<PAGE> 1
As filed with the Securities and Exchange Commission
on September 25, 1998
Registration Nos. 33-21660 and 811-5551
---------------------------------------
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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. 28 / X /
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT ____
COMPANY ACT OF 1940 / /
----
____
Amendment No. 29 / X /
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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 ___________, 1998 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
<PAGE> 2
CROSS REFERENCE SHEET
- ---------------------
Part A
<TABLE>
<CAPTION>
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
AMSOUTH MUTUAL FUNDS
PREMIER SHARES
<S> <C>
1. Cover Page............................... Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ........................... Financial Highlights; General Information
- Performance Information
4. General Description
of Registrant ......................... The Trust; Investment Objective and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ...................... The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ......................... Valuation of Shares; How to Purchase and
Redeem Shares
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 3
AMSOUTH MUTUAL FUNDS
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 "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"), the AmSouth Equity Income Fund (the "Equity Income Fund"), the
AmSouth Select Equity Fund (the "Select Equity Fund"), the AmSouth Enhanced
Market Fund (the "Enhanced Market Fund") (collectively, the "Capital
Appreciation Funds") are eighteen series of units of beneficial interest
("Shares") each representing interests in one of eighteen separate investment
funds (the "Funds") of AmSouth Mutual Funds (the "Trust"), an open-end
management investment company. All Funds, except the Institutional Money Market
Funds, offer Premier Shares. All securities or instruments in which the Money
Market Funds and the Institutional Money Market Funds invest have remaining
maturities of 397 days or less. Each Money Market Fund and Institutional 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 U.S.
dollar-denominated money market instruments and other high-quality U.S.
dollar-denominated instruments.
<PAGE> 4
AMSOUTH U.S. TREASURY FUND seeks current income with liquidity and
stability of principal. The 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 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 U.S. corporations and debt securities issued or guaranteed
by the U.S. 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 U.S.
corporations and debt securities issued or guaranteed by the U.S. 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
-2-
<PAGE> 5
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 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. The Fund seeks to achieve growth of income
over the long term.
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 80% of its total assets in common
stocks and securities convertible into common stocks such as convertible bonds
and
-3-
<PAGE> 6
convertible preferred stock of companies with market capitalizations that are
equivalent to the capitalization of the companies in the Russell 2000(R) Growth
Index at the time of purchase. As of the date of this Prospectus, such smaller
companies will have a market capitalization between $50 million and $2 billion
at the time of purchase.
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 SELECT EQUITY FUND (the "Select Equity Fund") seeks long-term
growth of capital by investing primarily in common stocks and securities
convertible into common stocks such as convertible bonds and convertible
preferred stocks. The Fund is non-diversified concentrating on companies which
possess a dominant market share and typically have a history of stable earnings
growth. 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 with market capitalizations
that are greater than $2 billion at the time of purchase.
AMSOUTH ENHANCED MARKET FUND (the "Enhanced Market Fund") seeks
long-term growth of capital by investing primarily in a diversified portfolio of
common stock and securities convertible into common stocks such as convertible
bonds and convertible preferred stocks. Under normal market conditions the Fund
will invest at least 80% of its total assets in equity securities listed in the
Standard & Poor's 500 Index ("S&P 500"). The Fund invests primarily in S&P 500
securities that are determined, through the use of a quantitative investment
approach emphasizing technical factors, to be undervalued compared to others in
the market sector.
AmSouth Bank, Birmingham, Alabama ("AmSouth"), acts as the investment
advisor to each Fund of the Trust (the "Advisor"). Rockhaven Asset Management,
LLC ("Rockhaven" or "Sub-Advisor") acts as the investment sub-advisor to the
Equity Income Fund. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
acts as the investment sub-advisor to the Capital Growth Fund. Sawgrass Asset
Management, LLC ("Sawgrass" or "Sub-Advisor") acts as the investment sub-advisor
to the Small Cap Fund. OakBrook Investments, LLC ("OakBrook" or "Sub-Advisor")
acts as the investment sub-advisor to the Select Equity Fund and the Enhanced
Market Fund. BISYS Fund Services Limited Partnership ("BISYS Fund Services"),
Columbus, Ohio, acts as the Trust's distributor ("Distributor").
-4-
<PAGE> 7
Each Fund, except for the U.S. Treasury Fund, the Tax Exempt Fund, the
Institutional Prime Obligations Fund, and the Institutional U.S. Treasury Fund,
has authorized three classes of Shares: Premier Shares, Classic Shares, and
Class B Shares. The U.S. Treasury Fund and the Tax Exempt Fund have authorized
two classes of Shares: Premier Shares and Classic 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; (iii) orders placed on behalf of other investment companies distributed
by the Distributor and its affiliated companies; and (iv) investors who purchase
through financial institutions approved by the Distributor. All other investors
are eligible to purchase Classic Shares or Class B Shares only.
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.
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.
----------------------
-5-
<PAGE> 8
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 December 1, 1998.
-6-
<PAGE> 9
FEE TABLE FOR THE MONEY MARKET FUNDS
<TABLE>
<CAPTION>
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 0.00% 0.00% 0.00%
Other Expenses 0.29% 0.30% 0.30%
===== ===== =====
Total Fund Operating Expenses
(after voluntary fee reduction
for the Tax Exempt Fund) 0.69% 0.70% 0.50%(4)
===== ===== =====
</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 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 0.40% 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 0.70%.
-7-
<PAGE> 10
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.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Fund $7 $22 $38 $86
U.S. Treasury Fund $7 $22 $39 $87
Tax Exempt Fund $5 $16 $28 $63
</TABLE>
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.
-8-
<PAGE> 11
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 0.50% 0.50% 0.30% 0.30% 0.40%
(after voluntary fee reduction)(3)
12b-1 Fees 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses (after voluntary fee 0.23% 0.23% 0.33% 0.19% 0.24%
reduction)(4)
Total Fund Operating Expenses 0.73% 0.73% 0.63% 0.49% 0.64%
(after voluntary fee reduction)(5)
</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 0.65% 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 0.31% for the Bond Fund, 0.31% for
the Limited Maturity Fund, 0.43% for the Government Income Fund, 0.29% for
the Florida Fund and 0.32% for the Municipal Bond Fund. (See "MANAGEMENT OF
AMSOUTH MUTUAL FUNDS - Administrator and Distributor.")
(5) In the absence of any voluntary reduction in investment advisory fees and
administration fees, Total Fund Operating Expenses would be 0.96% for the
Bond Fund, 0.96% for the Limited Maturity Fund, 1.08% for the Government
Income Fund, 0.94% for the Florida Fund, and 0.97% for the Municipal Bond
Fund.
-9-
<PAGE> 12
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
------ ------- ------- --------
[S] [C] [C] [C] [C]
Bond Fund $7 $23 $41 $91
Limited Maturity Fund $7 $23 $41 $91
Government Income Fund $6 $20 $35 $79
Florida Fund $5 $16 $27 $62
Municipal Bond Fund $7 $20 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.
-10-
<PAGE> 13
FEE TABLE FOR THE CAPITAL APPRECIATION FUNDS
<TABLE>
<CAPTION>
Regional Capital Equity Select Enhanced
Equity Equity Balanced Growth Small Income Equity Market
Fund Fund Fund Fund Cap Fund Fund Fund Fund
---- ---- ---- ---- -------- ---- ---- ----
Premier Premier Premier Premier Premier Premier Premier Premier
Shares Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <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% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 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% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable)(2) 0% 0% 0% 0% 0% 0% 0% 0%
Exchange Fee $0 $0 $0 $0 $0 $0 $0 $0
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of net assets)
Management Fees 0.80% 0.80% 0.80% 0.80% 1.20% 0.80% 0.80% 0.45%
12b-1 Fees 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses (after voluntary fee 0.29% 0.32% 0.30% 0.19% 0.30% 0.39% 0.25% 0.25%
reduction)(3)
Total Fund Operating Expenses 1.09% 1.12% 1.10% 0.99%(4) 1.50%(4) 1.19% 1.05% 0.70%
(after voluntary fee reductions)
</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 Funds. (See "HOW TO PURCHASE AND REDEEM
SHARES - Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a shareholder. (See "HOW TO PURCHASE AND
REDEEM SHARES - Redemption by Telephone.")
(3) Absent the voluntary reduction of administration fees, Other Expenses would
be 0.39% for the Capital Growth Fund and .50% for the Small Cap Fund. The
administration fee of 0.20% is being waived for the Select Equity Fund and
the Enhanced Market Fund until the respective Fund reaches $10 million in
assets. Other Expenses for the Small Cap Fund, the Select Equity Fund, and
the Enhanced Market Fund are based on estimates for the current fiscal
year.
(4) In the absence of any voluntary reduction of administration fees, Total
Fund Operating Expenses would be 1.19% for the Capital Growth Fund and
1.70% for the Small Cap Fund.
-11-
<PAGE> 14
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 $11 $35 $60 $133
Regional Equity Fund $11 $36 $62 $136
Balanced Fund $11 $35 $61 $134
Capital Growth Fund $10 $32 N/A N/A
Small Cap Fund $15 $47 N/A N/A
Equity Income Fund $12 $38 N/A N/A
Select Equity Fund $11 $34 N/A N/A
Enhanced Market Fund $ 7 $22 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.
-12-
<PAGE> 15
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 July 31, 1998. The information from the commencement of operations
to July 31, 1998 is a part of the financial statements audited by
PricewaterhouseCoopers LLP, independent accountants for the Trust, whose report
on the Trust's financial statements for the year ended July 31, 1998 appears in
the Statement of Additional Information. The Select Equity Fund and the Enhanced
Market Fund had not commenced operations as of July 31, 1998. Further financial
data is incorporated by reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Prime Obligations Fund
-----------------------------------------------------------------
Year Ended July 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ----------- ----------- ---- ----
Premier Premier (b) Premier (b)
<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 0.050 0.049 0.050 0 .050 0.029
------ ------ ------ ------ ------
DISTRIBUTIONS
Net investment income (0.050) (0.049) (0.050) (0.050) (0.029)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return 5.09% 5.00% 5.10% 5.14% 2.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $479.974 $416,966 $478,542 $617,673 $577,331
Ratio of expenses to average net assets 0.69% 0.68% 0.71% 0.69% 0.70%
Ratio of net investment income to average
net assets 4.98% 4.89% 5.00% 5.04% 2.92%
Ratio of expenses to average net assets* 0.70% (e) (e) (e) (e)
Ratio of net investment income to average
net assets* 4.98% (e) (e) (e) (e)
<CAPTION>
Prime Obligations Fund
---------------------------------------------
Year Ended July 31,
---------------------------------------------
August 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 0.042 0.067 0.079 0.084
------ ------ ------ ------ ------
DISTRIBUTIONS
Net investment income (0.027) (0.042) (0.067) (0.079) (0.084)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1,000 $1,000 $1,000
====== ====== ====== ====== ======
Total Return 2.76% 4.28% 6.87% 8.16% 8.72%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $456,428 $457,511 $307,873 $298,498 $293,749
Ratio of expenses to average net assets 0.71% 0.71% 0.72% 0.70% 0.58%(c)
Ratio of net investment income to average
net assets 2.73% 4.08% 6.61% 7.88% 8.69%(c)
Ratio of expenses to average net assets* (e) (e) (e) 0.72% 0.71%(c)
Ratio of net investment income to average
net assets* (e) (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.
-13-
<PAGE> 16
<TABLE>
<CAPTION>
U.S. Treasury Fund
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ----------- ----------- ---- ----
Premier Premier (b) Premier (b)
<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 0.047 0.046 0.048 0.048 0.028
-------- ------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.047) (0.046) (0.048) (0.048) (0.028)
-------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======= ======== ======== ========
Total Return 4.77% 4.70% 4.93% 4.90% 2.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $352,055 $309,361 $368,162 $322,939 $300,603
Ratio of expenses to average net assets 0.70% 0.69% 0.71% 0.70% 0.71%
Ratio of net investment income to average
net assets 4.67% 4.60% 4.82% 4.81% 2.77%
Ratio of expenses to average net assets* 0.70% (e) (e) (e) (e)
Ratio of net investment income to average
net assets* 4.66% (e) (e) (e) (e)
</TABLE>
<TABLE>
<CAPTION>
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.
-14-
<PAGE> 17
<TABLE>
<CAPTION>
Tax Exempt Fund
---------------------------------------------------------------------------
Year Ended July 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ----------- ----------- ---- ----
Premier Premier (b) Premier (b)
-------- ----------- -----------
<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 0.031 0.031 0.031 0.032 0.019
------ ------ ------ -------- --------
DISTRIBUTIONS
Net investment income (0.031) (0.031) (0.031) (0.032) (0.019)
------ ------ ------ -------- --------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $ 1.000 $ 1.000
====== ====== ====== ======== ========
Total Return 3.13% 3.15% 3.15% 3.22% 1.95%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $62,084 $55,429 $43,611 $57,640 $60,923
Ratio of expenses to average net assets 0.50% 0.52% 0.54% 0.54% 0.57%
Ratio of net investment income
to average net assets 3.07% 3.10% 3.11% 3.15% 1.93%
Ratio of expenses to average net assets* 0.73% 0.72% 0.74% 0.74% 0.77%
Ratio of net investment income to
average net assets* 2.85% 2.90% 2.91% 2.95% 1.73%
</TABLE>
<TABLE>
<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.
-15-
<PAGE> 18
<TABLE>
<CAPTION>
Bond Fund
-----------------------------------------------------------------------
Year Ended July 31,
-----------------------------------------------------------------------
1998(e) 1997 1996 1995 1994
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.72 $10.54 $10.83 $10.59 $ 11.29
------ ------ ------ ------ --------
INVESTMENT ACTIVITIES
Net investment income 0.57 0.65 0.65 0.69 0.69
Net realized and unrealized
gains (losses) from investments 0.38 0.42 (0.18) 0.28 (0.66)
------ ------ ------ ------ --------
Total from Investment Activities 0.95 1.07 0.47 0.97 0.03
------ ------ ------ ------ --------
DISTRIBUTIONS
Net investment income (0.59) (0.69) (0.65) (0.69) (0.70)
Net realized gains (0.03) -- (0.11) (0.04) (0.03)
------ ------ ------ ------ --------
Total Distributions (0.62) (0.69) (0.76) (0.73) (0.73)
------ ------ ------ ------ --------
NET ASSET VALUE, END OF PERIOD $11.05 $10.92 $10.54 $10.83 $ 10.59
====== ====== ====== ====== ========
Total Return (excludes sales charge) 7.54%(d) 10.48% 4.40% 9.70% 0.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $327,930 $311,881 $132,737 $94,671 $79,472
Ratio of expenses to average net assets 0.73%(b) 0.75% 0.75% 0.75% 0.78%
Ratio of net investment income to average
net assets 5.72%(b) 6.10% 6.12% 6.63% 6.31%
Ratio of expenses to average net assets* 0.97%(b) 0.98% 0.98% 0.98% 1.01%
Ratio of net investment income to average
net assets* 5.48%(b) 5.87% 5.89% 6.40% 6.08%
Portfolio turnover 40.41% 34.62% 9.60% 17.70% 30.90%
</TABLE>
<TABLE>
<CAPTION>
Bond Fund
-----------------------------------------------------------------------
Year Ended July 31,
-----------------------------------------------------------------------
December 1,
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.29 $ 10.42 $ 10.39 $ 10.61 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income 0.71 0.74 0.74 0.77 0.50
Net realized and unrealized
gains (losses) from investments 0.33 0.91 0.05 (0.21) 0.56
------- ------- ------- ------- -------
Total from Investment Activities 1.04 1.65 0.79 0.56 1.06
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income (0.71) (0.73) (0.74) (0.75) (0.45)
Net realized gains (0.33) (0.05) (0.02) (0.03) --
------- ------- ------- ------- -------
Total Distributions (1.04) (0.78) (0.76) (0.78) (0.45)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.29 $ 11.29 $ 10.42 $ 10.39 $ 10.61
======= ======= ======= ======= =======
Total Return (excludes sales charge) 9.80% 16.41% 7.99% 5.54% 10.91%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $65,777 $60,156 $26,008 $17,518 $4,954
Ratio of expenses to average net assets 0.78% 0.82% 0.93% 0.84% 1.10%(b)
Ratio of net investment income to average
net assets 6.37% 6.94% 7.26% 7.82% 7.47%(b)
Ratio of expenses to average net assets* 1.01% 1.01% 1.11% 1.21% 2.28%(b)
Ratio of net investment income to average
net assets* 6.14% 6.75% 7.09% 7.45% 6.29%(b)
Portfolio turnover 14.98% 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.
(d) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 9.03%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-16-
<PAGE> 19
<TABLE>
<CAPTION>
Limited Maturity Fund
--------------------------------------------------------------------
Year Ended July 31,
--------------------------------------------------------------------
1998(e) 1997 1996 1995 1994
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.34 $10.31 $10.41 $10.23 $ 10.81
------ ------ ------ ------ -------
INVESTMENT ACTIVITIES
Net investment income 0.55 0.58 0.58 0.58 0.54
Net realized and unrealized gains (losses)
from investments 0.10 0.14 (0.10) 0.17 (0.45)
------ ------ ------ ------ -------
Total from Investment Activities 0.65 0.72 0.48 0.75 0.09
---- ---- ---- ---- -------
DISTRIBUTIONS
Net investment income (0.56) (0.61) (0.57) (0.57) (0.54)
Net realized gains -- -- (0.01) -- --
In excess of net realized gains -- -- -- -- (0.13)
------ ------ ------ ------ -------
Total Distributions (0.56) (0.61) (0.58) (0.57) (0.67)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $10.43 $10.42 $10.31 $10.41 $ 10.23
====== ====== ====== ====== =======
Total Return (excludes sales charge) 6.04%(d) 7.25% 4.74% 7.65% 0.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $106,953 $138,675 $46,005 $59,798 $51,660
Ratio of expenses to average net assets 0.73%(b) 0.77% 0.76% 0.80% 0.79%
Ratio of net investment income to average
net assets 5.70%(b) 5.65% 5.48% 5.69% 5.05%
Ratio of expenses to average net assets* 0.98%(b) 1.02% 0.99% 1.03% 1.02%
Ratio of net investment income to average
net assets* 5.46%(b) 5.40% 5.25% 5.46% 4.82%
Portfolio turnover 39.31% 64.89% 29.56% 38.11% 48.06%
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity Fund
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
February 1,
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.81 $ 10.44 $ 10.29 $ 10.35 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income 0.60 0.70 0.73 0.72 0.35
Net realized and unrealized gains (losses)
from investments 0.09 0.45 0.17 (0.05) 0.32
------- ------- ------- ------- -------
Total from Investment Activities 0.69 1.15 0.90 0.67 0.67
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income (0.61) (0.69) (0.73) (0.70) (0.32)
Net realized gains (0.08) (0.09) (0.02) (0.03) --
In excess of net realized gains -- -- -- -- --
------- ------- ------- ------- -------
Total Distributions (0.69) (0.78) (0.75) (0.73) (0.32)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.81 $ 10.44 $ 10.29 $ 10.35
======= ======= ======= ======= =======
Total Return (excludes sales charge) 6.72% 11.48% 9.06% 6.80% 6.87%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $53,933 $38,206 $11,112 $5,983 $3,165
Ratio of expenses to average net assets 0.69% 0.68% 0.85% 1.02% 1.41%(b)
Ratio of net investment income to average
net assets 5.67% 6.78% 7.19% 7.23% 6.82%(b)
Ratio of expenses to average net assets* 1.03% 1.03% 1.20% 1.45% 2.72%(b)
Ratio of net investment income to average
net assets* 5.33% 6.43% 6.84% 6.80% 5.51%(b)
Portfolio turnover 141.27% 35.64% 85.08% 119.69% 28.28%
</TABLE>
- -------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
(d) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 6.37%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-17-
<PAGE> 20
<TABLE>
<CAPTION>
Government Income Fund
--------------------------------------------------------------------
Year Ended
July 31, October 1, 1993
-------------------------------------------------- to July 31,
1998(e) 1997 1996 1995 1994(a)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.66 $ 9.40 $ 9.54 $ 9.48 $ 10.00
----- ------ ------ ------ -------
INVESTMENT ACTIVITIES
Net investment income 0.59 0.58 0.66 0.68 0.54
Net realized and unrealized gains (losses)
from investments 0.17 0.35 (0.20) 0.08 (0.57)
----- ------ ------ ------ -------
Total from Investment Activities 0.76 0.93 0.46 0.76 (0.03)
----- ------ ------ ------ -------
DISTRIBUTIONS
Net investment income (0.49) (0.58) (0.59) (0.70) (0.33)
In excess of net investment income (0.06) -- -- -- --
Tax return of capital -- -- (0.01) -- (0.16)
----- ------ ------ ------ -------
Total Distributions (0.55) (0.58) (0.60) (0.70) (0.49)
----- ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $9.87 $ 9.75 $ 9.40 $ 9.54 $ 9.48
===== ====== ====== ====== =======
Total Return (excludes sales charge) 7.58%(d) 10.21% 4.91% 8.43% (0.26)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $2,521 $11,622 $15,752 $16,679 $ 15,465
Ratio of expenses to average net assets 0.63%(b) 0.69% 0.65% 0.580% 0.37%(b)
Ratio of net investment income to average
net assets 5.72%(b) 5.98% 6.81% 7.18% 6.56%(b)
Ratio of expenses to average net assets* 1.80%(b) 1.29% 1.10% 1.19% 1.22%(b)
Ratio of net investment income to average
net assets* 4.56%(b) 5.38% 6.36% 6.57% 5.71%(b)
Portfolio turnover 34.89% 2.96% 78.31% 27.32% 122.94%
</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 total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 8.04%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-18-
<PAGE> 21
<TABLE>
<CAPTION>
Municipal Bond Fund
-------------------
Year Ended July 1, 1997
July 31, 1998(a) to July 31,1997(b)
---------------- ------------------
(unaudited)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.04 $10.00
------ ------
INVESTMENT ACTIVITIES
Net investment income 0.39 0.04
Net realized and unrealized gains
(losses) from investment 0.14 0.15
------ ------
Total from Investment Activities 0.53 0.19
------ ------
DISTRIBUTIONS
Net investment income (0.40) (0.04)
Net realized gains (0.03) (0.00)
------ ------
Total Distributions (0.43) (0.04)
------ ------
NET ASSET VALUE, END OF PERIOD $10.14 $10.15
------ ------
Total Return (excludes sales charge) 4.49%(e) 1.86%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $326,464 $337,933
Ratio of expenses to average net assets 0.64%(d) 0.71%(d)
Ratio of net investment income to average net assets 4.23%(d) 4.31%(d)
Ratio of expenses to average net assets* 0.97%(d) 1.04%(d)
Ratio of net investment income to average net assets* 3.89%(d) 3.98%(d)
Portfolio turnover 28.75% 1.59%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Period from commencement of operations.
(c) Not annualized.
(d) Annualized.
(e) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 5.27%.
-19-
<PAGE> 22
<TABLE>
<CAPTION>
Florida Tax-Free Fund
----------------------------------------------------------------------
Year Ended July 31, September 30, 1994
----------------------------------------- to July 31,
1998(e) 1997 1996 1995(a)
------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.30 $10.32 $10.00
------ ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.41 0.45 0.45 0.34
Net realized and unrealized gains (losses)
from investments 0.14 0.24 (0.01) 0.30
------ ------ ------ ------
Total from Investment Activities 0.55 0.69 0.44 0.64
------ ------ ------ ------
DISTRIBUTIONS
Net investment income (0.41) (0.48) (0.45) (0.32)
Net realized gains (0.07) (0.01) (0.01) --
------ ------ ------ ------
Total Distributions (0.48) (0.49) (0.46) (0.32)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.46 $10.50 $10.30 $10.32
====== ====== ====== ======
Total Return (excludes sales charge) 4.66%(d) 6.89% 4.24% 6.53%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Asset at end of period (000) $55,369 $53,688 $48,869 $48,333
Ratio of expenses to average net assets 0.49%(b) 0.57% 0.59% 0.70%(b)
Ratio of net investment income to average
net assets 4.30%(b) 4.36% 4.33% 4.16%(b)
Ratio of expenses to average net assets* 1.04%(b) 1.06% 1.04% 1.01%(b)
Ratio of net investment income to average
net assets* 3.74%(b) 3.87% 3.88% 3.86%(b)
Portfolio turnover 29.55%(b) 24.05% 12.21% 2.33%
</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 total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 5.40%.
(e) Effective September 2, 1997, the Funds existing shares, which were
previously unclassified were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-20-
<PAGE> 23
<TABLE>
<CAPTION>
Equity Fund
--------------------------------------------------------------
Year Ended July 31,
--------------------------------------------------------------
1998(e) 1997 1996 1995 1994
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.51 $17.62 $16.75 $14.82 $ 14.38
------ ------ ------ ------ -------
INVESTMENT ACTIVITIES
Net investment income 0.28 0.30 0.33 0.33 0.28
Net realized and unrealized gains from
investments 3.31 6.77 1.48 2.39 0.83
------ ------ ------ ------ -------
Total from Investment Activities 3.59 7.07 1.81 2.72 1.11
------ ------ ------ ------ -------
DISTRIBUTIONS
Net investment income (0.28) (0.30) (0.33) (0.32) (0.28)
Net realized gains (1.25) (1.04) (0.61) (0.47) (0.39)
------ ------ ------ ------ -------
Total Distributions (1.53) (1.34) (0.94) (0.79) (0.67)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $24.57 $23.35 $17.62 $16.75 $ 14.82
====== ====== ====== ====== =======
Total Return (excludes sales charge) 12.46%(d) 42.35% 11.09% 19.27% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $947,575 $974,985 $374,622 $275,757 $205,611
Ratio of expenses to average net assets 1.09%(b) 1.06% 1.02% 1.03% 0.94%
Ratio of net investment income to average
net assets 1.26%(b) 1.52% 1.86% 2.17% 1.93%
Ratio of expenses to average net assets* 1.10%(b) 1.10% 1.11% 1.11% 1.11%
Ratio of net investment income to average
net assets* 1.26%(b) 1.48% 1.77% 2.09% 1.76%
Portfolio turnover 16.95% 24.47% 19.11% 19.46% 11.37%
</TABLE>
<TABLE>
<CAPTION>
Equity Fund
-----------------------------------------------
Year Ended July 31,
----------------------------------------------- December 1
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.40 $ 12.57 $11.99 $12.18 $10.00
------- ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.28 0.32 0.36 0.37 0.22
Net realized and unrealized gains from
investments 1.48 1.20 0.61 (0.17) 2.16
------- ------- ------ ------ ------
Total from Investment Activities 1.76 1.52 0.97 0.20 2.38
------- ------- ------ ------ ------
DISTRIBUTIONS
Net investment income (0.29) (0.33) (0.37) (0.35) (0.20)
Net realized gains (0.49) (0.36) (0.02) (0.04) --
------- ------- ------ ------ ------
Total Distributions (0.78) (0.69) (0.39) (0.39) (0.20)
------- ------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 14.38 $ 13.40 $12.57 $11.99 $12.18
======= ======= ====== ====== ======
Total Return (excludes sales charge) 13.81% 12.94% 8.46% 1.66% 24.06%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $153,074 $107,934 $32,406 $14,383 $5,476
Ratio of expenses to average net assets 0.95% 1.01% 1.15% 1.11% 1.16%(b)
Ratio of net investment income to average
net assets 2.08% 2.50% 3.16% 3.16% 2.91%(b)
Ratio of expenses to average net assets* 1.13% 1.15% 1.26% 1.41% 2.34%(b)
Ratio of net investment income to average
net assets* 1.90% 2.36% 3.04% 2.86% 1.73%(b)
Portfolio turnover 15.12% 113.12% 15.78% 14.89% 4.03%
</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 total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 16.52%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-21-
<PAGE> 24
<TABLE>
<CAPTION>
Regional Equity Fund
-------------------------------------------------------------------
Year Ended July 31,
-------------------------------------------------------------------
1998(e) 1997 1996 1995 1994
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $27.95 $20.95 $18.94 $16.68 $ 16.74
------ ------ ------ ------ -------
INVESTMENT ACTIVITIES
Net investment income 0.13 0.24 0.26 0.23 0.23
Net realized and unrealized gains from
investments 0.17 7.77 2.20 2.26 0.58
------ ------ ------ ------ -------
Total from Investment Activities 0.30 8.01 2.46 2.49 0.81
------ ------ ------ ------ -------
DISTRIBUTIONS
Net investment income (0.10) (0.24) (0.26) (0.23) (0.23)
In excess of net investment income (0.01) -- -- -- --
Net realized gains (0.94) (0.49) (0.19) -- (0.41)
In excess of net realized gains -- -- -- -- (0.23)
------ ------ ------ ------ -------
Total Distributions (1.05) (0.73) (0.45) (0.23) (0.87)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $27.20 $28.23 $20.95 $18.94 $ 16.68
====== ====== ====== ====== =======
Total Return (excludes sales charge) (0.12%)(d) 39.02% 13.10% 15.10% 4.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $94,909 $149,838 $93,584 $68,501 $54,744
Ratio of expenses to average net assets 1.12%(b) 1.06% 1.05% 1.07% 0.79%
Ratio of net investment income to
average net assets 0.45%(b) 0.99% 1.30% 1.35% 1.36%
Ratio of expenses to average net assets* 1.13%(b) 1.10% 1.13% 1.15% 1.24%
Ratio of net investment income to
average net assets* 0.44%(b) 0.95% 1.22% 1.27% 0.90%
Portfolio turnover 8.17% 10.30% 8.22% 14.25% 5.83%
</TABLE>
<TABLE>
<CAPTION>
Regional Equity Fund
------------------------------------------------
Year Ended July 31,
------------------------------------------------ December 1,
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.86 $ 13.44 $12.45 $11.64 $10.00
------- ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.19 0.23 0.26 0.23 0.14
Net realized and unrealized gains from
investments 2.09 2.34 1.20 0.84 1.64
------- ------- ------ ------ ------
Total from Investment Activities 2.28 2.57 1.46 1.07 1.78
------- ------- ------ ------ ------
DISTRIBUTIONS
Net investment income (0.20) (0.23) (0.26) (0.22) (0.14)
In excess of net investment income -- -- -- -- --
Net realized gains (0.20) (0.92) (0.21) (0.04) --
In excess of net realized gains -- -- -- -- --
------- ------- ------ ------ ------
Total Distributions (0.40) (1.15) (0.47) (0.26) (0.14)
------- ------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 16.74 $ 14.86 $13.44 $12.45 $11.64
======= ======= ====== ====== ======
Total Return (excludes sales charge) 15.53% 20.66% 12.52% 9.41% 17.79%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $41,347 $15,707 $7,853 $3,161 $2,523
Ratio of expenses to average net assets 0.80% 0.91% 0.79% 1.22% 1.41%(b)
Ratio of net investment income to
average net assets 1.17% 1.61% 2.21% 1.92% 1.98%(b)
Ratio of expenses to average net assets* 1.28% 1.36% 1.58% 2.32% 2.65%(b)
Ratio of net investment income to
average net assets* 0.69% 1.16% 1.42% 0.82% 0.74%(b)
Portfolio turnover 10.22% 24.99% 14.41% 14.00% 1.13%
</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 total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 0.87%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-22-
<PAGE> 25
<TABLE>
<CAPTION>
Balanced Fund
-----------------------------------------------------------
Year Ended July 31,
-----------------------------------------------------------
1998(e) 1997 1996 1995
------- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.77 $13.03 $12.76 $11.81
------ ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.41 0.48 0.47 0.47
Net realized and unrealized gains from
investments 1.38 2.78 0.58 1.24
------ ------ ------ ------
Total from Investment Activities 1.79 3.26 1.05 1.71
------ ------ ------ ------
DISTRIBUTIONS
Net investment income (0.41) (0.50) (0.47) (0.46)
Net realized gain (0.97) (0.58) (0.31) (0.30)
------ ------ ------ ------
Total Distributions (1.38) (1.08) (0.78) (0.76)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.18 $15.21 $13.03 $12.76
====== ====== ====== ======
Total Return (excludes sales charge) 9.73%(d) 26.42% 8.37% 15.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $329,626 $372,769 $338,425 $295,509
Ratio of expenses to average net assets 1.10%(b) 1.05% 0.98% 0.94%
Ratio of net investment income to average
net assets 2.95%(b) 3.49% 3.61% 3.91%
Ratio of expenses to average net assets* 1.10%(b) 1.10% 1.11% 1.12%
Ratio of net investment income to average
net assets* 2.94%(b) 3.44% 3.48% 3.73%
Portfolio turnover 25.40% 25.00% 20.47% 16.97%
</TABLE>
<TABLE>
<CAPTION>
Balanced Fund
--------------------------
Year Ended July 31,
-------------------------- December 19,
1991 to
July 31,
1994 1993 1992(a)
---- ---- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.86 $ 11.12 $ 10.00
------- ------- -------
INVESTMENT ACTIVITIES
Net investment income 0.42 0.44 0.27
Net realized and unrealized gains from
investments 0.18 0.80 1.09
------- ------- -------
Total from Investment Activities 0.60 1.24 1.36
------- ------- -------
DISTRIBUTIONS
Net investment income (0.42) (0.45) (0.24)
Net realized gain (0.23) (0.05) --
------- ------- -------
Total Distributions (0.65) (0.50) (0.24)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.81 $ 11.86 $ 11.12
======= ======= =======
Total Return (excludes sales charge) 5.13% 11.47% 13.71%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $236,306 $179,134 $143,813
Ratio of expenses to average net assets 0.84% 0.84% 0.83%(b)
Ratio of net investment income to average
net assets 3.56% 3.90% 4.45%(b)
Ratio of expenses to average net assets* 1.11% 1.12% 1.17%(b)
Ratio of net investment income to average
net assets* 3.28% 3.62% 4.10%(b)
Portfolio turnover 14.43% 11.09% 23.18%
</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 total return based on the activity of the Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 12.70%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-23-
<PAGE> 26
<TABLE>
<CAPTION>
Equity Income Fund
----------------------------------------
Year Ended March 20, 1997
July 31, 1998(e) to July 31, 1997(a)
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.35 $10.00
------ ------
INVESTMENT ACTIVITIES
Net investment income 0.25 0.07
Net realized and unrealized gains from investments 0.95 1.71
---- ----
Total from Investment Activities 1.20 1.78
------ ------
DISTRIBUTIONS
Net investment income (0.25) (0.06)
Net realized gain (0.41) --
------ ------
Total Distributions (0.66) (0.06)
------ ------
NET ASSET VALUE, END OF PERIOD $11.89 $11.72
====== ======
Total Return (excludes sales charge) 7.54%(d) 17.81%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $8,087 $22,273
Ratio of expenses to average net assets 1.19%(b) 1.30%(b)
Ratio of net investment income to average net assets 2.34%(b) 2.13%(b)
Ratio of expenses to average net assets* 1.35%(b) 1.51%(b)
Ratio of net investment income to average net assets* 2.17%(b) 1.92%(b)
Portfolio turnover 83.26% 27.38%
</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 total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 10.82%.
(e) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
-24-
<PAGE> 27
Capital Growth Fund
<TABLE>
<CAPTION>
August 3, 1997 to
to July 31, 1998(a)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.55
------
INVESTMENT ACTIVITIES
Net investment income --
----
Net realized and unrealized gains (losses) from investments 2.10
----
Total from Investment Activities 2.10
DISTRIBUTIONS
Net investments income --
Net realized gains --
Total Distributions --
NET ASSET VALUE, END OF PERIOD $11.65
======
Total Return (excludes sales charge) 16.50%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $2,824
Ratio of expenses to average net assets 0.99%(c)
Ration of net investment income to average net assets 0.00%(c)
Ratio of expenses to average net assets* 2.05%(c)
Ratio of net investment income to average net assets* (1.05)%(c)
Portfolio turnover 77.26%
</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. Effective September 2, 1997, the
Fund's existing shares, which were previously unclassified, were designated
either Classic Shares or Premier Shares. For reporting purposes, financial
highlights prior to September 2, 1997 are being reflected as Classic
Shares.
(b) Not annualized.
(c) Annualized.
(d) Represents total return based on the activity of Classic Shares for the
period from August 3, 1997 to September 1, 1997 and the activity of Premier
Shares for the period from September 2, 1997 to July 31, 1998. Total return
for the Premier Shares for the period from September 2, 1997 (commencement
of operations) to July 31, 1998 was 21.99%
-25-
<PAGE> 28
SMALL CAP FUND
<TABLE>
<CAPTION>
March 2, 1998 to
to July 31, 1998(c)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INVESTMENT ACTIVITIES
Net investment income (0.02)
Net realized and unrealized gains (losses) from investments (0.83)
Total from Investment Activities (0.85)
DISTRIBUTIONS
Net investment income --
Net realized gains --
Total Distributions --
NET ASSET VALUE, END OF PERIOD $ 9.15
Total Return (excludes sales charge) (8.48)%)(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $ 5,072
Ratio of expenses to average net assets 1.50%(b)
Ratio of net investment income to average net assets* (0.52)%(b)
Ratio of expenses to average net assets* 3.94%(b)
Ratio of net investment income to average net assets* (2.96)%(b)
Portfolio turnover 70.64%
</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) Not annualized.
(b) Annualized.
(c) Period from commencement of operations.
-26-
<PAGE> 29
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 THE U.S. TREASURY FUNDS
The investment objective of the Prime Obligations Fund and the U.S.
Treasury Fund is to seek current income with liquidity and stability of
principal. Although the Prime Obligations Fund and the 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.
-27-
<PAGE> 30
U.S. GOVERNMENT SECURITIES
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.
Bank Obligations
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 DEMAND NOTES
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
-28-
<PAGE> 31
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.
OTHER INVESTMENTS
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.
The U.S. TREASURY FUND invests exclusively in short-term U.S.
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 U.S. Treasury
Fund may be subject to repurchase agreements collateralized by the underlying
U.S. Treasury obligation.
THE BOND FUND AND THE 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 U.S. corporations or issued or guaranteed by the U.S. 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
-29-
<PAGE> 32
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, U.S. 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 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 U.S. corporations or issued or guaranteed by the U.S. 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
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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 five 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 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 U.S. 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
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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 U.S. Treasury
Bonds. Such zero-coupon obligations pay no current interest and are typically
sold at prices greatly discounted from par value, with par value to be paid to
the holder at maturity. The return on a zero-coupon obligation, when held to
maturity, equals the difference between the par value and the original purchase
price. Zero-coupon obligations have greater price volatility than coupon
obligations and such obligations will be purchased when the yield spread, in
light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the Bond Fund's total assets, and
the Limited Maturity Fund will only purchase zero-coupon obligations if, at the
time of purchase, such investments do not exceed 25% of the value of the Limited
Maturity Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the 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.
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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.
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 U.S. government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned U.S. 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 U.S. government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
government- sponsored corporations owned entirely by private stockholders.
Pass-through securities issued
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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 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
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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 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
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the value of the Fund's net assets would be invested in such securities and
other illiquid securities.
In reliance on a recent staff interpretation, the Government Income
Fund's investment in certain qualifying CMOs, including CMOs that have elected
to be treated as Real Estate Mortgage Investment Conduits (REMICs), are not
subject to the 1940 Act's limitation on acquiring interests in other investment
companies. In order to be able to rely on the staff's interpretation, the CMOs
and REMICs must be unmanaged, fixed-asset issuers, that (a) invest primarily in
mortgaged-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act, and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that the Government Income Fund selects CMOs or REMICs
that do not meet the above requirements, the Government Income Fund's investment
in such securities will be subject to the limitations on its investment in
investment company securities as set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Statement of Additional Information.
The Government Income Fund expects that governmental,
government-related or private entities may create mortgage loan pools offering
pass-through investments in addition to those described above. The mortgages
underlying these securities may be alternative mortgage instruments, that is,
mortgage instruments whose principal or interest payments may vary or whose
terms to maturity may be different from customary long-term fixed rate
mortgages. As new types of mortgage-related securities are developed and offered
to investors, 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, THE FLORIDA FUND AND THE 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
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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 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.
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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
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
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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 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
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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 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 U.S. 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
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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.
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
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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
1995 was $19,209, 82.8% of U.S. per capita income. 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 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.
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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 Section 222 of the Constitution of Alabama. In so
holding, the Court found that warrants are not "bonds" within the meaning of
Section 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.
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.
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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.
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 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.
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The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
SOURCES OF STATE AND LOCAL REVENUES
Florida's Constitution prohibits deficit spending by the state for
governmental operations. Florida does not have a personal income tax. An
amendment to the state's Constitution would be required in order to institute an
income tax, and passage of such an amendment is believed to be unlikely due to
the relatively large number of retirees living in the state as well as to the
general unpopularity of tax increases in the current political climate. A
two-thirds approval of voters voting in an election is now required for the
addition of any new taxes to the Florida Constitution. The principal sources of
state revenues are a 6% sales tax, state lottery, motor fuels tax, corporate
income tax, and miscellaneous other revenue sources, including beverage tax and
licenses, cigarette tax, documentary stamp taxes and an intangible tax.
Dependence on the sales tax may subject state revenues to more volatility than
would be the case if Florida had a personal income tax, with sales tax
collections adversely affected during recessions and periods when tourism
declines.
