that class in
relation to the net asset value of the Fund.
12. DIVIDENDS. The amount of dividends payable on Premier Shares may be
more than the dividends payable on Classic Shares or B Shares because of the
respective Classic Share Fee or B Share Fee charged as outlined in Section 6.
13. TERMINATION AND AMENDMENT. This Plan may be terminated or amended
pursuant to the requirement of Rule 18f-3(d) under the 1940 Act.
14. The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated June 25, 1993 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of AmSouth
Mutual Funds entered into in the name or on behalf thereof by any of the Trust,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series and/or class of Shares of the Trust must look solely to the
assets of the Trust belonging to such series and/or class for the enforcement of
any claims against the Trust.
Adopted by the Board of Trustees on December 6, 1995, as amended and
restated March 12, 1997.
4
<PAGE> 1
EXHIBIT 18(b)
Form of Multiple Class Plan for AmSouth Mutual Funds
<PAGE> 2
FORM OF MULTIPLE CLASS PLAN
FOR AMSOUTH MUTUAL FUNDS
This constitutes a MULTIPLE CLASS PLAN (the "Plan") of AmSouth Mutual
Funds, a Massachusetts business trust (the "Trust"), adopted pursuant to Rule
18f-3(d) under the Investment Company Act of 1940, as amended (the "1940 Act").
The Plan is applicable to each series of the Trust's units of beneficial
interest (each a "Fund" and collectively the "Funds") set forth in Schedule I,
as amended from time to time.
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and shareholder servicing needs of its current and
future investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust, as such term is defined by the 1940 Act, mindful of the requirements
imposed by Rule 18f-3(d) under the 1940 Act, has determined to adopt this Plan
to enable the Funds to provide appropriate services to certain designated
classes of shareholders of the Funds;
NOW, THEREFORE, the Trust designates the Plan as follows:
1. DESIGNATION OF CLASSES. Each Fund shall offer its units of
beneficial interest ("Shares") in three classes: Premier Shares, Classic
Shares, and Class B Shares except for the AmSouth U.S. Treasury Fund and Tax
Exempt Fund shall offer only two classes: Premier Shares and Classic Shares.
2. REDESIGNATION OF EXISTING SHARES. The Shares of the AmSouth Prime
Obligations Fund, AmSouth U.S. Treasury Fund, and AmSouth Tax Exempt Fund of
the Trust outstanding as of April 1, 1996 were redesignated as of that date as
Premier Shares. The Shares of the remaining series of the Trust existing as of
March 12, 1997 were redesignated as Classic Shares effective as of September 1,
1997.
3. PURCHASES. Classic Shares and Class B Shares are distributed to the
general public pursuant to procedures outlined in the Trust's Registration
Statement. Premier Shares may be purchased through procedures established by
the distributor in connection with the requirements of fiduciary, advisory,
agency, custodial and other similar accounts maintained by or on behalf of
Customers of AmSouth Bank or one of its affiliates, as outlined in the Trust's
Registration Statement. Classic Shares and Class B shares are subject to a
minimum initial purchase amount. A minimum initial purchase amount does not
apply to purchases of Premier Shares.
4. SHAREHOLDER SERVICES. Classic and Class B Shareholders may make
automatic investments in a Fund from their bank accounts. Classic and Class B
Shareholders may also make regular exchanges and redemptions of Classic or
Class B Shares. These services are not offered to Shareholders of Premier
Shares.
<PAGE> 3
5. SALES CHARGES.
Premier Shares
- --------------
Premier Shares are not subject to a sales charge at the time of
purchase or upon redemption.
Classic Shares
- --------------
Classic Shares, except Classic Shares of any money market funds, are
subject to a sales charge at the time of purchase. The sales charge is based on
a percentage of the offering price and may vary based on the amount of
purchase. Sales charges may be waived for certain purchasers or inapplicable to
purchases over a designated level in accordance with the current Registration
Statement. A contingent deferred sales charge may be assessed on redemptions
within twelve months of purchase of Classic Shares sold without a sales charge
in accordance with the current Registration Statement. The charge will be
assessed on an amount equal to the lesser of the then current market value or
the cost of the Shares being redeemed. Accordingly, no contingent deferred
sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on Shares derived from the
reinvestment of dividends or capital gain distributions.