Taxation by units of government other than the state is permitted only
to the extent that Florida's legislature enacts enabling legislation. The
principle sources of county and municipal government revenues are ad valorem
property taxes, state revenue sharing, and miscellaneous other revenue sources,
including utilities services fees and local option fees. The principal sources
of revenues for Florida's school districts are ad valorem property taxes and
state revenue sharing, including revenues from a state lottery. The state
Constitution imposes millage limits, including a 10-mill limit each on county,
municipal and school ad valorem taxes. Effective January 1, 1995, Florida's
voters amended the state Constitution to limit annual increases in the assessed
value of homestead property to the lesser of 3% of the prior year's assessment
or the percentage change in the Consumer Price Index during the preceding
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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.
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.
THE 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
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be contrary to the present expectations of other professional investors. These
decisions may involve greater risks compared to other mutual funds, of either
(a) more accurate assessment by other investors, in which case losses may be
incurred by a Fund, or (b) long delay in investor recognition of the accuracy of
the investment decisions of a Fund, in which case invested capital of a Capital
Appreciation Fund in an individual security or group of securities may not
appreciate for an extended period.
The equity securities in which the Capital Appreciation Funds may
invest may be subject to wider fluctuations in value than some other forms of
investment. Depending upon the performance of a Capital Appreciation Fund's
investments, the net asset value per Share of such Fund may decrease instead of
increase.
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
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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
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
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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 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 Fund seeks to achieve growth of income over
the long term. 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 Sub-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."
In managing the Capital Growth Fund, the Sub-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.
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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 80% of its total assets in common
stocks and securities convertible into common stocks such as convertible bonds
and convertible preferred stock of companies with market capitalizations that
are equivalent to the capitalization of the companies in the Russell 2000(R)
Growth Index at the time of purchase. As of the date of this Prospectus, such
smaller companies will have a market capitalization between $50 million and $2
billion at the time of purchase. Under normal market conditions, the Small Cap
Fund may invest up to 20% of the value of its total assets in common stocks and
securities convertible into common stocks of companies with a market
capitalization of greater than $2 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, the Small Cap 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 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.
In managing the Small Cap Fund, the Sub-Advisor seeks smaller companies
with above-average growth potential. Factors the Sub-Advisor typically considers
in selecting securities include positive changes in earnings estimates for
future growth, higher than market average profitability, a strategic position in
a specialized market and fundamental value.
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
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convertible securities will vary according to the Fund's assessment of market
and economic conditions and outlook. Under normal market conditions, the Equity
Income Fund may also invest up to 35% of the value of its total assets in
corporate bonds, notes, and warrants, and obligations with maturities of 12
months or less such as commercial paper (including variable amount master demand
notes), bankers' acceptances, certificates of deposit, repurchase agreements,
money market mutual funds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. If deemed
appropriate for temporary defensive purposes, the Equity Income Fund may
increase its holdings in short-term obligations to over 35% of its total assets
and may also hold uninvested cash pending investment. The Equity Income Fund may
also write covered call options. See "Options."
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.
The Select Equity Fund seeks long-term growth of capital by investing
primarily in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stocks. The Fund is non-diversified.
Under normal market conditions, the Select Equity 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 market capitalizations that are greater than $2 billion at the
time of purchase. Under normal market conditions, the Select Equity Fund may
invest up to 35% of the value of its total assets in common stocks and
securities convertible into common stocks of companies with market
capitalizations less than $2 billion, 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 Select 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. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market. See "Options" and "Futures."
The Select Equity Fund seeks to obtain its investment objective by
investing primarily in companies that possess a dominant market share and have a
barrier, such as a patent or well-known brand name, that shields its market
share and profits from competitors. These companies typically have long records
of stable earnings growth. The
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Sub-Advisor continuously monitors a universe of companies that possess a
dominant market share to look for opportunities to purchase such stocks at
reasonable prices.
In managing the investment portfolio for the Select Equity Fund, the
Sub-Advisor may focus on a relatively limited number of stocks (i.e., generally
25 or less). The Sub-Advisor believes that this investment strategy has the
potential for higher total returns than an investment strategy calling for
investment in a larger number of securities. However, the use of this focused
investment strategy may increase the volatility of the Fund's investment
performance. If the securities in which the Fund invests perform poorly, this
Fund could incur greater losses than it would have had it been invested in a
greater number of securities.
The Select Equity Fund is a non-diversified fund under the Investment
Company Act of 1940. This means it may concentrate its investments in the
securities of a limited number of issuers. Under the Code, at the end of each
fiscal quarter the Fund must nevertheless diversify its portfolio such that,
with respect to 50% of its total assets, not more than 25% of its assets is
invested in the securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment companies), and with
respect to the remainder of its total assets, no more than 5% of its assets is
invested in the securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment companies).
The Enhanced Market Fund seeks to produce long-term growth of capital
by investing primarily in a diversified portfolio of common stock and securities
convertible into common stocks such as convertible bonds and convertible
preferred stock. Under normal market conditions, the Enhanced Market Fund will
invest at least 80% of its total assets in equity securities drawn from the S&P
500 Index. Under normal market conditions, the Enhanced Market Fund may invest
up to 20% of the value of its total assets in equity securities not held in the
S&P 500, 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 Enhanced Market Fund
may increase its holdings in short-term obligations to over 20% of its total
assets and may also hold uninvested cash pending investment. Stock futures and
option contracts, stock index futures and index option contracts may be used to
hedge cash and maintain exposure to the U.S. equity market. See "Options" and
"Futures."
The Fund seeks to obtain its investment objective by investing
primarily in a broadly diversified portfolio of S&P 500 stocks that are
determined, through the use of a quantitative investment approach emphasizing
technical factors, to be undervalued
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compared to others in their market sector. The Fund seeks to maintain risk
characteristics similar to that of the S&P 500.
The Sub-Advisor's stock selection process utilizes computer-aided
quantitative analysis. The Sub-Advisor's computer models use many types of data,
but emphasize technical data such as price and volume information. Applying
these models to stocks within the S&P 500, the Sub-Advisor hopes to generate
more capital growth than that of the S&P 500. The Sub-Advisor's emphasis on
technical analyses can result in significant shifts in portfolio holdings at
different times. However, stringent risk controls at the style, industry and
individual stock levels help ensure the Fund maintains risk characteristics
similar to those of the S&P 500.
REAL ESTATE INVESTMENT TRUSTS
The Capital Growth Fund, the Small Cap Fund, the Equity Income Fund,
and the Enhanced Market 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 U.S. 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 thirty days' written
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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, the Limited Maturity Fund, the 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 transaction 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, the Balanced Fund, the Select Equity
Fund, and the Enhanced Market Fund may purchase put options as the Advisor or
Sub-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, the Balanced Fund, the Select Equity Fund, and the Enhanced
Market 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, the
Select Equity Fund, and the Enhanced Market 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). Each Fund intends to enter into
puts only with dealers, banks, and broker-dealers which, in the Advisor's or
Sub-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.
FUTURES CONTRACTS
To the extent consistent with its investment objective, the Select
Equity Fund and the Enhanced Market Fund may also invest in futures contracts
and options on futures contracts to commit funds awaiting investment, to
maintain cash liquidity or for other hedging purposes. The value of a Fund's
contracts may equal or exceed 100% of the Fund's total assets, although a Fund
will not purchase or sell a futures contract unless immediately afterwards the
aggregate amount of margin deposits on its existing futures positions plus the
amount of premiums paid for related futures options entered into for other than
bona fide hedging purposes is 5% or less of its net assets.
Futures contracts obligate a Fund, at maturity, to take or make
delivery of securities, the cash value of a securities index or a stated
quantity of a foreign currency. A Fund may sell a futures contract in order to
offset an expected decrease in the value of
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its portfolio positions that might otherwise result from a market decline or
currency exchange fluctuation. A Fund may do so either to hedge the value of its
securities portfolio as a whole, or to protect against declines occurring prior
to sales of securities in the value of the securities to be sold. In addition, a
Fund may utilize futures contracts in anticipation of changes in the composition
of its holdings or in currency exchange rates.
The Select Equity Fund and the Enhanced Market Fund may purchase and
sell call and put options on futures contracts traded on an exchange or board of
trade. When a Fund purchases an option on a futures contract, it has the right
to assume a position as a purchaser or a seller of a futures contract at a
specified exercise price during the option period. When a Fund sells an option
on a futures contract, it becomes obligated to sell or buy a futures contract if
the option is exercised. In connection with a Fund's position in a futures
contract or related option, a Fund will create a segregated account of liquid
assets or will otherwise cover its position in accordance with applicable SEC
requirements.
The risks related to the use of futures contracts include: (i) the
correlation between movements in the market price of the portfolio investments
(held or intended for purchase) being hedged and in the price of the futures
contract may be imperfect; (ii) possible lack of a liquid secondary market for
closing out futures positions; (iii) the need for additional portfolio
management skills and techniques; (iv) losses due to unanticipated market
movements; and (v) a purchaser's inability to predict correctly the direction of
securities prices, interest rates, currency exchange rates, and other economic
factors. Successful use of futures is subject to the ability correctly to
predict movements in the direction of the market. For example, if a Fund uses
futures contracts as a hedge against the possibility of a decline in the market
adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit of the increased value of
its securities that it has hedged because the Fund will have approximately equal
offsetting losses in its future positions. The risk of loss in trading futures
contracts in some strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage involved in futures
pricing. As a result, a relatively small price movement in a futures contract
may result in immediate and substantial loss or gain to the investor. Thus, a
purchase or sale of a futures contract may result in losses or gains in excess
of the amount invested in the contract.
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-
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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 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 (the "AmSouth Money Market Funds"), the AmSouth Institutional
Prime Obligations Fund, the AmSouth Institutional U.S. Treasury Fund (the
"AmSouth Institutional Money Market Funds") 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
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investments by each of the Funds in the AmSouth Money Market Funds and the
AmSouth Institutional Money Market Funds, 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 and the AmSouth
Institutional Money Market Funds, and with respect to the Tax-Free Funds, the
AmSouth Tax Exempt Fund, 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 unaffiliated money market funds, the AmSouth Money Market Funds,
and the AmSouth Institutional 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.
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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. To the extent
portfolio turnover results in the realization of short-term capital gains, such
gains are generally taxed at ordinary income tax rates. Portfolio turnover for
the Small Cap Fund and the Enhanced Market Fund is estimated to not exceed 200%
in the coming year. Portfolio turnover for the Select Equity Fund is estimated
to not exceed 50% in the coming year.
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 U.S.
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.
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THE 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 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, THE LIMITED MATURITY FUND, THE GOVERNMENT INCOME FUND,
THE MUNICIPAL BOND FUND AND THE CAPITAL APPRECIATION FUNDS MAY NOT:
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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. This investment restriction does not apply
to the Select Equity Fund.
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 or 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) 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, THE INCOME FUNDS, AND THE 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 (33 1/3% with respect to the Select Equity Fund); 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 (33 1/3% with respect to the Select Equity Fund). A Fund will not
purchase securities while
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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 Business Day of such Fund. The net asset value of each
of the Prime Obligations Fund and the 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.
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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.
Each Fund, except the U.S. Treasury Fund and the Tax Exempt Fund, has
been divided into three classes of Shares: Premier Shares, Classic Shares and
Class B Shares. Class B Shares are not currently offered in the Limited Maturity
Fund, Government Income Fund, Florida Fund and Municipal Bond Fund. The U.S.
Treasury Fund and the Tax Exempt Fund are divided into two classes of Shares:
Premier Shares and Classic Shares. The three classes of a particular Fund (or
two classes with respect to the U.S. Treasury Fund and the Tax Exempt 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; (iii) orders placed on behalf of other investment companies
distributed by the Distributor and its affiliated companies; and (iv) investors
who purchase through financial institutions approved by the Distributor. 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
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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 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 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
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(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.
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
EXCHANGES BETWEEN CLASSES OF A FUND
Premier Shares of a Fund may be exchanged for Classic Shares of the
same Fund, if the Shareholder ceases to be eligible to purchase Premier Shares.
Premier Shares of a Fund may not be exchanged for Class B Shares. A sales charge
is not imposed when Premier Shares are exchanged for Classic Shares of the same
Fund. An exchange of Premier Shares for Classic Shares of the same Fund will not
be a taxable event for a Shareholder.
EXCHANGES BETWEEN FUNDS
Premier Shares of a Fund may be exchanged for Premier Shares of another
Fund, provided that the Shareholder making the exchange is eligible on the date
of the exchange to purchase Premier Shares. Alternatively, Premier Shares of a
Fund may be exchanged for Classic Shares of another Fund if a Shareholder is no
longer eligible to purchase Premier Shares.
An exchange of Premier Shares of one Fund for Premier or Classic Shares
of another Fund is considered to be a taxable event for federal income tax
purposes on which a Shareholder may realize a capital gain or loss.
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ADDITIONAL INFORMATION ABOUT EXCHANGES
The Trust does not impose a charge for processing exchanges of its
Premier Shares. All exchanges will be effected based on the relative net asset
value next determined after the exchange order is received. Before exchanging
Shares, a Shareholder must receive a current prospectus describing the Shares to
be acquired. 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 the Funds may legally be sold,
and may be amended or terminated at any time upon sixty (60) days' prior notice
to Shareholders.
The Exchange Privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Excessive exchange transactions
may potentially disrupt the management of the Trust and increase transaction
costs. Accordingly, in order to prevent excessive use of the Exchange Privilege,
the Trust has established a policy of prohibiting excessive exchange activity.
Exchange activity will not be deemed excessive if limited to four substantive
exchange redemptions from a Fund during a calendar year.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains
and dividends) 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.
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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.
REDEMPTION BY MAIL
A written request for redemption must be received by the Transfer Agent
at AmSouth Mutual Funds, 3435 Stelzer Road, Columbus, OH 43219, 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 previously
designated bank account. 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. Wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The wire redemption charge is
currently $7.00, however, such charge may be reduced by the Transfer Agent.
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
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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 PURCHASE AND 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 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 or Capital Appreciation
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
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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.
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 Internal Revenue Code of 1986, as amended (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 it distributes 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
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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.
THE MONEY MARKET FUNDS
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. 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.
INFORMATION SPECIFIC TO THE PRIME OBLIGATIONS FUND AND THE 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 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 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 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.
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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.
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.
INFORMATION SPECIFIC TO THE BOND FUND, THE LIMITED MATURITY FUND AND THE
GOVERNMENT INCOME FUND
Distributions by the Bond Fund, the Limited Maturity Fund and the
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 to these distributions.
Distributions designated by the Bond Fund, the Limited Maturity Fund
and the Government Income Fund as derived from net gains on securities held for
more than one year, but not more than 18 months, or, from net gains on
securities held for more than 18 months, are taxable to Shareholders as such
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, the Limited Maturity Fund
or the 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.
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Dividends received by a Shareholder that are derived from the Bond
Fund's, the Limited Maturity Fund's or the Government Income 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 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 U.S. 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, the Limited
Maturity Fund and the 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.
INFORMATION SPECIFIC TO THE TAX EXEMPT FUND, THE FLORIDA FUND AND THE MUNICIPAL
BOND FUND
Shareholders of the Tax Exempt Fund and the Tax-Free Funds 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
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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.
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
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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 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 Technical
Assistance Advisement confirming this tax treatment has been obtained 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,
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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 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 that meet the holding period
requirements in the Code 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 designated by a Capital Appreciation Fund as deriving
from net gains on securities held for more than one year is taxable to
Shareholders as such, regardless of how long the Shareholder has held Shares in
such Fund. Such distributions are not eligible for the dividends-received
deduction.
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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 and
distributions on a Fund's shares are generally subject to federal income tax as
described herein to the extent they do not exceed the Fund's realized income and
gains, even though such dividends and distributions may economically represent a
return of a particular shareholder's investment. Such distributions are likely
to occur in respect of shares purchased at a time when the Fund's net asset
value reflects gains that are either unrealized, or realized but not
distributed. 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.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
TRUSTEES OF THE TRUST
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust, who are elected by the Shareholders of the Trust.
There are currently six Trustees, two of whom are "interested persons" of the
Trust within the meaning of that term under the Investment Company Act of 1940.
The Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name, Address and Age With the Trust During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
George R. Landreth*, 56 Chairman From December 1992 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS Fund Services
Columbus, OH 43219 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
</TABLE>
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<PAGE> 83
<TABLE>
<S> <C> <C>
Dick D. Briggs, Jr., M.D., 64 Trustee From September 1989 to
459 DER Building present, Emeritus
1808 7th Avenue South Professor and Eminent
UAB Medical Center Scholar Chair, Univ. of
Birmingham, Alabama 35294 Alabama at Birmingham;
from October 1979 to
present, Physician,
University of Alabama
Health Services
Foundation; from 1981 to
1995, Professor and Vice
Chairman, Department of
Medicine, University of
Alabama at Birmingham
School of Medicine; from
June 1988 to October
1992, President, Chief
Executive Officer and
Medical Director,
University of Alabama
Health Services
Foundation
Wendell D. Cleaver, 63 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*, 52 Trustee From June 1987 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS Fund Services
Columbus, OH 43219 Limited Partnership
Homer H. Turner, Jr., 70 Trustee From June 1991 to
751 Cary Drive present, retired; until
Auburn, Alabama 36830 June 1991, Vice
President, Birmingham
Division, Alabama Power
Company
James H. Woodward, Jr., 58 Trustee From 1996 to present,
The University of North Trustee, The Sessions
Carolina at Charlotte Group; from July 1989 to
Charlotte, North Carolina 28223 present, Chancellor, The
University of North
Carolina at Charlotte;
from April 1997 to
present, Trustee, BISYS
Variable Insurance Funds;
from August 1984 to July
1989, Senior Vice
President, University
College, University of
Alabama at Birmingham
</TABLE>
- --------------------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS
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Fund Services, or BISYS Fund Services, 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, 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 July 31, 1998 of $19.9 billion and operated 276 banking offices in Alabama,
Florida, Georgia and Tennessee. AmSouth has provided investment management
services through its Trust Investment Department since 1915. As of July 31,
1998, AmSouth and its affiliates had over $8.8 billion in assets under
discretionary management and provided custody services for an additional $18.7
billion in securities. AmSouth is the largest provider of trust services in
Alabama 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, the Capital Growth Fund, the Small Cap Fund, the Select Equity Fund, and
the Enhanced Market 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, has been 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 since inception, and as such, has primary responsibility for the day-to-day
management of
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the 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.
Steven L. Cass, is the portfolio manager for the Florida Fund and, as
such, has primary responsibility for the day-to-day portfolio management of the
Fund's portfolio. Mr. Cass has been associated with AmSouth's Trust Investment
Group since October, 1995 and is currently Assistant Vice President and Trust
Investment Officer. Mr. Cass was a registered representative and insurance agent
employed by First of America Securities, Great Western Financial Securities, and
CM Financial Group for three years prior to joining AmSouth.
Pedro Verdu, CFA, is the portfolio manager for the Equity Fund,
Regional Equity Fund, and Balanced 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 (0.40%) of each Money Market Fund's average
daily net assets; sixty-five one-hundredths of one percent (0.65%) of each
Income Fund's average daily net assets; eighty one-hundredths of one percent
(0.80%) of each of the Equity, Regional Equity, Balanced, Equity Income ,
Capital Growth, and Select Equity Fund's average daily net assets; one hundred
twenty one-hundredths of one percent (1.20%) of the Small Cap Fund's average
daily net assets; and forty-five one-hundredths of one percent (0.45%) of the
Enhanced 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. 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, 1998, the Advisor
received investment advisory fees amounting to 0.40% of the Prime Obligation
Fund's average daily net assets, 0.40% of the U.S. Treasury Fund's average daily
net assets and 0.20% of the Tax Exempt Fund's average daily net assets, after
voluntary fee reductions with respect to the Tax Exempt Fund.
During the Trust's fiscal year ended July 31, 1998, the Advisor
received investment advisory fees amounting to 0.50% of the Bond Fund's average
daily net assets, 0.50% of the
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Limited Maturity Fund's average daily net assets, 0.30% of the Government Income
Fund's average daily net assets, 0.30% of the Florida Fund's average daily net
assets, and 0.40% of the Municipal Bond Fund's average daily net assets.
During the Trust's fiscal year ended July 31, 1998, the Advisor
received investment advisory fees amounting to 0.80% of the Equity Fund's
average daily net assets, 0.80% of the Regional Equity Fund's average daily net
assets , 0.80% of the Balanced Fund's average daily net assets, 0.80% of the
Capital Growth Fund's average daily net assets, 0.80% of the Equity Income
Fund's average daily net assets . For the period from March 2, 1998 to July 31,
1998, the Advisor received investment advisory fees amounting to 1.20% of the
Small Cap Fund's average daily net assets.
INVESTMENT SUB-ADVISORS
ROCKHAVEN ASSET MANAGEMENT, LLC
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 (0.48%) 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 139.82%, absent the imposition of a
sales charge. 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 Federated Equity Income Fund had approximately $970 million in net
assets. As portfolio manager of the Federated
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Equity Income Fund, Mr. Wiles had full discretionary authority over the
selection of investments for that fund. Average annual total 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 and the Lipper Equity Income Fund Index were:
PRIOR PERFORMANCE OF THE CLASS A
SHARES OF THE FEDERATED EQUITY INCOME FUND
<TABLE>
<CAPTION>
Federated S&P 500 Lipper Equity
Equity Income Fund+ * Index @ Income Fund Index #
--------------------- ------- -------------------
<S> <C> <C> <C>
CLASS A SHARES (absent imposition of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through
January 31, 1997 17.25% 16.78% 14.99%
CLASS A SHARES (assuming imposition of the
Federated Equity Income Fund's maximum sales charge)
One Year 16.48%
Three Year 14.85%
Five Year 15.20%
August 1, 1991 through 16.05%
January 31, 1997
</TABLE>
- ---------------------
+ Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
* During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares of the Federated Equity
Income Fund ranged from 0.95% to 1.05 of the fund's average daily net
assets. These operating expenses were lower than the projected operating
expenses of the Premier Shares of the AmSouth Equity Income Fund. If the
actual operating expenses of the Premier Shares of the AmSouth Equity
Income Fund are higher than the historical operating expenses of the Class
A Shares of the Federated Equity Income Fund, this could negatively affect
performance.
@ The S&P 500 Index is an unmanaged index of common stocks that is considered
to be generally representative of the U.S. stock market. The Index is
adjusted to reflect reinvestment of dividends.
# 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.
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<PAGE> 88
The Federated Equity Income Fund does not offer Premier Shares,
therefore the performance data is shown for the Class A Shares, the shares most
similar to Premier Shares. However, since the Premier Shares of the AmSouth
Equity Income Fund do not impose a sales charge, the Federated Equity Income
Fund performance data, absent the imposition of a sales charge, reflects the
most comparable past performance.
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 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.
PEACHTREE ASSET MANAGEMENT
Peachtree Asset Management ("Peachtree" or "Sub-Advisor") serves as
investment sub-advisor to the Capital Growth Fund, pursuant to a Sub-Advisory
Agreement with AmSouth. The Capital Growth Fund commenced operations on August
4, 1997. Under the Sub-Advisory Agreement, Peachtree manages the fund, selects
investments, and places all orders for purchases and sales of securities,
subject to the general supervision of the Trust's Board of Trustees and AmSouth
in accordance with the Fund's investment objectives, policies and restrictions.
Peachtree is a division of Mutual Management Corp., a wholly-owned
subsidiary of Salomon Smith Barney Holdings, Inc., which in turn is a
wholly-owned subsidiary of Travelers Group Inc. Peachtree has performed advisory
services since 1994 for institutional clients, and has its principal offices at
303 Peachtree Street, N.E., Atlanta, GA 30308. Mutual Management Corp. and its
predecessors have been providing
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<PAGE> 89
investment advisory services to mutual funds since 1968. As of July 31, 1998,
Mutual Management Corp. had aggregate assets under management of approximately
$110 billion.
For its services and expenses incurred under the Sub-Advisory
Agreement, Peachtree is entitled to a fee payable by AmSouth, computed daily and
paid monthly at the annual rate of forty-eight one-hundredths of one percent
(0.48%) of the Fund's average daily net assets or such lower fee as may be
agreed upon in writing by AmSouth and Peachtree.
Dennis A. Johnson is the portfolio manager for the Capital Growth Fund,
and , as such has the primary responsibility for the day-to-day portfolio
management of the Fund. Mr. Johnson, who has been employees by Peachtree since
1994, is President and Chief Investment Officer of Peachtree. From 1989 to 1994,
Mr. Johnson was Vice President and Portfolio Manager at Trusco Capital, the
investment management subsidiary of Trust Company Bank, Atlanta, Georgia.
SAWGRASS ASSET MANAGEMENT, LLC
Sawgrass Asset Management, LLC ("Sawgrass") serves as investment
sub-adviser to the Small Cap Fund, pursuant to a Sub-Advisory Agreement with
AmSouth. The Small Cap Fund commenced operations as of March 2, 1998. Under the
Sub-Advisory Agreement, Sawgrass manages the Fund, selects investments, and
places all orders for purchases and sales of securities, subject to the general
supervision of the Trust's Board of Trustees and AmSouth in accordance with the
Fund's investment objectives, policies and restrictions.
Sawgrass is 50% owned by AmSouth and 50% owned by Sawgrass Asset
Management, Inc. Sawgrass Asset Management, Inc. is controlled by Mr. Dean
McQuiddy, Mr. Brian Monroe and Mr. Andrew Cantor. Sawgrass was organized in
January, 1998 to perform advisory services for investment companies and other
institutional clients and has its principal offices at 4337 Pablo Oaks Court,
Jacksonville, FL 32224.
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 eighty-four
one-hundredths of one percent (0.84%) 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. Dean McQuiddy, CFA, is the portfolio manager for the Small Cap
Fund, and, as such, has the primary responsibility for the day-to-day portfolio
management of the Fund. He received his B.S. in Finance from the University of
Florida. Mr. McQuiddy
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holds membership in the Association of Management and Research. He has 16 years
of investment experience.
The following tables set forth the performance data relating to the
historical performance of an institutional fund (the Employee Benefit Small
Capitalization Fund) and a mutual fund (the Emerald Small Capitalization Fund),
since the dates indicated, that have investment objectives, policies, strategies
and risks substantially similar to those of the AmSouth Small Cap Fund. Mr. Dean
McQuiddy, a Principal of Sawgrass, is the portfolio manager for the Small Cap
Fund, and, as such, has the primary responsibility for the day-to-day portfolio
management of the Fund. From January 1, 1987 to December 31, 1997, he was the
portfolio manager of the Employee Benefit Small Capitalization Fund, a common
trust fund managed by Barnett Bank for employee benefit plan accounts. On
January 4, 1994, the Employee Benefits Small Capitalization Fund transferred the
majority of its assets to the Emerald Small Capitalization Fund. Mr. McQuiddy
was the portfolio manager for the Emerald Small Capitalization Fund from its
inception through December 31, 1997. This data is provided to illustrate the
past performance of Mr. McQuiddy in managing substantially similar accounts as
measured against a specified market index and does not represent the performance
of the Small Cap Fund. Investors should not consider this performance data as an
indication of future performance of the Small Cap Fund.
The performance data shown below relating to the institutional account
was calculated in accordance with required recommended standards of the
Association for Investment Management and Research(1) ("AIMR"), retroactively
applied to all time periods. The returns of the institutional account were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and loses. The returns of the
institutional account reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by Barnett's institutional
private account, without provision for federal or state income taxes. Custodial
fees of the institutional account, if any, were not included in the calculation.
Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and equivalents are included in performance
returns. The yearly returns of the institutional fund are calculated by
geometrically linking the monthly returns.
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(1) AIMR is a non-profit membership and education organization with more than
30,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and
fair presentations by investment advisers of their performance results, and
(ii) ensure uniformity in reporting so that performance results of
investment advisers are directly comparable.
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The institutional private account was not subject to the same types of
expenses to which the Small Cap Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Fund by the Investment Company Act or Subchapter M of the Internal Revenue
Code. Consequently, the performance results for the institutional account could
have been adversely affected if the account had been regulated as investment
company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of investments
and redemptions. In addition, the effect of taxes on any investor will depend on
such person's tax status, and the results have not been reduced to reflect any
income tax which may have been payable.
The investment results presented below are unaudited and are not
intended to predict or suggest the returns that might be experienced by the
Small Cap Fund or an individual investor investing in such Fund. The investment
results were not calculated pursuant to the methodology established by the SEC
that will be used to calculate the Small Cap Fund's performance results.
Investors should also be aware that the use of a methodology different from that
used below to calculate performance could result in different performance data.
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All information set forth in the tables below relies on data supplied
by Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
Sawgrass Small Cap Russell 2000(R)
Year Composite Growth Index(1)
---- --------- ---------------
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years(2) 16.38% 12.76%
Last 10 Years(2) 16.09% 13.50%
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(1) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index
with higher price-to-book ratios and higher forecasted growth values.
(2) Through December 31, 1997.
PRIOR PERFORMANCE OF THE INSTITUTIONAL SHARES
OF THE EMERALD SMALL CAPITALIZATION FUND
The cumulative total return for the Institutional Shares of the Emerald
Small Capitalization Fund from January 4, 1994 through December 31, 1997 was
66.3%. The cumulative total return for the same period for the Russell 2000
Growth Index was 60.8%. At December 31, 1997, the Emerald Small Capitalization
Fund had approximately $180 million in assets. As portfolio manager of the
Emerald Small Capitalization Fund, Mr. McQuiddy had full discretionary authority
over the selection of investments for that fund. Average annual total returns
for the Institutional Shares for the one-year, three-year and since inception
through December 31, 1997 period (the entire period during which Mr. McQuiddy
managed the Institutional Shares of the Emerald Small Capitalization Fund),
compared with the performance of the Russell 2000 Growth Index were:
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Emerald Small Russell 2000
Capitalization Growth
Fund(1) Index(2)
------- --------
INSTITUTIONAL SHARES
One Year 13.2% 12.9%
Three Years 18.8% 18.1%
Since Inception 13.6% 12.6%
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(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index
with higher price-to-book ratios and higher forecasted growth values.
During the period from January 4, 1994 through December 31, 1997, the
operating expense ratio of the Institutional Shares (the shares most similar to
the Premier Shares of the AmSouth Small Cap Fund) of the Emerald Small
Capitalization Fund ranged from 1.24% to 1.48% of the Fund's average daily net
assets. If the actual operating expenses of the AmSouth Small Cap Fund are
higher than the historical operating expenses of the Emerald Small
Capitalization Fund, this could negatively affect performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The
Emerald Small Capitalization Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth Small
Cap Fund, Share prices and investment returns will fluctuate reflecting market
conditions, as well as change in company-specific fundamentals of portfolio
securities.
OAKBROOK INVESTMENTS, LLC
OakBrook Investments, LLC ("OakBrook") serves as Sub-Advisor to the
Enhanced Market Fund and the Select Equity Fund pursuant to a Sub-Advisory
Agreement with the Advisor. Under the Sub-Advisory Agreement, the Sub-Advisor
manages the Funds, selects investments, and places all orders for purchases and
sales of securities, subject to the general supervision of the Trust's Board of
Trustees and the Advisor in accordance with each Fund's investment objective,
policies, and restrictions.
OakBrook is 50% owned by AmSouth and 50% owned by Neil Wright, Janna
Sampson and Peter Jankovskis. OakBrook was organized in February, 1998 to
perform advisory services for investment companies and other institutional
clients and has its principal offices at 701 Warrenville Road, Suite 135, Lisle,
IL 60532.
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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 fifty-six
one-hundredths of one percent (0.56%) with respect to the Select Equity Fund and
thirty-two one-hundredths of one percent (0.32%) with respect to the Enhanced
Market Fund or such lower fee as may be agreed upon in writing by the Advisor
and Sub-Advisor.
The Select Equity Fund and the Enhanced Market Fund are managed by a
team from OakBrook Investments, LLC. Dr. Neil Wright, Ms. Janna Sampson and Dr.
Peter Jankovskis are the portfolio managers for the Select Equity Fund and the
Enhanced Market Fund. They have managed both Funds since their inception and, as
such, have the primary responsibility for the day-to-day portfolio management of
the Funds. Dr. Wright is OakBrook's President and the Chief Investment Officer.
He holds a doctorate in economics. From 1993 to 1997, Dr. Wright was the Chief
Investment Officer of ANB Investment Management & Trust Co. ("ANB"). He managed
ANB's Large Cap Growth Fund and other equity funds since 1981. Ms. Sampson is
OakBrook's Director of Portfolio Management. She holds a Master of Arts degree
in economics. From 1993 to 1997, Ms. Sampson was Senior Portfolio Manager for
ANB. She has worked in the investment field since 1981 and was a portfolio
manager at ANB since 1987. Dr. Jankovskis is OakBrook's Director of Research. He
holds a doctorate in economics. He has conducted economic research since 1988.
From August, 1992 to July, 1996, Dr. Jankovskis was an Investment Strategist for
ANB and from July, 1996 to December, 1997 was the Manager of Research for ANB.
ADMINISTRATOR AND DISTRIBUTOR
ASO Service Company ("ASO") is the administrator for each Fund of the
Trust and BISYS Fund Services ("BISYS") acts as the Trust's principal
underwriter and distributor (the "Administrator" and the "Distributor,"
respectively). ASO is a wholly owned subsidiary of BISYS. 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 (0.20%) of such 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 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, 1998, ASO received
administration fees amounting to 0.20% of each Money Market Fund's average daily
net assets. During the Trust's fiscal year ended July 31, 1998, ASO received
administration fees, after voluntary fee reductions, amounting to 0.12% of the
Bond Fund's average daily net assets; 0.12% of the Limited Maturity Fund's
average daily net assets; 0.10% of the Government Income Fund's average daily
net assets; 0.10% of the Florida Fund's average daily net assets; 0.12% of the
Municipal Bond Fund's average daily net assets; 0.20% of the Equity Fund's
average daily net assets, 0.20% of the Regional Equity Fund's average daily net
assets, 0.20% of the Balanced Fund's average daily net assets; 0% of the Capital
Growth Fund's average daily net assets; 0.20% of the Equity Income Fund's
average daily net assets. For the period from March 2, 98 (commencement of
operations) through July 31, 1998, ASO received administration fees amounting to
0% of the Small Cap 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, 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 (0.10%) 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 a 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
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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 eighteen
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 Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth
Equity Income Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced Market
Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund, the AmSouth Florida
Tax-Free Fund, the AmSouth Institutional Prime Obligations Fund, and the AmSouth
Institutional U.S. Treasury Fund. Each Fund, except the AmSouth Florida Tax-Free
Fund and the AmSouth Select Equity Fund, is a diversified fund under the
Investment Company Act of 1940, as amended. Each Fund, except for the U.S.
Treasury Fund, the Tax Exempt Fund, the Institutional Prime Obligations Fund,
and the Institutional U.S. Treasury Fund, has authorized three classes of
Shares: Premier Shares, Classic Shares, and Class B 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. The U.S.
Treasury Fund and the Tax Exempt Fund have authorized two classes of Shares:
Premier Shares and Classic Shares. The Institutional Prime Obligations Fund and
the Institutional U.S. Treasury Fund have authorized three classes of Shares:
Class I Shares, Class II Shares, and Class III Shares. 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)
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when the Trustees have determined that the matter affects only the interests of
one or more series or class, (iii) when matters pertain to the Servicing Plan,
and (iv) when matters pertain 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 September 17, 1998, AmSouth was the beneficial owner of
approximately 65% of the outstanding Premier Shares of the Prime Obligations
Fund, 24% of the outstanding Premier Shares of the U.S. Treasury Fund, 75% of
the outstanding Premier Shares of the Tax Exempt Fund, 89% of the outstanding
Premier Shares of the Bond Fund, 77% of the outstanding Premier Shares of the
Equity Fund, 66% of the outstanding Premier Shares of the Regional Equity Fund,
89% of the outstanding Premier Shares of the Limited Maturity Fund, 67% of the
outstanding Premier Shares of the Balanced Fund, 99% of the outstanding Premier
Shares of the Florida Fund, 84% of the outstanding Premier Shares of the Capital
Growth Fund, and 51% of the outstanding Premier Shares of the Municipal Bond
Fund, and may be deemed to be a "controlling person" of the Premier Shares of
the each Fund within the meaning of the Investment Company Act of 1940.
CUSTODIAN
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
the Trust. BISYS Fund Services, Inc. serves as fund accountant for the Trust.
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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 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.
COMPARATIVE PERFORMANCE INFORMATION REGARDING
THE TAX-EXEMPT PORTFOLIO AND THE MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURN*
AS OF JUNE 30, 1997
Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
Tax-Exempt Portfolio 5.45% 5.21% 4.69% 5.92%
* Figures were calculated pursuant to a methodology established by the SEC
and 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-mentioned 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, limitations and diversification
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requirements imposed by the Act and the Code. If the Tax-Exempt Portfolio had
been registered under the 1940 Act, its performance may have been adversely
affected. The investment objective, restrictions and guidelines of the Municipal
Bond Fund are substantially similar to the Tax-Exempt Portfolio and both were
managed by the same personnel.
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.
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
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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.
Each of 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 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.
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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.
Inquiries regarding the Trust may be directed in writing to the AmSouth
Mutual Funds 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-ADVISORS
(Equity Income Fund only)
Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, PA 15222
(Capital Growth Fund Only)
Peachtree Asset Management
A Division of Mutual Management Corp.
One Peachtree Center
Atlanta, GA 30308
(Small Cap Fund Only)
Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, FL 32224
(Select Equity Fund and Enhanced Market Fund Only)
OakBrook Investments, LLC
701 Warrenville Road, Suite 135
Lisle, IL 60532
DISTRIBUTOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
-100-
<PAGE> 103
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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
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<PAGE> 104
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.
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<PAGE> 105
AMSOUTH MUTUAL FUNDS
AmSouth Bank
Investment Advisor
PREMIER SHARES
NOT FDIC INSURED
BISYS FUND SERVICES, DISTRIBUTOR
The date of this Prospectus is December 1, 1998
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<PAGE> 106
CROSS REFERENCE SHEET
Part A
<TABLE>
<CAPTION>
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
PROSPECTUS FOR AMSOUTH INSTITUTIONAL PRIME OBLIGATIONS
FUND AND AMSOUTH INSTITUTIONAL U.S. TREASURY FUND
<S> <C>
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ............................. Inapplicable
4. General Description
of Registrant ........................... The Trust; Investment Objectives and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund................... Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ........................ The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........................... Valuation of Shares; How to Purchase and
Redeem Shares
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 107
AMSOUTH MUTUAL FUNDS
INSTITUTIONAL MONEY MARKET FUNDS
3435 Stelzer Road For current yield,
Columbus, Ohio 43219 purchase, and redemption
information, call (800) 451-8382
The AmSouth Institutional Money Market Funds (the "Institutional Money
Market Funds") are two of eighteen series of units of beneficial interest
("Shares") each representing interests in one of eighteen separate investment
funds (the "Funds") of AmSouth Mutual Funds (the "Trust"), an open-end
management investment company. All securities or instruments in which the
Institutional Money Market Funds invest have remaining maturities of 397 days or
less. Each Institutional 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. Currently, Shares are not being
offered in the Institutional U.S. Treasury Fund.
AMSOUTH INSTITUTIONAL PRIME OBLIGATIONS FUND (the "Institutional Prime
Obligations Fund") seeks current income with liquidity and stability of
principal. The Institutional Prime Obligations Fund invests in high quality U.S.
dollar-denominated money market instruments and other high-quality U.S.
dollar-denominated instruments.
AMSOUTH INSTITUTIONAL U.S. TREASURY FUND (the "Institutional U.S.
Treasury Fund") seeks current income with liquidity and stability of principal.
The Institutional 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 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
Institutional Money Market Fund ("Distributor").
Each Institutional Money Market Fund has been divided into three
classes of Shares: Class I Shares, Class II Shares and Class III Shares. Class I
Shares require a minimum initial investment of $3 million and are offered to (i)
Customers for whom AmSouth acts in a fiduciary, advisory, custodial, agency, or
similar capacity, and (ii) fiduciary Customers of other Financial Institutions
approved by the Distributor. Class II Shares and Class III Shares are offered as
a cash sweep vehicle to institutional or corporate Customers of AmSouth and of
other Financial Institutions approved by the Distributor.
This Prospectus relates only to the Institutional Money Market Funds.
Interested persons who wish to obtain a copy of the prospectuses of the AmSouth
Equity Fund, the
<PAGE> 108
AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the AmSouth Capital
Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity Income Fund, the
AmSouth Select Equity Fund, and the AmSouth Enhanced Market 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"); the AmSouth Prime
Obligations Fund, the AmSouth U.S. Treasury Fund and the AmSouth Tax Exempt Fund
(the "Money Market Funds") may contact the Distributor at the telephone number
shown above. Additional information about the Institutional 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
Institutional Money Market Funds that a prospective investor ought to know
before investing. Investors should read this Prospectus and retain it for future
reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR ENDORSED OR GUARANTEED BY AMSOUTH OR ANY OF ITS AFFILIATES.
THE TRUST'S SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR BY ANY OTHER AGENCY. AN INVESTMENT IN
THE TRUST'S SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
----------
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION")
OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION OF THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is December 1, 1998.
-2-
<PAGE> 109
FEE TABLE
<TABLE>
<CAPTION>
Institutional Institutional
Prime U.S.
Obligations Fund Treasury Fund
---------------- -------------
Class I Class II Class III Class I Class II Class III
Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
- -----------------------------------
Maximum Sales Load Imposed
on Purchases (as a percentage
of offering price) 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed
on Reinvested Dividends
(as a percentage of offering price) 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as
a percentage of original
purchase price or redemption
proceeds, as applicable) 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage
of amount redeemed, if applicable)(2) 0% 0% 0% 0% 0% 0%
Exchange Fee $0 $0 $0 $0 $0 $0
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of net assets)
Management Fees (after voluntary
fee reductions)(3) 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%
12b-1 Fees 0.00% 0.25% 0.50% 0.00% 0.25% 0.50%
Other Expenses(4) 0.18% 0.18% 0.18% 0.18% 0.18% 0.18%
Total Fund Operating Expenses (after
voluntary fee reductions)(5) 0.25% 0.50% 0.75% 0.25% 0.50% 0.75%
===== ===== ===== ===== ===== =====
</TABLE>
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<PAGE> 110
(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 an Institutional 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 0.20% for the
Class I, Class II and Class III Shares of the Institutional Prime Obligations
Fund and the Institutional U.S. Treasury Fund.
(4) Absent the voluntary reduction of administration fees, Other
Expenses would be 0.20% for Class I Shares of the Institutional Prime
Obligations Fund, 0.20% for Class II Shares of the Institutional Prime
Obligations Fund, 0.20% for Class III Shares of the Institutional Prime
Obligations Fund, 0.20% for Class I Shares of the Institutional U.S. Treasury
Fund, 0.20% for Class II Shares of the Institutional U.S. Treasury Fund and
0.20% for Class III Shares of the Institutional U.S. Treasury Fund. Other
Expenses are based on estimated amounts for the current fiscal year.
(5) Absent the voluntary reduction of investment advisory and
administration fees, Total Fund Operating Expenses would be 0.40% for Class I
Shares of the Institutional Prime Obligations Fund, 0.65% for Class II Shares of
the Institutional Prime Obligations Fund, 0.90% for Class III Shares of the
Institutional Prime Obligations Fund, 0.40% for Class I Shares of the
Institutional U.S. Treasury Fund, 0.65% for Class II Shares of the Institutional
U.S. Treasury Fund and 0.90% for Class III Shares of the Institutional U.S.
Treasury Fund.
Example
- -------
You would pay the following expenses on a $1,000 investment in a Fund,
assuming (1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
Class I Class II Class III Class I Class II Class III
Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime Obligations Fund $3 $5 $8 $8 $16 $24
Institutional U.S. Treasury Fund $3 $5 $8 $8 $16 $24
</TABLE>
The purpose of the tables above is to assist an investor in a 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 Institutional 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.
-4-
<PAGE> 111
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Institutional Prime Obligations Fund
and the Institutional U.S. Treasury Fund is to seek current income with
liquidity and stability of principal. Although the Institutional Prime
Obligations Fund and the Institutional 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 Institutional
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 either Institutional
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 Institutional 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 Institutional
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
Institutional Money Market Fund will not exceed 90 days.
The Institutional Prime Obligations Fund invests in U.S.
dollar-denominated, high-quality short-term debt instruments. All securities in
which the Fund invests will be eligible for purchase by a national bank in
accordance with federal law and regulations. 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 Institutional 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.
-5-
<PAGE> 112
The Institutional U.S. Treasury Fund invests exclusively in short-term
U.S. 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 than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Obligations purchased by the
Institutional U.S. Treasury Fund may be subject to repurchase agreements
collateralized by the underlying U.S. Treasury obligation.
U.S. GOVERNMENT SECURITIES
The Institutional 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 Institutional 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.
BANK OBLIGATIONS
The Institutional 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 Institutional 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.
-6-
<PAGE> 113
FOREIGN OBLIGATIONS
The Institutional 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 Institutional 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 Institutional Prime Obligations Fund may invest in commercial paper
(including variable amount master demand notes) issued by U.S. or foreign
corporations. The Institutional 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.
Investments in ECDs, ETDs, CTDs, Yankee CDs, CCP, and Europaper may
subject the Institutional 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 Institutional 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 U.S.
dollars.
VARIABLE AMOUNT DEMAND NOTES
Variable amount master demand notes in which the Institutional 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
-7-
<PAGE> 114
Institutional Prime Obligations Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, the Institutional
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.
FUNDING AGREEMENTS
The Institutional 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
Institutional Prime Obligations Fund invests an amount of cash with an insurance
company and the insurance company credits such investment on a monthly basis
with guaranteed interest which is based on an index. The Funding Agreements
provide that this guaranteed interest will not be less than a certain minimum
rate. The Funding Agreements provide for adjustment of the interest rate monthly
and are considered variable rate instruments. The Institutional 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 Institutional 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 Institutional 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.
-8-
<PAGE> 115
ASSET-BACKED SECURITIES
The Institutional 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 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 Institutional Prime
Obligations Fund will be subject to the same quality requirements as other
securities purchased by the Fund.
-9-
<PAGE> 116
OTHER INVESTMENTS
The Institutional 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, as amended.
The Institutional Prime Obligations Fund may also invest in short-term
municipal obligations.
REPURCHASE AGREEMENTS
Securities held by the Institutional 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, an Institutional 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
Institutional Money Market Fund were delayed pending court action. Additionally,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Institutional Money Market Fund may incur delays and costs in selling the
underlying security or may suffer a loss of principal and interest if the
Institutional 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 Institutional Money Market Fund's total assets that may be
invested in instruments which are subject to repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
Each Institutional 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, an
Institutional 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 an Institutional Money
Market Fund may decline below the price at which the Institutional Money Market
Fund is obligated to repurchase the securities.
INVESTMENT RESTRICTIONS
Each Institutional Money Market 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).
-10-
<PAGE> 117
INSTITUTIONAL PRIME OBLIGATIONS FUND
The Institutional 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 Institutional
Prime Obligations Fund's total assets would be invested in such issuer, except
that 25% or less of the value of the Institutional 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 Institutional 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 U.S.
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.
INSTITUTIONAL U.S. TREASURY FUND
The Institutional 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.
INSTITUTIONAL PRIME OBLIGATIONS FUND AND INSTITUTIONAL U.S. TREASURY FUND
The Institutional Prime Obligations Fund and the Institutional U.S.
Treasury Fund may not:
1. Borrow money or issue senior securities, except that each
Institutional 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
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10% of the value of the Fund's total assets at the time of its borrowing. An
Institutional 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 Institutional 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 the Institutional Prime Obligations Fund and the
Institutional U.S. Treasury Fund is determined and its Shares are priced as of
2:00 p.m. and 4:00 p.m., Eastern time (the "Valuation Times") 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
Institutional Money Market Fund, less the liabilities charged to that Class, by
the number of the outstanding Shares of that Class.
The assets in each Institutional 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 Institutional Money Market Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less. Although the Trust seeks to
maintain each Institutional 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 Institutional Money Market Funds are sold on a continuous
basis by the Trust's distributor, BISYS Fund Services (the "Distributor"). The
principal office of the
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Distributor is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase
Shares, contact the Trust at (800) 451-8382.
Each Institutional Money Market Fund offers three classes of Shares:
Class I Shares, Class II Shares and Class III Shares. The three classes of
Shares of a particular Fund represent interests in the same investments and are
identical in all respects except that (i) Class II Shares and Class III Shares
bear the expense of a fee under the Trust's Distribution and Shareholder
Services Plan (the "Distribution Plan"), which will cause Class II Shares and
Class III Shares to have higher expense ratios and to pay lower dividends than
those of the Class I Shares, and (ii) Class II Shares and Class III Shares have
certain exclusive voting rights with respect to the Distribution Plan.
Class I Shares require a minimum initial investment of $3 million and
are offered to (i) Customers for whom AmSouth acts in a fiduciary, advisory,
custodial, agency, or similar capacity, and (ii) fiduciary Customers of other
Financial Institutions approved by the Distributor. Class II Shares and Class
III Shares are offered as a cash sweep vehicle to institutional or corporate
Customers of AmSouth and of other Financial Institutions approved by the
Distributor.
PURCHASES OF SHARES
Shares of the Institutional 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 by 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 an Institutional
Money Market Fund. This Prospectus should be read in conjunction with
information received from the Financial Institutions.
Shares of the Institutional Money Market Funds sold to Financial
Institutions acting in a fiduciary, advisory, custodial, agency, or 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 Shares of an Institutional Money Market Fund.
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Shares of the Institutional 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 use federal funds to purchase Shares.
Each Institutional Money Market Fund has been divided into three
classes of Shares: Class I Shares, Class II Shares and Class III Shares. Class I
Shares require a minimum initial investment of $3 million and are offered to (i)
Customers for whom AmSouth acts in a fiduciary, advisory, custodial, agency, or
similar capacity, and (ii) fiduciary Customers of other Financial Institutions
approved by the Distributor; there is no minimum investment amount for
subsequent purchases.
There is no limitation on the amount of Shares that may be purchased.
Purchases of Shares of an Institutional Money Market Fund will be
effected only on a Business Day (as defined in "VALUATION OF SHARES") of such
Institutional 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 an
Institutional Money Market Fund purchased before 2:00 p.m., Eastern time, begin
earning dividends on the same Business Day. All Shares of an Institutional 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 Shares held of record
by Financial Institutions but beneficially owned by a Customer, confirmations of
purchases, exchanges, and redemptions of 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.
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EXCHANGE PRIVILEGE
Shares of an Institutional Money Market Fund may be exchanged for
Shares of the same Class of the other Institutional Money Market Fund. Shares of
an Institutional Money Market Fund may not be exchanged for Premier Shares,
Classic Shares or Class B Shares of the other AmSouth Mutual Funds.
ADDITIONAL INFORMATION ABOUT EXCHANGES
An exchange from one Fund to another Fund is considered to be a taxable
event for federal income tax purposes on which a Shareholder may realize a
capital gain or loss. Exchange Privileges may be exercised only in those states
where Shares may legally be sold, and may be amended or terminated at any time
upon sixty (60) days' prior notice to Shareholders.
The Exchange Privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Excessive exchange transactions
may potentially disrupt the management of the Trust and increase transaction
costs. Accordingly, in order to prevent excessive use of the Exchange Privilege,
the Trust has established a policy of prohibiting excessive exchange activity.
Exchange activity will not be deemed excessive if limited to four substantive
exchange redemptions from a Fund during a calendar year.
REDEMPTION OF SHARES
Shareholders may redeem their Shares without 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, at AmSouth Mutual Funds, 3435 Stelzer Road, Columbus, OH 43219, 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
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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 previously designated bank account. 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 the receipt of a valid request for redemption. Wire redemption
requests may be made by the Shareholder by telephone to the Transfer Agent. The
wire redemption charge is currently $7.00, however, such charge may be reduced
by the Transfer Agent. 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 PURCHASE AND 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. 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 2:00 p.m., Eastern time, on
a Business Day or, if the request for redemption is received after
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2:00 p.m., 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 Institutional 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.
The Trust reserves the right to convert, at net asset value, Class I
Shares of any Shareholder to Premier Shares if, because of redemptions of Shares
by or on behalf of the Shareholder, the account of such Shareholder in Class I
Shares of an Institutional Money Market Fund has a value of less than $3
million. Accordingly, an investor purchasing Class I Shares of an Institutional
Money Market Fund in only the minimum investment amount may be subject to such
involuntary conversion to Premier Shares of a Money Market Fund if he or she
thereafter redeems some of his or her Shares. Before the Trust exercises its
right to convert Class I Shares to Premier Shares, the Shareholder will be given
notice that the value of the Class I Shares in his or her account is less than
the minimum amount and the Shareholder will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $3 million.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and "VALUATION -
Valuation of the Institutional 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,
as amended.
DIVIDENDS AND TAXES
The net income of each Institutional Money Market Fund is declared
daily as a dividend to Shareholders of record at the close of business on the
day of declaration. 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
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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 Institutional Money Market Fund will be treated as a separate
entity for federal income tax purposes. Each Institutional 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, an
Institutional 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 Institutional Money Market Fund intends to avoid paying federal income and
excise taxes by timely distributing all its net income and substantially all its
net capital gain income. Shareholders will be advised at least annually as to
the character for federal income tax purposes of distributions made during the
year.
The amount of dividends payable with respect to Class I Shares will
exceed dividends on Class II Shares, and the amount of dividends on Class II
Shares will exceed the dividends on Class III Shares, as a result of the
Distribution and Shareholder Services Plan fee of 0.25% applicable to Class II
Shares and of 0.50% applicable to Class III Shares.
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 each Institutional Money Market Fund is expected to be interest income, it is
anticipated that no distributions will qualify for the dividends received
deduction for corporate shareholders. The Institutional Money Market Funds 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 Institutional 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.
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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."
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
Institutional 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,
as amended. 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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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name, Address and Age With the Trust During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
George R. Landreth*, 56 Chairman From December 1992 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services Limited Partnership;
Columbus, Ohio 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.
Dick D. Briggs, Jr., M.D., 64 Trustee From September 1989 to
459 DER Building present, Emeritus Professor
1808 7th Avenue South and Eminent Scholar Chair,
UAB Medical Center Univ. of Alabama at
Birmingham, Alabama 35294 Birmingham; from October 1979
to present, Physician,
University of Alabama Health
Services Foundation; from 1981
to 1995, Professor and Vice
Chairman, Department of
Medicine, University of
Alabama at Birmingham School
of Medicine; from June 1988 to
October 1992, President, Chief
Executive Officer and Medical
Director, University of
Alabama Health Services
Foundation
Wendell D. Cleaver, 63 Trustee From September, 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*, 52 Trustee From June 1987 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services Limited Partnership
Columbus, Ohio 43219
Homer H. Turner, Jr., 70 Trustee From June 1991 to present,
751 Cary Drive retired; until June 1991, Vice
Auburn, Alabama 36830-2505 President, Birmingham
Division, Alabama Power
Company
</TABLE>
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<TABLE>
<S> <C> <C>
James H. Woodward, Jr. , 58 Trustee From 1996 to present, Trustee,
The University of North The Sessions Group; from July
Carolina at Charlotte 1989 to present, Chancellor,
Charlotte, North Carolina 28223 The University of North
Carolina at Charlotte; from
April 1997 to present, Trustee
BISYS Variable Insurance
Funds; from August 1984 to
July 1989, Senior Vice
President, University College,
University of Alabama at
Birmingham
</TABLE>
- ---------------------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended.
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, 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, 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 July 31, 1998 of $19.9 billion and operated 276 banking offices in Alabama,
Florida, Georgia and Tennessee. AmSouth has provided investment management
services through its Trust Investment Department since 1915. As of July 31,
1998, AmSouth and its affiliates had over $8.8 billion in assets under
discretionary management and provided custody services for an additional $18.7
billion in securities. AmSouth is the largest provider of trust services in
Alabama 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
Institutional Money Market Funds, the Advisor manages the Institutional 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.
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Under an investment advisory agreement between the Trust and the
Advisor, the fee payable to the Advisor by each Institutional Money Market Fund
for investment advisory services is the lesser of (a) a fee computed daily and
paid monthly at the annual rate of twenty one-hundredths of one percent (0.20%)
of such Institutional 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 an Institutional Money Market
Fund's expenses and increase the net income of the Fund during the period when
such lower fee is in effect.
ADMINISTRATOR
ASO Services Company ("ASO") is the administrator for each Fund of the
Trust (the "Administrator"). ASO is a wholly owned subsidiary of BISYS. BISYS is
a subsidiary of The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of the Institutional
Money Market Funds' administration and operation. Under a management and
administration agreement between the Trust and the Administrator, the fee
payable by each Institutional Money Market Fund to the Administrator for
administration services is the lesser of (a) a fee computed at the annual rate
of ten one-hundredths of one percent (0.10%) of such Institutional 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
an Institutional Money Market Fund's expenses and increase the net income of the
Fund during the period when such lower fee is in effect.
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 (0.10%) of each Institutional Money Market 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.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class II 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 twenty-five one-hundredths of one
percent (0.25%) of the average daily net assets of Class II Shares of each Fund;
Class III 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 fifty one-hundredths of one percent (0.50%) of
the average daily net assets of the Class III 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 Class II or Class III
Share Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's Class II or
Class III 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 Class II or Class III 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 Class II or Class III 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 II
Shares or Class III 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 II Shares or Class III 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.
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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 Institutional Money Market Fund. No Institutional Money Market
Fund will bear, directly or indirectly, the cost of any activity primarily
intended to result in the distribution of Shares of such Institutional Money
Market Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Class I Shares,
Class II Shares and Class III 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 Class II Shares and Class III Shares other than in accordance with the
relative net asset value of the class, are expenses under the Trust's
Distribution Plan which relates only to the Class II Shares and Class III
Shares.
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<PAGE> 131
BANKING LAWS
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Institutional 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 eighteen
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 Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth
Equity Income Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced Market
Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund, the AmSouth Florida
Tax-Free Fund, the AmSouth Institutional Prime Obligations Fund, and the AmSouth
Institutional U.S. Treasury Fund. Each Fund, except the AmSouth Florida Tax-Free
Fund and the AmSouth Select Equity Fund, is a diversified fund under the
Investment Company Act of 1940, as amended. Each Fund, except for the U.S.
Treasury Fund, the Tax-Exempt Fund, the Institutional Prime Obligations Fund,
and the Institutional U.S. Treasury Fund, has authorized three classes of
Shares: Premier Shares, Classic Shares, and Class B 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. The U.S.
Treasury Fund and the Tax-Exempt Fund have authorized two classes of Shares:
Premier Shares and Classic Shares. The Institutional Prime Obligations Fund and
the Institutional U.S. Treasury Fund have authorized three classes of Shares:
Class I Shares, Class II Shares, and Class III Shares. Each Share represents an
equal proportionate interest in a Fund with other Shares of the same series, and
is entitled
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<PAGE> 132
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,
as amended, 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) when matters pertain to the Shareholder Servicing
Plan, and (iv) when matters pertain 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
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 the Trust.
BISYS Fund Services, Inc. serves as fund accountant for the Trust.
PERFORMANCE INFORMATION
From time to time, the Institutional Money Market Funds' annualized
"yield" and "effective yield" and total return may be presented in
advertisements and sales literature.
The "yield" of an Institutional Money Market Fund is based upon the
income earned by the Institutional 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 an Institutional 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
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<PAGE> 133
course of a 52-week period. The effective yield will be higher than the yield
because of the compounding effect of this assumed reinvestment.
Total return is calculated for the past year, five years (if
applicable) and the period since the establishment of an Institutional Money
Market Fund. Average annual total return is measured by comparing the value of
an investment in an Institutional 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. The yield and total return for
Class I Shares will be higher than that of the Class II Shares for the same
period as a result of the Distribution and Shareholder Services Plan fee of
0.25% applicable to Class II Shares. The yield and total return for Class II
Shares will be higher than that of the Class III Shares for the same period as a
result of the Distribution and Shareholder Services Plan fee of 0.25% applicable
to Class II Shares and 0.50% applicable to Class III Shares.
Investors may also judge the performance of each Institutional 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. 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 an Institutional Money Market Fund is
based on the Institutional 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
Institutional Money Market Fund will fluctuate. Any fees charged by the
Financial Institutions to their Customers in connection with investment in a
Institutional Money Market Fund are not reflected in the Fund's performance
information.
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<PAGE> 134
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.
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<PAGE> 135
Inquiries regarding the Trust may be directed in writing to the AmSouth
Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by calling toll
free (800) 451-8382.
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<PAGE> 136
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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
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<PAGE> 137
TABLE OF CONTENTS
- -----------------
Page
----
Fee Table ................................................................
Investment Objectives and Policies........................................
Investment Restrictions...................................................
Valuation of Shares.......................................................
How to Purchase and Redeem Shares.........................................
Dividends and Taxes.......................................................
Management of The AmSouth Mutual 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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<PAGE> 138
AMSOUTH MUTUAL FUNDS
AmSouth Bank
Investment Advisor
INSTITUTIONAL MONEY MARKET FUNDS
AMSOUTH MUTUAL FUNDS
NOT FDIC INSURED
BISYS FUND SERVICES, DISTRIBUTOR
This Prospectus is dated December 1, 1998.
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<PAGE> 139
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
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ............................ Financial Highlights; General Information-
Performance Information
4. General Description
of Registrant .......................... The Trust; Investment Objective and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund .................. Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ....................... The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........................... Valuation of Shares;
How to Purchase and
Redeem Shares
8. Redemption or Repurchase How to Purchase and
Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 140
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 eighteen series of units of beneficial interest ("Shares") each
representing interests in one of eighteen 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 U.S. dollar-denominated money market instruments
and other high-quality U.S. dollar-denominated instruments.
AMSOUTH U.S. TREASURY FUND (the "U.S. Treasury Fund") seeks current
income with liquidity and stability of principal. The 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 U.S. Treasury
Fund and Tax Exempt Fund
<PAGE> 141
have been divided into two classes of Shares: Premier Shares and Classic 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.
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, the AmSouth Equity Income Fund, the AmSouth Select Equity Fund,
and the AmSouth Enhanced Market 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"); the Institutional Prime Obligations Fund and the
Institutional U.S. Treasury Fund (the "Institutional Money Market Funds"); and
the Premier Shares of the Money Market Funds, the Capital Appreciation Funds and
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
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
--------------
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<PAGE> 142
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 December 1, 1998.
-3-
<PAGE> 143
FEE TABLE
<TABLE>
<CAPTION>
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
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 0.40% 0.40% 0.40% 0.20%
fee reduction for the Tax Exempt
Fund)(3)
12b-1 Fees 0.00% 1.00% 0.00% 0.00%
Shareholder Servicing Fees(4)
(after voluntary fee reductions
for the Classic Shares) 0.10% 0.00% 0.10% 0.10%
Other Expenses 0.29% 0.29% 0.30% 0.30%
----- ----- ----- -----
Total Fund Operating Expenses(5)
(after voluntary fee reductions
for the Classic Shares) 0.79% 1.69% 0.80% 0.60%
==== ==== ==== ====
</TABLE>
-4-
<PAGE> 144
(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 0.40% 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 0.25%
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 0.94%, for the U.S. Treasury Fund
would be 0.95%, and for the Tax Exempt Fund would be 0.95%.
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 $25 $44 $98
U.S. Treasury Fund $8 $26 $44 $99
Tax Exempt Fund $6 $19 $33 $75
</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 $83 $112 $176
Assuming no redemption $17 $53 $92 $176
</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.
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 Money Market 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 "HOW TO PURCHASE AND REDEEM SHARES -
Distributor."
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<PAGE> 145
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 July 31, 1998. The information from the commencement of operations
to July 31, 1998 is a part of the financial statements audited by
PricewaterhouseCoopers LLP, independent accountants for the Trust, whose report
on the Trust's financial statements for the year ended July 31, 1998 appears in
the Statement of Additional Information. Further financial data is incorporated
by reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Prime Obligations Fund
Year Ended July 31,
----------------------------------------------------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
Classic Class B(g) Classic (b) Classic (b)
------- ---------- ----------- -----------
<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 0.049 0.005 0 .048 0.016 0.050
-------- ------ -------- -------- --------
DISTRIBUTIONS
Net investment income (0.049) (0.005) (0.048) (0.016) (0.050)
-------- ------ -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------ -------- -------- --------
Total Return 4.99% 0.49%(d) 4.90% 5.07%(f) 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $116,960 $ 1 $111,027 $125,075 $617,673
Ratio of expenses to average net
assets 0.79% 1.85%(c) 0.78% 0.81%(c) 0.69%
Ratio of net investment income to
average net assets 4.88% 3.83%(c) 4.79% 4.61%(c) 5.04%
Ratio of expenses to average net
assets* 0.95% 1.88%(c) 0.93% 0.96%(c) (e)
Ratio of net investment income to
average net assets* 4.73% 3.81%(c) 4.64% 4.46%(c) (e)
</TABLE>
<TABLE>
<CAPTION>
Prime Obligations Fund August 8,
Year Ended July 31, 1988 to
------------------------------------------------------------------ July 31,
1994 1993 1992 1991 1990 1989(a)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------- --------
INVESTMENT ACTIVITIES
Net investment income 0.029 0.027 0.042 0.067 0.079 0.084
-------- -------- -------- -------- --------- --------
DISTRIBUTIONS
Net investment income (0.029) (0.027) (0.042) (0.067) (0.079) (0.084)
-------- -------- -------- -------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------- --------
Total Return 2.94% 2.76% 4.28% 6.87% 8.16% 8.72%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $577,331 $456,428 $457,511 $307,873 $298,498 $293,749
Ratio of expenses to average net
assets 0.70% 0.71% 0.71% 0.72% 0.70% 0.58%(c)
Ratio of net investment income to
average net assets 2.92% 2.73% 4.08% 6.61% 7.88% 8.69%(c)
Ratio of expenses to average net
assets* (e) (e) (e) (e) 0.72% 0.71%(c)
Ratio of net investment income to
average net assets* (e) (e) (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. Total return for the
Classic Shares for the period April 1, 1996 (commencement of operations) to
July 31, 1996 was 1.55%.
(g) For the period from June 15, 1998 (commencement of operations) to July 31,
1998.
-6-
<PAGE> 146
<TABLE>
<CAPTION>
U.S. Treasury Fund
Year Ended July 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
Classic Classic (b) Classic (b)
------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------ ------ ------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.046 0.045 0.015 0.048 0.028 0.027
------ ------ ------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.046) (0.045) (0.015) (0.048) (0.028) (0.027)
------ ------ ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
====== ======= ======= ======== ======== ========
Total Return 4.67% 4.60% 4.90%(f) 4.90% 2.80% 2.69%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $8,070 $9,885 $12,263 $322,939 $300,603 $404,473
Ratio of expenses to average net assets 0.80% 0.79% 0.82%(c) 0.70% 0.71% 0.72%
Ratio of net investment income to average
net assets 4.57% 4.50% 4.44%(c) 4.81% 2.77% 2.66%
Ratio of expenses to average net assets* 0.95% 0.94% 0.97%(c) (e) (e) (e)
Ratio of net investment income to average
net assets* 4.42% 4.35% 4.29%(c) (e) (e) (e)
</TABLE>
<TABLE>
<CAPTION>
U.S. Treasury Fund September 8,
Year Ended July 31, 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.
(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. Total return for the
Classic Shares for the period April 1, 1996 (commencement of operations) to
July 31, 1996 was 1.49%.
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<PAGE> 147
<TABLE>
<CAPTION>
Tax Exempt Fund
Year Ended July 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Classic Classic (b) Classic (b)
------- ----------- -----------
<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 0.030 0.030 0.010 0.032 0.019
------ ------ ------ ------ ------
DISTRIBUTIONS
Net investment income (0.030) (0.030) (0.010) (0.032) (0.019)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return 3.03% 3.04% 3.12%(e) 3.22% 1.95%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $28,657 $27,296 $17,116 $57,640 $60,923
Ratio of expenses to average net assets 0.60% 0.62% 0.68%(c) 0.54% 0.57%
Ratio of net investment income to average net assets 2.97% 3.00% 2.82%(c) 3.15% 1.93%
Ratio of expenses to average net assets* 0.98% 0.97% 1.03%(c) 0.74% 0.77%
Ratio of net investment income to average net assets* 2.59% 2.65% 2.47%(c) 2.95% 1.73%
</TABLE>
<TABLE>
<CAPTION>
Tax Exempt Fund June 27
Year Ended July 31, 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. Total return for
the period April 1, 1996 (commencement of operations) to July 31, 1996 was
0.95%.
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<PAGE> 148
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Prime Obligations Fund and the 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 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 PRIME OBLIGATIONS FUND
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.
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<PAGE> 149
U.S. GOVERNMENT SECURITIES
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.
BANK OBLIGATIONS
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.
FOREIGN OBLIGATIONS
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.
-10-
<PAGE> 150
The Prime Obligations Fund will not invest in excess of 10% of its net
assets in time deposits, including ETDs and CTDs but not including certificates
of deposit, with maturities in excess of seven days which are subject to
penalties upon early withdrawal.
The Prime Obligations Fund may invest in commercial paper (including
variable amount master demand notes) issued by U.S. or foreign corporations. The
Prime Obligations Fund may also invest in Canadian Commercial Paper ("CCP"),
which is commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation, and in Europaper, which is U.S.
dollar-denominated commercial paper of a foreign issuer.
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 U.S. dollars.
VARIABLE AMOUNT DEMAND NOTES
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.
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<PAGE> 151
FUNDING AGREEMENTS
The Prime Obligations Fund may invest in funding agreements ("Funding
Agreements"), also known as guaranteed investment contracts, issued by insurance
companies. Pursuant to such agreements, the Prime Obligations Fund invests an
amount of cash with an insurance company and the insurance company credits such
investment on a monthly basis with guaranteed interest which is based on an
index. The Funding Agreements provide that this guaranteed interest will not be
less than a certain minimum rate. The Funding Agreements provide for adjustment
of the interest rate monthly and are considered variable rate instruments. The
Prime Obligations Fund will only purchase a Funding Agreement (i) when 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, as amended, 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.
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.
-12-
<PAGE> 152
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period. The CARDS principal balance remains constant during this
period, while any cardholder repayments or new borrowings flow to the issuer's
participation. Once the principal amortization phase begins, the balance
declines with paydowns on the underlying portfolio. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization. Asset-backed securities purchased by the Prime Obligations
Fund will be subject to the same quality requirements as other securities
purchased by the Fund.
OTHER INVESTMENTS
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, as amended.
The Prime Obligations Fund may also invest in short-term municipal
obligations.
THE U.S. TREASURY FUND
THE U.S. TREASURY FUND invests exclusively in short-term U.S.
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
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<PAGE> 153
by the U.S. Treasury Fund may be subject to repurchase agreements collateralized
by the underlying U.S. Treasury obligation.
THE TAX EXEMPT FUND
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.
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.
TAXABLE OBLIGATIONS
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
-14-
<PAGE> 154
below) for tax-exempt commercial paper. These obligations are described further
in the Statement of Additional Information.
PRIVATE ACTIVITY BONDS
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.
MUNICIPAL SECURITIES
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 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
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<PAGE> 155
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 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
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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.
PUTS
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 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.
MONEY MARKET FUNDS
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.
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REVERSE REPURCHASE AGREEMENTS
Each Money Market Fund may borrow funds for temporary purposes by
entering into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Money Market Fund
would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Money Market Fund may decline below the price at which
the Money Market Fund is obligated to repurchase the securities.
INVESTMENT RESTRICTIONS
Each of the Money Market Funds is subject to a number of investment
restrictions that may be changed only by a vote of a majority of the outstanding
Shares of that Fund (see "GENERAL INFORMATION -- Miscellaneous" in this
Prospectus).
PRIME OBLIGATIONS FUND
The Prime Obligations Fund may not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Prime
Obligations Fund's total assets would be invested in such issuer, except that
25% or less of the value of the Prime Obligations Fund's total assets may be
invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value
of the Prime Obligations Fund's total assets at the time of purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, bank certificates of deposit or
bankers' acceptances issued by a domestic bank or by a U.S. branch of a foreign
bank provided that such U.S. branch is subject to the same regulation as U.S.
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.
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U.S. TREASURY FUND
The U.S. Treasury Fund may not purchase securities other than bills,
notes, and bonds issued by the U.S. Treasury, certain of which securities may be
subject to repurchase agreements collateralized by the underlying U.S. Treasury
obligation.
TAX EXEMPT FUND
The Tax Exempt Fund may not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the Tax
Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax
Exempt Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry; provided that this limitation shall not apply to Municipal
Securities; and provided, further, that for the purpose of this limitation only,
private activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax Exempt Fund's assets.
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PRIME OBLIGATIONS FUND, U.S. TREASURY FUND AND TAX EXEMPT FUND
The Prime Obligations Fund, the 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 U.S.
Treasury Fund is determined and its Shares are priced as of 1:00 p.m. and 4:00
p.m., Eastern time (the "Valuation Times") on each Business Day of such Fund.
The net asset value of the Tax Exempt Fund is determined and its Shares are
priced as of 12:00 noon and 4:00 p.m., Eastern time (the "Valuation Times") on
each Business Day of the Fund. As used herein a "Business Day" constitutes any
day on which the New York Stock Exchange (the "NYSE") is open for trading and
the Federal Reserve Bank of Atlanta is open, except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected, or days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, either the NYSE or the Federal Reserve Bank of Atlanta is
closed on the customary national business holidays of New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Net asset value per Share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
a Money Market Fund, less the liabilities charged to that 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
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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 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 are
subject to a contingent deferred sales charge.
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
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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 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.
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To change the frequency or amount invested, written instructions must
be received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
REDEMPTION BY MAIL below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
Investors should check with their banks to determine whether they are
members of the Automated Clearing House and whether their banks charge a fee for
transferring funds through the Automated Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.
Shares of 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
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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 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 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 "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.
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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.
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
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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 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;
(ii) exchanges for Class B Shares of other Funds of the Trust as described under
"Exchange Privilege;" or (iii) provided that the Shareholder withdraws no more
than 12% of the account value annually using the Automatic Withdrawal Plan
Feature.
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
EXCHANGES BETWEEN CLASSES OF A FUND
Classic Shares of a Fund may not be exchanged for Class B Shares of the
same Fund, and may be exchanged for Premier Shares of the same Fund only if the
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Shareholder becomes eligible to purchase Premier Shares. Class B Shares may not
be exchanged for Classic Shares of the same Fund, and may be exchanged for
Premier Shares of the same Fund only if the Shareholder becomes eligible to
purchase Premier Shares. A Contingent Deferred Sales Charge will not apply to
exchanges of Class B Shares for Premier Shares. An exchange of Classic Shares or
Class B Shares for Premier Shares of the same Fund will not be a taxable event
for a Shareholder.
EXCHANGES BETWEEN FUNDS
CLASSIC SHARES
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, subject to a minimum initial investment. 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, during a
twelve month period, a Shareholder acquires Classic Shares of a Money Market
Fund from an exchange involving Shares of a Variable NAV Fund, then such Shares
of the Money Market Fund may be exchanged back for Shares of a Variable NAV Fund
without the payment of any additional sales load. 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 Prospectus, Class B Shares were not yet being offered in
the 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
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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 not apply to exchanges of Class B Shares for Premier Shares.
ADDITIONAL INFORMATION ABOUT EXCHANGES
An exchange from one Fund to another Fund is considered to be a taxable
event for federal income tax purposes on which a Shareholder may realize a
capital gain or loss.
Before exchanging Shares, a Shareholder must receive a current
prospectus describing the Shares to be acquired. An exchange may be made by
calling the Trust at (800) 451-8382 or by mailing written instructions to BISYS
Fund Services, Inc. ("Transfer Agent"), P.O. Box 182733, Columbus, Ohio
43218-2733. Exchange Privileges may be exercised only in those states where
Shares may legally be sold, and may be amended or terminated at any time upon
sixty (60) days' prior notice to Shareholders.
The Exchange Privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Excessive exchange transactions
may potentially disrupt the management of the Trust and increase transaction
costs. Accordingly, in order to prevent excessive use of the Exchange Privilege,
the Trust has established a policy of prohibiting excessive exchange activity.
Exchange activity will not be deemed excessive if limited to four substantive
exchange redemptions from a Fund during a calendar year.
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.
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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
at AmSouth Mutual Funds, 3435 Stelzer Road, Columbus, OH 43219, 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 previously
designated bank account. 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
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the next Business Day following the receipt of a valid request for redemption.
Wire redemption requests may be made by the Shareholder by telephone to the
Transfer Agent. The wire redemption charge is currently $7.00, however, such
charge may be reduced by the Transfer Agent. 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 PURCHASE AND REDEEM
SHARES--Redemption by Mail."
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains
and dividends) 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.
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AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan ("AWP") enables Shareholders to make
regular redemptions of Classic Shares and Class B Shares of a Fund. With
Shareholder authorization, the Transfer Agent will automatically redeem Classic
Shares and Class B Shares at the net asset value of the applicable Fund on the
dates of withdrawal and have the amount specified transferred according to the
instructions of the Shareholder. In certain cases, Class B Shareholders may
redeem using AWP without paying a contingent deferred sales charge as described
in "How to Purchase and Redeem Shares - Contingent Deferred Sales Charge."
Shareholders participating in the AWP must maintain a minimum account balance of
$1,000 in the Fund from which Classic Shares or the Class B Shares are being
redeemed. Purchase of additional Shares concurrent with withdrawals may be
disadvantageous to certain Shareholders because of tax liabilities.
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 has a
value of less than $250. Accordingly, an investor purchasing Shares of a Money
Market 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
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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, as amended.
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 income. Shareholders will be advised at
least annually as to the character for federal income tax purposes of
distributions made during the year.
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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 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 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 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 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
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 Tax
Exempt Fund distributes exempt-interest dividends during the Shareholder's
taxable year. It is anticipated that distributions from the Tax Exempt Fund will
not be eligible for the dividends received deduction for corporate shareholders.
Gains on the sale of Shares in the Tax Exempt Fund will be subject to
federal, state and local taxes. If a Shareholder receives an exempt-interest
dividend with respect to any Share of
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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 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 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,
as amended. 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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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
George R. Landreth*, 56 Chairman From December 1992 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 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.
Dick D. Briggs, Jr., M.D., 64 Trustee From September 1989 to
459 DER Building present, Emeritus Professor
1808 7th Avenue South and Eminent Scholar Chair,
UAB Medical Center Univ. of Alabama at
Birmingham, Alabama 35294 Birmingham; from October 1979
to present, Physician,
University of Alabama Health
Services Foundation; from 1981
to 1995, Professor and Vice
Chairman, Department of
Medicine, University of
Alabama at Birmingham School
of Medicine; from June 1988 to
October 1992, President, Chief
Executive Officer and Medical
Director, University of
Alabama Health Services
Foundation
Wendell D. Cleaver, 63 Trustee From September 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*, 52 Trustee From June 1987 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services Limited Partnership
Homer H. Turner, Jr., 70 Trustee From June 1991 to present,
751 Cary Drive retired; until June 1991, Vice
Auburn, Alabama 3683-2505 President, Birmingham
Division, Alabama Power
Company
</TABLE>
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<PAGE> 175
<TABLE>
<CAPTION>
<S> <C> <C>
James H. Woodward, Jr., 58 Trustee From 1996 to present, Trustee,
The University of North The Sessions Group; from July
Carolina at Charlotte 1989 to present, Chancellor,
Charlotte, North Carolina 28223 The University of North
Carolina at Charlotte; from
April 1997 to present,
Trustee, BISYS Variable
Insurance Funds; from August
1984 to July 1989, Senior Vice
President, University College,
University of Alabama at
Birmingham
</TABLE>
- ---------------------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended.
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, 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, 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 July 31, 1998 of $19.9 billion and operated 276 banking offices in Alabama,
Florida, Georgia and Tennessee. AmSouth has provided investment management
services through its Trust Investment Department since 1915. As of July 31,
1998, AmSouth and its affiliates had over $8.8 billion in assets under
discretionary management and provided custody services for an additional $18.7
billion in securities. AmSouth is the largest provider of trust services in
Alabama 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.
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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 (0.40%) 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.
During the Trust's fiscal year ended July 31, 1998, the Advisor
received investment advisory fees amounting to 0.40% of the Prime Obligation
Fund's average daily net assets, 0.40% of the U.S. Treasury Fund's average daily
net assets and 0.20% 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 ("ASO") is the administrator for each Fund of the
Trust (the "Administrator"). ASO is a wholly owned subsidiary of BISYS. BISYS is
a subsidiary of The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of the Money Market
Funds' administration and operation. Under a management and administration
agreement between the Trust and the Administrator, the fee payable by each Money
Market Fund to the Administrator for administration services is the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(0.20%) 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.
During the Trust's fiscal year ended July 31, 1998, ASO received
administration fees amounting to 0.20% 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
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Administrator, calculated at an annual rate of up to ten one-hundredths of one
percent (0.10%) 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.
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 0.25% 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
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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 a Money Market Fund. No Money Market Fund will bear, directly or
indirectly, the cost of any activity primarily
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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 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 eighteen
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 Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth
Equity Income Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced Market
Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund, the AmSouth Florida
Tax-Free Fund, the AmSouth Institutional Prime Obligations Fund, and the
AmSouth Institutional U.S. Treasury Fund. Each Fund, except the AmSouth Florida
Tax-Free Fund and the AmSouth Select Equity Fund, is a diversified fund under
the Investment Company Act of 1940, as amended. Each Fund, except for the U.S.
Treasury Fund, the Tax
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<PAGE> 180
Exempt Fund, the Institutional Prime Obligations Fund, and the Institutional
U.S. Treasury Fund, has authorized three classes of Shares: Premier Shares,
Classic Shares, and Class B 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. The U.S. Treasury Fund and the
Tax-Exempt Fund have authorized two classes of Shares: Premier Shares and
Classic Shares. The Institutional Prime Obligations Fund and the Institutional
U.S. Treasury Fund have authorized three classes of Shares: Class I Shares,
Class II Shares, and Class III Shares. 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,
as amended, 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) when matters pertain to the Servicing Plan, and (iv)
when matters pertain 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 September 17, 1998, AmSouth was the beneficial owner of
approximately 65% of the outstanding Premier Shares of the Prime Obligations
Fund, 24% of the outstanding Premier Shares of the U.S. Treasury Fund, and 75%
of the outstanding Premier Shares of the Tax Exempt Fund, and may be deemed to
be a "controlling person" of the Premier Shares of each Fund within the
meaning of the Investment Company Act of 1940.
CUSTODIAN
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 the Trust.
BISYS Fund Services, Inc. serves as fund accountant for the Trust.
-41-
<PAGE> 181
PERFORMANCE INFORMATION
From time to time, the Money Market Funds' annualized "yield" and
"effective yield" and total return may be presented in advertisements and sales
literature.