Class B Shares
- --------------
If a Shareholder redeems Class B Shares prior to the sixth anniversay
of purchase, the Shareholder will pay a contingent deferred sales charge
assessed on an amount equal to the lesser of the then current market value or
the cost of the Shares being redeemed. Accordingly, no contingent deferred
sales charge is imposed on increases in net asset value above the initial
purchase price. In addition, no charge is assessed on Shares derived from the
reinvestment of dividends or capital gain distributions. The amount of the
contingent deferred sales charge, if any, varies depending on the number of
years from the time of payment for the purchase of Class B Shares until the
time of redemption of such Shares. The schedule of contingent deferred sales
charges shall be disclosed in the Trust's Registration Statement and may be
waived in accordance with the Registration Statement.
6. SHAREHOLDER SERVICES FEE.
Premier Shares
- --------------
Premier Shares are not subject to a shareholder services fee.
Classic Shares
- --------------
Classic Shares are subject to a shareholder services fee assessed in
accordance with the Shareholder Services Plan adopted by the Trust (the
"Services Plan") (the "Classic Share Fee").
2
<PAGE> 4
7. DISTRIBUTION AND SHAREHOLDER SERVICES FEE.
Class B Shares
- --------------
Class B Shares of the Fund are subject to a distribution and
shareholder services fee assessed in accordance with the Distribution and
Shareholder Services Plan adopted by the Trust (the "Distribution Plan") (the
"B Share Fee"). The Classic Share Fee is lower than the B Share Fee.
8. EXCHANGES
Premier Shares
- --------------
Premier Shares of a Fund may be exchanged for Premier Shares of another
Fund. Premier Shares may also be exchanged for Classic Shares, if the
Shareholder ceases to be eligible to purchase Premier Shares.
Classic Shares
- --------------
Classic Shares may be exchanged for Classic Shares of another Fund.
Classic Shares may be exchanged for Premier Shares only if the Shareholder
becomes eligible to purchase Premier shares.
Class B Shares
- --------------
Class B Shares of a Fund may be exchanged for Class B Shares of another
Fund. Class B Shares may not be exchanged for Classic Shares and may be
exchanged for Premier Shares only if the Shareholder becomes eligible to
purchase Premier Shares.
9. REDEMPTIONS. Premier Shares and Classic Shares may be redeemed
without charge. Class B Shares may be subject to a Contingent Deferred Sales
Charge as outlined in Section 5.
10. VOTING RIGHTS. Each Share held entitles the Shareholder of record
to one vote. Each Fund will vote separately on matters relating solely to that
Fund. Each class of a Fund shall have exclusive voting rights on any matter
submitted to Shareholders that relates solely too that class, and shall have
separate voting rights on any matter submitted to Shareholders in which the
interest of one class differ from the interests of any other class. However,
all Fund Shareholders will have equal voting rights on matters that affect all
Fund Shareholders equally.
11. EXPENSE ALLOCATION. Classic Shares shall pay the expenses
associated with the Services Plan and Class B Shares shall pay the expenses
associated with the Distribution Plan. Each class may, at the Board's
discretion, also pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the management of the
Trust's assets, if these expenses are actually incurred in a different amount
by that class, or if the class receives services of a different kind or to a
different degree than other classes. All other expenses will be allocated
3
<PAGE> 5
to each class on the basis of the relative net asset value of that class in
relation to the net asset value of the Fund.
12. Dividends. The amount of dividends payable on Premier Shares may be
more than the dividends payable on Classic Shares or B Shares because of the
respective Classic Share Fee or B Share Fee charged as outlined in Section 6.
13. Termination and Amendment. This Plan may be terminated or amended
pursuant to the requirement of Rule 18f-3(d) under the 1940 Act.
14. The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated June 25, 1993 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of AmSouth
Mutual Funds entered into in the name or on behalf thereof by any of the Trust,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series and/or class of Shares of the Trust must look solely to the
assets of the Trust belonging to such series and/or class for the enforcement of
any claims against the Trust.
Adopted by the Board of Trustees on December 6, 1995, as amended and
restated July 16, 1997.