The "yield" of a Money Market Fund is based upon the income earned by
the Money Market Fund over a seven-day period and then annualized, i.e. the
income earned in the period is assumed to be earned every seven days over a
52-week period and is stated as a percentage of the investment. The "effective
yield" of a Money Market Fund is calculated similarly but when annualized, the
income earned by the investment is assumed to be reinvested in Shares of the
Fund and thus compounded in the course of a 52-week period. The effective yield
will be higher than the yield because of the compounding effect of this assumed
reinvestment.
The Tax Exempt Fund may also present its "tax equivalent yield" and
"tax equivalent effective yield" which reflect the amount of income subject to
federal income taxation that a taxpayer in a stated tax bracket would have to
earn in order to obtain the same after-tax income as that derived from the yield
and effective yield, respectively, of the Tax Exempt Fund. The tax equivalent
yield and tax equivalent effective yield will be significantly higher than the
yield and effective yield of the Tax Exempt Fund.
Total return is calculated for the past year, 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
-42-
<PAGE> 182
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.
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
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<PAGE> 183
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 AmSouth
Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by calling toll
free (800) 451-8382.
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<PAGE> 184
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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
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<PAGE> 185
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fee Table ......................................................................................
Financial Highlights ...........................................................................
Investment Objectives and Policies..............................................................
Investment Restrictions.........................................................................
Valuation of Shares.............................................................................
How to Purchase and Redeem Share................................................................
Dividends and Taxes.............................................................................
Management of The AmSouth Mutual Fund...........................................................
General Information.............................................................................
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
-46-
<PAGE> 186
AMSOUTH MUTUAL FUNDS
AmSouth Bank
Investment Advisor
MONEY MARKET FUNDS
AMSOUTH MUTUAL FUNDS
NOT FDIC INSURED
BISYS FUND SERVICES, DISTRIBUTOR
This Prospectus is dated December 1, 1998.
-47-
<PAGE> 187
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
<TABLE>
<S> <C>
1. Cover Page............................... Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ........................... Financial Highlights; General Information -
Performance Information
4. General Description
of Registrant ......................... The Trust; Investment Objective and Policies;
Investment Restrictions; General Information -
Description of the Trust and Its Shares
5. Management of the Fund .................. Management of AmSouth Mutual Funds; General
Information - Custodian and Transfer Agent
6. Capital Stock and
Other Securities ...................... The Trust; How to Purchase and Redeem Shares;
Dividends and Taxes; General Information -
Description of the Trust and Its Shares; General
Information -Miscellaneous
7. Purchase of Securities
Being Offered ......................... Valuation of Shares; How to Purchase and Redeem
Shares
8. Redemption or Repurchase ................ How to Purchase and Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 188
AMSOUTH MUTUAL FUNDS
INCOME FUNDS
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
eighteen series of units of beneficial interest ("Shares") each representing
interests in one of eighteen 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, the only Income Fund currently offering Class B
Shares is the Bond Fund. 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 U.S. corporations and debt securities issued or
guaranteed by the U.S. 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 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 U.S. corporations and debt
<PAGE> 189
securities issued or guaranteed by the U.S. 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.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
Fund, and the AmSouth Tax Exempt Fund (the "Money Market Funds"); the AmSouth
Equity Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the
AmSouth Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity
Income Fund, the Amsouth Select Equity Fund, and the Amsouth Enhanced Market
Fund (the "Capital Appreciation Funds"); the Institutional Prime Obligations
Fund and the Institutional U.S. Treasury Fund (the "Institutional Money Market
Funds"); and the Premier Shares of the Income Funds, the Money Market Funds and
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
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<PAGE> 190
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 December 1, 1998.
- 3 -
<PAGE> 191
<TABLE>
<CAPTION>
FEE TABLE
LIMITED MATURITY GOVERNMENT INCOME
BOND FUND FUND FUND
--------- ---- ----
CLASSIC CLASS B CLASSIC CLASS B CLASSIC CLASS B
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 Reinvested 0% 0% 0% 0% 0% 0%
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 of amount 0% 0% 0% 0% 0% 0%
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 0.50% 0.50% 0.50% 0.50% 0.30% 0.30%
reduction)(3)
12b-1 Fees 0.00% 1.00% 0.00% 1.00% 0.00% 1.00%
Shareholder Servicing Fees (after voluntary 0.10% 0.00% 0.10% 0.00% 0.10% 0.00%
fee reduction)(4)
Other Expenses (after voluntary fee 0.23% 0.23% 0.23% 0.23% 0.33% 0.33%
reduction)(5)
Total Fund Operating Expenses 0.83% 1.73% 0.83% 1.73% 0.73% 1.63%
(after voluntary fee REDUCTION)(6)
</TABLE>
<TABLE>
<CAPTION>
FLORIDA TAX-FREE MUNICIPAL BOND
FUND FUND
---- ----
CLASSIC CLASS B CLASSIC CLASS B
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) 4.00% 4.00% 4.00% 4.00%
Maximum Sales Load Imposed on Reinvested 0% 0% 0% 0%
Dividends (as a percentage of offering price)
Deferred Sales Load (as a percentage 0% 0% 0% 0%
of original purchase price or redemption
proceeds, as applicable)
Redemption Fees (as a percentage of amount 0% 0% 0% 0%
redeemed, if applicable)(2)
Exchange Fee $ 0 $ 0 $ 0 $ 0
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees (after voluntary fee 0.30% 0.30% 0.40% 0.40%
reduction)(3)
12b-1 Fees 0.00% 1.00% 0.00% 1.00%
Shareholder Servicing Fees (after voluntary 0.10% 0.00% 0.10% 0.00%
fee reduction)(4)
Other Expenses (after voluntary fee 0.19% 0.19% 0.24% 0.24%
reduction)(5)
Total Fund Operating Expenses 0.59% 1.49% 0.74% 1.64%
(after voluntary fee REDUCTION)(6)
</TABLE>
(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 0.65% for each
Income Fund. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS - Investment Advisor.")
- 4 -
<PAGE> 192
(4) Absent the voluntary reduction of shareholder servicing fees,
Shareholder Servicing Fees as a percentage of average net assets would be 0.25%
for the Classic Shares of the Bond Fund, the Limited Maturity Fund, the
Government Income Fund, the Florida Tax-Free Fund and the Municipal Bond Fund.
(5) Absent the voluntary reduction of administration fees, Other
Expenses as a percentage of average net assets would be 0.31% for the Bond Fund,
0.31% for the Limited Maturity Fund, 0.43% for the Government Income Fund, 0.29%
for the Florida Fund and are estimated to be 0.32% for the Municipal Bond Fund.
(See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS-Administrator.")
(6) In the absence of any voluntary reduction in investment advisory
fees, administration fees and shareholder servicing fees, Total Fund Operating
Expenses for the Classic Shares would be 1.21% for the Bond Fund, 1.21% for the
Limited Maturity Fund, 1.33% for the Government Income Fund, 1.19% for the
Florida Fund and 1.22% 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 1.96% for the Bond Fund,
1.96% for the Limited Maturity Fund, 2.08% for the Government Income Fund, 1.94%
for the Florida Fund, and 1.97% for the Municipal 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Bond Fund $48 $65 $84 $138
Limited Maturity Fund $48 $65 $84 $138
Government Income Fund $47 $62 $79 $127
Florida Fund $46 $58 $72 $111
Municipal Bond Fund $47 $63 N/A N/A
</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>
Bond Fund
Assuming a complete
redemption at end of period $68 $84 $114 $180
Assuming no redemption $18 $54 $94 $180
Limited Maturity Fund
Assuming a complete
redemption at end of period $18 $54 $94 $180
Assuming no redemption $68 $84 $114 $180
Government Income Fund
Assuming a complete
redemption at end of period $17 $51 $89 $169
Assuming no redemption $67 $81 $109 $169
Florida Fund
Assuming a complete
redemption at end of period $15 $47 $81 $154
Assuming no redemption $65 $77 $101 $154
Municipal Bond Fund
Assuming a complete
redemption at end of period $17 $52 $89 $170
Assuming no redemption $67 $82 $109 $170
</TABLE>
- 5 -
<PAGE> 193
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 "HOW TO PURCHASE AND REDEEM SHARES -DISTRIBUTOR."
- 6 -
<PAGE> 194
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 July 31, 1998. The information from the commencement of operations
to July 31, 1998 is a part of the financial statements audited by
PricewaterhouseCoopers LLP, independent accountants for the Trust, whose report
on the Trust's financial statements for the year ended July 31, 1998 appears in
the Statement of Additional Information. Further financial data is incorporated
by reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Bond Fund
Year Ended July 31,
-------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Classic(d) Class B(e)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.88 $ 10.54 $ 10.83 $ 10.59 $ 11.29
------- ------- --------- --------- -------- -------
INVESTMENT ACTIVITIES
Net investment income 1.41 0.46 0.65 0.65 0.69 0.69
Net realized and unrealized
gains (losses) from investments (0.62) 0.24 0.42 (0.18) 0.28 (0.66)
------- ------- --------- --------- -------- -------
Total from Investment Activities 0.79 0.70 1.07 0.47 0.97 0.03
------- ------- --------- --------- -------- -------
DISTRIBUTIONS
Net investment income (0.63) (0.51) (0.69) (0.65) (0.69) (0.70)
Net realized gains (0.03) (0.03) -- (0.11) (0.04) (0.03)
------- ------- --------- --------- -------- -------
Total Distributions (0.66) (0.54) (0.69) (0.76) (0.73) (0.73)
------- ------- --------- --------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 11.05 $ 11.04 $ 10.92 $ 10.54 $ 10.83 $ 10.59
Total Return (excludes sales charge) 7.45% 6.58%(c) 10.48% 4.40% 9.70% 0.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 7,032 $ 442 $ 311,881 $ 132,737 $ 94,671 $79,472
Ratio of expenses to average net assets 0.73% 1.74%(b) 0.75% 0.75% 0.75% 0.78%
Ratio of net investment income to average
net assets 5.78% 4.75%(b) 6.10% 6.12% 6.63% 6.31%
Ratio of expenses to average net assets* 0.95% 1.99%(B) 0.98% 0.98% 0.98% 1.01%
Ratio of net investment income to average
net assets* 5.56% 4.49%(b) 5.87% 5.89% 6.40% 6.08%
Portfolio turnover 40.41% 40.41% 34.62% 9.60% 17.70% 30.90%
</TABLE>
<TABLE>
<CAPTION>
Bond Fund
Year Ended July 31,
------------------------------------------------------
December 1, 1988
to July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.29 $ 10.42 $ 10.39 $ 10.61 $ 10.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net investment income 0.71 0.74 0.74 0.77 0.50
Net realized and unrealized
gains (losses) from investments 0.33 0.91 0.05 (0.21) 0.56
-------- -------- -------- -------- -------
Total from Investment Activities 1.04 1.65 0.79 0.56 1.06
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income (0.71) (0.73) (0.74) (0.75) (0.45)
Net realized gains (0.33) (0.05) (0.02) (0.03) --
-------- -------- -------- -------- -------
Total Distributions (1.04) (0.78) (0.76) (0.78) (0.45)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 11.29 $ 11.29 $ 10.42 $ 10.39 $ 10.61
Total Return (excludes sales charge) 9.80% 16.41% 7.99% 5.54% 10.91% (c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 65,777 $ 60,156 $ 26,008 $ 17,518 $ 4,954
Ratio of expenses to average net assets 0.78% 0.82% 0.93% 0.84% 1.10% (b)
Ratio of net investment income to average
net assets 6.37% 6.94% 7.26% 7.82% 7.47% (b)
Ratio of expenses to average net assets* 1.01% 1.01% 1.11% 1.21% 2.28% (b)
Ratio of net investment income to average
net assets* 6.14% 6.75% 7.09% 7.45% 6.29% (b)
Portfolio turnover 14.98% 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.
(d) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or
Premier Shares. For reporting purposes, financial highlights prior to
September 2, 1997 are being reflected as Classic Shares.
(e) For the period from September 16, 1997 (commencement of operations) to
July 31, 1998.
- 7 -
<PAGE> 195
<TABLE>
<CAPTION>
Limited Maturity Fund
---------------------
Year Ended July 31,
--------------------------------------------------------------------------
1998(d) 1997 1996 1995 1994
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42 $ 10.31 $ 10.41 $ 10.23 $ 10.81
-------- --------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.85 0.58 0.58 0.58 0.54
Net realized and unrealized gains (losses) from
investments (0.25) 0.14 (0.10) 0.17 (0.45)
-------- --------- -------- -------- --------
Total from Investment Activities 0.60 0.72 0.48 0.75 0.09
-------- --------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.59) (0.61) (0.57) (0.57) (0.54)
In excess of net investment income -- -- (0.01) -- --
Net realized gains -- -- -- -- --
In excess of net realized gains -- -- -- -- (0.13)
-------- --------- -------- -------- --------
Total Distributions (0.59) (0.61) (0.58) (0.57) (0.67)
-------- --------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.43 $ 10.42 $ 10.31 $ 10.41 $ 10.23
Total Return (excludes sales charge) 5.94% 7.25% 4.74% 7.65% 0.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 3,531 $ 138,675 $ 46,005 $ 59,798 $ 51,660
Ratio of expenses to average net assets 0.74% 0.77% 0.76% 0.80% 0.79%
Ratio of net investment income to average
net assets 5.65% 5.65% 5.48% 5.69% 5.05%
Ratio of expenses to average net assets* 0.96% 1.02% 0.99% 1.03% 1.02%
Ratio of net investment income to average
net assets* 5.43% 5.40% 5.25% 5.46% 4.82%
Portfolio turnover 39.31% 64.89% 29.56% 38.11% 48.06%
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity Fund
---------------------
Year Ended July 31,
--------------------------------------------------------- February 1,
1988 to
July 31,
1993 1992 1991 1990 1989(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.81 $ 10.44 $ 10.29 $ 10.35 $ 10.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net investment income 0.60 0.70 0.73 0.72 0.35
Net realized and unrealized gains (losses) from
investments 0.09 0.45 0.17 (0.05) 0.32
-------- -------- -------- -------- -------
Total from Investment Activities 0.69 1.15 0.90 0.67 0.67
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income (0.61) (0.69) (0.73) (0.70) (0.32)
In excess of net investment income -- -- -- -- --
Net realized gains (0.08) (0.09) (0.02) (0.03) --
In excess of net realized gains -- -- -- -- --
-------- -------- -------- -------- -------
Total Distributions (0.69) (0.78) (0.75) (0.73) (0.32)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.81 $ 10.44 $ 10.29 $ 10.35
Total Return (excludes sales charge) 6.72% 11.48% 9.06% 6.80% 6.87%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 53,933 $ 38,206 $ 11,112 $ 5,983 $ 3,165
Ratio of expenses to average net assets 0.69% 0.68% 0.85% 1.02% 1.41%(b)
Ratio of net investment income to average
net assets 5.67% 6.78% 7.19% 7.23% 6.82%(b)
Ratio of expenses to average net assets* 1.03% 1.03% 1.20% 1.45% 2.72%(b)
Ratio of net investment income to average
net assets* 5.33% 6.43% 6.84% 6.80% 5.51%(b)
Portfolio turnover 141.27% 35.64% 85.08% 119.69% 28.28%
</TABLE>
- -------
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
(d) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or
Premier Shares. For reporting purposes, financial highlights prior to
September 2, 1997 are being reflected as Classic Shares.
- 8 -
<PAGE> 196
<TABLE>
<CAPTION>
Government Income Fund
--------------------------------------------
Year Ended July 31,
------------------------------------------------------- October 1, 1993
to July 31,
1998(d) 1997 1996 1995 1994(a)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.75 $ 9.40 $ 9.54 $ 9.48 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.63 0.58 0.66 0.68 0.54
Net realized and unrealized gains (losses)
from investments 0.08 0.35 (0.20) 0.08 (0.57)
-------- -------- -------- -------- --------
Total from Investment Activities 0.71 0.93 0.46 0.76 (0.03)
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.53) (0.58) (0.59) (0.70) (0.33)
In excess of net investment income (0.06) -- -- -- --
Tax return of capital -- -- (0.01) -- (0.16)
-------- -------- -------- -------- --------
Total Distributions (0.59) (0.58) (0.60) (0.70) (0.49)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.75 $ 9.40 $ 9.54 $ 9.48
Total Return (excludes sales charge) 7.58% 10.21% 4.91% 8.43% (0.26%)(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 8,176 $ 11,622 $ 15,752 $ 16,679 $ 15,465
Ratio of expenses to average net assets 0.71% 0.69% 0.65% 0.58% 0.37%(b)
Ratio of net investment income to average
net assets 5.95% 5.98% 6.81% 7.18% 6.56%(b)
Ratio of expenses to average net assets* 1.77% 1.29% 1.10% 1.19% 1.22%(b)
Ratio of net investment income to average
net assets* 4.89% 5.38% 6.36% 6.57% 5.71%(b)
Portfolio turnover 34.89% 2.96% 78.31% 27.32% 122.94%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier
Shares. For reporting purposes, financial highlights prior to September
2, 1997 are being reflected as Classic Shares.
- 9 -
<PAGE> 197
<TABLE>
<CAPTION>
Florida Tax-Free Fund
---------------------
Year Ended July 31, September 30, 1994
------------------------------------------ to July 31,
1998(d) 1997 1996 1995(a)
------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.50 $10.30 $10.32 $10.00
------ ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income 0.45 0.45 0.45 0.34
Net realized and unrealized gains (losses)
from investments 0.01 0.24 (0.01) 0.30
------ ------- ------- -------
Total from Investment Activities 0.46 0.69 0.44 0.64
------ ------- ------- -------
DISTRIBUTIONS
Net investment income (0.44) (0.48) (0.45) (0.32)
Net realized gains (0.07) (0.01) (0.01) --
------ ------- ------- -------
Total Distributions (0.51) (0.49) (0.46) (0.32)
------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.45 $10.50 $10.30 $10.32
Total Return (excludes sales charge) 4.46% 6.89% 4.24% 6.53%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $8,663 $53,688 $48,869 $48,333
Ratio of expenses to average net assets 0.55% 0.57% 0.59% 0.70%(b)
Ratio of net investment income to average
net assets 4.24% 4.36% 4.33% 4.16%(b)
Ratio of expenses to average net assets* 1.06% 1.06% 1.04% 1.01%(b)
Ratio of net investment income to average
net assets* 3.74% 3.87% 3.88% 3.86%(b)
Portfolio turnover 29.55% 24.05% 12.21% 2.33%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier
Shares. For reporting purposes, financial highlights prior to September
2, 1997 are being reflected as Classic Shares.
- 10 -
<PAGE> 198
<TABLE>
<CAPTION>
Municipal Bond Fund
-------------------
JULY 1, 1997
YEAR ENDED TO
JULY 31, 1998(a) JULY 31, 1997(b)
---------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.15 $10.00
------ --------
INVESTMENT ACTIVITIES
Net investment income 0.86 0.04
Net realized and unrealized gains (losses) from investments (0.42) 0.15
------ --------
Total from Investment Activities 0.44 0.19
------ --------
DISTRIBUTIONS
Net investment income (0.42) (0.04)
Net realized gains (0.03) --
------ --------
Total Distributions (0.45) (0.04)
------ --------
NET ASSET VALUE, END OF PERIOD $10.14 $10.15
Total Return (excludes sales charge) 4.30% 1.86%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Asset at end of period (000) $2,689 $337,933
Ratio of expenses to average net assets 0.62% 0.71%(d)
Ratio of net investment income to average net assets 4.26% 4.31%(d)
Ratio of expenses to average net assets* 0.92% 1.04%(d)
Ratio of net investment income to average net assets* 3.95% 3.98%(d)
Portfolio turnover 28.75% 1.59%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier
Shares. For reporting purposes, financial highlights prior to September
2, 1997 are being reflected as Classic Shares.
(b) Period from commencement of operations.
(c) Not Annualized.
(d) Annualized.
- 11 -
<PAGE> 199
INVESTMENT OBJECTIVE AND POLICIES
Each of the Bond Fund, the Limited Maturity Fund, and the Government
Income Fund seeks current income consistent with the preservation of capital.
There can be, of course, no assurance that any Fund will achieve its investment
objective. The investment objective of each Fund is fundamental and may not be
changed without a vote of a majority of the outstanding Shares of that Fund (as
defined below under "GENERAL INFORMATION -- Miscellaneous" in this Prospectus).
THE BOND FUND AND THE LIMITED MATURITY FUND
THE BOND FUND invests in long-term bonds and other fixed-income
securities. The Bond Fund's investments primarily consist of, but are not
limited to, debt obligations such as bonds, notes and debentures, which are
issued by U.S. corporations or issued or guaranteed by the U.S. 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, U.S. 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
- 12 -
<PAGE> 200
"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 U.S. corporations or issued or guaranteed by the U.S. 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 five 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
- 13 -
<PAGE> 201
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 Fund and the Limited Maturity Fund 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 U.S. 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 U.S. 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
- 14 -
<PAGE> 202
considered advantageous. The Bond Fund will only purchase zero-coupon
obligations if, at the time of purchase, such investments do not exceed 15% of
the value of the Bond Fund's total assets, and the Limited Maturity Fund will
only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 25% of the value of the Limited Maturity Fund's total
assets.
An increase in interest rates will generally reduce the value of the
investments in the Income Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, 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
- 15 -
<PAGE> 203
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 guidelines established by the Board of Trustees, that the Funding
Agreement presents minimal credit risks to the Fund and is of comparable quality
to instruments that are rated high quality by a nationally recognized
statistical rating organization that is not an affiliated person, as defined in
the Investment Company Act of 1940, of the issuer, on any insurer, guarantor,
provider of credit support for the instrument. The Bond Fund and the Limited
Maturity Fund may receive all principal of and accrued interest on a Funding
Agreement at any time upon thirty days' written notice. Because the Bond Fund
and the Limited Maturity Fund may not receive the principal amount of a Funding
Agreement from the insurance company on seven days' notice or less, the Funding
Agreement is considered an illiquid investment, and, together with other
instruments in such Fund which are not readily marketable, will not exceed 15%
of such Fund's net assets.
ASSET-BACKED SECURITIES
The Bond Fund and the Limited Maturity Fund may invest in securities
backed by automobile receivables and credit-card receivables and other
securities backed by other types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, typically 18 months. The CARD'S principal balance
remains constant during this period, while any cardholder repayments or new
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
CARDS have monthly payment schedules, weighted-average lives of 18-24 months and
stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after
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the end of the interest-only period. During this amortization period, the
principal payments on CARDS depend specifically on the method for allocating
cardholder repayments to investors. In many cases, the investor's participation
is based on the ratio of the CARDS' balance to the total credit card portfolio
balance. This ratio can be adjusted monthly or can be based on the balances at
the beginning of the amortization period. In some issues, investors are
allocated most of the repayments, regardless of the CARDS' balance. This method
results in especially fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization. The Bond Fund and the Limited Maturity Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three 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
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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 U.S. government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned U.S. 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 U.S. 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
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
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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.
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.
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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
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
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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.
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 THE MUNICIPAL BOND FUND
The Florida Fund seeks to produce as high a level of current interest
income exempt from federal income taxes and Florida intangibles taxes as is
consistent with the preservation of capital. The Municipal Bond Fund seeks to
produce as high a level of current federal tax-exempt income, as is consistent
with the preservation of capital. There can be, of course, no assurance that the
Florida Fund or the Municipal Bond Fund will achieve their investment
objectives. The investment objective of each Tax-Free Fund is fundamental and
may not be changed without a vote of a majority of the outstanding Shares of the
Fund (as defined below under "GENERAL INFORMATION -- Miscellaneous" in this
Prospectus).
THE FLORIDA FUND invests primarily in bonds, notes and warrants
generally issued by or on behalf of the State of Florida and its political
subdivisions, the interest on which, in the opinion of the issuer's bond counsel
at the time of issuance, is exempt from federal income tax, is not treated as a
preference item for purposes of the federal alternative minimum tax for
individuals, and is exempt from the Florida Intangible Personal Property Tax
("Florida Municipal Securities"). As a fundamental policy, under normal market
conditions at least 80% of the Florida Fund's net assets will be invested in
Florida Municipal Securities.
THE MUNICIPAL BOND FUND invests primarily in bonds and notes issued by
or on behalf of states (including the District of Columbia), territories, and
possessions of the United States and their respective authorities, agencies,
instrumentalities, and political subdivisions, the interest on which is both
exempt from federal income tax and not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Municipal Securities").
As a fundamental policy, under normal market conditions at least 80% of the
Municipal Bond Funds' net assets will be invested in Municipal Securities and in
securities of money market
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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 U.S. 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
many
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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-third in the nation in total population, with
over four million residents in 1997. 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 1.5%
in 1997. Alabama's per capita income in 1996 was $18,258, 82.8% of U.S. per
capita income. Currently Alabama's general obligations are rated AA3 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 state funding, including
certain issuers of Alabama Municipal Securities held in the Alabama Fund.
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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 Section 222 of the Constitution of Alabama. In so
holding, the Court found that warrants are not "bonds" within the meaning of
Section 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.
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
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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.
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
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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 Aa2 by
Moody's and AA+ by Standard and Poor's.
The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
SOURCES OF STATE AND LOCAL REVENUES
Florida's Constitution prohibits deficit spending by the state for
governmental operations. Florida does not have a personal income tax. An
amendment to the state's Constitution would be required in order to institute an
income tax, and passage of such an amendment is believed to be unlikely due to
the relatively large number of retirees living in the state as well as to the
general unpopularity of tax increases in the current political climate. A
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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
principal 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.
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.
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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 (the "AmSouth
Money Market Funds"), the AmSouth Institutional Prime Obligations Fund, the
AmSouth Institutional U.S. Treasury Fund (the "AmSouth Institutional Money
Market Funds") 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 each of
the Funds in the AmSouth Money Market Funds and the AmSouth Institutional Money
Market Funds, 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 and the AmSouth Institutional Money Market Funds, and
with respect to the Tax-Free Funds, the AmSouth Tax Exempt Fund, that are
attributable to those Fund investments. Each Income Fund and Tax-Free 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 Income Funds' and the Tax-Free Funds'
investments in the securities of unaffiliated money market funds, the AmSouth
Money Market Funds, and the AmSouth Institutional Money Market Funds are
contained in the Statement of Additional Information.
OPTIONS
The Bond Fund, the Limited Maturity Fund, and the 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
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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.
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.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield and thereby involve a risk that the
yield obtained in the transaction will be less than that available in the market
when delivery takes place. The Income Funds will generally not pay for such
securities or start earning interest on them until they are received. When an
Income Fund agrees to purchase securities on a "when-issued" basis, the Trust's
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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 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, the Limited
Maturity Fund, and the 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
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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 the 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, THE LIMITED MATURITY FUND, THE GOVERNMENT INCOME FUND,
AND THE MUNICIPAL BOND FUND MAY NOT:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities.
THE INCOME FUNDS MAY NOT:
1. Purchase any securities which would cause more than 25% of the value
of such Income Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the
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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.
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
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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 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.
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
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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, 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 canceled 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
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receive a confirmation from the Trust for every transaction, and a withdrawal
will appear on their bank statements.
To participate in AIP, investors must complete the appropriate sections
of the Account Registration form or call for instructions. This form may be
obtained by calling the Trust at (800) 451-8382. The amount investors specify
will automatically be invested in Shares at the specified Fund's public offering
price per Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must
be received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
"REDEMPTION BY MAIL" below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
Investors should check with their banks to determine whether they are
members of the Automated Clearing House and whether their banks charge a fee for
transferring funds through the Automated Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.
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.
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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 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
A PERCENTAGE OF SALES CHARGE AS DEALER ALLOWANCE AS
NET AMOUNT A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF PURCHASE INVESTED OFFERING PRICE OFFERING PRICE
- ------------------ -------- -------------- --------------
<S> <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% 0.90%
$1,000,000 or more 0%* 0%* 0%*
</TABLE>
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<PAGE> 226
* 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 billion.
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.
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
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the Distributor which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account," asset allocation or a
similar program under which such clients pay a fee to such broker-dealer,
registered investment advisor or other financial institution.
From time to time, for special promotional purposes, the Distributor
may offer special concessions to enable investors to purchase shares of a Fund
offered by the Trust at net asset value without payment of a front-end charge.
To qualify for a net asset value purchase, the investor must pay for such
purchase with the proceeds from the redemption of shares of a non-affiliated
mutual fund on which a front-end sales charge was paid. A qualifying purchase of
shares must occur within 30 days of prior redemption and must be evidenced by a
confirmation of the redemption transaction. At the time of purchase, the
investment representative must notify the Distributor that the purchase
qualifies for a purchase at net asset value and provide sufficient information
to permit confirmation of qualification. Proceeds from the redemption of shares
on which no front-end sales charge was paid do not qualify for a purchase at net
asset value.
The Distributor may also periodically waive the sales charge for all
investors with respect to any Income Fund.
LETTER OF INTENT
By checking the Letter of Intent box on the account application, a
shareholder becomes eligible for reduced sales charges applicable to the total
amount invested in 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). BISYS Fund Services, Inc. (the "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.
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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 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.
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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.
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
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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 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;
(ii) exchanges for Class B Shares of other Funds of the Trust as described under
"Exchange Privilege;" or (iii) provided that the Shareholder withdraws no more
than 12% of the account value annually using the Automatic Withdrawal Plan
feature.
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.
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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 dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Compensation will also
include the following types of non-cash compensation offered through sales
contests: (1) vacation trips, including the provision of travel arrangements and
lodging at luxury resorts at an exotic location, (2) tickets for entertainment
events (such as concerts, cruises and sporting events) and (3) merchandise (such
as clothing, trophies, clocks and pens). Dealers may not use sales of a Fund's
Shares to qualify for this compensation to the extent such may be prohibited by
the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by any Fund or its Shareholders.
EXCHANGE PRIVILEGE
Exchanges Between Classes of a Fund
Classic Shares of a Fund may not be exchanged for Class B Shares of the
same Fund, and may be exchanged for Premier Shares of the same Fund only if the
Shareholder becomes eligible to purchase Premier Shares. Class B Shares may not
be exchanged for Classic Shares of the same Fund, and may be exchanged for
Premier Shares of the same Fund only if the Shareholder becomes eligible to
purchase Premier Shares. A contingent deferred sales charge will not apply to
exchanges of Class B Shares for Premier Shares. An exchange of Classic Shares or
Class B Shares for Premier Shares of the same Fund will not be a taxable event
for a Shareholder.
Exchanges Between Funds
CLASSIC SHARES
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, subject to a minimum initial investment. 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
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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, during a twelve month period, a Shareholder acquires Classic Shares of
a Money Market Fund from an exchange involving Shares of a Variable NAV Fund,
then such Shares of the Money Market Fund may be exchanged back for Shares of a
Variable NAV Fund without the payment of any additional sales load. 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 Prospectus, Class B Shares were not yet being offered in
the 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 not apply to exchanges of Class B Shares for Premier Shares.
ADDITIONAL INFORMATION ABOUT EXCHANGES
An exchange from one Fund to another Fund is considered to be a taxable
event for federal income tax purposes on which a Shareholder may realize a
capital gain or loss. If a shareholder exchanges Income Fund Shares for Shares
of another Fund without paying a sales charge on the exchange, the gain or loss
on the sale of the Fund Shares will be calculated without taking into account
the sales charge paid on the original Shares if they were held less
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than 91 days. The sales charge will instead be added to the basis of the Fund
Shares acquired in the exchange. This treatment will increase the gain or reduce
the loss that the Shareholder would otherwise recognize on the exchange.
Before exchanging Shares, a Shareholder must receive a current
prospectus describing the Shares to be acquired. 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 may legally be sold, and may be amended or terminated at any time upon
sixty (60) days' prior notice to Shareholders.
The Exchange Privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Excessive exchange transactions
may potentially disrupt the management of the Trust and increase transaction
costs. Accordingly, in order to prevent excessive use of the Exchange Privilege,
the Trust has established a policy of prohibiting excessive exchange activity.
Exchange activity will not be deemed excessive if limited to four substantive
exchange redemptions from a Fund during any calendar year.
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.
REINSTATEMENT PRIVILEGE
The Reinstatement Privilege enables investors who have redeemed Classic
Shares to repurchase, within 90 days of such redemption, Classic Shares in an
amount not to exceed the redemption proceeds received at a purchase price equal
to the then-current net asset value
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<PAGE> 234
determined after a reinstatement request and payment are received by the
Transfer Agent. This privilege also enables investors to reinstate their account
for the purpose of exercising the Exchange Privilege. To use the Reinstatement
Privilege, you must submit a written reinstatement request to the Transfer
Agent. The reinstatement request and the payment must be received within 90 days
of the trade date of the redemption.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains
and dividends) 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 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
at AmSouth Mutual Funds, 3435 Stelzer Road, Columbus, OH 43219, 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
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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 previously designated bank account. 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 the receipt of a
valid request for redemption. Wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The wire redemption charge is
currently $7.00, however, such charge may be reduced by the Transfer Agent.
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 PURCHASE AND REDEEM
SHARES - Redemption by Mail."
Automatic Withdrawal Plan
The Automatic Withdrawal Plan ("AWP") enables Shareholders to make
regular redemptions of Classic Shares and Class B Shares of a Fund. With
Shareholder authorization, the Transfer Agent will automatically redeem Classic
Shares and Class B Shares at the net asset value of the applicable Fund on the
dates of withdrawal and have the amount specified transferred according to the
instructions of the Shareholder. In certain cases, Class B Shareholders may
redeem using AWP without paying a contingent deferred sales charge as described
in "How to Purchase and Redeem Shares - Contingent Deferred Sales Charge."
Shareholders participating in the AWP must maintain a minimum account balance of
$10,000 in the Fund from which Classic Shares or the Class
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B Shares are being redeemed. Purchase of additional Shares concurrent with
withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities.
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 redemption or redeem Shares involuntarily if it appears appropriate to do so
in light of the Trust's responsibilities under the Investment Company Act of
1940.
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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 Internal Revenue Code of 1986, as
amended (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.
THE BOND FUND, THE LIMITED MATURITY FUND, AND THE GOVERNMENT INCOME FUND
Distributions by the Bond Fund, the Limited Maturity Fund, and the
Government Income Fund of ordinary income and/or an excess of short-term capital
gain over net long-term
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loss are taxable to Shareholders as ordinary income. It is not expected that the
dividends-received deduction for corporations will apply to these distributions.
Distributions designated by the Bond Fund, the Limited Maturity Fund,
and the Government Income Fund as deriving from net gains on securities held for
more than one year are taxable to Shareholders as such, 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, the Limited Maturity Fund,
and the 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 and distributions on a Fund's
Shares are generally subject to federal income tax as described herein to the
extent they do not exceed the Fund's realized income and gains, even though such
dividends and distributions may economically represent a return of a particular
Shareholder's investment. Such distributions are likely to occur in respect of
shares purchased at a time when the Fund's net asset value reflects gains that
are either unrealized, or realized but not distributed. 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, the Limited Maturity Fund, and the Government Income 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 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, the Limited Maturity Fund, and the
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 U.S. 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, the Limited
Maturity Fund, and the 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.
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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" 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, the Limited
Maturity Fund, and the 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.
THE FLORIDA FUND AND THE 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 Tax-Free Funds will
not be eligible for the dividends-received deduction for corporate shareholders.
Gains on the sale of Shares in the Tax-Free Funds will be subject to
federal, state, and local taxes. If a Shareholder receives an exempt-interest
dividend with respect to any Share of
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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(3)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(3)d provides similar tax-exempt treatment for interest on obligations of the
United States or its Possessions (including Puerto Rico, Guam
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<PAGE> 241
and the Virgin Islands). Regulation Section 810-3-14-.02(4)(a) extends the
exclusion to agencies of the United States or corporations owned by the United
States and lists as examples of exempt obligations, U.S. Savings Bonds, U.S.
Treasury notes or bills, obligations of the Bank for Cooperation, Federal Land
Bank, Federal Intermediate Credit Bank, Federal Home Loan Bank, production
credit associations, Federal Financing Bank, and the Tennessee Valley Authority.
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.
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<PAGE> 242
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 technical
assistance advisement confirming this tax treatment has been obtained 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):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name, Address and Age With the Trust During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
George R. Landreth*, 56 Chairman From December 1992 to present,
BISYS Fund Services employee of BISYS Fund Services
3435 Stelzer Road Limited Partnership; from July 1991 to
Columbus, Ohio 43219 December 1992, employee of PNC
Financial Corp.; from October 1984 to
July 1991, employee of The Central
Trust Co., N.A.
</TABLE>
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<PAGE> 243
<TABLE>
<S> <C> <C>
Dick D. Briggs, Jr., M.D., 64 Trustee From September 1989 to present,
459 DER Building Emeritus Professor and Eminent
1808 7th Avenue South Scholar Chair, Univ. of Alabama at
UAB Medical Center Birmingham; from October 1979 to
Birmingham, Alabama 35294 present, Physician, University of
Alabama Health Services Foundation;
from 1981 to 1995, Professor and
Vice Chairman, Department of
Medicine, University of Alabama at
Birmingham School of Medicine; from
June 1988 to October 1992, President,
Chief Executive Officer and Medical
Director, University of Alabama
Health Services Foundation
Wendell D. Cleaver, 63 Trustee From September 3, 1993 to present,
209 Lakewood Drive, West retired; from December 1988 to
Mobile, Alabama 36608 August, 1993, Executive Vice
President, Chief Operating Officer
and Director, Mobile Gas Service
Corporation
J. David Huber*, 52 Trustee From June 1987 to present,
BISYS Fund Services employee of BISYS Fund Services
3435 Stelzer Road Limited Partnership
Columbus, OH 43219
Homer H. Turner, Jr., 70 Trustee From June 1991 to present,
751 Cary Drive retired; until June 1991, Vice
Auburn, Alabama 36830-2505 President, Birmingham Division,
Alabama Power Company
James H. Woodward, Jr. , 58 Trustee From 1996 to present, Trustee, The
The University of North Sessions Group; from July 1989 to
Carolina at Charlotte present, Chancellor, The
Charlotte, North Carolina 28223 University of North Carolina at
Charlotte; from April 1997 to
present, Trustee, BISYS Variable
Insurance Funds; from August 1984
to July 1989, Senior Vice
President, University College,
University of Alabama at
Birmingham
</TABLE>
- ---------------------
* Indicates an "interested person" of the Trust as defined in the Investment
Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services, 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, 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.
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<PAGE> 244
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 July 31, 1998 OF $19.9 billion and operated 276 banking offices in
Alabama, Florida, Georgia and Tennessee. AmSouth has provided investment
management services through its Trust Investment Department since 1915. As of
July 31, 1998, AmSouth and its affiliates had over $8.8 billion in assets
under discretionary management and provided custody services for an additional
$18.7 billion in securities. AmSouth is the largest provider of trust services
in Alabama 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 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.
Steven L. Cass, is the portfolio manager for the Florida Fund and, as
such, has primary responsibility for the day-to-day portfolio management of the
Fund's portfolio. Mr. Cass has been associated with AmSouth's Trust Investment
Group since October, 1995 and is currently Assistant Vice President and Trust
Investment Officer. Mr. Cass was a registered representative and insurance
agent employed by First of America Securities, Great Western Financial
Securities, and CM Financial Group for three years prior to joining AmSouth.
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<PAGE> 245
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
sixty-five one-hundredths of one percent (0.65%) 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, 1998, the Advisor
received investment advisory fees amounting to 0.50% of the Bond Fund's average
daily net assets, 0.50% of the Limited Maturity Fund's average daily net
assets, 0.30% of the Government Income Fund's average daily net assets , 0.30%
of the Florida Fund's average daily net assets, and 0.40% of the Municipal Bond
Fund's average daily net assets.
ADMINISTRATOR
ASO Service Company ("ASO") is the administrator for each Fund of the
Trust (the "Administrator"). ASO is a wholly owned subsidiary of BISYS. BISYS
is a subsidiary of The BISYS Group, Inc., 150 Clove Road, Little Falls, New
Jersey 07424, a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of the 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 (0.20%) 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.
During the Trust's fiscal year ended July 31, 1998, ASO received
administration fees, after voluntary fee reductions, amounting to 0.12% of the
Bond Fund's average daily net assets; 0.12% of the Limited Maturity Fund's
average daily net assets; 0.10% of the Government Income Fund's average daily
net assets; 0.10% of the Florida Fund's average daily net assets, AND 0.12% of
the Municipal Bond Fund's average daily assets.
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
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<PAGE> 246
AmSouth receives a fee, paid by the Administrator, calculated at an annual rate
of up to ten one-hundredths of one percent (0.10%) 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 (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 Shareholder
Servicing fee of 0.25% 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
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<PAGE> 247
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 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.
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<PAGE> 248
As a general matter, expenses are allocated to the Premier Shares,
Classic Shares, 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 Shares 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 eighteen
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 Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth
Equity Income Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced Market
Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund , the AmSouth Florida
Tax-Free Fund, the AmSouth Institutional Prime Obligations Fund, and the
AmSouth Institutional U.S. Treasury Fund. Each Fund, except the AmSouth Florida
Tax-Free Fund and the AmSouth Select Equity Fund, is a diversified fund under
the Investment Company Act of 1940, as amended. Each Fund, except for the U.S.
Treasury Fund, the Tax Exempt Fund, the Institutional Prime Obligations Fund,
and the Institutional U.S. Treasury Fund, has authorized three classes of
Shares: Premier Shares, Classic Shares, and Class B 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
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<PAGE> 249
Bond Fund. The U.S. Treasury Fund and the Tax Exempt Fund have authorized two
classes of Shares: Premier Shares and Classic Shares. The Institutional Prime
Obligations Fund and the Institutional U.S. Treasury Fund have authorized three
classes of Shares: Class I Shares, Class II Shares, and Class III Shares. 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, (iii) when matters pertain to the Servicing Plan, and (iv)
when matters pertain 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 September 17, 1998, AmSouth was the beneficial owner of
approximately 89% of the outstanding Premier Shares of the Bond Fund, 89% of
the outstanding Premier Shares of the Limited Maturity Fund, 99% of the
outstanding Premier Shares of the Florida Fund, and 51% of the outstanding
Premier Shares of the Municipal Bond Fund, and may be deemed to be a
"controlling person" of the Premier Shares of each Fund within the meaning
of the Investment Company Act of 1940.
CUSTODIAN
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 ACCOUNTANT
BISYS Fund Services Ohio, Inc. serves as transfer agent for the Trust.
BISYS Fund Services, Inc. serves as fund accountant for 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
- 62 -
<PAGE> 250
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 below. These figures are based on
historical earnings, but past performance data is not necessarily indicative of
future performance of the Fund.
COMPARATIVE PERFORMANCE INFORMATION REGARDING THE TAX-EXEMPT
PORTFOLIO AND THE MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURN*
AS OF JUNE 30, 1997
Fund 1 year 3 years 5 years 10 years
---- ------ ------- ------- --------
Tax-Exempt Portfolio 0.99% 3.54% 3.59% 5.24%
*Figures were calculated pursuant to a methodology established by the SEC. 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, limitations and diversification
requirements imposed by the Act and the Code. If the Tax-Exempt Portfolio had
been registered under the 1940 Act, its performance may have been adversely
affected. The investment objective, restrictions and guidelines of the
Municipal Bond Fund are substantially similar to the Tax-Exempt Portfolio and
both were managed by the same personnel.
- 63 -
<PAGE> 251
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 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.
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.
- 64 -
<PAGE> 252
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.
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
- 65 -
<PAGE> 253
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 AmSouth
Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733 or by calling toll
free (800) 451-8382.
- 66 -
<PAGE> 254
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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
- 67 -
<PAGE> 255
TABLE OF CONTENTS
Page
----
The Trust................................................................
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.
- 68 -
<PAGE> 256
AMSOUTH MUTUAL FUNDS
AmSouth Bank
Investment Advisor
INCOME FUNDS
NOT FDIC INSURED
BISYS FUND SERVICES, DISTRIBUTOR
This Prospectus is dated December 1, 1998.
- 69 -
<PAGE> 257
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, AMSOUTH
EQUITY INCOME FUND, AMSOUTH SELECT EQUITY FUND,
AND AMSOUTH ENHANCED MARKET FUND
CLASSIC SHARES AND CLASS B SHARES
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page.................................................... Cover Page
2. Synopsis...................................................... Fee Table
3. Condensed Financial Information............................... Financial Highlights; General
Information - Performance Information
4. General Description of Registrant............................. The Trust; Investment Objective and
Policies; Investment Restrictions;
General Information - Description of
the Trust and Its Shares
5. Management of the Fund........................................ Management of AmSouth Mutual
Funds; General Information - Custodian
and Transfer Agent
6. Capital Stock and Other Securities............................ The Trust; How to Purchase and
Redeem Shares; Dividends and Taxes;
General Information - Description of
the Trust and Its Shares; General
Information - Miscellaneous
7. Purchase of Securities Being Offered.......................... Valuation of Shares; How to Purchase
and Redeem Shares
8. Redemption or Repurchase...................................... How to Purchase and Redeem Shares
9. Legal Proceedings............................................. Inapplicable
</TABLE>
<PAGE> 258
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
eight of eighteen series of units of beneficial interest ("Shares") each
representing interests in one of eighteen 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.
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.
<PAGE> 259
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. The Fund
seeks to achieve growth of income over the long term.
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 80% of its
total assets in common stocks and securities convertible into common stocks such
as convertible bonds and convertible preferred stock of companies with market
capitalizations that are equivalent to the capitalization of the companies in
the Russell 2000(R) Growth Index at the time of purchase. As of the date of this
Prospectus, such smaller companies will have a market capitalization between $50
million and $2 billion at the time of purchase.
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 SELECT EQUITY FUND (the "Select Equity Fund") seeks long-term
growth of capital by investing primarily in common stocks and securities
convertible into common stocks such as convertible bonds and convertible
preferred stocks. The Fund is non-diversified concentrating on companies which
possess a dominant market share and typically have a history of stable earnings
growth. 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 with market capitalizations
that are greater than $2 billion at the time of purchase.
AMSOUTH ENHANCED MARKET FUND (the "Enhanced Market Fund") seeks
long-term growth of capital by investing primarily in a diversified portfolio of
common stock and securities convertible into common stocks such as convertible
bonds and convertible preferred stocks. Under normal market conditions the Fund
will invest at least 80% of its total assets in equity securities listed in the
Standard & Poor's 500 Index ("S&P 500"). The Fund invests primarily in S&P 500
securities that are determined, through the use of a quantitative investment
approach emphasizing technical factors, to be undervalued compared to others in
the market sector.
-2-
<PAGE> 260
AmSouth Bank, Birmingham, Alabama ("AmSouth") acts as the investment
advisor to each Capital Appreciation Fund ("Advisor"). Rockhaven Asset
Management, LLC ("Rockhaven" or "Sub-Advisor") acts as the investment
sub-advisor to the Equity Income Fund. Peachtree Asset Management ("Peachtree"
or "Sub-Advisor") acts as the investment sub-advisor to the Capital Growth Fund.
Sawgrass Asset Management, LLC ("Sawgrass" or "Sub-Advisor") acts as the
investment sub-advisor to the Small Cap Fund. OakBrook Investments, LLC
("OakBrook" or "Sub-Advisor") acts as the investment sub-advisor to the Enhanced
Market Fund and the Select Equity Fund. 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. 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 who wish to obtain a copy of the prospectuses of the AmSouth
Prime Obligations Fund, the AmSouth U.S. Treasury Fund, and the AmSouth Tax
Exempt Fund (the "Money Market Funds"); the AmSouth Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund, the AmSouth Municipal
Bond Fund, and the AmSouth Florida Tax-Free Fund (the "Income Funds"); the
Institutional Prime Obligations Funds and the Institutional U.S. Treasury Fund
(the "Institutional Money Market Funds"); and the Premier Shares of the Capital
Appreciation Funds, the Money Market Funds and 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
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<PAGE> 261
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 December 1, 1998.
-4-
<PAGE> 262
FEE TABLE
<TABLE>
<CAPTION>
Equity Regional Equity
Fund Fund Balanced Fund
---- ---- -------------
Class B Class B Class B
Classic Shares Classic Shares Classic Shares
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on 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%
Reinvested Dividends (as a percentage of
offering price)
Deferred Sales Load (as a percentage 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%
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 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
12b-1 Fees 0.00% 1.00% 0.00% 1.00% 0.00% 1.00%
Shareholder Servicing Fees 0.25% 0.00% 0.25% 0.00% 0.25% 0.00%
Other Expenses (after voluntary 0.29% 0.29% 0.32% 0.32% 0.30% 0.30%
fee reduction)(5) ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses(6) 1.34% 2.09% 1.37% 2.12% 1.35% 2.10%
(after voluntary fee reduction) ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Small Cap Equity Income
Fund Fund Fund
---- ---- ----
Class B Class B Class B
Classic Shares Classic Shares Classic Shares
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Load Imposed on 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%
Reinvested Dividends (as a percentage of
offering price)
Deferred Sales Load (as a percentage 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%
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 0.80% 0.80% 1.20% 1.20% 0.80% 0.80%
12b-1 Fees 0.00% 1.00% 0.00% 1.00% 0.00% 1.00%
Shareholder Servicing Fees 0.25% 0.00% 0.25% 0.00% 0.25% 0.00%
Other Expenses (after voluntary fee 0.19% 0.19% 0.30% 0.30% 0.39% 0.39%
reduction)(5) ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses(6) 1.24% 1.99% 1.75% 2.50% 1.44% 2.19%
(after voluntary fee reduction) ==== ==== ==== ==== ==== ====
</TABLE>
-5-
<PAGE> 263
FEE TABLE
<TABLE>
<CAPTION>
Select Equity Enhanced Market
Fund Fund
---- ----
Classic Class B Shares Classic Class B 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 0.80% 0.80% 0.45% 0.45%
12b-1 Fees 0.00% 1.00% 0.00% 1.00%
Shareholder Servicing Fees 0.25% 0.00% 0.25% 0.00%
(after voluntary fee reduction)
Other Expenses(3) 0.50% 0.50% 0.25% 0.25%
---- ---- ---- ----
Total Fund Operating Expenses(4) 1.55% 2.30% 0.95% 1.70%
(after voluntary fee reduction) ==== ==== ==== ====
</TABLE>
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 Absent the voluntary reduction of administration fees, Other Expenses
would be 0.39% for the Capital Growth Fund and 0.50% for the Small Cap Fund. The
administration fee of 0.20% is being waived for the Select Equity Fund and the
Enhanced Market Fund until the respective Fund reaches $10 million in assets.
Other Expenses for the Small Cap Fund, the Select Equity Fund and the Enhanced
Market Fund are based on estimates for the current fiscal year.
4 In the absence of any voluntary reduction of administration fees,
Total Fund Operating Expenses for the Classic Shares would be 1.44% for the
Capital Growth Fund, and 1.95% for the Small Cap Fund. In the absence of any
voluntary reduction of administration fees, Total Fund Operating Expenses for
the Class B Shares would be 2.19% for Capital Growth Fund and 2.70% for the
Small Cap Fund.
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<PAGE> 264
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>
Equity Fund $58 $86 $115 $199
Regional Equity Fund $58 $86 $117 $202
Balanced Fund $58 $86 $116 $200
Capital Growth Fund $57 $83 N/A N/A
Small Cap Fund $62 $98 N/A N/A
Equity Income Fund $59 $89 N/A N/A
Select Equity Fund $58 $84 N/A N/A
Enhanced Market Fund $54 $74 N/A N/A
</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.
-7-
<PAGE> 265
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund
Assuming a complete
redemption at end of period $71 $ 95 $132 $223
Assuming no redemption $21 $ 65 $112 $223
Regional Equity Fund
Assuming a complete
redemption at end of period $72 $ 96 $134 $226
Assuming no redemption $22 $ 66 $114 $226
Balanced Fund
Assuming a complete
redemption at end of period $71 $ 96 $133 $224
Assuming no redemption $21 $ 66 $113 $224
Capital Growth Fund
Assuming a complete
redemption at end of period $70 $ 92 N/A N/A
Assuming no redemption $20 $ 62 N/A N/A
Small Cap Fund
Assuming a complete
redemption at end of period $75 $108 N/A N/A
Assuming no redemption $25 $ 78 N/A N/A
Equity Income Fund
Assuming a complete
redemption at end of period $72 $99 N/A N/A
Assuming no redemption $22 $69 N/A N/A
Select Equity Fund
Assuming a complete
redemption at end of period $73 $102 N/A N/A
Assuming no redemption $23 $72 N/A N/A
Enhanced Market Fund
Assuming a complete
redemption at end of period $67 $84 N/A N/A
Assuming no redemption $17 $54 N/A N/A
</TABLE>
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 "HOW TO PURCHASE AND REDEEM SHARES --
Distributor.")
-8-
<PAGE> 266
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Funds (with the exception of the Select
Equity Fund and the Enhanced Market Fund) for the period from commencement of
operations to July 31, 1998. The information from the commencement of operations
to July 31, 1998 is a part of the financial statements audited by
PricewaterhouseCoopers LLP, independent accountants for the Trust, whose report
on the Trust's financial statements for the year ended July 31, 1998 appears in
the Statement of Additional Information. Further financial data is incorporated
by reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Equity Fund
------------------------------------------------------------------
Year Ended July 31,
------------------------------------------------------------------
1998
----
Classic (a) B Shares (f) 1997 1996
----------- ------------ ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.35 $23.15 $ 17.62 $ 16.75
------- ------ -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.21 0.09 0.30 0.33
Net realized and unrealized gains (losses)
from investments 2.54 2.68 6.77 1.48
---- ---- ---- ----
Total from Investment Activities 2.75 2.77 7.07 1.81
---- ---- ---- ----
DISTRIBUTIONS
Net investment income (0.25) (0.12) (0.30) (0.33)
Net realized gains from investment transactions (1.25) (1.25) (1.04) (0.61)
----- ----- ----- -----
Total Distributions (1.50) (1.37) (1.34) (0.94)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 24.60 $24.55 $ 23.35 $ 17.62
======= ====== ======== ========
Total Return (excludes sales charge) 12.34% 12.49%(c) 42.35% 11.09%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $73,165 $7,929 $974,985 $374,622
Ratio of expenses to average net assets 1.19% 2.11%(b) 1.06% 1.02%
Ratio of net investment income to average net assets 0.89% 0.26%(b) 1.52% 1.86%
Ratio of expenses to average net assets* 1.19% 2.11%(b) 1.10% 1.11%
Ratio of net investment income to average net assets* 0.89% 0.26%(b) 1.48% 1.77%
Portfolio turnover (d) 16.95% 16.95% 24.47% 19.11%
</TABLE>
<TABLE>
<CAPTION>
Equity Fund
------------------------------------------------------------------
Year Ended July 31,
------------------------------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.82 $ 14.38 $ 13.40 $ 12.57
-------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.33 0.28 0.28 0.32
Net realized and unrealized gains (losses)
from investments 2.39 0.83 1.48 1.20
---- ---- ---- ----
Total from Investment Activities 2.72 1.11 1.76 1.52
---- ---- ---- ----
DISTRIBUTIONS
Net investment income (0.32) (0.28) (0.29) (0.33)
Net realized gains from investment transactions (0.47) (0.39) (0.49) (0.36)
----- ----- ----- -----
Total Distributions (0.79) (0.67) (0.78) (0.69)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 16.75 $ 14.82 $ 14.38 $ 13.40
======== ======== ======== ========
Total Return (excludes sales charge) 19.27% 7.90% 13.81% 12.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $275,757 $205,611 $153,074 $107,934
Ratio of expenses to average net assets 1.03% 0.94% 0.95% 1.01%
Ratio of net investment income to average net assets 2.17% 1.93% 2.08% 2.50%
Ratio of expenses to average net assets* 1.11% 1.11% 1.13% 1.15%
Ratio of net investment income to average net assets* 2.09% 1.76% 1.90% 2.36%
Portfolio turnover (d) 19.46% 11.37% 15.12% 113.12%
</TABLE>
<TABLE>
<CAPTION>
Equity Fund
-------------------------------------------
Year Ended July 31, December 1, 1988
----------------------- to
July 31,
1991 1990 1989 (e)
---- ---- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.99 $ 12.18 $10.00
------- ------- ------
INVESTMENT ACTIVITIES
Net investment income 0.36 0.37 0.22
Net realized and unrealized gains (losses)
from investments 0.61 (0.17) 2.16
---- ----- ----
Total from Investment Activities 0.97 0.20 2.38
---- ---- ----
DISTRIBUTIONS
Net investment income (0.37) (0.35) (0.20)
Net realized gains from investment transactions (0.02) (0.04) --
----- ----- -----
Total Distributions (0.39) (0.39) (0.20)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 12.57 $ 11.99 $12.18
======= ======= ======
Total Return (excludes sales charge) 8.46% 1.66% 24.06%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $32,406 $14,383 $5,476
Ratio of expenses to average net assets 1.15% 1.11% 1.16%(b)
Ratio of net investment income to average net assets 3.16% 3.16% 2.91%(b)
Ratio of expenses to average net assets* 1.26% 1.41% 2.34%(b)
Ratio of net investment income to average net assets* 3.04% 2.86% 1.73%(b)
Portfolio turnover (d) 15.78% 14.89% 4.03%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
-9-
<PAGE> 267
<TABLE>
<CAPTION>
Regional Equity Fund
---------------------------------------------------------------
Year Ended July 31,
---------------------------------------------------------------
1998
----
Classic (a) B Shares (f) 1997 1996
----------- ------------ ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.23 $28.49 $ 20.95 $ 18.94
------- ------ --------- -------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.05 (0.05) 0.24 0.26
Net realized and unrealized gains
(losses) from investments (0.08) (0.42) 7.77 2.20
----- ----- ---- ----
Total from Investment Activities (0.03) (0.47) 8.01 2.46
----- ----- ---- ----
DISTRIBUTIONS
Net investment income (0.07) (0.03) (0.24) (0.26)
In excess of net investment income (0.01) -- -- --
Net realized gains from investment transactions (0.94) (0.94) (0.49) (0.19)
In excess of net realized gains -- -- -- --
------- ------ --------- -------
Total Distributions (1.02) (0.97) (0.73) (0.45)
------- ------ --------- -------
NET ASSET VALUE, END OF PERIOD $ 27.18 $27.05 $ 28.23 $ 20.95
======= ====== ======== =======
Total Return (excludes sales charge) (0.31)% (1.86)%(c) 39.02% 13.10%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $42,700 $1,998 $149,838 $93,584
Ratio of expenses to average net assets 1.30% 2.14%(b) 1.06% 1.05%
Ratio of net investment income to average net assets 0.14% (0.65)%(b) 0.99% 1.30%
Ratio of expenses to average net assets* 1.32% 2.15%(b) 1.10% 1.13%
Ratio of net investment income to average net assets* 0.13% 0.66%(b) 0.95% 1.22%
Portfolio turnover (d) 8.17% 8.17% 10.30% 8.22%
</TABLE>
<TABLE>
<CAPTION>
Regional Equity Fund
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.68 $ 16.74 $ 14.86 $ 13.44
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.23 0.23 0.19 0.23
Net realized and unrealized gains
(losses) from investments 2.26 0.58 2.09 2.34
---- ---- ---- ----
Total from Investment Activities 2.49 0.81 2.28 2.57
---- ---- ---- ----
DISTRIBUTIONS
Net investment income (0.23) (0.23) (0.20) (0.23)
In excess of net investment income -- -- -- --
Net realized gains from investment transactions -- (0.41) (0.20) (0.92)
In excess of net realized gains -- (0.23) -- --
------- ------- ------- -------
Total Distributions (0.23) (0.87) (0.40) (1.15)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 18.94 $ 16.68 $ 16.74 $ 14.86
======= ======= ======= =======
Total Return (excludes sales charge) 15.10% 4.87% 15.53% 20.66%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $68,501 $54,744 $41,347 $15,707
Ratio of expenses to average net assets 1.07% 0.79% 0.80% 0.91%
Ratio of net investment income to average net assets 1.35% 1.36% 1.17% 1.61%
Ratio of expenses to average net assets* 1.15% 1.24% 1.28% 1.36%
Ratio of net investment income to average net assets* 1.27% 0.90% 0.69% 1.16%
Portfolio turnover (d) 14.25% 5.83% 10.22% 24.99%
</TABLE>
<TABLE>
<CAPTION>
Regional Equity Fund
--------------------------------------------
December 1, 1988
Year Ended July 31, to
-------------------------- July 31,
1991 1990 1989 (e)
---- ---- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.45 $11.64 $10.00
------- ------ ------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.26 0.23 0.14
Net realized and unrealized gains
(losses) from investments 1.20 0.84 1.64
---- ---- ----
Total from Investment Activities 1.46 1.07 1.78
---- ---- ----
DISTRIBUTIONS
Net investment income (0.26) (0.22) (0.14)
In excess of net investment income -- -- --
Net realized gains from investment transactions (0.21) (0.04) --
In excess of net realized gains -- -- --
------- ------ ------
Total Distributions (0.47) (0.26) (0.14)
------- ------ ------
NET ASSET VALUE, END OF PERIOD $13.44 $12.45 $11.64
====== ====== ======
Total Return (excludes sales charge) 12.52% 9.41% 17.79%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $7,853 $3,161 $2,523
Ratio of expenses to average net assets 0.79% 1.22% 1.41%(b)
Ratio of net investment income to average net assets 2.21% 1.92% 1.98%(b)
Ratio of expenses to average net assets* 1.58% 2.32% 2.65%(b)
Ratio of net investment income to average net assets* 1.42% 0.82% 0.74%(b)
Portfolio turnover (d) 14.41% 14.00% 1.13%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
-10-
<PAGE> 268
<TABLE>
<CAPTION>
Balanced Fund
---------------------------------------------------------------------
Year Ended July 31,
---------------------------------------------------------------------
1998
----
Classic (a) B Shares (f) 1997 1996
----------- ------------ ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.21 $14.99 $ 13.03 $ 12.76
------- ------ -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.38 0.28 0.48 0.47
Net realized and unrealized gains from investments 0.98 1.15 2.78 0.58
------- ------ -------- --------
Total from Investment Activities 1.36 1.43 3.26 1.05
------- ------ -------- --------
DISTRIBUTIONS
Net investment income (0.41) (0.29) (0.50) (0.47)
Net realized gains from investment transactions (0.97) (0.97) (0.58) (0.31)
Total Distributions (1.38) (1.26) (1.08) (0.78)
------- ------ -------- --------
NET ASSET VALUE, END OF PERIOD $ 15.19 $15.16 $ 15.21 $ 13.03
======= ====== ======== ========
Total Return (excludes sales charge) 9.54% 10.07%(c) 26.42% 8.37%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $46,814 $5,309 $372,769 $338,425
Ratio of expenses to average net assets 1.24% 2.12%(b) 1.05% 0.98%
Ratio of net investment income to average net assets 2.77% 1.83%(b) 3.49% 3.61%
Ratio of expenses to average net assets* 1.24% 2.12%(b) 1.10% 1.11%
Ratio of net investment income to average net assets* 2.76% 1.82%(b) 3.44% 3.48%
Portfolio turnover (d) 25.40% 25.40% 25.00% 20.47%
</TABLE>
<TABLE>
<CAPTION>
Balanced Fund
---------------------------------------------------- December 19,
Year Ended July 31, 1991, to
------------------------------------------------- July 31,
1995 1994 1993 1992 (e)
---- ---- ---- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.81 $ 11.86 $ 11.12 $ 10.00
--------- ------- -------- --------
INVESTMENT ACTIVITIES
Net investment income 0.47 0.42 0.44 0.27
Net realized and unrealized gains from investments 1.24 0.18 0.80 1.09
--------- ------- -------- --------
Total from Investment Activities 1.71 0.60 1.24 1.36
--------- ------- -------- --------
DISTRIBUTIONS
Net investment income (0.46) (0.42) (0.45) (0.24)
Net realized gains from investment transactions (0.30) (0.23) (0.05) --
Total Distributions (0.76) (0.65) (0.50) (0.24)
--------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 11.81 $ 11.86 $ 11.12
======== ======== ======== ========
Total Return (excludes sales charge) 15.27% 5.13% 11.47% 13.71%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $295,509 $236,306 $179,134 $143,813
Ratio of expenses to average net assets 0.94% 0.84% 0.84% 0.83%(b)
Ratio of net investment income to average net assets 3.91% 3.56% 3.90% 4.45%(b)
Ratio of expenses to average net assets* 1.12% 1.11% 1.12% 1.17%(b)
Ratio of net investment income to average net assets* 3.73% 3.28% 3.62% 4.10%(b)
Portfolio turnover (d) 16.97% 14.43% 11.09% 23.18%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from September 2, 1997 (commencement of operations) to
July 31, 1998.
-11-
<PAGE> 269
<TABLE>
<CAPTION>
Equity Income Fund
---------------------------------------------------
Year Ended March 20, 1997
July 31, 1998 to
Classic (a) B Shares (f) July 31, 1997 (e)
----------- ------------ -----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.72 $11.60 $ 10.00
------- ------ -------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.24 0.15 0.07
Net realized and unrealized gains from investments 0.59 0.68 1.71
---- ---- ----
Total from Investment Activities 0.83 0.83 1.78
---- ---- ----
DISTRIBUTIONS
Net investment income (0.25) (0.16) (0.06)
Net realized gains from investment transactions (0.41) (0.41) --
----- ----- -----
Total Distributions (0.66) (0.57) (0.06)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 11.89 $11.86 $ 11.72
======= ====== =======
Total Return (excludes sales charge) 7.29% 7.26%(c) 17.81%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $26,686 $7,733 $22,273
Ratio of expenses to average net assets 1.42% 2.19%(b) 1.30%(b)
Ratio of net investment income to average net assets 2.03% 1.29%(b) 2.13%(b)
Ratio of expenses to average net assets* 1.57% 2.35%(b) 1.51%(b)
Ratio of net investment income to average net assets* 1.88% 1.12%(b) 1.92%(b)
Portfolio turnover (d) 83.26% 83.26% 27.38%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
-12-
<PAGE> 270
<TABLE>
<CAPTION>
Capital Growth Fund
------------------------------
August 1, 1997 to
July 31, 1998 (e)
-----------------
Classic (a) B Shares (f)
----------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $9.82
------ -----
INVESTMENT ACTIVITIES
Net investment income (loss) (0.03) (0.06)
Net realized and unrealized gains from investments 1.65 1.78
---- ----
Total from Investment Activities 1.62 1.72
---- ----
DISTRIBUTIONS
Net investment income -- --
Net realized gains from investment transactions -- --
Total Distributions -- --
NET ASSET VALUE, END OF PERIOD $11.62 $11.54
====== ======
Total Return (excludes sales charge) 16.20%(c) 17.52%(c)
===== =====
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $9,720 $3,477
Ratio of expenses to average net assets 1.40%(b) 2.05%(b)
Ratio of net investment income to average net assets (0.42)%(b) (1.10)%(b)
Ratio of expenses to average net assets* 2.37%(b) 3.11%(b)
Ratio of net investment income to average net assets* (1.39)%(b) (2.16)%(b)
Portfolio turnover (d) 77.26% 77.26%
</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) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic Shares or Premier
Shares. For reporting purposes, financial highlights prior to September 2,
1997 are being reflected as Classic Shares.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
-13-
<PAGE> 271
<TABLE>
<CAPTION>
Small Cap Fund
---------------------------
March 3, 1998 to
July 31, 1998 (d)
---------------------------
Classic(e) B Shares
---------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.97 $10.00
------ ------
INVESTMENT ACTIVITIES
Net investment income (loss) (0.03) (0.04)
Net realized and unrealized gains from investments (0.80) (0.85)
------ ------
Total from Investment Activities (0.83) (0.89)
------ ------
DISTRIBUTIONS
Net investment income -- --
Net realized gains from investment transactions -- --
------ ------
Total Distributions -- --
------ ------
Net Asset Value, End of Period $ 9.14 $ 9.11
====== ======
Total Return (excludes sales charge) (8.31)%(b) (8.90)%(b)
Ratios/Supplemental Data:
Net Assets at end of period (000) $1,372 $ 871
Ratio of expenses to average net assets 1.78%(a) 2.54%(a)
Ratio of net investment income to average net assets (0.92)%(a) (1.69)%(a)
Ratio of expenses to average net assets* 4.23%(a) 4.98%(a)
Ratio of net investment income to average net assets* (3.37)%(a) (4.13)%(a)
Portfolio turnover (c) 70.64% 70.64%
</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) Annualized.
(b) Not annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Period from commencement of operations.
(e) For the period from March 3, 1998 (commencement of operations) to July 31,
1998.
-14-
<PAGE> 272
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 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 Capital Appreciation 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
The investment objective of the Equity Fund is to 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 production of current income is an incidental objective of
the Equity Fund.
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), 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."
With respect to the Equity Fund, the Advisor will use a variety of
economic projections, technical analysis, and earnings projections in
formulating individual stock
-15-
<PAGE> 273
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 Fund. In the selection of
the investments for the Fund, 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 the Fund, or (b) long delay in investor
recognition of the accuracy of the investment decisions of the Fund, in which
case invested capital of the Fund in an individual security or group of
securities may not appreciate for an extended period.
THE REGIONAL EQUITY FUND
The investment objective of the Regional Equity Fund is to 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 production of current income is an incidental
objective of the Regional Equity Fund.
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. 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."
With respect to the Regional Equity Fund, 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
Fund. In the selection of the investments for the Regional Equity Fund, 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
the Fund, or (b) long delay in investor recognition of the
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accuracy of the investment decisions of the Fund, in which case invested capital
of the Fund in an individual security or group of securities may not appreciate
for an extended period.
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
The investment objective of the Balanced Fund is to seek 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 a
nationally recognized statistical rating organization (an "NRSRO") at the time
of purchase, or if not rated, found 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.
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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.
With respect to the Balanced Fund, 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
Fund. In the selection of the investments for the Balanced Fund, 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 the Fund,
or (b) long delay in investor recognition of the accuracy of the investment
decisions of the Fund, in which case invested capital of the Fund in an
individual security or group of securities may not appreciate for an extended
period.
THE CAPITAL GROWTH FUND
The investment objective of the Capital Growth Fund is to seek
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 Fund
seeks to achieve growth of income over the long term.
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 Sub-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."
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In managing the Capital Growth Fund, the Sub-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 SMALL CAP FUND
The investment objective of the Small Cap Fund is to seek 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 Small Cap Fund will invest at least
80% of its total assets in common stocks and securities convertible into common
stocks such as convertible bonds and convertible preferred stock of companies
with market capitalizations that are equivalent to the capitalization of the
companies in the Russell 2000(R) Growth Index at the time of purchase. As of the
date of this Prospectus, such smaller companies will have a market
capitalization between $50 million and $2 billion at the time of purchase. Under
normal market conditions, the Small Cap Fund may invest up to 20% of the value
of its total assets in common stocks and securities convertible into common
stocks of companies with a market capitalization of greater than $2 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, the Small Cap 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 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.
In managing the Small Cap Fund, the Sub-Advisor seeks smaller companies
with above-average growth potential. Factors the Sub-Advisor typically considers
in selecting
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securities include positive changes in earnings estimates for future growth,
higher than market average profitability, a strategic position in a specialized
market and fundamental value.
THE EQUITY INCOME FUND
The investment objective of the Equity Income Fund is to seek 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.
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 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.
The Sub-Advisor will seek to invest in equity securities which are
believed to represent investment value. Factors which the Sub-Advisor may
consider in selecting equity securities include industry and company
fundamentals, historical price relationships, and/or underlying asset value.
THE SELECT EQUITY FUND
The investment objective of the Select Equity Fund is to seek long-term
growth of capital by investing primarily in common stocks and securities
convertible into common stocks such as convertible bonds and convertible
preferred stocks. The Fund is non-diversified.
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Under normal market conditions, the Select Equity 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 market capitalizations that are greater than
$2 billion at the time of purchase. Under normal market conditions, the Select
Equity Fund may invest up to 35% of the value of its total assets in common
stocks and securities convertible into common stocks of companies with market
capitalizations less than $2 billion, 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 Select 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. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market. See "Options" and "Futures."
The Select Equity Fund seeks to obtain its investment objective by
investing primarily in companies that possess a dominant market share and have a
barrier, such as a patent or well-known brand name, that shields its market
share and profits from competitors. These companies typically have long records
of stable earnings growth. The Sub-Advisor continuously monitors a universe of
companies that possess a dominant market share to look for opportunities to
purchase such stocks at reasonable prices.
In managing the investment portfolio for the Select Equity Fund, the
Sub-Advisor may focus on a relatively limited number of stocks (i.e., generally
25 or less). The Sub-Advisor believes that this investment strategy has the
potential for higher total returns than an investment strategy calling for
investment in a larger number of securities. However, the use of this focused
investment strategy may increase the volatility of the Fund's investment
performance. If the securities in which the Fund invests perform poorly, this
Fund could incur greater losses than it would have had it been invested in a
greater number of securities.
THE ENHANCED MARKET FUND
The investment objective of the Enhanced Market Fund is to seek to
produce long-term growth of capital by investing primarily in a diversified
portfolio of common stock and securities convertible into common stocks such as
convertible bonds and convertible preferred stock.
Under normal market conditions, the Enhanced Market Fund will invest at
least 80% of its total assets in equity securities drawn from the S&P 500 Index.
Under normal market conditions, the Enhanced Market Fund may invest up to 20% of
the value of its total assets in
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equity securities not held in the S&P 500, 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 Enhanced Market Fund may increase its holdings in short-term
obligations to over 20% of its total assets and may also hold uninvested cash
pending investment. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market. See "Options" and "Futures."
The Fund seeks to obtain its investment objective by investing
primarily in a broadly diversified portfolio of S&P 500 stocks that are
determined, through the use of a quantitative investment approach emphasizing
technical factors, to be undervalued compared to others in their market sector.
The Fund seeks to maintain risk characteristics similar to that of the S&P 500.
The Sub-Advisor's stock selection process utilizes computer-aided
quantitative analysis. The Sub-Advisor's computer models use many types of data,
but emphasize technical data such as price and volume information. Applying
these models to stocks within the S&P 500, the Sub-Advisor hopes to generate
more capital growth than that of the S&P 500. The Sub-Advisor's emphasis on
technical analyses can result in significant shifts in portfolio holdings at
different times. However, stringent risk controls at the style, industry and
individual stock levels help ensure the Fund maintains risk characteristics
similar to those of the S&P 500.
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
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and therefore less liquidity and greater price volatility than U.S. securities,
and the risk that custodian and brokerage costs may be higher.
CONVERTIBLE SECURITIES
Each of the Capital Appreciation Funds may invest in convertible
securities. Convertible securities are fixed-income securities which may be
exchanged or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. Each Capital
Appreciation Fund other than the Balanced Fund 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
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
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debt securities also generally fluctuate with changes in interest rates so that
the 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.
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 "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
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the transaction will be less than those available in the market when delivery
takes place. The Capital Appreciation Funds will generally not pay for such
securities or start earning interest on them until they are received. When a
Capital Appreciation Fund agrees to purchase securities on a "when-issued"
basis, the Trust's custodian will set aside cash or liquid securities equal to
the amount of the commitment in a segregated account. Securities purchased on a
"when-issued" basis are recorded as an asset and are subject to changes in value
based upon changes in the general level of interest rates. Each of the Capital
Appreciation Funds expects that commitments to purchase "when-issued" securities
will not exceed 25% of the value of its total assets under normal market
conditions, and that a commitment to purchase "when-issued" securities will not
exceed 60 days. In the event its commitment to purchase "when-issued" securities
ever exceeded 25% of the value of its total assets, a Capital Appreciation
Fund's liquidity and the 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, the Enhanced Market Fund and the Select Equity Fund
may purchase put options from time to time as the Advisor or Sub-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 Funds 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 Funds 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
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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 Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period. The Funds
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). Each Fund intends to enter into puts only with dealers, banks, and
broker-dealers which, in the Advisor's or Sub-Advisor's opinion, present minimal
credit risks.
FUTURES CONTRACTS
To the extent consistent with its investment objective, the Select
Equity Fund and the Enhanced Market Fund may also invest in futures contracts
and options on futures contracts to commit funds awaiting investment, to
maintain cash liquidity or for other hedging purposes. The value of a Fund's
contracts may equal or exceed 100% of the Fund's total assets, although a Fund
will not purchase or sell a futures contract unless immediately afterwards the
aggregate amount of margin deposits on its existing futures positions plus the
amount of premiums paid for related futures options entered into for other than
bona fide hedging purposes is 5% or less of its net assets.
Futures contracts obligate a Fund, at maturity, to take or make
delivery of securities, the cash value of a securities index or a stated
quantity of a foreign currency. A Fund may sell a futures contract in order to
offset an expected decrease in the value of its portfolio positions that might
otherwise result from a market decline or currency exchange fluctuation. A Fund
may do so either to hedge the value of its securities portfolio as a whole, or
to protect against declines occurring prior to sales of securities in the value
of the securities to be sold. In addition, a Fund may utilize futures contracts
in anticipation of changes in the composition of its holdings or in currency
exchange rates.
The Select Equity Fund and the Enhanced Market Fund may purchase and
sell call and put options on futures contracts traded on an exchange or board of
trade. When a Fund purchases an option on a futures contract, it has the right
to assume a position as a purchaser or a seller of a futures contract at a
specified exercise price during the option period. When a Fund sells an option
on a futures contract, it becomes obligated to sell or buy a futures contract if
the option is exercised. In connection with a Fund's position in a futures
contract or related option, a Fund will create a segregated account of liquid
assets or will otherwise cover its position in accordance with applicable SEC
requirements.
The risks related to the use of futures contracts include: (i) the
correlation between movements in the market price of the portfolio investments
(held or intended for purchase) being hedged and in the price of the futures
contract may be imperfect; (ii) possible lack of a
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liquid secondary market for closing out futures positions; (iii) the need for
additional portfolio management skills and techniques; (iv) losses due to
unanticipated market movements; and (v) a purchaser's inability to predict
correctly the direction of securities prices, interest rates, currency exchange
rates, and other economic factors. Successful use of futures is subject to the
ability correctly to predict movements in the direction of the market. For
example, if a Fund uses futures contracts as a hedge against the possibility of
a decline in the market adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of its securities that it has hedged because the Fund will have
approximately equal offsetting losses in its future positions. The risk of loss
in trading futures contracts in some strategies can be substantial, due both to
the low margin deposits required, and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial loss or gain to the
investor. Thus, a purchase or sale of a futures contract may result in losses or
gains in excess of the amount invested in the contract.
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.
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REAL ESTATE INVESTMENT TRUSTS
The Capital Growth Fund, the Small Cap Fund, the Equity Income Fund,
and the Enhanced Market 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 , the AmSouth U.S. Treasury Fund
(the "AmSouth Money Market Funds"), the AmSouth Institutional Prime Obligations
Fund, and the AmSouth Institutional U.S. Treasury Fund (the "AmSouth
Institutional 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 or the AmSouth Institutional 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 their
service fees from the AmSouth Money Market Funds or the AmSouth Institutional
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 unaffiliated money market funds, the AmSouth Money Market Funds,
and the AmSouth Institutional Money Market Funds 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
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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.
Portfolio turnover for the Small Cap Fund and the Enhanced Market Fund
is estimated not to exceed 200% in the coming year. Portfolio turnover for the
Select Equity Fund is estimated not to exceed 50% 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).
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 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
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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. This investment restriction does not apply to the Select
Equity Fund.
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 (33 1/3 with respect to the Select Equity
Fund); 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 (33 1/3 with respect to the Select Equity
Fund). A Capital Appreciation Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
4. Make loans, except that each Capital Appreciation Fund may purchase
or hold debt securities and lend portfolio securities in accordance with its
investment objective and policies, and may enter into repurchase agreements.
DIVERSIFICATION
The Select Equity Fund is a non-diversified fund under the Investment
Company Act of 1940. This means it may concentrate its investments in the
securities of a limited number of issuers. Under the Internal Revenue Code of
1986, as amended, at the end of each fiscal quarter the Fund must nevertheless
diversify its portfolio such that, with respect to 50% of its total assets, not
more than 25% of its assets is invested in the securities of any one issuer
(other than U.S. Government Securities or securities of other regulated
investment companies), and with respect to the remainder of its total assets, no
more than 5% of its assets is invested in the securities of any one issuer
(other than U.S. Government Securities or securities of other regulated
investment companies).
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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 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
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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.
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 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
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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 canceled 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 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
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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.
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
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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% 0.90%
$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 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):
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(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.
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). BISYS Fund Services, Inc. (the "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
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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.
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
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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.
<TABLE>
<CAPTION>
Contingent
Deferred
Sales Charge as a
Year(s) Percentage of
Since Dollar Amount
Purchase Subject to Charge
-------- -----------------
<S> <C>
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
</TABLE>
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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 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;
(ii) exchanges for Class B Shares of other Funds of the Trust as described under
"Exchange Privilege;" or (iii) provided that the Shareholder withdraws no more
than 12% of the account value annually using the Automatic Withdrawal Plan
feature.
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
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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 dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside 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
EXCHANGES BETWEEN CLASSES OF A FUND
Classic Shares of a Fund may not be exchanged for Class B Shares of the
same Fund, and may be exchanged for Premier Shares of the same Fund only if the
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Shareholder becomes eligible to purchase Premier Shares. Class B Shares may not
be exchanged for Classic Shares of the same Fund, and may be exchanged for
Premier Shares of the same Fund only if the Shareholder becomes eligible to
purchase Premier Shares. A Contingent Deferred Sales Charge will not apply to
exchanges of Class B Shares for Premier Shares. An exchange of Classic Shares or
Class B Shares for Premier Shares of the same Fund will not be a taxable event
for a Shareholder.
EXCHANGES BETWEEN FUNDS
CLASSIC SHARES
Classic Shares of each Fund may be exchanged for Classic Shares of the
other Funds, subject to a minimum initial investment. 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, during a
twelve month period, a Shareholder acquires Classic Shares of a Money Market
Fund from an exchange involving Shares of a Variable NAV Fund, then such Shares
of the Money Market Fund may be exchanged back for Shares of a Variable NAV Fund
without the payment of any additional sales load. 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 Prospectus, Class B Shares were not yet being offered in
the 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
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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 not apply to exchanges of Class B Shares for Premier Shares.
ADDITIONAL INFORMATION ABOUT EXCHANGES
An exchange from one Fund to another Fund is considered to be a taxable
event for federal income tax purposes on which a Shareholder may realize a
capital gain or loss. If a Shareholder exchanges Capital Appreciation Fund
Shares for Shares of another Fund without paying a sales charge on the exchange,
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 original
Shares if they were held less than 91 days. The sales charge will instead be
added to the basis of the Fund Shares acquired in the exchange. This treatment
will increase the gain or reduce the loss that the Shareholder would otherwise
recognize on the exchange.
Before exchanging Shares, a Shareholder must receive a current
prospectus describing the Shares to be acquired. 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 may legally be sold, and may be amended or terminated at any time upon
sixty (60) days' prior notice to Shareholders.