4
<PAGE> 6
SCHEDULE I
MULTIPLE CLASS PLAN
FOR AMSOUTH MUTUAL FUNDS
(as amended and restated July 16, 1997)
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Municipal Bond Fund
<PAGE> 1
EXHIBIT 18(d)
Amended Schedule I to the Shareholder Servicing Plan
<PAGE> 2
SCHEDULE I
This Shareholder Servicing Plan shall be adopted with respect to the
following Funds (and Classes) of AmSouth Mutual Funds:
Name of Fund Class
- ------------ -----
AmSouth Prime Obligations Fund Classic Class
AmSouth U.S. Treasury Fund Classic Class
AmSouth Tax Exempt Fund Classic Class
AmSouth Government Bond Fund Classic Class
AmSouth Bond Fund Classic Class
AmSouth Limited Maturity Fund Classic Class
AmSouth Municipal Bond Fund Classic Class
AmSouth Florida Tax-Free Fund Classic Class
AmSouth Equity Fund Classic Class
AmSouth Regional Equity Fund Classic Class
AmSouth Balanced Fund Classic Class
AmSouth Capital Growth Fund Classic Class
AmSouth Small Cap Fund Classic Class
AmSouth Equity Income Fund Classic Class
<PAGE> 1
EXHIBIT 18(f)
Distribution and Shareholder Services Plan
<PAGE> 2
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
March 12, 1997
This Plan (the "Plan") constitutes the DISTRIBUTION AND SHAREHOLDER
SERVICES PLAN of AmSouth Mutual Funds, a Massachusetts business trust (the
"Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"). The Plan relates to the Class B ("B Shares") of each
series of the Trust (each a "Fund") identified on Schedule A hereto, as such may
be amended from time to time.
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and Shareholder servicing needs of its future investors;
and
WHEREAS, the Board of Trustees, mindful of the requirements imposed by
Rule 12b-1 under the 1940 Act, has determined to effect the Plan for the
provision of distribution assistance with respect to the B Shares of each Fund
listed on Schedule A hereto and for the provision of Shareholder services with
respect to the holders of such Shares of each Fund;
NOW THEREFORE, the Trust and BISYS Fund Services (the "Distributor")
hereby agree as follows:
Section 1. Each Fund, the B Shares of which are listed on Schedule A
hereto, shall pay out of its assets attributable to its B Shares a distribution
and shareholder services fee (the "B Share Fee") to the Distributor equal to the
lesser of (i) the fee at the applicable annual rate set forth in Schedule A
hereto, or (ii) such fee as may be agreed upon in writing by the Trust and the
Distributor. The Distributor may apply the B Share Fee toward the following: (i)
compensation for its services or expenses in connection with distribution
assistance with respect to such Fund's B Shares; (ii) payments to financial
institutions and intermediaries (such as banks, savings and loan associations,
insurance companies, and investment counselors) as brokerage commissions in
connection with the sale of such Fund's B Shares; and (iii) payments to
financial institutions and intermediaries (such as banks, savings and loan
associations, insurance companies, and investment counselors), broker-dealers,
and the Distributor's affiliates and subsidiaries as compensation for services
and/or reimbursement of expenses incurred in connection with distribution or
shareholder services with respect to such Fund's B Shares. The maximum amount of
the B Share Fee that may be payable by the Fund's B Shares for the
aforementioned services and expenses other than services and/or reimbursement of
expenses incurred in connection with shareholder services with respect to such
Fund's B Shares is .75% of the average daily net assets of such Fund's B Shares.
The remaining portion of the B Share Fee is payable by the Fund's B Shares only
as compensation for services and/or reimbursement of expenses incurred in
connection with shareholder services with respect to such Fund's B Shares. As
provided in the Distribution Agreement,
<PAGE> 3
the Distributor may assign its right to receive the B Share Fee to any entity in
connection with the sale of a Fund's B Shares.
Section 2. The B Share Fee shall be accrued daily and payable monthly, and
shall be paid by each Fund to the Distributor irrespective of whether such fee
exceeds the amounts paid (or payable) by the Distributor pursuant to Section 1
of this Part B.
Section 3. The Plan shall not take effect with respect to the B Shares of
a Fund until it has been approved, together with any related agreements, by a
vote of a majority (or whatever greater percentage may, from time to time, be
required by Section 12(b) of the 1940 Act or the rules and regulations
thereunder) 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 operation of this Plan or in any agreements related to this Plan (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on the Plan or such agreement.
Section 4. The Plan shall continue in effect with respect to a class of a
Fund for a period of more than one year after it takes effect, provided that
such continuance is specifically approved at least annually in the manner
provided for approval of the Plan in Section 3.
Section 5. Any person authorized to direct the disposition of monies paid
or payable by a Fund pursuant to the Plan or any related agreement shall provide
to the Trustees of the Trust, and the Trustees shall review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made.
Section 6. The Plan may be terminated with respect to the B Shares of a
Fund at any time by vote of a majority of the Independent Trustees, or by vote
of a majority of the outstanding B Shares of that Fund.
Section 7. All agreements with any person relating to the implementation
of the Plan shall be in writing and any agreement related to the Plan shall
provide:
A. That such agreement, may be terminated with respect to the B Shares
of a Fund at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees, or by vote of a majority of
the outstanding B Shares of that Fund, on not more than 60 days'
written notice; and
B. That such agreement shall terminate automatically in the event of
its assignment.
2
<PAGE> 4
Section 8. The Plan may not be amended to increase materially the amount
of the B Share Fee with respect to a Fund without approval by at least (i) a
majority of the outstanding voting securities of the Fund and (ii) the Trustees
in the manner provided in Section 3 hereof, and all material amendments to the
Plan with respect to a Fund shall be approved by the Trustees in the manner
provided for approval of the Plan in Section 3.
Section 9. As used herein, the terms "assignment," "interested person,"
and "majority of the outstanding voting securities" shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
Section 10. The names "AmSouth Mutual Funds" and "Trustees of AmSouth
Mutual Funds" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under an
Amended Declaration of Trust dated as of June 25, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of
State of the Commonwealth of Massachusetts and elsewhere as required by law, and
to any and all amendments thereto so filed or hereafter filed. The obligations
of AmSouth Mutual Funds entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series and/or class of Shares of the Trust must
look solely to the assets of the Trust belonging to such series and/or class for
the enforcement of any claims against the Trust.
[SEAL] AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
------------------------
Name: John Calvano
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
------------------------
Dated: March 12, 1997
3
<PAGE> 5
Dated: March 12, 1997
Schedule A to the
Distribution and Shareholder Services Plan
dated March 12, 1997
Name of Funds Compensation*
- ------------- -------------
The AmSouth Limited Maturity Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Limited Maturity Fund.
The AmSouth Bond Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Bond Fund.
The AmSouth Government Income Fund -- Annual rate of one percent (1.00%) of
B Shares the average daily net assets of the
AmSouth Government Income Fund.
The AmSouth Florida Tax-Free Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Florida Tax-Free Fund.
The AmSouth Municipal Bond Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Municipal Bond Fund.
The AmSouth Equity Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Equity Fund.
The AmSouth Regional Equity Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Regional Equity Fund.
The AmSouth Balanced Fund-- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Balanced Fund.
The AmSouth Capital Growth Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Capital Growth Fund.
A-1
<PAGE> 6
The AmSouth Small Cap Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Small Cap Fund.
The AmSouth Equity Income Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
[SEAL] AMSOUTH MUTUAL FUNDS
By: /s/ John Calvano
--------------------------------
Title:
-----------------------------
Title: Secretary
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ J. David Huber
--------------------------------
- ----------
* All fees are computed and paid monthly.
A-2
<PAGE> 1
EXHIBIT 18(g)
Form of Amended Schedule A
to the Distribution and Shareholder Services Plan
<PAGE> 2
Dated: __________, 1997
Form of
Schedule A to the
Distribution and Shareholder Services Plan
dated March 12, 1997
Name of Funds Compensation*
- ------------- -------------
The AmSouth Prime Obligations Fund -- Annual rate of one percent (1.00%) of
B Shares the average daily net assets of the
AmSouth Prime Obligations Fund
The AmSouth Limited Maturity Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Limited Maturity Fund.
The AmSouth Bond Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Bond Fund.
The AmSouth Government Income Fund -- Annual rate of one percent (1.00%) of
B Shares the average daily net assets of the
AmSouth Government Income Fund.
The AmSouth Florida Tax-Free Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Florida Tax-Free Fund.
The AmSouth Municipal Bond Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Municipal Bond Fund.
The AmSouth Equity Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Equity Fund.
The AmSouth Regional Equity Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Regional Equity Fund.
The AmSouth Balanced Fund-- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Balanced Fund.
A-1
<PAGE> 3
The AmSouth Capital Growth Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Capital Growth Fund.
The AmSouth Small Cap Fund -- B Shares Annual rate of one percent (1.00%) of
the average daily net assets of the
AmSouth Small Cap Fund.
The AmSouth Equity Income Fund -- B Annual rate of one percent (1.00%) of
Shares the average daily net assets of the
AmSouth Equity Income Fund.
[SEAL]
AMSOUTH MUTUAL FUNDS
By:
------------------------------
Name: --------------------------
Title: --------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
------------------------------
- ----------
* All fees are computed and paid monthly.
A-2
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<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS U.S. TREASURY FUND
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<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS LIMITED MATURITY
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS TAX EXEMPT
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<F1>Classic Shares
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS TAX EXEMPT
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS
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