The Exchange Privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Excessive exchange transactions
may potentially disrupt the management of the Trust and increase transaction
costs. Accordingly, in order to prevent excessive use of the Exchange Privilege,
the Trust has established a policy of prohibiting excessive exchange activity.
Exchange activity will not be deemed excessive if limited to four substantive
exchange redemptions from a Fund during a calendar year.
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
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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.
REINSTATEMENT PRIVILEGE
The Reinstatement Privilege enables investors who have redeemed Classic
Shares to repurchase, within 90 days of such redemption, Classic Shares in an
amount not to exceed the redemption proceeds received at a purchase price equal
to the then-current net asset value determined after a reinstatement request and
payment are received by the Transfer Agent. This privilege also enables
investors to reinstate their account for the purpose of exercising the Exchange
Privilege. To use the Reinstatement Privilege, you must submit a written
reinstatement request to the Transfer Agent. The reinstatement request and the
payment must be received within 90 days of the trade date of the redemption.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains
and dividends) 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
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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
at AmSouth Mutual Funds, 3435 Stelzer Road, Columbus, Ohio 43219, 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 previously
designated bank account. 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 the receipt of a
valid request for redemption. Wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The wire redemption charge is
currently $7.00, however, such charge may be reduced by the Transfer Agent.
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 PURCHASE AND REDEEM
SHARES--Redemption by Mail."
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan ("AWP") enables Shareholders to make
regular redemptions of Classic Shares and Class B Shares of a Fund. With
Shareholder authorization, the Transfer Agent will automatically redeem Classic
Shares and Class B Shares at the net asset value of the applicable Fund on the
dates of withdrawal and have the amount specified transferred according to the
instructions of the Shareholders. In certain cases, Class B Shareholders may
redeem using AWP without paying a contingent deferred sales charge as described
in "How to Purchase and Redeem Shares - Contingent Deferred Sales Charge."
Shareholders participating in the AWP must maintain a minimum account balance of
$10,000 in the Fund from which Classic Shares or Class B Shares are being
redeemed. Purchase of additional Shares concurrent with withdrawals may be
disadvantageous to certain Shareholders because of tax liabilities.
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
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in portfolio securities at their then market value equal to the redemption
price. In such cases, an investor may incur brokerage costs in converting such
securities to cash.
Due to the relatively high cost of handling small investments, the
Trust reserves the right to redeem, at net asset value, the Shares of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder, the account of such Shareholder in any Capital Appreciation Fund
has a value of less than $250. Accordingly, an investor purchasing Shares of a
Capital Appreciation Fund in only the minimum investment amount may be subject
to such involuntary redemption if he or she thereafter redeems some of his or
her Shares. Before the Trust exercises its right to redeem such Shares and to
send the proceeds to the Shareholder, the Shareholder will be given notice that
the value of the Shares of a Capital Appreciation Fund in his or her account is
less than the minimum amount and will be allowed 60 days to make an additional
investment in an amount which will increase the value of the account to at least
$250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the
Statement of Additional Information for examples of when the Trust may suspend
the right of redemption or redeem Shares involuntarily if it appears appropriate
to do so in light of the Trust's responsibilities under the Investment Company
Act of 1940.
DIVIDENDS AND TAXES
The net income of each of the Capital Appreciation Funds will be
declared monthly as a dividend to Shareholders at the close of business on the
day of declaration. Dividends will generally be paid monthly. Distributable net
realized capital gains are distributed 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 AmSouth Mutual Funds,
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
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"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 capital gain income.
A distribution to a Shareholder of net investment income (generally a
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 that meet the holding period
requirements in the Code 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 designated by a Capital Appreciation Fund as deriving
from net gains on securities held for more than one year is taxable to
Shareholders as such, 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
and distributions on a Fund's shares are generally subject to federal income
tax as described herein to the extent they do not exceed the Fund's realized
income and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when the Fund's
net asset value reflects gains that are either unrealized, or realized but not
distributed. 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
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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.
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):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name , Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
George R. Landreth*, 56 Chairman From December 1992 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services Limited Partnership;
Columbus, Ohio 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.
</TABLE>
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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name , Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
Dick D. Briggs, Jr., M.D., 64 Trustee From September 1989 to
459 DER Building present, Emeritus Professor
1808 7th Avenue South and Eminent Scholar Chair,
UAB Medical Center Univ. of Alabama at
Birmingham, Alabama 35294 Birmingham; from October 1979
to present, Physician,
University of Alabama Health
Services Foundation; from 1981
to 1995, Professor and Vice
Chairman, Dept. of Medicine,
Univ. of Alabama at Birmingham
School of Medicine; from 1988
to 1992, President, CEO and
Medical Director, Univ. of
Alabama Health Services
Foundation
Wendell D. Cleaver, 63 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*, 52 Trustee From June 1987 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services Limited Partnership
Homer H. Turner, Jr., 70 Trustee From June 1991 to present,
751 Cary Drive retired; until June 1991, Vice
Auburn, Alabama 36830-2505 President, Birmingham
Division, Alabama Power
Company
</TABLE>
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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name , Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
James H. Woodward, Jr., 58 Trustee From 1996 to present, Trustee,
The University of North The Sessions Group; from July
Carolina at Charlotte 1989 to present, Chancellor,
Charlotte, North Carolina 28223 The University of North
Carolina at Charlotte; from
April 1997 to present,
Trustee, BISYS Variable
Insurance Funds; from August
1984 to July 1989, Senior Vice
President, University College,
University of Alabama at
Birmingham
</TABLE>
- --------------------------
* Indicates an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services, 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, 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 July 31, 1998 of $19.9 billion and operated 276 banking offices in Alabama,
Florida, Georgia and Tennessee. AmSouth has provided investment management
services through its Trust Investment Department since 1915. As of July 31,
1998, AmSouth and its affiliates had over $8.8 billion in assets under
discretionary management and provided custody services for an additional $18.7
billion in securities. AmSouth is the largest provider of trust services in
Alabama 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.
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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, the Advisor manages the Equity Fund, Regional Equity
Fund and Balanced 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 the Equity Fund, Regional Equity Fund and Balanced 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 Fund, the Regional Equity
Fund, the Balanced Fund, the Equity Income Fund, the Capital Growth Fund, and
the Select Equity Fund for investment advisory services is the lesser of (a) a
fee computed daily and paid monthly at the annual rate of eighty one-hundredths
of one percent (0.80%) 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 one hundred twenty one-hundredths of one percent (1.20%) 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 Advisor. The fee payable to the
Advisor by the Enhanced Market Fund for investment advisory services is the
lesser of (a) a fee computed daily and paid monthly at the annual rate of
forty-five one-hundredths of one percent (0.45%) 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 the fees are higher than the advisory fee paid
by most mutual funds, they are 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, 1998, the Advisor
received investment advisory fees amounting to 0.80% of the Equity Fund's
average daily net assets, 0.80% of the Regional Equity Fund's average daily net
assets , 0.80% of the Balanced Fund's average daily net assets, 0.80% of the
Capital Growth Fund's average daily net assets, and 0.80% of the Equity Income
Fund's average daily net assets. For the period from March 2, 1998 to July 31,
1998, the Advisor received investment advisory fees amounting to 1.20% of the
Small Cap Fund's average daily net assets.
INVESTMENT SUB-ADVISORS
Rockhaven Asset Management, LLC
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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 orders 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 (0.48%) 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 Class A Shares of the Federated
Equity Income Fund from August 1, 1991 through January 31, 1997 was 139.82%,
absent the imposition of a sales charge. The cumulative total return for the
same period for the Standard & Poor's Composite Stock Price Index ("S&P 500
Index") was 135.09%. The cumulative total return for the Class B Shares of the
Federated Equity Income Fund from September 27, 1994 (date of initial public
offering) through January 31, 1997 was 62.64%, absent the imposition of a
contingent deferred sales charge. The cumulative total return for the same
period for the S&P 500 Index was 79.69%. At January 31, 1997, the Federated
Equity Income 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 total
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 the Class A Shares
of the Federated Equity Income Fund and for the one-year and since inception
period for the Class B Shares of the Federated Equity Income Fund) compared with
the performance of the S&P 500 Index and the Lipper Equity Income Fund Index
were:
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PRIOR PERFORMANCE OF CLASS A SHARES AND CLASS B SHARES
OF THE FEDERATED EQUITY INCOME FUND
<TABLE>
<CAPTION>
Federated Lipper
Equity S&P 500 Equity Income
Income Fund+* Index @ Fund Index #
------------- ------- ------------
<S> <C> <C> <C>
CLASS A SHARES (absent imposition
of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through
January 31, 1997 17.25% 16.78% 14.99%
CLASS A SHARES (assuming imposition
of the Federated Equity Income Fund's
maximum sales charge)
One Year 16.48%
Three Years 14.85%
Five Years 15.20%
August 1, 1991 through January 31, 1997 16.05%
CLASS B SHARES (absent imposition of
contingent deferred sales charge)
One Year 22.26% 26.34% 19.48%
September 27, 1994 through January 31, 1997 23.15% 28.44% 20.65%
CLASS B Shares (assuming imposition of
the Federated Equity Income Fund's
maximum contingent deferred sales charge)
One Year 16.76%
September 27, 1994 through January 31, 1997 22.79%
</TABLE>
+ Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
* During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares (the shares most similar to
the Classic Shares of the AmSouth Equity Income Fund) of the Federated
Equity Income Fund ranged from 0.95% to 1.05% of the fund's average daily
net assets. During the period from September 27, 1994 through January 31,
1997 the operating expense ratio for the Class B Shares of the Federated
Equity Income Fund ranged from 1.80% to 1.87% of the fund's average daily
net assets. The operating expenses of the Class A Shares and Class B Shares
of the Federated Equity Income Fund were lower than the projected operating
expenses of the Classic Shares and Class B Shares, respectively, of the
AmSouth Equity Income Fund. If the actual operating expenses of the AmSouth
Equity Fund are higher than the historical operating expenses of the
Federated Equity Income Fund, this could negatively affect performance.
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@ 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.
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 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.
PEACHTREE ASSET MANAGEMENT
Peachtree Asset Management ("Peachtree" or "Sub-Advisor") serves as
investment sub-advisor to the Capital Growth Fund, pursuant to a Sub-Advisory
Agreement with AmSouth. The Capital Growth Fund commenced operations on August
4, 1997. Under the Sub-Advisory Agreement, Peachtree manages the fund, selects
investments, and places all orders for purchases and sales of securities,
subject to the general supervision of the Trust's Board of Trustees and AmSouth
in accordance with the Fund's investment objectives, policies and restrictions.
Peachtree is a division of Mutual Management Corp., a wholly-owned
subsidiary of Salomon Smith Barney Holdings, Inc., which in turn is a
wholly-owned subsidiary of Travelers Group Inc. Peachtree has performed advisory
services since 1994 for institutional clients, and has its principal offices at
303 Peachtree Street, N.E., Atlanta, GA 30308. Mutual Management Corp. and its
predecessors have been providing investment advisory services to mutual funds
since 1968. As of July 31, 1998, Mutual Management Corp. had aggregate assets
under management of approximately $110 billion.
For its services and expenses incurred under the Sub-Advisory
Agreement, Peachtree is entitled to a fee payable by AmSouth, computed daily and
paid monthly at the annual rate of forty-eight one-hundredths of one percent
(0.48%) of the Fund's average daily net assets or such lower fee as may be
agreed upon in writing by AmSouth and Peachtree.
Dennis A. Johnson is the portfolio manager for the Capital Growth Fund,
and as such has the primary responsibility for the day-to-day portfolio
management of the Fund. Mr. Johnson, who has been employed by Peachtree since
1994, is President and Chief Investment
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Officer of Peachtree. From 1989 to 1994, Mr. Johnson was Vice President and
Portfolio Manager at Trusco Capital, the investment management subsidiary of
Trust Company Bank, Atlanta, Georgia.
SAWGRASS ASSET MANAGEMENT, LLC
Sawgrass Asset Management, LLC ("Sawgrass") serves as investment
sub-adviser to the Small Cap Fund, pursuant to a Sub-Advisory Agreement with
AmSouth. The Small Cap Fund commenced operations as of March 2, 1998. Under the
Sub-Advisory Agreement, Sawgrass manages the Fund, selects investments, and
places all orders for purchases and sales of securities, subject to the general
supervision of the Trust's Board of Trustees and AmSouth in accordance with the
Fund's investment objectives, policies and restrictions.
Sawgrass is 50% owned by AmSouth and 50% owned by Sawgrass Asset
Management, Inc. Sawgrass Asset Management, Inc. is controlled by Mr. Dean
McQuiddy, Mr. Brian Monroe and Mr. Andrew Cantor. Sawgrass was organized in
January, 1998 to perform advisory services for investment companies and other
institutional clients and has its principal offices at 4337 Pablo Oaks Court,
Jacksonville, FL 32224.
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 eighty-four
one-hundredths of one percent (0.84%) 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. Dean McQuiddy, CFA, is the portfolio manager for the Small Cap
Fund, and, as such, has the primary responsibility for the day-to-day portfolio
management of the Fund. He received his B.S. in Finance from the University of
Florida. Mr. McQuiddy holds membership in the Association of Management and
Research. He has 16 years of investment experience.
The following tables set forth the performance data relating to the
historical performance of an institutional fund (the Employee Benefit Small
Capitalization Fund) and a mutual fund (the Emerald Small Capitalization Fund),
since the dates indicated, that have investment objectives, policies, strategies
and risks substantially similar to those of the AmSouth Small Cap Fund. Mr. Dean
McQuiddy, a Principal of Sawgrass, is the portfolio manager for the Small Cap
Fund, and, as such, has the primary responsibility for the day-to-day portfolio
management of the Fund. From January 1, 1987 to December 31, 1997, he was the
portfolio manager of the Employee Benefit Small Capitalization Fund, a common
trust fund managed by Barnett Bank for employee benefit plan accounts. On
January 4, 1994, the Employee Benefits Small Capitalization Fund transferred the
majority of its assets to the Emerald Small Capitalization Fund. Mr. McQuiddy
was the portfolio manager for the Emerald Small Capitalization Fund from its
inception through
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December 31, 1997. This data is provided to illustrate the past performance of
Mr. McQuiddy in managing substantially similar accounts as measured against a
specified market index and does not represent the performance of the Small Cap
Fund. Investors should not consider this performance data as an indication of
future performance of the Small Cap Fund.
The performance data shown below relating to the institutional account
was calculated in accordance with required recommended standards of the
Association for Investment Management and Research (1) ("AIMR"), retroactively
applied to all time periods. The returns of the institutional account were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and loses. The returns of the
institutional account reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by Barnett's institutional
private account, without provision for federal or state income taxes. Custodial
fees of the institutional account, if any, were not included in the calculation.
Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and equivalents are included in performance
returns. The yearly returns of the institutional fund are calculated by
geometrically linking the monthly returns.
The institutional private account was not subject to the same types of
expenses to which the Small Cap Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Fund by the Investment Company Act or Subchapter M of the Internal Revenue
Code. Consequently, the performance results for the institutional account could
have been adversely affected if the account had been regulated as investment
company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of investments
and redemptions. In addition, the effect of taxes on any investor will depend on
such person's tax status, and the results have not been reduced to reflect any
income tax which may have been payable.
The investment results presented below are unaudited and are not
intended to predict or suggest the returns that might be experienced by the
Small Cap Fund or an individual investor investing in such Fund. The investment
results were not calculated pursuant to the methodology established by the SEC
that will be used to calculate the
- --------
1 AIMR is a non-profit membership and education organization with more
than 30,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.
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<PAGE> 314
Small Cap Fund's performance results. Investors should also be aware that the
use of a methodology different from that used below to calculate performance
could result in different performance data.
All information set forth in the tables below relies on data supplied
by Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
<TABLE>
<CAPTION>
Sawgrass Small Cap Russell 2000(R)
Year Composite Growth Index(1)
---- --------- ---------------
<S> <C> <C>
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years(2) 16.38% 12.76%
Last 10 Years(2) 16.09% 13.50%
</TABLE>
- ---------------
1 The Russell 2000(R) Growth Index is an unmanaged index which measures
the performance of the 2,000 smallest companies in the Russell 3000(R) Index
with higher price-to-book ratios and higher forecasted growth values.
2 Through December 31, 1997.
PRIOR PERFORMANCE OF RETAIL SHARES AND CLASS B SHARES
OF THE EMERALD SMALL CAPITALIZATION FUND
The cumulative total return for the Retail Shares of the Emerald Small
Capitalization Fund from March 1, 1994 through December 31, 1997 was 56.78%
absent the imposition of a sales charge and was 49.72% including the imposition
of a sales charge. The cumulative total return for the same period for the
Russell 2000 Growth Index was 57.31%. The cumulative total return for the Class
B Shares of the Emerald Small Capitalization Fund from March 1, 1994 through
March 11, 1996 was 39.85% absent
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the imposition of a contingent deferred sales charge and was 34.25% including
the imposition of a contingent deferred sales charge. The cumulative total
return for the same period for the Russell 2000 Growth Index was 29.71%. At
December 31, 1997, the Emerald Small Capitalization Fund had approximately $180
million in assets. As portfolio manager of the Emerald Small Capitalization
Fund, Mr. McQuiddy had full discretionary authority over the selection of
investments for that fund. Average annual total returns for the Retail Shares
for the one-year, three-year and since inception through December 31, 1997
period (the entire period during which Mr. McQuiddy managed the Retail Shares of
the Emerald Small Capitalization Fund) and for the one-year and since inception
through March 11, 1996 period for the Class B Shares, compared with the
performance of the Russell 2000 Growth Index were:
<TABLE>
<CAPTION>
Emerald Small Russell 2000
Capitalization Growth
Fund(1) Index(2)
------ -------
<S> <C> <C>
RETAIL SHARES (absent imposition
of sales charge)
One Year 12.62% 12.86%
Three Years 18.39% 18.12%
Since Inception 12.41% 12.55%
RETAIL SHARES (assuming imposition
of the Emerald Small Capitalization Fund's
maximum sales charge)
One Year 7.55% 12.86%
Three Years 16.58% 18.12%
Since Inception 10.17% 12.55%
CLASS B SHARES (absent imposition
of sales charge)
One Year 4.99% 12.86%
Since Inception 18.26% 13.89%
CLASS B SHARES (assuming imposition of the
Emerald Small Capitalization Fund's maximum
contingent deferred sales charge)
One Year 8.02% 12.86%
Since Inception 15.87% 13.89%
</TABLE>
- ----------------------
1 Average annual total return reflects changes in share prices and reinvestment
of dividends and distributions and is net of fund expenses.
2 The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
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<PAGE> 316
During the period from March 1, 1994 through December 31, 1997, the
operating expense ratio of the Retail Shares (the shares most similar to the
Classic Shares of the AmSouth Small Cap Fund) of the Emerald Small
Capitalization Fund ranged from 1.73% to 2.50% of the Fund's average daily net
assets. During the period from March 1, 1994 through March 11, 1996, the
operating expense ratio of the Class B Shares (the shares most similar to the
Class B Shares of the AmSouth Small Cap Fund) of the Emerald Small
Capitalization Fund ranged from 2.50% to 3.29% of the Fund's average daily net
assets. If the actual operating expenses of the AmSouth Small Cap Fund are
higher than the historical operating expenses of the Emerald Small
Capitalization Fund, this could negatively affect performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The
Emerald Small Capitalization Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth Small
Cap Fund, Share prices and investment returns will fluctuate reflecting market
conditions, as well as change in company-specific fundamentals of portfolio
securities.
OAKBROOK INVESTMENTS, LLC
OakBrook Investments, LLC ("OakBrook") serves as Sub-Advisor to the
Enhanced Market Fund and the Select Equity Fund pursuant to a Sub-Advisory
Agreement with the Advisor. Under the Sub-Advisory Agreement, the Sub-Advisor
manages the Funds, selects investments, and places all orders for purchases and
sales of securities, subject to the general supervision of the Trust's Board of
Trustees and the Advisor in accordance with each Fund's investment objective,
policies, and restrictions.
OakBrook is 50% owned by AmSouth and 50% owned by Neil Wright, Janna
Sampson and Peter Jankovskis. OakBrook was organized in February, 1998 to
perform advisory services for investment companies and other institutional
clients and has its principal offices at 701 Warrenville Road, Suite 135, Lisle,
IL 60532.
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 fifty-six
one-hundredths of one percent (0.56%) with respect to the Select Equity Fund and
thirty-two one-hundredths of one percent (0.32%) with respect to the Enhanced
Market Fund or such lower fee as may be agreed upon in writing by the Advisor
and Sub-Advisor.
The Select Equity Fund and the Enhanced Market Fund are managed by a
team from OakBrook Investments, LLC. Dr. Neil Wright, Ms. Janna Sampson and Dr.
Peter Jankovskis are the portfolio managers for the Select Equity Fund and the
Enhanced Market Fund. They have managed both Funds since their inception and, as
such, have the primary
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responsibility for the day-to-day portfolio management of the Funds. Dr. Wright
is OakBrook's President and the Chief Investment Officer. He holds a doctorate
in economics. From 1993 to 1997, Dr. Wright was the Chief Investment Officer of
ANB Investment Management & Trust Co. ("ANB"). He managed ANB's Large Cap Growth
Fund and other equity funds since 1981. Ms. Sampson is OakBrook's Director of
Portfolio Management. She holds a Master of Arts degree in economics. From 1993
to 1997, Ms. Sampson was Senior Portfolio Manager for ANB. She has worked in the
investment field since 1981 and was a portfolio manager at ANB since 1987. Dr.
Jankovskis is OakBrook's Director of Research. He holds a doctorate in
economics. He has conducted economic research since 1988. From August, 1992 to
July, 1996, Dr. Jankovskis was an Investment Strategist for ANB and from July,
1996 to December, 1997 was the Manager of Research for ANB.
ADMINISTRATOR
ASO Services Company ("ASO") is the administrator for each Fund of the
Trust (the "Administrator"). ASO is a wholly-owned subsidiary of BISYS. BISYS is
a subsidiary of The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of the Capital
Appreciation Funds' administration and operation. Under a management and
administration agreement between the Trust and the Administrator, the fee
payable by each Capital Appreciation Fund to the Administrator for
administration services is the lesser of (a) a fee computed at the annual rate
of twenty one-hundredths of one percent (0.20%) 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.
During the Trust's fiscal year ended July 31, 1998, ASO received
administration fees, after voluntary fee reductions, amounting to 0.20% of the
Equity Fund's average daily net assets, 0.20% of the Regional Equity Fund's
average daily net assets and 0.20% of the Balanced Fund's average daily net
assets, 0% of the Capital Growth Fund's average daily net assets, and 0.20% of
the Equity Income Fund's average daily net assets. For the period from March 2,
1998 to July 31, 1998, ASO received administration fees amounting to 0% of the
Small Cap 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, AmSouth has assumed certain of the
Administrator's duties, for which
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AmSouth receives a fee, paid by the Administrator, calculated at an annual rate
of up to ten one-hundredths of one percent (0.10%) 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 (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 Shareholder
Servicing fee of 0.25% 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
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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 a Capital Appreciation Fund. No Capital Appreciation Fund will
bear, directly or indirectly, the cost of any activity
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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 eighteen
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 Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth
Equity Income Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced Market
Fund , the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Government Income Fund, the AmSouth Florida
Tax-Free Fund , the AmSouth Institutional Prime Obligations Fund, and the
AmSouth Institutional U.S. Treasury Fund. Each Fund, except the AmSouth Florida
Tax-Free Fund and the AmSouth Select Equity Fund, is a diversified fund under
the Investment Company Act of 1940, as amended. Each Fund , except for the U.S.
Treasury Fund, the Tax Exempt Fund, the Institutional Prime Obligations Fund,
and the
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Institutional U.S. Treasury Fund, has authorized three classes of Shares:
Premier Shares, Classic Shares, and Class B 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. The U.S. Treasury
Fund and the Tax Exempt Fund have authorized two classes of Shares: Premier
Shares and Classic Shares. The Institutional Prime Obligations Fund and the
Institutional U.S. Treasury Fund have authorized three classes of Shares: Class
I Shares, Class II Shares, and Class III Shares. 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, (iii) when matters pertain to the Servicing Plan , and (iv) when matters
pertain to the Distribution Plan.
As of September 17, 1998, AmSouth was the beneficial owner of
approximately 77% of the outstanding Premier Shares of the Equity Fund, 66% of
the outstanding Premier Shares of the Regional Equity Fund, 67% of the
outstanding Premier Shares of the Balanced Fund, and 84% of the outstanding
Premier Shares of the Capital Growth Fund, and may be deemed to be a
"controlling person" of the Premier Shares of the each Fund within the meaning
of the Investment Company Act of 1940.
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
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 the Trust.
BISYS Fund Services, Inc. serves as fund accountant for the Trust.
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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 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.
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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 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.
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Inquiries regarding the Trust may be directed in writing to the AmSouth
Mutual Funds 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-ADVISORS
(Equity Income Fund Only)
Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, PA 15222
(Capital Growth Fund Only)
Peachtree Asset Management
A Division of Mutual Management Corp.
One Peachtree Center
Atlanta, GA 30308
(Small Cap Fund Only)
Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, FL 32224
(Select Equity Fund and
Enhanced Market Fund Only)
OakBrook Investments, LLC
701 Warrenville Road, Suite 135
Lisle, IL 60532
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
DISTRIBUTOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
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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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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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 .............................................................................
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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AMSOUTH MUTUAL FUNDS
AMSOUTH BANK
Investment Advisor
CAPITAL APPRECIATION FUNDS
AMSOUTH MUTUAL FUNDS
NOT FDIC INSURED
BISYS FUND SERVICES, DISTRIBUTOR
Prospectus dated December 1, 1998
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<PAGE> 329
CROSS REFERENCE SHEET
Part B
<TABLE>
<CAPTION>
Form N-1A Item No. Caption
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information - Description of Shares
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Trust Management of the Trust
15. Control Persons and Principal
Holders of Securities Miscellaneous
16. Investment Advisory and
Other Services Management of the Trust
17. Brokerage Allocation Management of the Trust
18. Capital Stock and Other
Securities Valuation; Additional Purchase and Redemption
Information; Management of the Trust;
Redemptions; Additional Information
19. Purchase, Redemption and Pricing
of Securities Being Offered Valuation; Additional Purchase and Redemption
Information; Management of the Trust
20. Tax Status Additional Purchase and Redemption Information
21. Underwriters Management of the Trust
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
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<PAGE> 330
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
December 1, 1998
-----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth Prime Obligations Fund, the
AmSouth U.S. Treasury Fund, the AmSouth Tax Exempt Fund, the AmSouth Government
Income Fund, the AmSouth Bond Fund, the AmSouth Limited Maturity Fund, the
AmSouth Municipal Bond Fund, the AmSouth Florida Tax-Free Fund, the AmSouth
Equity Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the
AmSouth Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity
Income Fund, the AmSouth Select Equity Fund and the AmSouth Enhanced Market Fund
(each a "Fund" and collectively the "Funds"), each dated December 1, 1998. This
Statement of Additional Information is incorporated by reference in its entirety
into each Prospectus. A copy of each Fund's Prospectus may be obtained by
writing to AmSouth Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733,
or by telephoning toll free (800) 451-8382.
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<PAGE> 331
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
AMSOUTH MUTUAL FUNDS.............................................................................................1
INVESTMENT OBJECTIVES AND POLICIES...............................................................................1
Additional Information on Portfolio Instruments.........................................................1
Investment Restrictions............................................................................... 14
Additional Investment Restrictions.................................................................... 15
Portfolio Turnover.................................................................................... 16
VALUATION...................................................................................................... 16
Valuation of the Money Market Funds................................................................... 17
Valuation of the Capital Appreciation Funds and the Income Funds...................................... 17
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................................................. 18
Purchase of Shares.................................................................................... 18
Matters Affecting Redemption.......................................................................... 19
Additional Tax Information............................................................................ 19
Additional Tax Information Concerning the Tax Exempt Fund and
Tax-Free Funds............................................................................... 21
MANAGEMENT OF THE TRUST........................................................................................ 23
Officers ............................................................................................. 23
Investment Advisor.................................................................................... 25
Portfolio Transactions................................................................................ 29
Glass-Steagall Act.................................................................................... 31
Administrator......................................................................................... 32
Expenses ............................................................................................. 34
Sub-Administrators.................................................................................... 34
Distributor........................................................................................... 35
Custodian............................................................................................. 36
Transfer Agent and Fund Accounting Services........................................................... 37
Auditors ............................................................................................. 37
Legal Counsel......................................................................................... 37
PERFORMANCE INFORMATION........................................................................................ 37
Yields of the Money Market Funds...................................................................... 38
Yield of the Capital Appreciation Funds, the Income Funds and the
Tax-Free Funds............................................................................... 39
</TABLE>
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<TABLE>
<S> <C>
Calculation of Total Return........................................................................... 41
Performance Comparisons............................................................................... 43
ADDITIONAL INFORMATION......................................................................................... 44
Organization and Description of Shares................................................................ 44
Shareholder Liability................................................................................. 45
FINANCIAL STATEMENTS........................................................................................... 50
APPENDIX ...................................................................................................... 51
</TABLE>
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<PAGE> 333
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"): the AmSouth Prime Obligations Fund (the "Prime
Obligations Fund"), the AmSouth U.S. Treasury Fund (the "U.S. Treasury Fund"),
the AmSouth Tax Exempt Fund (the "Tax Exempt Fund," and these three Funds being
collectively referred to as the "Money Market Funds"), 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"), the AmSouth Equity Income Fund (the "Equity Income Fund"), the
AmSouth Select Equity Fund ("the "Select Equity Fund"), and the AmSouth Enhanced
Market Fund (the "Enhanced Market Fund") and these eight Funds being
collectively referred to as the "Capital Appreciation 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 Municipal Bond Fund (the "Municipal Bond Fund"), the AmSouth Florida
Tax-Free Fund (the "Florida Fund" and these five Funds being collectively
referred to as the "Income Funds"), the AmSouth Institutional Prime Obligations
Fund (the "Institutional Prime Obligations Fund"), and the AmSouth Institutional
U.S. Treasury Fund (the "Institutional U.S. Treasury Fund" and these two Funds
being collectively referred to as the "Institutional Money Market Funds"). The
Florida Fund and the Municipal Bond Fund are also collectively referred to
herein as the "Tax-Free Funds." The Funds, except for the U.S. Treasury Fund,
the Tax Exempt Fund, the Institutional Prime Obligations Fund, and the
Institutional U.S. Treasury Fund, offer three classes of Shares: Premier Shares,
Classic Shares, and Class B Shares. The U.S. Treasury Fund and the Tax Exempt
Fund offer 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. The
Institutional Prime Obligations Fund and the Institutional U.S. Treasury Fund
offer three classes of Shares: Class I Shares, Class II Shares, and Class III
Shares. Much of the information contained in this Statement of Additional
Information expands on subjects discussed in the Prospectuses. This Statement of
Additional Information relates to all Funds except the Institutional Money
Market Funds. The Institutional Money Market Funds have a separate Statement of
Additional Information. 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
<PAGE> 334
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objectives,
restrictions and policies of each Fund 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 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
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is satisfied at the time of purchase, a later increase in such percentage
resulting from a change in the Fund's net asset value or a subsequent change in
a security's qualification as an Eligible Security will not constitute a
violation of the limitation. In addition, there is no limit on the percentage of
the Fund's assets that may be invested in obligations issued or guaranteed by
the U.S. government, its agencies, and instrumentalities and repurchase
agreements fully collateralized by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), 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,
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.
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Each Fund, except the U.S. Treasury Fund, the Tax Exempt Fund, and the
Tax-Free Funds may invest in (i) Canadian Commercial Paper, which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial
paper of an issue located in Europe.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Prime Obligations Fund, the Capital Appreciation Funds, and
the Income Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, a Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party. 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 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.
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securities markets. Such risks include future adverse political and economic
developments, possible seizure, currency blockage, nationalization or
expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source, and
the adoption of other foreign governmental restrictions. Additional risks
include currency exchange risks, less publicly available information, the risk
that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore many securities traded in
these markets may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks. 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 Fund 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.
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REVERSE REPURCHASE AGREEMENTS. As discussed in each Prospectus, each
Fund may borrow funds for temporary purposes by entering into reverse repurchase
agreements in accordance with the Fund's investment restrictions. Pursuant to
such an agreement, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. Such assets will include U.S. government securities or other liquid
high quality debt securities in the case of the Money Market Funds and the
Income Funds or other liquid, high-grade debt securities, in the case of the
Capital Appreciation Funds. Reverse repurchase agreements involve the risk that
the market value of the securities sold by a Fund may decline below the price at
which a Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by a Fund under the 1940 Act.
U.S. GOVERNMENT OBLIGATIONS. The U.S. Treasury Fund will invest
exclusively in bills, notes and bonds issued by the U.S. Treasury. Such
obligations are supported by the full faith and credit of the U.S. government.
Each of the other Funds may invest in such obligations and in other obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities.
Such other obligations may include those which are supported by the full faith
and credit of the U.S. government; others which are supported by the right of
the issuer to borrow from the Treasury; others which are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations; and still others which are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. A Fund will invest in
the obligations of such agencies and instrumentalities only when 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
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will consider the earning power, cash flow and other liquidity ratios of the
issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, the Fund may
resell the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Fund to dispose of a variable
or floating rate note in the event the issuer of the note defaulted on its
payment obligations and the Fund could, as a result or for other reasons, suffer
a loss to the extent of the default. Variable or floating rate notes may be
secured by bank letters of credit or drafts.
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
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the United States through agreements with the issuing authority which provide
that, if required, the federal government will lend the issuer an amount equal
to the principal of and interest on the Project Notes.
As described in the Prospectuses of the Tax Exempt Fund and the
Tax-Free Funds, the two principal classifications of Municipal Securities
consist of "general obligation" and "revenue" issues. A Fund permitted to invest
in Municipal Securities may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities. There are, of course, variations
in the quality of Municipal Securities, both within a particular classification
and between classifications, and the yields on Municipal Securities depend upon
a variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of NRSROs represent their opinions as to the quality of
Municipal Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Municipal Securities with the
same maturity, interest rate and rating may have different yields, while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to purchases by the Tax Exempt Fund,
an issue of Municipal Securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Tax Exempt Fund.
Neither event would under all circumstances require the elimination of such an
obligation from the Fund's investment portfolio. However, the obligation
generally would be retained only if such retention was determined by the Board
of Trustees to be in the best interests of the Fund.
An issuer's obligations under its Municipal Securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal bankruptcy code, and laws, if
any, which may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon the enforcement of such obligations or upon the ability of municipalities
to levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
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
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tend to reflect short-term corporate and market developments to a greater extent
than higher rated securities, which fluctuate primarily in response to the
general level of interest rates, assuming that there has been no change in the
fundamental interest rates, assuming that there has been no change in the
fundamental quality of such securities. The market prices of fixed income
securities generally fall when interest rates rise. Conversely, the market
prices of fixed-income securities generally rise when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Equity Income Fund more difficult, at
least in the absence of price concessions. Reduced liquidity also could
adversely affect the Equity Income Fund's ability to accurately value high yield
securities. Issuers of high yield securities also are more vulnerable to real or
perceived economic changes (for instance, an economic downturn or prolonged
period of rising interest rates), political changes or adverse developments
specific to the issuer. Adverse economic, political or other developments may
impair the issuer's ability to service principal and interest obligations, to
meet projected business goals and to obtain additional financing, particularly
if the issuer is highly leveraged. In the event of a default, the Equity Income
Fund would experience a reduction of its income and could expect a decline in
the market value of the defaulted securities.
WHEN-ISSUED SECURITIES. As discussed in the Prospectuses, each Fund
except the Prime Obligations Fund and the U.S. Treasury Fund may purchase
securities on a when-issued basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a when-issued basis, the Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of 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.
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CALLS. The Capital Appreciation Funds, the Bond Fund, the Limited
Maturity Fund and the 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 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, the
Bond Fund, the Limited Maturity Fund and the 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,
the Bond Fund, the Limited Maturity Fund and the 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 when a
Fund owns securities not subject to an option, the Capital Appreciation Funds,
the Bond Fund, the Limited Maturity Fund and the Government Income Fund will not
have any control over when they may be required to sell the underlying
securities, since they may be assigned an exercise notice at any time prior to
the expiration of their obligation as a writer. If a call option which the Fund
has written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security.
The security covering the call will be maintained in a segregated account of the
Fund's custodian. The Capital Appreciation Funds, the Bond Fund, the Limited
Maturity Fund and the Government Income Fund will consider a security covered by
a call to be
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"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,
the Limited Maturity Fund and the Government Income Fund will normally have
expiration dates of less than nine months from the date written. The exercise
price of the options may be below, equal to, or above the current market values
of the underlying securities at the time the options are written. From time to
time, a Fund may purchase an underlying security for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price
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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 and the Enhanced Market Fund
and Select Equity Fund may acquire "puts" with respect to equity 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, the
Limited Maturity Fund, the Enhanced Market Fund, and the Select Equity 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, the Limited Maturity Fund, the
Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, a Fund
may pay for puts either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the puts (thus reducing the
yield to maturity otherwise available for the same securities).
The Tax Exempt Fund, the Tax-Free Funds, the Limited Maturity Fund, the
Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund intend 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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FUTURES CONTRACTS AND RELATED OPTIONS. The Enhanced Market Fund and the
Select Equity Fund may invest in futures contracts and options thereon (interest
rate futures contracts or index futures contracts, as applicable). Positions in
futures contracts may be closed out only on an exchange which provides a
secondary market for such futures. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Thus, it may not be possible to close a futures position. In the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments to maintain its required margin. In such situations, if a
Fund has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to do so. In
addition, a Fund may be required to make delivery of the instruments underlying
the futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on a Fund's ability to effectively
hedge.
Successful use of futures by the Funds is also subject to an adviser's
or sub-adviser's ability to correctly predict movements in the direction of the
market. For example, if a Fund has hedged against the possibility of a decline
in the market adversely affecting securities held by it and securities prices
increase instead, a Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have approximately
equal offsetting losses in its futures positions. In addition, in some
situations, if a Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market. A
Fund may have to sell securities at a time when it may be disadvantageous to do
so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
Utilization of futures transactions by a Fund involves the risk of loss
by a Fund of margin deposits in the event of bankruptcy of a broker with whom a
Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of
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\
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement, during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
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 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 with respect to each Fund other than the Small Cap, Enhanced Market
and Select Equity Funds, which may purchase 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 Fund, the Small
Cap Fund, the Equity Income Fund, the Enhanced Market Fund and the Select Equity
Fund);
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 the Prime Obligations Fund may purchase securities of a money
market fund which invests primarily in high quality short-term obligations
exempt from federal
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income tax, if, with respect to each such Fund, immediately after such purchase,
the acquiring Fund, does not own in the aggregate (i) more than 3% of the
acquired company's outstanding voting securities, (ii) securities issued by the
acquired company having an aggregate value in excess of 5% of the value of the
total assets of the acquiring Fund, or (iii) securities issued by the acquired
company and all other investment companies (other than Treasury stock of the
acquiring Fund) having an aggregate value in excess of 10% of the value of the
acquiring Fund's total assets;
4. Invest in any issuer for purposes of exercising control or
management;
5. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its investment 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 (except the Enhanced Market and Select Equity
Fund) may write put options. The Prime Obligations Fund, the U.S. Treasury Fund,
the Equity Fund, the Regional Equity Fund, the Capital Growth 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. As a
non-fundamental investment restriction with respect to the Small Cap Fund only,
the Small Cap Fund may not write or purchase put options.
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.
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Portfolio Turnover
- ------------------
The portfolio turnover rate for each Fund 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.
For the fiscal year ended July 31, 1998, the portfolio turnover rate
for the Balanced Fund was 17.15% with respect to the common stock portion of its
portfolio and 11.99% with respect to the other portion of its portfolio.
For the fiscal year ended July 31, 1997, the portfolio turnover rate
for the Balanced Fund was 15.80% with respect to the common stock portion of its
portfolio and 18.62% 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. To the extent portfolio turnover results in the realization of
short-term capital gains, such gains will generally be taxed to shareholders at
ordinary income tax rates.
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
B-16
<PAGE> 349
during which no Shares are tendered for redemption and no orders to purchase
Shares are received. Currently, either the NYSE or the Federal Reserve Bank of
Atlanta is closed on the customary national business holidays of New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and
Christmas Day.
Valuation of the Money Market Funds
- -----------------------------------
The Money Market Funds have elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. The value of
securities in these Funds can be expected to vary inversely with changes in
prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that no Fund will
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Trust's Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires that the Board of Trustees promptly consider what action, if any,
should be initiated. If the Trustees believe that the extent of any deviation
from a Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the
dollar-weighted average portfolio maturity, withholding or reducing dividends,
reducing the number of a Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per Share determined by using
available market quotations.
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
B-17
<PAGE> 350
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 Fund are sold on a continuous basis by BISYS Fund
Services Limited Partnership ("BISYS"), and BISYS has agreed to use appropriate
efforts to solicit all purchase orders. In addition to purchasing Shares
directly from BISYS, Shares may be purchased through procedures established by
BISYS in connection with the requirements of accounts at AmSouth or financial
institutions that provide certain support services for their customers or
account holders ("Financial Institutions"). Customers purchasing Shares 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 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.
B-18
<PAGE> 351
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.
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 Fund to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended (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) each year distribute at least 90% of the sum of its taxable net
investment company income, its net tax-exempt income, and the excess, if any, of
its net short-term capital gains over its net long-term capital losses; and (c)
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
B-19
<PAGE> 352
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.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
A non-deductible 4% 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 did not
meet the 98% thresholds, the Fund would be subject to the 4% excise tax on the
undistributed amounts. Each Fund intends generally to make distributions
sufficient to avoid imposition of this 4% excise tax.
Each Fund 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."
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 1999 (although transition rules will apply). In
some circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in a Fund should consult their tax
advisors with respect to the potential application of these new regulations.
B-20
<PAGE> 353
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," "constructive 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 may be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Trust's Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax 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
B-21
<PAGE> 354
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 net of
certain deductions. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Tax Exempt Fund and the
Tax-Free Funds and designated as an exempt-interest dividend in a written notice
mailed to Shareholders after the close of such Fund's taxable year, but not to
exceed in the aggregate the net Municipal Securities interest received by the
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from the Tax Exempt Fund and the
Tax-Free Funds during such year, regardless of the period for which the Shares
were held.
While the Tax Exempt Fund and the Tax-Free Funds do not expect to
realize any significant amount of long-term capital gains, any net realized
long-term capital gains will be distributed annually. The Tax Exempt Fund and
the Tax-Free Funds will have no tax liability with respect to such gains and the
distributions will be taxable to Shareholders as net gains on securities held
for more than one year, 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.
B-22
<PAGE> 355
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
(including, short-term capital gains) subject to certain adjustments and
excluding the excess of any net long-term capital gains for the taxable year
over any 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.
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.
B-23
<PAGE> 356
MANAGEMENT OF THE TRUST
Officers
- --------
The officers of each Fund , their current addresses, their age, and
principal occupation 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 Age With the Trust During Past 5 Years
- ---------------- --- ---------------- -------------------
<S> <C> <C> <C>
George R. Landreth 56 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 52 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).
Charles Booth 38 Treasurer From 1988 to present, employee of BISYS Fund
Services Limited Partnership.
John F. Calvano 38 President 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.
Robin Thomas 41 Secretary From May 1997 to present, employee of BISYS
Fund Services Limited Partnership; from April
1989 to May, 1997, employee of AmSouth
Bank.
James L. Smith 38 Assistant Secretary From October 1996 to present, employee of BISYS
Fund Services Limited Partnership; from
October, 1995 to October, 1996, employee of
Davis, Graham & Stubbs; from June, 1991 to
October, 1995, Director of Legal and
Compliance, ALPS Mutual Fund Services, Inc.
</TABLE>
B-24
<PAGE> 357
<TABLE>
<S> <C> <C> <C>
Alaina V. Metz 31 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.
</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, Inc. receives fees
from the Trust for acting as Transfer Agent for and for providing fund
accounting services to the Trust. Messrs. Calvano, Landreth, Grimm, Booth and
Smith and Mmes. Thomas and Metz are employees of BISYS Fund Services Limited
Partnership.
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 Fund Expenses Fund Expenses Retirement Paid to Trustee
- -------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
George R. Landreth None None None None
J. David Huber None None None None
James H. $14,473 None None $14,473
Woodward, Jr.
Homer H. Turner $12,448 None None $12,448
Wendell D. Cleaver $14,251 None None $14,251
Dick D. Briggs, Jr., $11,782 None None $11,782
M.D.
</TABLE>
(1) Figures are for the Trust's fiscal year ended July 31, 1998.
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"). The First Investment Advisory Agreement and the Second
Investment Advisory Agreement are collectively referred to as the "Advisory
Agreements."
B-25
<PAGE> 358
In selecting investments for the Equity Fund, the Balanced Fund and the
Regional Equity 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
investments for each of these Funds is to attempt to buy and sell securities
that are temporarily mispriced relative to long-term value.
In selecting investments for each of the Income Funds and the Balanced
Fund, 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
(0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one percent
(0.40%) annually; the Institutional Prime Obligations Fund - twenty
one-hundredths of one percent (0.20%); the Institutional U.S. Treasury Fund -
twenty one-hundredths of one percent (0.20%); the Equity Fund - eighty
one-hundredths of one percent (0.80%) annually; the Regional Equity Fund -
eighty one-hundredths of one percent (0.80%) annually; the Tax Exempt Fund -
forty one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Maturity Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund -
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Capital Growth Fund - eighty one-hundredths of one percent (0.80%) annually; the
Small Cap Fund - one hundred twenty one-hundredths of one percent (1.20%)
annually; the Select Equity Fund - eighty one hundredths of one percent (.80%)
annually; and the Enhanced Market Fund forty-five hundredths of one percent
(.45%) 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, 1998, July 31, 1997, and July 31,
1996, the Advisor received $2,515,690, $2,366,707 and $2,459,885, respectively,
from the Prime Obligations Fund. For the fiscal years ended July 31, 1998, July
31, 1997, and July 31, 1996, the Advisor received $1,256,351, $1,325,127 and
$1,588,850, respectively, from
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<PAGE> 359
the U.S. Treasury Fund. For the fiscal years ended July 31, 1998, July 31, 1997,
and July 31, 1996, the Advisor received $176,963, $160,785 and $133,336,
respectively, from the Tax Exempt Fund. For the fiscal years ended July 31,
1998, July 31, 1997, and July 31, 1996, investment advisory fees paid to the
Advisor reflect voluntary reductions in investment advisory fees of $176,963,
$160,785 and $133,340 respectively, from the Tax Exempt Fund.
For the fiscal year ended July 31, 1998, the Advisor received
$7,981,703, $1,263,837, $1,581,387, $595,473, $3,005,940, $32,006, $170,463,
$1,335,325, $70,873 and $267,522, from the Equity Fund, the Regional Equity
Fund, the Bond Fund, the Limited Maturity Fund, the Balanced Fund, the
Government Income Fund, the Florida Fund, the Municipal Bond Fund, the Capital
Growth Fund and the Equity Income Fund, respectively. For the fiscal period
ended July 31, 1998, the Advisor received $33,202 from the Small Cap Fund.
For the fiscal year ended July 31, 1997, the Advisor received
$3,733,019, $953,375, $745,426, $247,500, $2,855,190, $41,620, and $156,820 from
the Equity Fund, the Regional Equity Fund, the Bond Fund, the Limited Maturity
Fund, the Balanced Fund, the Government Income Fund and the Florida Fund,
respectively. For the period ended July 31, 1997, the Advisor received $111,117
and $36,130 from the Municipal Bond Fund and the Equity Income Fund,
respectively. For the fiscal year ended July 31, 1997, investment advisory fees
paid to the Advisor reflect voluntary fee reductions of $224,000, $74,000,
$48,000 and $183,000 for the Bond Fund, the Limited Maturity Fund, the
Government Income Fund and the Florida Fund, respectively. For the period ended
July 31, 1997, investment advisory fees paid to the Advisor reflect voluntary
fee reductions of $70,000 for the Municipal Bond 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 Bond Fund,
the Limited Maturity Fund, the Balanced Fund, the Government Income Fund, and
Florida Fund, respectively.
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
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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, 2000 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.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Maturity Fund until January 31, 2000 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.
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-Advisors
- -----------------------
Investment sub-advisory services are provided to the Equity Income Fund
by Rockhaven Asset Management, LLC ("Rockhaven" or "Sub-Advisor") pursuant to a
Sub-Advisory Agreement dated as of March 12, 1997 between the Advisor and
Rockhaven ("Sub-Advisory Agreement"). Investment sub-advisory services are
provided to the Capital Growth
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Fund by Peachtree Asset Management ("Peachtree" or "Sub-Advisor") pursuant to a
Sub- Advisory Agreement dated July 31, 1997 between the Advisor and Peachtree.
Investment sub-advisory services are provided to the Small Cap Fund by Sawgrass
Asset Management, LLC ("Sawgrass" or "Sub-Advisor") pursuant to a Sub-Advisory
Agreement dated as of March 2, 1998 between the Advisor and Sub-Advisor (a
"Sub-Advisory Agreement"). Investment sub-advisory services are provided to the
Select Equity Fund and the Enhanced Market Fund pursuant to a Sub-Advisory
Agreement dated as of September 1, 1998 between the Advisor and OakBrook
Investments, LLC ("OakBrook" or "Sub-Advisor").
The Sub-Advisors 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 a
Sub-Advisor shall be liable to the Advisor for a loss resulting from a breach of
fiduciary duty by the Sub-Advisor under the 1940 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 the 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, 2000, with respect to
the Capital Growth Fund until July 31, 1999, with respect to the Small Cap Fund
until January 31, 2000, and with respect to the Select Equity Fund and Enhanced
Market Fund until January 31, 2000, and each Sub-Advisory Agreement shall
continue in effect for successive one-year periods if such continuance is
approved at least annually by the Board of Trustees or by vote of the holders of
a majority of the outstanding voting Shares of the respective 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. Each Sub-Advisory Agreement may be terminated with respect to
a Fund by the Trust at any time without the payment of any penalty by the Board
of Trustees, 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. Each Sub-Advisory 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 a 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 or Sub-Advisor
determines, subject to the general supervision of the Board of Trustees and in
accordance with each Fund's
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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 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.
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 their 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 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 believe to be equitable to the Fund(s) and such other
investment company or account. In some instances, this investment procedure may
adversely
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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, 1998, the Equity Fund paid
aggregate brokerage commissions in the amount of $592,269; the Regional Equity
Fund paid aggregate brokerage commissions of $182,346; the Balanced Fund paid
aggregate brokerage commissions of $365,522; and the Equity Income Fund paid
aggregate brokerage commissions of $615,317.
During the fiscal year ended July 31, 1997, the Equity Fund paid
aggregate brokerage commissions in the amount of $397,271; the Regional Equity
Fund paid aggregate brokerage commissions in the amount of $98,747; and the
Balanced Fund paid aggregate brokerage commissions in the amount of $145,513.
During the period from March 20, 1997 to July 31, 1997, the Equity Income Fund
paid aggregate brokerage commissions in the amount of $28,462.
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
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<PAGE> 364
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 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 operations would affect its
net asset value per Share or result in financial losses to any customer.
Administrator
- -------------
ASO Services Company ("ASO") 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"). ASO 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-Advisors under the Sub-Advisory Agreements, those performed by AmSouth
under its custodial services agreement with the Trust and those performed by
BISYS Fund Services, 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
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<PAGE> 365
operations (other than those performed by the Advisor under the Advisory
Agreements, the Sub-Advisors under the Sub-Advisory Agreements, those by AmSouth
under its custodial services agreement with the Trust and those performed by
BISYS Fund Services, Inc. under its fund accounting agreement and BISYS Fund
Services Ohio, Inc. under its transfer agency agreement 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 (except the Institutional Money Market Funds) equal to the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(0.20%) 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. Under
the Administration Agreement for expenses assumed and services provided as
manager and administrator, the Administrator receives a fee from each
Institutional Money Market Fund equal to the lesser of (a) a fee computed at the
annual rate of (0.10%) of an Institutional 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 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.
For the fiscal year ended July 31, 1998, ASO received $1,257,853 from
the Prime Obligations Fund, $628,179 from the U.S. Treasury Fund, and $176,963
from the Tax Exempt Fund.
For the fiscal year ended July 31, 1997, ASO received $1,183,357, for
the fiscal years ended July 31, 1996 and July 31, 1995, BISYS and ASO received
$1,229,842 and $1,092,079, respectively, from the Prime Obligations Fund. For
the fiscal year ended July 31, 1997, ASO received $662,565; for the fiscal years
ended July 31, 1996 and July 31, 1995, BISYS and ASO received $794,425 and
$622,689, respectively, from the U.S. Treasury Fund. For the fiscal year ended
July 31, 1997, ASO received $160,785; for the fiscal years ended July 31, 1996
and July 31, 1995, BISYS and ASO received $133,336 and $125,213, 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, 1998, ASO received $1,995,442,
$316,102, $379,537, $142,915, $751,492, $10,668, $56,820, $400,601, $2,137 and
$66,881, from the Equity Fund, the Regional Equity Fund, the Bond Fund, the
Limited Maturity Fund, the Balanced Fund, the Government Income Fund, the
Florida Fund, the Municipal Bond
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<PAGE> 366
Fund, the Capital Growth Fund and the Equity Income Fund, respectively. For the
fiscal period ended July 31, 1998, ASO received $0 from the Small Cap Fund.
For the fiscal year ended July 31, 1997, ASO received $745,786,
$187,612, $178,921, $59,376, $549,167, $13,872 and $52,277 from the Equity Fund,
the Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund, the Government Income Fund and the Florida Fund, respectively. For the
period ended July 31, 1997, ASO received $33,335 and $9,033 from the Municipal
Bond Fund and Equity Income Fund, respectively. For the fiscal year ended July
31, 1997, management and administration fees reflect voluntary fee reductions of
$188,000, $51,000, $119,000, $40,000, $165,000, $14,000 and $53,000 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 period ended July 31, 1997, management and administration fees reflect
voluntary fee reductions of $22,000 for the Municipal Bond Fund.
For the fiscal year ended July 31, 1996, BISYS and ASO 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, 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, the Government Income Fund and the Florida Fund, respectively.
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the Administration Agreement shall be renewed
automatically for successive five-year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days' prior to
the expiration of the then-current term. The Administration Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Trust's Board of Trustees or by the Administrator.
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.
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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
- ------------------
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO 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 (0.10%) ten one-hundredths
of one percent of each Fund's average net assets. For the fiscal year ended July
31, 1998, AmSouth received $1,924,684 with respect to the Trust.
BISYS is 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.
Distributor
- -----------
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, 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
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<PAGE> 368
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 0.25% 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, 1998, BISYS received $122,121
with respect to the Classic Shares of the Prime Obligations Fund (which reflects
a fee reduction of $183,169); $7,657 with respect to the Classic Shares of the
U.S. Treasury Fund (which reflects a fee reduction of $11,486); and $23,263 with
respect to the Classic Shares of the Tax-Exempt Fund (which reflects a fee
reduction of $34,893); $5,523 with respect to the Classic Shares of the Florida
Fund (which reflects a fee reduction of $8,284); $6,321 with respect to the
Classic Shares of the Bond Fund (which reflects a fee reduction of $9,482);
$1,927 with respect to the Classic Shares of the Municipal Bond Fund (which
reflects a fee reduction of $2,890);$3,259 with respect to the Classic Shares of
the Limited Maturity Fund (which reflects a fee reduction of $4,887); $8,491
with respect to the Classic Shares of the Government Income Fund (which reflects
a fee reduction of $12,735); $145,337 with respect to the Classic Shares of the
Equity Fund (which reflects a fee reduction of $0); $114,529 with respect to the
Classic Shares of the Regional Equity Fund (which reflects a fee reduction of
$0); $113,512 with respect to the Classic Shares of the Balanced Fund (which
reflects a fee reduction of $0); $12,153 with respect to the Classic Shares of
the Capital Growth Fund (which reflects a fee reduction of $0); $55,507 with
respect to the Classic Shares of the Equity Income Fund (which reflects a fee
reduction of $0); and $1,084 with respect to the Classic Shares of the Small Cap
Fund (which reflects a fee reduction of $0);
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
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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
- ---------
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. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each tax exempt fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
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 PricewaterhouseCoopers, LLP, independent accountants, as
set forth in their report incorporated by reference herein, and are included in
reliance upon such report and on the
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authority of such firm as experts in auditing and accounting.
PricewaterhouseCoopers, LLP's address is 100 East Broad Street, Columbus, Ohio
43215.
Legal Counsel
- -------------
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
PERFORMANCE INFORMATION
General
- -------
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with 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
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<PAGE> 371
Exempt Fund's yield which is tax-exempt by the difference between one and a
stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund that is not tax-exempt. The tax equivalent effective yield for
the Tax Exempt Fund is computed by dividing that portion of the effective yield
of the Tax Exempt Fund which is tax-exempt by the difference between one and a
stated income tax rate and adding the product to that portion, if any, of the
effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1998, the yield, effective
yield, the tax equivalent yield and the tax equivalent effective yield of the
Premier Shares and Classic Shares of each Money Market Fund, calculated as
described, above was as follows:
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Premier 4.99% 5.11%
U.S. Treasury Fund Premier 4.64% 4.75%
Tax Exempt Fund Premier 3.05% 3.10% 4.24% 4.31%
Prime Obligations Fund Classic 4.89% 5.01%
U.S. Treasury Fund Classic 4.54% 4.65%
Tax Exempt Fund Classic 2.95% 3.00% 4.10% 4.17%
</TABLE>
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds
- --------------------------------------------------------------------------------
As summarized in the Prospectuses under the heading "General
Information - Performance Information," the yield of each of the Capital
Appreciation Funds, the Income Funds and the Tax-Free Funds will be computed by
annualizing net investment income per share for a recent 30-day period and
dividing that amount by the maximum offering price per share (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed-income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated
B-39
<PAGE> 372
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 July 31, 1998, the yield and the tax
equivalent yield of the Income Funds was:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- -----
<S> <C> <C> <C>
Florida Fund Classic 4.09% 5.68%
Premier 4.19% 5.82%
Municipal Bond Fund Classic 3.92% 5.44%
Premier 4.02% 5.58%
Bond Fund Classic 5.63%
Premier 5.73%
Class B 4.73%
Government Income Fund Classic 5.39%
Premier 5.49%
Limited Maturity Fund Classic 5.47%
Premier 5.58%
</TABLE>
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<PAGE> 373
For the 30-day period ending July 31, 1998, the yield of the Capital
Appreciation Funds was:
<TABLE>
<CAPTION>
Fund Class Yield
---- ----- -----
<S> <C> <C>
Equity Fund Premier 1.17%
Regional Equity Fund Premier 0.34%
Balanced Fund Premier 2.88%
Equity Income Fund Premier 2.57%
Capital Growth Fund Premier (0.53)%
Small Cap Fund Premier (0.92)%
Equity Fund Classic 0.92%
Regional Equity Fund Classic 0.09%
Balanced Fund Classic 2.63%
Equity Income Fund Classic 2.32%
Capital Growth Fund Classic (0.77)%
Small Cap Fund Classic (1.17)%
Equity Fund Class B 0.17%
Regional Equity Fund Class B (0.66)%
Balanced Fund Class B 1.88%
Equity Income Fund Class B 1.57%
Capital Growth Fund Class B (1.52)%
Small Cap Fund Class B (1.92)%
</TABLE>
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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<PAGE> 374
$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 and five-year periods ended July 31, 1998, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
---- ----- -------- ---------
<S> <C> <C> <C>
Prime Obligations Fund Premier 5.09% 4.65%
U.S. Treasury Fund Premier 4.77% 4.42%
Tax Exempt Fund Premier 3.13% 2.92%
Prime Obligations Fund Classic 4.99% 4.60%
U.S. Treasury Fund Classic 4.67% 4.37%
Tax Exempt Fund Classic 3.03% 2.87%
Florida Fund Classic 0.26% N/A
Bond Fund Classic 3.19% 5.50%
Limited Maturity Fund Classic 1.74% 4.38%
Government Income Fund Classic 3.24% N/A
Municipal Bond Classic 0.16% N/A
</TABLE>
For the one-year and five-year periods ended July 31, 1998, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
---- ----- -------- ---------
<S> <C> <C> <C>
Equity Fund Premier 12.46% 18.01%
Regional Equity Fund Premier (0.12)% 13.64%
Balanced Fund Premier 9.73% 12.74%
Capital Growth Fund Premier N/A N/A
Equity Income Fund Premier 7.54% N/A
Equity Fund Classic 7.29% 16.90%
Regional Equity Fund Classic (4.79)% 12.56%
Balanced Fund Classic 4.59% 11.66%
Capital Growth Fund Classic N/A N/A
Equity Income Fund Classic 2.48% N/A
Equity Fund Class B N/A N/A
Regional Equity Fund Class B N/A N/A
Balanced Fund Class B N/A N/A
Capital Growth Fund Class B N/A N/A
Equity Income Fund Class B N/A N/A
</TABLE>
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<PAGE> 375
For the period from commencement of operations through July 31, 1998,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1998 of Operations Date
---- ----- -------------------------- -----------------
<S> <C> <C> <C>
Prime Obligations Fund Premier 5.40% August 8, 1988
U.S. Treasury Fund Premier 5.17% September 8, 1988
Tax Exempt Fund Premier 3.10% June 27, 1988
Florida Fund Premier 5.82% September 2, 1997
Municipal Bond Fund Premier 5.91% September 2, 1997
Bond Fund Premier 8.50% September 2, 1997
Limited Maturity Fund Premier 7.07% September 2, 1997
Government Income Fund Premier 6.32% September 2, 1997
Prime Obligations Fund Classic 5.38% April 1, 1996
U.S. Treasury Fund Classic 5.15% April 1, 1996
Tax Exempt Fund Classic 3.07% April 1, 1996
Florida Fund Classic 4.63% September 30, 1994
Municipal Bond Fund Classic .16% July 1, 1997
Bond Fund Classic 8.03% December 1, 1988
Limited Maturity Fund Classic 6.59% February 1, 1988
Government Income Fund Classic 5.41% October 1, 1993
Bond Fund Class B 8.41% September 2, 1997
Prime Obligations Fund Class B 0.49% June 15, 1998
</TABLE>
For the period from commencement of operations through July 31, 1998,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1998 of Operations Date
---- ----- --------------------------- -----------------
<S> <C> <C> <C>
Equity Fund Premier 15.50% December 1, 1988
Regional Equity Fund Premier 14.91% December 1, 1988
Balanced Fund Premier 13.47% December 19, 1991
Equity Income Fund Premier 18.94% March 20, 1997
Capital Growth Fund Premier 16.50% July 31, 1997
Small Cap Fund Premier (8.48)% March 2, 1998
Equity Fund Class B 15.41% December 1, 1988
Regional Equity Fund Class B 14.81% December 1, 1988
Balanced Fund Class B 13.32% December 19, 1991
Equity Income Fund Class B 15.29% March 20, 1997
</TABLE>
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<PAGE> 376
<TABLE>
<S> <C> <C> <C>
Capital Growth Fund Class B 10.40% July 31, 1997
Small Cap Fund Class B (13.46)% March 2, 1998
Equity Fund Classic 14.93% December 1, 1988
Regional Equity Fund Classic 14.35% December 1, 1988
Balanced Fund Classic 12.66% December 19, 1991
Equity Income Fund Classic 14.81% March 20, 1997
Capital Growth Fund Classic 10.98% July 31, 1997
Small Cap Fund Classic (12.69)% March 2, 1998
</TABLE>
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.
B-44
<PAGE> 377
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/ Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
ALL FUNDS. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by 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 eighteen series of Shares which represent interests in the Prime Obligations
Fund, the 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, the Equity Income Fund, the Select Equity Fund,
the Enhanced Market Fund, the Institutional Prime Obligations Fund, and the
Institutional U.S. Treasury 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
B-45
<PAGE> 378
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution.
As described in the text of the Prospectuses following the caption
"GENERAL INFORMATION -- Description of the Trust and its Shares," Shares of the
Trust are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as Shareholders are entitled to vote.
Shareholders vote in the aggregate and not by series or class on all matters
except (i) when required by the 1940 Act, shares shall be voted by individual
series, (ii) when the Trustees have determined that the matter affects only the
interests of one or more series or class, then only Shareholders of such series
or class shall be entitled to vote thereon, (iii) when pertaining to the
Shareholder Servicing Plan, and (iv) when pertaining 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 September 4, 1998, the trustees and officers of the Trust, as a
group, owned less than 1% of the Premier Shares, of the Classic Shares and of
the Class B Shares of any of the AmSouth Funds.
B-46
<PAGE> 379
As of September 4, 1998, AmSouth, 1901 Sixth Avenue-North, Birmingham,
Alabama 35203 was the Shareholder of record of the outstanding voting shares of
the Premier Shares of the Funds as follows: 95.62% of the Prime Obligations
Fund, 97.40% of the U.S. Treasury Fund, 99.99% of the Tax Exempt Fund, 94.96% of
the Equity Fund, 94.33% of the Regional Equity Fund, 96.33% of the Bond Fund,
98.64% of the Limited Maturity Fund, 95.88% of the Balanced Fund, 95.40% of the
Florida Fund, 99.99% of the Government Income Fund, 99.20% of the Municipal Bond
Fund, 100% of the Equity Income Fund, 99.99% of the Capital Growth Fund, and
100% of the Small Cap Fund. AmSouth was the Shareholder of record for Classic
Shares of 74.85% of the Select Equity Fund and 92.64% of the Enhanced Market
Fund. Under the 1940 Act, AmSouth may be deemed to be a controlling person of
the Premier Class of each of the above-mentioned Funds. The ultimate parent of
AmSouth is AmSouth Bancorporation.
As of September 4, 1998, National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of the outstanding voting Shares of the Classic Shares of
the Funds as follows: 99.53% of the Prime Obligations Fund, 87.43% of the
Treasury Fund, 94.60% of the Tax Exempt Fund, 20.23% of the Government Income
Fund, 25.29% of the Bond Fund, 51.20% of the Limited Maturity Fund, 31.59% of
the Municipal Bond Fund, 76.40% of the Florida Fund, 33.39% of the Capital
Growth Fund, 53.40% of the Small Cap Fund, 25.12% of the Select Equity Fund and
7.29% of the Enhanced Market Fund. As of September 4, 1998 National Financial
Services Corporation, One World Financial Center, 200 Liberty Street, New York,
New York 10281, was the Shareholder of record of the outstanding voting Shares
of the Class B Shares of the Funds as follows: 97.48% of the Prime Obligations
Fund, 68.89% of the Bond Fund, 6.27% of the Regional Equity Fund, 23.58% of the
Small Cap Fund, 99.92% of the Select Equity Fund, and 98.57% of the Enhanced
Market Fund. National Financial Services Corporation under the 1940 Act may be
deemed to be a controlling person of the Classic Shares of the Prime Obligations
Fund, Treasury Fund, Tax Exempt Fund, Limited Maturity Fund, Municipal Bond
Fund, Florida Fund and Capital Growth Fund and the Class B Shares of the Bond
Fund, Prime Obligations Fund, Select Equity Fund and Enhanced Market 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
September 4, 1998:
U.S. Treasury Fund -- Classic Shares
------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Association of Edison 812,932.80 10.35%
Illumination
600 18th Street North
Birmingham, AL 35291
</TABLE>
B-47
<PAGE> 380
Equity Fund -- Classic Shares
-----------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
National Bank of Commerce
TRST Maynard Cooper 218,550.383 7.39
P.O. Box 10686
Birmingham, AL 35202-0686
</TABLE>
Municipal Bond Fund -- Classic Shares
-------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Sterne Agee Leach Inc.
AC 2432-0915 13,608.083 5.31
CMT Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
Lynspen & Company
P.O. Box 2554 71,869.217 28.06
Birmingham, AL 35290
JC Bradford Co Cust FBO
Janet Haynes Revocable 13,352.735 5.21
330 Commerce St.
Nashville, TN 37201-1899
Sterne Agee Leach Inc. 18,220.130 7.11
AC 8102-3199
CMT Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
</TABLE>
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<PAGE> 381
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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<PAGE> 382
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1998,
Financial Statements for the AmSouth Mutual Funds for the period ended July 31,
1998, are all incorporated by reference to the Annual Report of the AmSouth
Mutual Funds, dated as of such dates, which has 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.
B-50
<PAGE> 383
APPENDIX
--------
SHORT-TERM RATINGS. Short-term credit ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt having an original maturity of no more than 365 days. Short-term credit
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
extremely strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation. Short-term credit
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. Short-term credit rated A-3 indicates adequate capacity
for timely payment. It is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Short-term credit rated B is regarded as having only speculative capacity for
timely payment. Short-term credit rated C is assigned to short-term debt
obligations with a doubtful capacity for payment. Short-term credit 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 unless Standard & Poor's believes such payments will be made during such
grace period.
The rating Prime-1 is the highest short-term rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or supporting
institutions) are considered to have a superior ability for repayment of senior
short-term debt obligations. Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term debt 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 supporting
institutions) have an acceptable ability for repayment of senior 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.
Short-term credit rated F-1 by Fitch IBCA is regarded as having the
strongest capacity for timely payments. Short-term credit rated F-2 by Fitch
IBCA is regarded as having a satisfactory capacity for timely payment, but that
margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Short-term credit rated F-3 has an adequate capacity for timely payment but
near-term adverse changes could cause these securities to be rated below
investment grade. Issues rated B have characteristics suggesting a minimal
capacity for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions. Issues related C have characteristics
suggesting default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment. Issues rated D denotes actual or imminent payment default. The plus
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
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.
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<PAGE> 384
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.
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.
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.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
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 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.
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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.
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.
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.
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.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
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"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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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CROSS REFERENCE SHEET
Part B
<TABLE>
<CAPTION>
Form N-1A Item No. Caption
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<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information - Description of Shares
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Trust Management of the Trust
15. Control Persons and Principal
Holders of Securities Miscellaneous
16. Investment Advisory and
Other Services Management of the Trust
17. Brokerage Allocation Management of the Trust
18. Capital Stock and Other
Securities Valuation; Additional Purchase and Redemption
Information; Management of the Trust;
Redemptions; Additional Information
19. Purchase, Redemption and Pricing
of Securities Being Offered Valuation; Additional Purchase and Redemption
Information; Management of the Trust
20. Tax Status Additional Purchase and Redemption Information
21. Underwriters Management of the Trust
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 388
AMSOUTH MUTUAL FUNDS
INSTITUTIONAL MONEY MARKET FUNDS
Statement of Additional Information
December 1, 1998
-----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth Institutional Prime
Obligations Fund and the AmSouth Institutional U.S. Treasury Fund (each a "Fund"
and collectively the "Funds"), dated December 1, 1998. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. A copy of the Funds' Prospectus may be obtained by writing to
AmSouth Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by
telephoning toll free (800) 451-8382.
<PAGE> 389
TABLE OF CONTENTS
-----------------
<TABLE>
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Page
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AMSOUTH INSTITUTIONAL MONEY MARKET FUNDS..........................................................................1
INVESTMENT OBJECTIVES AND POLICIES................................................................................2
Additional Information on Portfolio Instruments...............................................................2
Investment Restrictions.......................................................................................6
Additional Investment Restrictions............................................................................7
Portfolio Turnover............................................................................................7
VALUATION.........................................................................................................8
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION....................................................................9
Purchase of Shares............................................................................................9
Matters Affecting Redemption..................................................................................9
Additional Tax Information...................................................................................10
MANAGEMENT OF THE TRUST..........................................................................................12
Officers ....................................................................................................12
Investment Advisor...........................................................................................13
Portfolio Transactions.......................................................................................17
Glass-Steagall Act...........................................................................................19
Administrator................................................................................................20
Expenses ....................................................................................................21
Sub-Administrators...........................................................................................22
Distributor..................................................................................................22
Custodian....................................................................................................23
Transfer Agent and Fund Accounting Services..................................................................23
Auditors ....................................................................................................24
Legal Counsel................................................................................................24
PERFORMANCE INFORMATION..........................................................................................24
Yields of the Institutional Money Market Funds ..............................................................25
Calculation of Total Return..................................................................................25
Performance Comparisons......................................................................................26
ADDITIONAL INFORMATION...........................................................................................27
Organization and Description of Shares.......................................................................27
Shareholder Liability........................................................................................28
</TABLE>
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<TABLE>
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FINANCIAL STATEMENTS.............................................................................................32
APPENDIX.........................................................................................................33
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH INSTITUTIONAL MONEY MARKET FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"). This Statement of Additional Information relates to
two of these Funds: the AmSouth Institutional Prime Obligations Fund (the
"Institutional Prime Obligations Fund") and the AmSouth Institutional U.S.
Treasury Fund (the "Institutional U.S. Treasury Fund," and these two Funds being
collectively referred to as the "Institutional Money Market Funds"). The Trust's
other sixteen Funds, which are offered through separate prospectuses and have a
separate Statement of Additional Information, are: the AmSouth Prime Obligations
Fund (the "Prime Obligations Fund"), the AmSouth U.S. Treasury Fund (the "U.S.
Treasury Fund"), the 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"), 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"), the AmSouth Equity
Income Fund (the "Equity Income Fund"), the AmSouth Select Equity Fund (the
"Select Equity Fund") and the AmSouth Enhanced Market Fund (the "Enhanced Market
Fund") and, collectively with the Equity Fund, the Regional Equity Fund, the
Balanced Fund, the Capital Growth Fund, the Small Cap Fund, the Equity Income
Fund, the Select Equity Fund and the Enhanced Market Fund (the "Capital
Appreciation 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 Municipal Bond Fund (the
"Municipal Bond Fund"), and the 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 Institutional Prime Obligations Fund and the Institutional U.S.
Treasury Fund offer three classes of Shares: Class I Shares, Class II Shares and
Class III Shares. Some of the information contained in this Statement of
Additional Information expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of a Fund should be made without first reading that Fund's
Prospectus.
<PAGE> 392
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 INSTITUTIONAL MONEY MARKET FUNDS. As
noted in the Prospectus for the Institutional Money Market Funds, each Fund may
invest only in obligations determined by AmSouth Bank, Birmingham, Alabama
("AmSouth") the investment advisor to the Trust ("Advisor") to present minimal
credit risks under guidelines adopted by the Trust's Board of Trustees.
With regard to the Institutional 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. For purposes of this investment
limitation, 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 Institutional Prime Obligations 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 Institutional 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
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Eligible Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, and instrumentalities and repurchase agreements fully collateralized
by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), 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. The Institutional
Prime Obligation 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. The Institutional Prime Obligations 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.
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The Institutional Prime Obligations Fund may invest in (i) Canadian
Commercial Paper, which is commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S. corporation, and (ii) Europaper, which is U.S.
dollar-denominated commercial paper of an issue located in Europe.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Institutional Prime Obligations Fund 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 Fund to dispose of a variable amount master demand note if the issuer
defaulted on its payment obligations or during periods when the Fund is not
entitled to exercise its demand rights, and the Fund 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 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. The Institutional Prime Obligations Fund may,
subject to its 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
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<PAGE> 395
seizure, currency blockage, nationalization or expropriation of foreign
investments, less stringent disclosure requirements, the possible establishment
of exchange controls or taxation at the source, and the adoption of other
foreign governmental restrictions. Additional risks include currency exchange
risks, less publicly available information, the risk that companies may not be
subject to the accounting, auditing and financial reporting standards and
requirements of U.S. companies, the risk that foreign securities markets may
have less volume and therefore many securities traded in these markets may be
less liquid and their prices more volatile than U.S. securities, and the risk
that custodian and brokerage costs may be higher. Foreign issuers of securities
or obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. The Fund will acquire such securities only when the
Advisor believes the risks associated with such investments are minimal.
REPURCHASE AGREEMENTS. Securities held by each Fund 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 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 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 Prospectus, the
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the Fund's investment restrictions.
Pursuant to such an agreement, a Fund
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would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase the securities at a mutually agreed-upon
date and price. Each Fund intends to enter into reverse repurchase agreements
only to avoid otherwise selling securities during unfavorable market conditions
to meet redemptions. At the time a Fund enters into a reverse repurchase
agreement, it will place assets consisting of U.S. government securities or
other liquid high quality debt securities having a value equal to the repurchase
price (including accrued interest), in a segregated custodial account and will
subsequently monitor the account to ensure that such equivalent value is
maintained. 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 Institutional 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.
The Institutional Prime Obligations Fund 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
believes that the credit risk with respect thereto is minimal.
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 Institutional Money Market Funds 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 the Institutional Prime Obligations Fund, in
marketable securities of companies engaged in
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such activities and in securities secured by real estate or interests therein
are not hereby precluded);
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 Institutional 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
Institutional Prime Obligations 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 Institutional Prime Obligations Fund, or (iii)
securities issued by the acquired company and all other investment companies
(other than Treasury stock of the Institutional Prime Obligations Fund) having
an aggregate value in excess of 10% of the value of the Institutional Prime
Obligations Fund's total assets;
4. Invest in any issuer for purposes of exercising control or
management;
5. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its investment 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 Institutional Money Market Funds may not buy common stocks or
voting securities, or state, municipal, or private activity bonds. The
Institutional Money Market Funds may not write or purchase put or call options.
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
Additional Investment Restrictions
- ----------------------------------
The following investment restriction is non-fundamental and may be
changed by a vote of the majority of the Board of Trustees: No Fund will invest
more than 15% of its net assets in securities that are restricted as to resale,
or for which no readily available market exists, including repurchase agreements
providing for settlement more than seven days after notice.
B-7
<PAGE> 398
Portfolio Turnover
- ------------------
The portfolio turnover rate for each Fund 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 Institutional Money Market
Funds is expected to be zero percent for regulatory purposes.
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. 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. 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 Prospectus, the net asset value of each
Institutional Money Market Fund is determined and the Shares of each Fund are
priced as of 2:00 p.m. 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.
The Institutional Money Market Funds have elected to use the amortized
cost method of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. This method
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
The value of securities in these Funds can be expected to vary inversely with
changes in prevailing interest rates.
Pursuant to Rule 2a-7, each Institutional 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
B-8
<PAGE> 399
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 Institutional 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.
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 of the Trust may include officers, directors, or employees of
AmSouth or AmSouth's correspondent banks.
Purchase of Shares
- ------------------
As stated in the Prospectus, the public offering price of the Class I,
Class II, and Class III Shares is their net asset value per Share, as next
computed after an order is received.
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.
B-9
<PAGE> 400
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" above.
Additional Tax Information
- --------------------------
It is the policy of each Fund to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended. By following such policy, the 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) each year distribute at least 90% of the sum of its taxable net
investment company income, its net tax-exempt income, and the excess, if any, of
its net short-term capital gains over its net long-term capital losses; and (c)
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.
A non-deductible 4% 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 did not meet
the 98% threshold, the Fund would be subject to the 4% excise tax on the
undistributed amounts. Each Fund intends generally to make distributions
sufficient to avoid imposition of this 4% excise tax.
Each Fund will be required in certain cases to withhold and remit to
the U.S. 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
B-10
<PAGE> 401
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."
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 1999 (although transition rules will apply). In
some circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in a Fund should consult their tax
advisors with respect to the potential application of these new regulations.
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," "constructive 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.
Information set forth in the Prospectus 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 Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of a Fund or its
B-11
<PAGE> 402
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 Prospectus and this Statement of
Additional Information is based on tax laws and regulations which are in effect
on the date of the Prospectus and 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, their
age, and principal occupation 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 , Address and Age With the Trust During Past 5 Years
- ----------------------- ---------------- ------------------
<S> <C> <C>
George R. Landreth, 56 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, 52 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).
Chuck Booth, 38 Treasurer From 1988 to present, employee of BISYS
Fund Services Limited Partnership.
John F. Calvano, 38 President From October, 1994 to present, employee of
BISYS Fund Services; from September 1994 to
March 1997, Independent Consultant; from
April 1975 to September 1994, employee of
Federated Investors, Inc.
Robin Thomas, 41 Secretary From May, 1997 to present, employee of BISYS
Fund Services Limited Partnership; from April
1989 to May 1997, employee of AmSouth Bank.
James L. Smith, 38 Assistant Secretary From October, 1996 to present, employee of
BISYS Fund Services Limited Partnership; from
October, 1995 to October, 1996, employee of
Davis, Graham & Stubbs; from June, 1991 to
August, 1995, Director of Legal and
Compliance, ALPS Mutual Fund Services, Inc.
</TABLE>
B-12
<PAGE> 403
<TABLE>
<S> <C> <C>
Alaina V. Metz, 31 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.
</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, Inc. receives fees
from the Trust for acting as Transfer Agent for and for providing fund
accounting services to the Trust. Messrs. Booth, Calvano, Landreth, Grimm, and
Smith and Mme. Thomas and Metz are employees of BISYS Fund Services Limited
Partnership.
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>
George R. Landreth None None None None
J. David Huber None None None None
James H. $14,473 None None $14,473
Woodward, Jr.
Homer H. Turner $12,448 None None $12,448
Wendell D. Cleaver $14,251 None None $14,251
Dick D. Briggs, Jr., $11,782 None None $11,782
M.D.
</TABLE>
1 Figures are for the Trust's fiscal year ended July 31, 1998.
Investment Advisor
- ------------------
Investment advisory and management services are provided to the Money
Market Funds, the Institutional 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"). The First
B-13
<PAGE> 404
Investment Advisory Agreement and the Second Investment Advisory Agreement are
collectively referred to as the "Advisory Agreements."
In selecting investments for each of the Capital Appreciation Funds
(except for the Equity Income Fund, Capital Growth Fund and Small Cap 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 investments for
each of these Funds is to attempt to buy and sell securities that are
temporarily mispriced relative to long-term value.
In selecting investments for each of the Income Funds and the Balanced
Fund, 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 (0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one
percent (0.40%) annually; the Institutional Prime Obligations Fund - twenty
one-hundredths of one percent (0.20%) annually; the Institutional U.S. Treasury
Fund - twenty one-hundredths of one percent (0.20%) annually; the Equity Fund -
eighty one-hundredths of one percent (0.80%) annually; the Regional Equity Fund
- - eighty one-hundredths of one percent (0.80%) annually; the Tax Exempt Fund -
forty one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Maturity Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund -
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Capital Growth Fund - eighty one-hundredths of one percent (0.80%) annually; the
Small Cap Fund - one hundred twenty one-hundredths of one percent (1.20%)
annually; the Select Equity Fund - eighty one hundredths of one percent (.80%)
annually; and the Enhanced Market Fund - forty-five hundredths of one percent
(.45%) 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.
B-14
<PAGE> 405
For the fiscal years ended July 31, 1998, July 31, 1997, and July 31,
1996, the Advisor received $2,515,690, $2,366,707 and $2,459,885 , respectively,
from the Prime Obligations Fund. For the fiscal years ended July 31, 1998, July
31, 1997, and July 31, 1996, the Advisor received $1,256,351, $1,325,127 and
$1,588,850 , respectively, from the U.S. Treasury Fund. For the fiscal years
ended July 31, 1998, July 31, 1997, and July 31, 1996, the Advisor received
$176,963, $160,785 and $133,336 , respectively, from the Tax Exempt Fund. For
the fiscal years ended July 31, 1998, July 31, 1997, and July 31, 1996,
investment advisory fees paid to the Advisor reflect voluntary reductions in
investment advisory fees of $176,963, $160,785 and $133,340 respectively, from
the Tax Exempt Fund.
For the fiscal year ended July 31, 1998, the Advisor received
$7,981,703, $1,263,837, $1,581,387, $595,473, $3,005,940, $32,006, $170,463,
$1,335,325, $70,873 and $267,522, from the Equity Fund, the Regional Equity
Fund, the Bond Fund, the Limited Maturity Fund, the Balanced Fund, the
Government Income Fund, the Florida Fund, the Municipal Bond Fund, the Capital
Growth Fund and the Equity Income Fund, respectively. For the fiscal period
ended July 31, 1998, the Advisor received $33,202 from the Small Cap Fund.
For the fiscal year ended July 31, 1997, the Advisor received
$3,733,019, $953,375, $745,426, $247,500, $2,855,190, $41,620, and $156,820 from
the Equity Fund, the Regional Equity Fund, the Bond Fund, the Limited Maturity
Fund, the Balanced Fund, the Government Income Fund and the Florida Fund,
respectively. For the period ended July 31, 1997, the Advisor received $111,117
and $36,130 from the Municipal Bond Fund and the Equity Income Fund,
respectively. For the fiscal year ended July 31, 1997, investment advisory fees
paid to the Advisor reflect voluntary fee reductions of $224,000, $74,000,
$48,000 and $183,000 for the Bond Fund, the Limited Maturity Fund, the
Government Income Fund and the Florida Fund, respectively. For the period ended
July 31, 1997, investment advisory fees paid to the Advisor reflect voluntary
fee reductions of $70,000 for the Municipal Bond 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 Bond Fund,
the Limited Maturity Fund, the Balanced Fund, the Government Income Fund, and
Florida Fund, respectively.
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
B-15
<PAGE> 406
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, 2000 as to each of the Money Market Funds,
the Institutional 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
Institutional Money Market Funds, the Capital Appreciation Funds and the Income
Funds), and a majority of the Trustees who are not parties to the First
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the First Investment Advisory Agreement by votes cast in person
at a meeting called for such purpose.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Maturity Fund until January 31, 2000 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.
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.
B-16
<PAGE> 407
Investment Sub-Advisors
- -----------------------
Investment Sub-Advisors
Investment sub-advisory services are provided to the Equity Income Fund
by Rockhaven Asset Management, LLC ("Rockhaven" or "Sub-Advisor") pursuant to a
Sub- Advisory Agreement dated as of March 12, 1997 between the Advisor and
Rockhaven ("Sub- Advisory Agreement"). Investment sub-advisory services are
provided to the Capital Growth Fund by Peachtree Asset Management ("Peachtree"
or "Sub-Advisor") pursuant to a Sub- Advisory Agreement dated July 31, 1997
between the Advisor and Peachtree. Investment sub-advisory services are provided
to the Small Cap Fund by Sawgrass Asset Management, LLC ("Sawgrass" or
"Sub-Advisor") pursuant to a Sub-Advisory Agreement dated as of March 2, 1998
between the Advisor and Sub-Advisor (a "Sub-Advisory Agreement"). Investment
sub-advisory services are provided to the Select Equity Fund and the Enhanced
Market Fund pursuant to a Sub-Advisory Agreement dated as of September 1, 1998
between the Advisor and OakBrook Investments, LLC ("OakBrook" or "Sub-Advisor").
The Sub-Advisors 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 a
Sub-Advisor shall be liable to the Advisor for a loss resulting from a breach of
fiduciary duty by the Sub-Advisor under the 1940 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 the 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, 2000, with respect to
the Capital Growth Fund until July 31, 1999, with respect to the Small Cap Fund
until January 31, 2000, and with respect to the Select Equity Fund and Enhanced
Market Fund until January 31, 2000, and each Sub-Advisory Agreement shall
continue in effect for successive one-year periods if such continuance is
approved at least annually by the Board of Trustees or by vote of the holders of
a majority of the outstanding voting Shares of the respective 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. Each Sub-Advisory Agreement may be terminated with respect to
a Fund by the Trust at any time without the payment of any penalty by the Board
of Trustees , 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. Each Sub-Advisory Agreement will also immediately terminate in the event
of its assignment.
B-17
<PAGE> 408
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective Shareholders of the Trust may
include descriptions of a 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 or 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 Institutional 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.
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 their 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
B-18
<PAGE> 409
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 believe 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, 1998: the Equity Fund paid
aggregate brokerage commissions in the amount of $592,269; the Regional Equity
Fund paid aggregate brokerage commissions in the amount of $182,346; the
Balanced Fund paid aggregate brokerage commissions in the amount of $365,522;
and the Equity Income Fund paid aggregate brokerage commissions in the amount of
$615,317.
During the fiscal year ended July 31, 1997: the Equity Fund paid
aggregate brokerage commissions in the amount of $397,271; the Regional Equity
Fund paid aggregate brokerage commissions in the amount of $98,747; and the
Balanced Fund paid aggregate brokerage commissions in the amount of $145,513.
During the period from March 20, 1997 to July 31, 1997, the Equity Income Fund
paid aggregate brokerage commissions in the amount of $28,462.
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
B-19
<PAGE> 410
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 operations would affect its
net asset value per Share or result in financial losses to any customer.
Administrator
- -------------
ASO Services Company ("ASO") 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"). ASO 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
B-20
<PAGE> 411
performed by AmSouth under its custodial services agreement with the Trust and
those performed by BISYS Fund Services, 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 and the
Institutional 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, 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 (except the Institutional Money Market Funds) equal to the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(0.20%) 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. Under
the Administration Agreement for expenses assumed and services provided as
manager and administrator, the Administrator receives a fee from each
Institutional Money Market Fund equal to the lesser of (a) a fee computed at the
annual rate of (0.10%) of an Institutional 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 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.
For the fiscal year ended July 31, 1998, ASO received $1,257,853 from
the Prime Obligations Fund, $628,179 for the U.S. Treasury Fund, and $176,963
for the Tax Exempt Fund.
For the fiscal year ended July 31, 1997, ASO received $1,183,357, for
the fiscal years ended July 31, 1996 and July 31, 1995, BISYS and ASO received
$1,229,842 and $1,092,079, respectively, from the Prime Obligations Fund. For
the fiscal year ended July 31, 1997, ASO received $662,565; for the fiscal years
ended July 31, 1996 and July 31, 1995, BISYS and ASO received $794,425 and
$622,689, respectively, from the U.S. Treasury Fund. For the fiscal year ended
July 31, 1997, ASO received $160,785; for
B-21
<PAGE> 412
the fiscal years ended July 31, 1996 and July 31, 1995, BISYS and ASO received
$133,336 and $125,213, 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, 1998, ASO received $1,995,442,
$316,102, $379,537, $142,915, $751,492, $10,668, $56,820, $400,601, $2,137 and
$66,881, from the Equity Fund, the Regional Equity Fund, the Bond Fund, the
Limited Maturity Fund, the Balanced Fund, the Government Income Fund, the
Florida Fund, the Municipal Bond Fund, the Capital Growth Fund and the Equity
Income Fund, respectively. For the fiscal period ended July 31, 1998, the
Advisor received $0 from the Small Cap Fund.
For the fiscal year ended July 31, 1997, ASO received $745,786,
$187,612, $178,921, $59,376, $549,167, $13,872 and $52,277 from the Equity Fund,
the Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund, the Government Income Fund and the Florida Fund, respectively. For the
period ended July 31, 1997, ASO received $33,335 and $9,033 from the Municipal
Bond Fund and Equity Income Fund, respectively. For the fiscal year ended July
31, 1997, management and administration fees reflect voluntary fee reductions of
$188,000, $51,000, $119,000, $40,000, $165,000, $14,000 and $53,000 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 period ended July 31, 1997, management and administration fees reflect
voluntary fee reductions of $22,000 for the Municipal Bond Fund.
For the fiscal year ended July 31, 1996, BISYS and ASO 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, 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, the Government Income Fund and the Florida Fund, respectively.
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the Administration Agreement shall be renewed
automatically for successive five-year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days' prior to
the expiration of the then-current term. The Administration Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Trust's Board of Trustees or by the Administrator.
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<PAGE> 413
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
- ------------------
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO 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 (0.10%) ten one-hundredths
of one percent of each Fund's average net assets. For the fiscal year ended July
31, 1998, AmSouth received $1,924,684 with respect to the Trust.
BISYS is 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.
Distributor
- -----------
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, 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
B-23
<PAGE> 414
(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 0.25% 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, 1998, BISYS received $122,121
with respect to the Classic Shares of the Prime Obligations Fund (which reflects
a fee reduction of $183,169); $7,657 with respect to the Classic Shares of the
U.S. Treasury Fund (which reflects a fee reduction of $11,486); and $23,263 with
respect to the Classic Shares of the Tax-Exempt Fund (which reflects a fee
reduction of $34,893); $5,523 with respect to the Classic Shares of the Florida
Fund (which reflects a fee reduction of $8,294); $6,321 with respect to the
Classic Shares of the Bond Fund (which reflects a fee reduction of $9,482);
$1,927 with respect to the Classic Shares of the Municipal Bond Fund (which
reflects a fee reduction of $2,890); $3,259 with respect to the Classic Shares
of the Limited Maturity Fund (which reflects a fee reduction of $4,887); $8,491
with respect to the Classic Shares of the Government Income Fund (which reflects
a fee reduction of $12,735); $145,337 with respect to the Classic Shares of the
Equity Fund (which reflects a fee reduction of $0); $114,529 with respect to the
Classic Shares of the Regional Equity Fund (which reflects a fee reduction of
$0); $113,512 with respect to the Classic Shares of the Balanced Fund (which
reflects a fee reduction of $0); $12,153 with respect to the Classic Shares of
the Capital Growth Fund (which reflects a fee reduction of $0); $55,507 with
respect to the Classic Shares of the Equity Income Fund
B-24
<PAGE> 415
(which reflects a fee reduction of $0); and $1,084 with respect to the Classic
Shares of the Small Cap Fund (which reflects a fee reduction of $0).
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
- ---------
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.
B-25
<PAGE> 416
Transfer Agent and Fund Accounting Services.
- --------------------------------------------
BISYS Fund Services Ohio, Inc. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each tax exempt fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
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 PricewaterhouseCoopers LLP, 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. The address of PricewaterhouseCoopers LLP is 100 East
Broad Street, Columbus, Ohio 43215.
Legal Counsel
- -------------
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333 are counsel to the Trust.
PERFORMANCE INFORMATION
General
- -------
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry
B-26
<PAGE> 417
indices or other appropriate benchmarks; and (8) discussions of fund rankings
or ratings by recognized rating organizations.
Yields of the Money Market Funds
- --------------------------------
As summarized in the Prospectus of the Money Market Funds under the
heading "Performance Information," the "yield" of each of those Funds for a
seven-day period (a "base period") will be computed by determining the "net
change in value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include the value
of additional shares purchased with dividends from the original share
and dividends declared on both the original share and any such additional
shares, but will not include realized gains or losses or unrealized
appreciation or depreciation on portfolio investments. Yield may also be
calculated on a compound basis (the "effective yield") which assumes that net
income is reinvested in Fund shares at the same rate as net income is earned
for the base period.
The Tax Exempt Fund may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of the Tax Exempt Fund's yield which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent effective yield for the Tax Exempt Fund is computed by dividing that
portion of the effective yield of the Tax Exempt Fund which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1998, the yield, effective
yield, the tax equivalent yield and the tax equivalent effective yield of the
Premier Shares and Classic Shares of each Money Market Fund, calculated as
described, above was as follows:
B-27
<PAGE> 418
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Premier 4.99% 5.11%
U.S. Treasury Fund Premier 4.64% 4.75%
Tax Exempt Fund Premier 3.05% 3.10% 4.24% 4.31%
Prime Obligations Fund Classic 4.89% 5.01%
U.S. Treasury Fund Classic 4.54% 4.65%
Tax Exempt Fund Classic 2.95% 3.00% 4.10% 4.17%
</TABLE>
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds
- --------------------------------------------------------------------------------
As summarized in the Prospectuses under the heading "General
Information Performance Information," the yield of each of the Capital
Appreciation Funds, the Income Funds and the Tax-Free Funds will be computed by
annualizing net investment income per share for a recent 30-day period and
dividing that amount by the maximum offering price per share (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed-income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The yield of each of the Capital Appreciation Funds and the Income
Funds will vary from time to time depending upon market conditions, the
composition of the Fund's portfolios and operating expenses of the Trust
allocated to each Fund. These factors and possible differences in the methods
used in calculating yield should be considered when 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.
B-28
<PAGE> 419
For the 30-day period ending July 31, 1998, the yield and the tax
equivalent yield of the Income Funds was:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- -----
<S> <C> <C> <C>
Florida Fund Classic 4.09% 5.68%
Premier 4.19% 5.82%
Municipal Bond Fund Classic 3.92% 5.44%
Premier 4.02% 5.58%
Bond Fund Classic 5.63%
Premier 5.73%
Class B 4.73%
Government Income Fund Classic 5.39%
Premier 5.49%
Limited Maturity Fund Classic 5.47%
Premier 5.58%
</TABLE>
For the 30-day period ending July 31, 1998, the yield of the Capital
Appreciation Funds was:
<TABLE>
<CAPTION>
Fund Class Yield
---- ----- -----
<S> <C> <C>
Equity Fund Premier 1.17%
Regional Equity Fund Premier 0.34%
Balanced Fund Premier 2.88%
Equity Income Fund Premier 2.57%
Capital Growth Fund Premier (0.53)%
Small Cap Fund Premier (0.92)%
Equity Fund Classic 0.92%
Regional Equity Fund Classic 0.09%
Balanced Fund Classic 2.63%
Equity Income Fund Classic 2.32%
Capital Growth Fund Classic (0.77)%
Small Cap Fund Classic (1.17)%
</TABLE>
B-29
<PAGE> 420
<TABLE>
<S> <C> <C>
Equity Fund Class B 0.17%
Regional Equity Fund Class B (0.66)%
Balanced Fund Class B 1.88%
Equity Income Fund Class B 1.57%
Capital Growth Fund Class B (1.52)%
Small Cap Fund Class B (1.92)%
</TABLE>
Calculation of Total Return
- ---------------------------
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
For the one-year and five-year periods ended July 31, 1998, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
---- ----- -------- ---------
<S> <C> <C> <C>
Prime Obligations Fund Premier 5.09% 4.65%
U.S. Treasury Fund Premier 4.77% 4.42%
Tax Exempt Fund Premier 3.13% 2.92%
Prime Obligations Fund Classic 4.99% 4.60%
U.S. Treasury Fund Classic 4.67% 4.37%
Tax Exempt Fund Classic 3.03% 2.87%
Florida Fund Classic 0.26% N/A
Bond Fund Classic 3.19% 5.50%
Limited Maturity Fund Classic 1.74% 4.38%
Government Income Fund Classic 3.24% N/A
Municipal Bond Classic 0.16% N/A
</TABLE>
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<PAGE> 421
For the one-year and five-year periods ended July 31, 1998, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
---- ----- -------- ---------
<S> <C> <C> <S>
Equity Fund Premier 12.46% 18.01%
Regional Equity Fund Premier (0.12)% 13.64%
Balanced Fund Premier 9.73% 12.74%
Capital Growth Fund Premier N/A N/A
Equity Income Fund Premier 7.54% N/A
Equity Fund Classic 7.29% 16.90%
Regional Equity Fund Classic (4.79)% 12.56%
Balanced Fund Classic 4.59% 11.66%
Capital Growth Fund Classic N/A N/A
Equity Income Fund Classic 2.48% N/A
Equity Fund Class B N/A N/A
Regional Equity Fund Class B N/A N/A
Balanced Fund Class B N/A N/A
Capital Growth Fund Class B N/A N/A
Equity Income Fund Class B N/A N/A
</TABLE>
For the period from commencement of operations through July 31, 1998,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1998 of Operations Date
---- ----- --------------------- ------------------
<S> <C> <C> <C>
Prime Obligations Fund Premier 5.40% August 8, 1988
U.S. Treasury Fund Premier 5.17% September 8, 1988
Tax Exempt Fund Premier 3.10% June 27, 1988
Florida Fund Premier 5.82% September 2, 1997
Municipal Bond Fund Premier 5.91% September 2, 1997
Bond Fund Premier 8.50% September 2, 1997
Limited Maturity Fund Premier 7.07% September 2, 1997
Government Income Fund Premier 6.32% September 2, 1997
Prime Obligations Fund Classic 5.38% April 1, 1996
U.S. Treasury Fund Classic 5.15% April 1, 1996
Tax Exempt Fund Classic 3.07% April 1, 1996
Florida Fund Classic 4.63% September 30, 1994
Municipal Bond Fund Classic 0.16% July 1, 1997
Bond Fund Classic 8.03% December 1, 1988
Limited Maturity Fund Classic 6.59% February 1, 1988
Government Income Fund Classic 5.41% October 1, 1993
Bond Fund Class B 8.41% September 2, 1997
Prime Obligations Fund Class B 0.49% June 15, 1998
</TABLE>
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<PAGE> 422
For the period from commencement of operations through July 31, 1998,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1998 of Operations Date
---- ----- --------------------- ------------------
<S> <C> <C> <C>
Equity Fund Premier 15.50% December 1, 1988
Regional Equity Fund Premier 14.91% December 1, 1988
Balanced Fund Premier 13.47% December 19, 1991
Equity Income Fund Premier 18.94% March 20, 1997
Capital Growth Fund Premier 16.50% July 31, 1997
Small Cap Fund Premier (8.48)% March 2, 1998
Equity Fund Class B 15.41% December 1, 1988
Regional Equity Fund Class B 14.81% December 1, 1988
Balanced Fund Class B 13.32% December 19, 1991
Equity Income Fund Class B 15.29% March 20, 1997
Capital Growth Fund Class B 10.40% July 31, 1997
Small Cap Fund Class B (13.46)% March 2, 1998
Equity Fund Classic 14.93% December 1, 1988
Regional Equity Fund Classic 14.35% December 1, 1988
Balanced Fund Classic 12.66% December 19, 1991
Equity Income Fund Classic 14.81% March 20, 1997
Capital Growth Fund Classic 10.98% July 31, 1997
Small Cap Fund Classic (12.69)% March 2, 1998
</TABLE>
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.
B-32
<PAGE> 423
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/ Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
All Funds. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by 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 eighteen series of Shares which represent interests in the Prime Obligations
Fund, the U.S. Treasury Fund, the Institutional Prime Obligations Fund, the
Institutional U.S. Treasury Fund,
B-33
<PAGE> 424
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, the Equity Income Fund, the Select Equity Fund, and the Enhanced Market
Fund. The Trust's Declaration of Trust authorizes the Board of Trustees to
divide or redivide any unissued Shares of the Trust into one or more additional
series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
As described in the text of the Prospectuses following the caption
"GENERAL INFORMATION -- Description of the Trust and its Shares," Shares of the
Trust are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as Shareholders are entitled to vote.
Shareholders vote in the aggregate and not by series or class on all matters
except (i) when required by the 1940 Act, shares shall be voted by individual
series, (ii) when the Trustees have determined that the matter affects only the
interests of one or more series or class, then only Shareholders of such series
or class shall be entitled to vote thereon, (iii) when matters pertain to the
Shareholder Servicing Plan, and (iv) when matters pertain 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
B-34
<PAGE> 425
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 September 4, 1998, the trustees and officers of the Trust, as a
group, owned less than 1% of the Premier Shares, of the Classic Shares and of
the Class B Shares of any of the AmSouth Funds.
As of September 4, 1998, AmSouth, 1901 Sixth Avenue-North, Birmingham,
Alabama 35203 was the Shareholder of record of the outstanding voting shares of
the Premier Shares of the Funds as follows: 95.62% of the Prime Obligations
Fund, 97.40% of the U.S. Treasury Fund, 99.99% of the Tax Exempt Fund, 94.96% of
the Equity Fund, 94.33% of the Regional Equity Fund, 96.33% of the Bond Fund,
98.64% of the Limited Maturity Fund, 95.88% of the Balanced Fund, 95.40% of the
Florida Fund, 99.99% of the Government Income Fund, 99.20% of the Municipal Bond
Fund, 100% of the Equity Income Fund, 99.99% of the Capital Growth Fund , and
100% of the Small Cap Fund. AmSouth was the Shareholder of record for Classic
Shares of 74.85% of the Select Equity Fund and 92.64% of the Enhanced Market
Fund. Under the 1940 Act, AmSouth may be deemed to be a controlling person of
the Premier Class of each of the above-mentioned Funds. The ultimate parent of
AmSouth is AmSouth Bancorporation.
As of September 4, 1998, National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of the outstanding voting Shares of the Classic Shares of
the Funds as follows: 99.53% of the Prime Obligations Fund, 87.43% of the
Treasury Fund, 94.60% of the Tax Exempt Fund, 20.23% of the Government Income
Fund, 25.29% of the Bond Fund, 51.20% of the Limited Maturity Fund, 31.59% of
the Municipal Bond Fund, 76.40% of the Florida Fund, 33.39% of the Capital
Growth Fund, 53.40% of the Small Cap Fund, 25.12% of the Select Equity Fund and
7.29% of the Enhanced Market Fund. As of September 4, 1998 National Financial
Services Corporation, One World Financial Center, 200 Liberty Street, New York,
New York 10281, was the Shareholder of record of the outstanding voting Shares
of the Class B Shares of the Funds as follows: 97.48% of the Prime Obligations
Fund, 68.89% of the Bond Fund, 6.27% of the Regional Equity Fund, 23.58% of the
Small Cap Fund, 99.92% of the Select Equity Fund, and 98.57% of the Enhanced
Market Fund. National Financial Services Corporation under the 1940 Act may be
deemed to be a controlling person of the Classic Shares of the Prime Obligations
Fund, Treasury Fund, Tax Exempt Fund, Limited Maturity Fund, Municipal Bond
Fund, Florida Fund and Capital Growth Fund and the Class B Shares of the Bond
Fund, Prime Obligations Fund, Select Equity Fund and Enhanced Market Fund.
B-35
<PAGE> 426
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
September 4, 1998:
U.S. Treasury Fund -- Classic Shares
------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Association of Edison 812,932.80 10.35%
Illumination
600 18th Street North
Birmingham, AL 35291
</TABLE>
Equity Fund -- Classic Shares
-----------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
National Bank of Commerce
TRST Maynard Cooper 218,550.383 7.39
P.O. Box 10686
Birmingham, AL 35202-0686
</TABLE>
Municipal Bond Fund -- Classic Shares
-------------------------------------
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C> <C>
Sterne Agee Leach Inc.
AC 2432-0915 13,608.083 5.31
CMT Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
Lynspen & Company
P.O. Box 2554 71,869.217 28.06
Birmingham, AL 35290
JC Bradford Co Cust FBO
Janet Haynes Revocable 13,352.735 5.21
</TABLE>
B-36
<PAGE> 427
<TABLE>
<S> <C> <C>
330 Commerce St.
Nashville, TN 37201-1899
Sterne Agee Leach Inc. 18,220.130 7.11
AC 8102-3199
CMT Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
</TABLE>
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
B-37
<PAGE> 428
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1998
and the Financial Statements for the AmSouth Mutual Funds for the period ended
July 31, 1998 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.
B-38
<PAGE> 429
APPENDIX
Short-Term Ratings. Short-term credit ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt having an original maturity of no more than 365 days. Short-term credit
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
extremely strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation. Short-term credit
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. Short-term credit rated A-3 indicates adequate capacity
for timely payment. It is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Short-term credit rated B is regarded as having only speculative capacity for
timely payment. Short-term credit rated C is assigned to short-term debt
obligations with a doubtful capacity for payment. Short-term credit 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 unless Standard & Poor's believes such payments will be made during such
grace period.
The rating Prime-1 is the highest short-term rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or supporting
institutions) are considered to have a superior ability for repayment of senior
short-term debt obligations. Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term debt 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 supporting
institutions) have an acceptable ability for repayment of senior 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.
Short-term credit rated F-1 by Fitch IBCA is regarded as having the
strongest capacity for timely payments. Short-term credit rated F-2 by Fitch
IBCA is regarded as having a satisfactory capacity for timely payment, but that
margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Short-term credit rated F-3 has an adequate capacity for timely payment but
near-term adverse changes could cause these securities to be rated below
investment grade. Issues rated B have characteristics suggesting a minimal
capacity for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions. Issues related C have characteristics
suggesting default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment. Issues rated D denotes actual or imminent
B-39
<PAGE> 430
payment default. The plus (+) sign is used after a rating symbol to designate
the relative status of an issuer within the rating category.
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.
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.
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.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
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 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.
B-40
<PAGE> 431
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.
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.
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<PAGE> 432
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.
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.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
B-42
<PAGE> 433
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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.
B-43
<PAGE> 434
"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of
preferred stock quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
B-44
<PAGE> 435
Part C of Post-Effective Amendment No. 28
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, 1997:
-- Report of Independent Accountants for AmSouth Mutual Funds
dated September 18, 1998.
-- Statements of Assets and Liabilities at July 31,
1998 (audited).
-- Statements of Operations for the year ended July
31, 1998 (audited).
-- Statements of Changes in Net Assets for the year
ended July 31, 1998 (audited).
-- Schedules of Portfolio Investments at July 31,
1998 (audited).
-- Notes to Financial Statements dated July 31,
1998 (audited).
-- Financial Highlights for the periods or years
ended July 31, 1994, July 31, 1995, July 31,
1996, July 31, 1997 and July 31, 1998 (audited).
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(b) Exhibits:
(1) Amended Declaration of Trust, dated as of June
25, 1993 and filed on August 19, 1993 --
incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(2) (a) By-laws -- incorporated by reference
to the Registrant's initial
Registration Statement on Form N-1A
(File No. 33-21660).
(b) Amendment No. 1 to By-laws --
incorporated by reference to
Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(3) None.
(4) (a) Article III, Sections 4 and 5; Article
IV, Sections 1 and 6; Article V;
Article VIII, Section 4; and Article
IX, Sections 1, 4 and 7 of the Amended
Declaration of Trust -- incorporated
by reference to Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on Form N-1A
(File No. 33-21660).
(b) Article 11 of the By-laws --
incorporated by reference to the
Registrant's initial Registration
Statement on Form N-1A (File No.
33-21660).
(c) 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).
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(c) Form of Amended Schedule A dated
September 15, 1998 to the Investment
Advisory Agreement dated as of August
1, 1988 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 -- incorporated by
reference to Exhibit 5(f) to
Post-Effective Amendment No. 23 to the
Registrant's Registration Statement
filed on July 3, 1997 on Form N-1A
(File No. 33-21660).
(g) Investment Sub-Advisory Agreement
dated July 31, 1997 between AmSouth
Bank and Peachtree Asset Management
--incorporated by reference to Exhibit
5(g) to Post-Effective Amendment No.
25 to the Registrant's Registration
Statement filed on November 26, 1997
on Form N-1A (File No. 33-21660).
(h) Investment Sub-Advisory Agreement
dated as of March 2, 1998 between
AmSouth Bank and Sawgrass Asset
Management, LLC -- incorporated by
reference to Exhibit 5(h) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement
filed on May 22, 1998 on Form N-1A
(File No. 33-21660).
(i) Investment Sub-Advisory Agreement
dated September 1, 1998 between
AmSouth Bank and OakBrook Investments,
LLC is filed herewith.
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(6) (a) Distribution Agreement dated as of
July 16, 1997 between the Registrant
and BISYS Fund Services, Limited
Partnership is incorporated by
reference to Exhibit 6(a) of
Post-Effective Amendment No. 24 to the
Registrant's Registration Statement
filed on August 27, 1997 on Form N-1A
(File No. 33-21660).
(b) Form of Amended Schedules A, B, C and
D dated September 15, 1998 to the
Distribution Agreement between the
Registrant and BISYS Fund Services
Limited Partnership are 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 -- incorporated by
reference to Exhibit 8(a) to
Post-Effective Amendment No. 23 to the
Registrant's Registration Statement
filed on July 3, 1997 on Form N-1A
(File No. 33-21660).
(b) Form of Amended Schedule A dated
September 15, 1998 to the Custodian
Agreement 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).
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(b) Form of Amended Schedule A dated
September 15, 1998 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
Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(d) Form of Amended Schedules A and B
dated September 15, 1998 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) Form of Amended Schedules A and B
dated September 15, 1998 to the
Sub-Administration Agreement between
ASO Services Company and BISYS Fund
Services Limited Partnership are filed
herewith.
(g) Transfer Agency and Shareholder
Service Agreement dated as of July 16,
1989, as amended October 3, 1997,
between the Registrant and BISYS Fund
Services, Inc.-- incorporated by
reference to Exhibit 9(g) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement
filed on May 22, 1998 on Form N-1A
(File No. 33-21660).
(h) Form of Amended Schedules A and D
dated September 15, 1998 to the
Transfer Agency and Shareholder
Services Agreement between the
Registrant and BISYS Fund Services
Ohio, Inc. is filed herewith.
(i) Fund Accounting Agreement dated as of
April 1, 1996 between the Registrant
and BISYS Fund Services, Inc.
incorporated by reference to
Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(10) Opinion of Ropes & Gray is filed herewith.
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(11) (a) Consent of PricewaterhouseCoopers
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 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 incorporated by
reference to Exhibit 16(b) to
Post-Effective Amendment No. 24 to the
Registrant's Registration Statement
filed on August 27, 1997 on Form N-1A
(File No. 33-21660).
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<PAGE> 441
(c) Performance Calculation Schedule for
the Capital Growth Fund is
incorporated by reference to Exhibit
16(c) to Post-Effective Amendment No.
24 to the Registrant's Registration
Statement filed on August 27, 1997 on
Form N-1A (File No. 33-21660).
(17) (a) Financial Data Schedule for the
Classic Shares of the AmSouth
Municipal Bond Fund is filed
herewith.
(b) Financial Data Schedule for the
Premier Shares of the AmSouth
Municipal Bond Fund is filed
herewith.
(c) Financial Data Schedule for the Class
B Shares of the AmSouth Capital Growth
Fund is filed herewith.
(d) Financial Data Schedule for the
Classic Shares of the AmSouth Capital
Growth Fund is filed herewith.
(e) Financial Data Schedule for the
Premier Shares of the AmSouth Capital
Growth Fund is filed herewith.
(f) Financial Data Schedule for the
Classic Shares of the AmSouth Florida
Tax-Free Fund is filed herewith.
(g) Financial Data Schedule for the
Premier Shares of the AmSouth Florida
Tax-Free Fund is filed herewith.
(h) Financial Data Schedule for the
Classic Shares of the AmSouth Prime
Obligations Fund is filed herewith.
(i) Financial Data Schedule for the
Premier Shares of the AmSouth Prime
Obligations Fund is filed herewith.
(j) Financial Data Schedule for the Class
B Shares of the AmSouth Prime
Obligations Fund is filed herewith.
(k) Financial Data Schedule for the
Classic Shares of the AmSouth Equity
Income Fund is filed herewith.
(l) Financial Data Schedule for the
Premier Shares of the AmSouth Equity
Income Fund is filed herewith.
(m) Financial Data Schedule for the Class
B Shares of the AmSouth Equity Income
Fund is filed herewith.
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<PAGE> 442
(n) Financial Data Schedule for the
Classic Shares of the AmSouth U.S.
Treasury Fund is filed herewith.
(o) Financial Data Schedule for the
Premier Shares of the AmSouth U.S.
Treasury Fund is filed herewith.
(p) Financial Data Schedule for the
Classic Shares of the AmSouth Bond
Fund is filed herewith.
(q) Financial Data Schedule for the
Premier Shares of the AmSouth Bond
Fund is filed herewith.
(r) Financial Data Schedule for the Class
B Shares of the AmSouth Bond Fund is
filed herewith.
(s) Financial Data Schedule for the
Classic Shares of the AmSouth Regional
Equity Fund is filed herewith.
(t) Financial Data Schedule for the
Premier Shares of the AmSouth Regional
Equity Fund is filed herewith.
(u) Financial Data Schedule for the Class
B of the AmSouth Regional Equity Fund
is filed herewith.
(v) Financial Data Schedule for the
Classic Shares of the AmSouth Tax
Exempt Fund is filed herewith.
(w) Financial Data Schedule for the
Premier Shares of the AmSouth Tax
Exempt Fund is filed herewith.
(x) Financial Data Schedule for the
Classic Shares of the AmSouth Balanced
Fund is filed herewith.
(y) Financial Data Schedule for the
Premier Shares of the AmSouth Balanced
Fund is filed herewith.
(z) Financial Data Schedule for the Class
B of the AmSouth Balanced Fund is
filed herewith.
(aa) Financial Data Schedule for the
Classic Shares of the AmSouth
Government Income Fund is filed
herewith.
(bb) Financial Data Schedule for the
Premier Shares of the AmSouth
Government Income Fund is filed
herewith.
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(cc) Financial Data Schedule for the
Classic Shares of the AmSouth Equity
Fund is filed herewith.
(dd) Financial Data Schedule for the
Premier Shares of the AmSouth Equity
Fund is filed herewith.
(ee) Financial Data Schedule for the Class
B Shares of the AmSouth Equity Fund is
filed herewith.
(ff) Financial Data Schedule for the
Classic Shares of the AmSouth Small
Cap Fund is filed herewith.
(gg) Financial Data Schedule for the
Premier Shares of the AmSouth Small
Cap Fund is filed herewith.
(hh) Financial Data Schedule for the Class
B Shares of the AmSouth Small Cap Fund
is filed herewith.
(ii) Financial Data Schedule for the
Classic Shares of the AmSouth Limited
Maturity Fund is filed herewith.
(jj) Financial Data Schedule for the
Premier Shares of the AmSouth Limited
Maturity Fund is filed herewith.
(18) (a) Multiple Class Plan for AmSouth Mutual
Funds adopted by the Board of Trustees
on December 6, 1995, as amended and
restated as of July 16, 1997 and as of
March 17, 1998 -- incorporated by
reference to Exhibit 18(a) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement
filed on May 22, 1998 on Form N-1A
(File No. 33-21660).
(b) Amended Schedule I dated September 15,
1998 to the Multiple Class Plan 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 --incorporated by
reference to Exhibit 18(d) to
Post-Effective Amendment No. 23 to the
Registrant's Registration Statement
filed on July 3, 1997 on Form N-1A
(File No. 33-21660).
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<PAGE> 444
(e) Amended Schedule I dated September 15,
1998 to the Shareholder Servicing Plan
is filed herewith.
(f) 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).
(g) Distribution and Shareholder Services
Plan between the Registrant and BISYS
Fund Services, LP, dated as of March
12, 1997, as amended and restated as
of March 18, 1998 -- incorporated by
reference to Exhibit 18(e) to Post-
Effective Amendment No. 26 to the
Registrant's Registration Statement
filed on May 22, 1998 on Form N-1A
(File No. 33-21660).
(h) Form of Amended Schedule A dated
September 15, 1998 to the Distribution
and Shareholder Services Plan is
incorporated by reference to Exhibit
18(h) to Post-Effective Amendment No.
27 to the Registrant's Registration
Statement filed on June 17, 1998 on
Form N-1A (File No. 33-21660).
- -------------
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, AmSouth U.S. Treasury Fund, Tax Exempt Fund, Bond Fund,
Limited Maturity Fund, Municipal Bond Fund, Government Income Fund,
Florida Tax-Free Fund, Balanced Fund, Equity Income Fund, Capital
Growth Fund and Small Cap Fund.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of August 31, 1998, the number of record holders of the
Registrant's respective series of shares were as follows:
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
Prime Obligations Fund -- Premier Shares 10
Prime Obligations Fund -- Classic Shares 15
Prime Obligations Fund -- Class B Shares 4
</TABLE>
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<PAGE> 445
<TABLE>
<S> <C>
U.S. Treasury Fund -- Premier Shares 9
U.S. Treasury Fund -- Classic Shares 9
Tax Exempt Fund -- Premier Shares 4
Tax-Exempt Fund -- Classic Shares 14
Equity Fund -- Premier Shares 7
Equity Fund -- Classic Shares 3,940
Equity Fund -- Class B Shares 1,144
Regional Equity Fund -- Premier Shares 6
Regional Equity Fund -- Classic Shares 3,189
Regional Equity Fund -- Class B Shares 353
Equity Income Fund -- Premier Shares 3
Equity Income Fund -- Classic Shares 1,475
Equity Income Fund -- Class B Shares 894
Bond Fund -- Premier Shares 6
Bond Fund -- Classic Shares 322
Bond Fund -- Class B Shares 29
Capital Growth Fund -- Premier Shares 3
Capital Growth Fund -- Classic Shares 669
Capital Growth Fund -- Class B Shares 522
Balanced Fund -- Premier Shares 6
Balanced Fund -- Classic Shares 2,501
Balanced Fund -- Class B Shares 429
Small Cap Fund -- Premier Shares 1
Small Cap Fund -- Classic Shares 139
Small Cap Fund -- Class B Shares 130
Limited Maturity Fund -- Premier Shares 6
Limited Maturity Fund -- Classic Shares 97
Municipal Bond Fund -- Premier Shares 5
Municipal Bond Fund -- Classic Shares 22
Government Income Fund -- Premier Shares 3
Government Income Fund -- Classic Shares 322
</TABLE>
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<PAGE> 446
<TABLE>
<S> <C>
Florida Tax-Free Fund -- Premier Shares 3
Florida Tax-Free Fund -- Classic Shares 55
</TABLE>
Item 27. INDEMNIFICATION
Article VIII, Sections 1 and 2 of the Registrant's Declaration of
Trust provides as follows:
"TRUSTEES, OFFICERS, ETC.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all
liabilities and expenses, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered
Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or
with which such Covered Person may be or may have been threatened,
while in office or thereafter, by reason of being or having been
such a Covered Person except with respect to any matter as to which
such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), shall be paid from time to time by the Trust
in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article, provided, however, that either (a)
such Covered Person shall have provided appropriate security for
such undertaking, (b) the Trust shall be insured against losses
arising from any such advance payments or (c) either a majority of
the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
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COMPROMISE PAYMENT
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the
proceeding was brought, that such Covered Person either (a) did not
act in good faith in the reasonable belief that his action was in
the best interests of the Trust or (b) is liable to the Trust or
its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, indemnification shall be provided if
(a) approved as in the best interests of the Trust, after notice
that it involves such indemnification, by at least a majority of
the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry) that such
Covered Person acted in good faith in the reasonable belief that
his action was in the best interests of the Trust and is not liable
to the Trust or its Shareholders by reasons of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been
obtained an opinion in writing of independent legal counsel, based
upon a review of readily available facts (as opposed to a full
trial type inquiry) to the effect that such Covered Person appears
to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust and that such
indemnification would not protect such Person against any liability
to the Trust to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Any
approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person
in accordance with this Section as indemnification if such Covered
Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best interests
of the Trust or to have been liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
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
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<PAGE> 448
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer,
or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Indemnification for the Group's principal underwriter is provided
for in the Distribution Agreement incorporated herein by reference
as Exhibits 6(a).
In addition, the Trust maintains a directors and officer liability
insurance policy with a maximum coverage of $3,000,000.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR AND INVESTMENT
SUB-ADVISORS.
AMSOUTH BANK
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
March 31, 1998 of $19.4 billion and operated 270 banking offices
and over 600 ATM locations in Alabama, Florida, Georgia and
Tennessee. AmSouth has provided investment management services
through its Trust Investment Department since 1915. As of March 31,
1998, AmSouth and its affiliates had over $8.7 billion in assets
under discretionary management and provided custody services for an
additional $21.6 billion in securities. AmSouth is the largest
provider of trust services in Alabama, 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
- ------------ ------------------------------------
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<PAGE> 449
J. Harold Chandler Chairman, President & CEO
Director Provident Companies, Inc.
One Fountain Square
Chattanooga, Tennessee 37402
James E. Dalton, Jr. President and CEO
Director Quorum Health Group, Inc.
103 Continental Place
Brentwood, Tennessee 37027
Rodney C. Gilbert Chairman of the Board & CEO
Director Enfinity Corporation
3700 Old Leeds Road
Birmingham, Alabama 35213
Elmer B. Harris President and CEO
Director Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Victoria Jackson Gregorious President and CEO
Director DSS/ProDiesel, Inc.
922 Main Street
Nashville, Tennessee 37206
Ronald L. Kuehn, Jr. Chairman of the Board, President and CEO
Director Sonat Inc.
1900 Fifth Avenue North
Birmingham, Alabama 35203
James R. Malone Chairman and CEO
Director HMI Industries, Inc./Intok Capital, Inc.
8889 Pelican Bay Boulevard
Naples, Florida 34108
Claude B. Nielson President and CEO
Director Coca-Cola Bottling Company United, Inc.
4600 East Lake Boulevard
Birmingham, Alabama 35217
Dr. Benjamin F. Payton President
Director Tuskegee University
399 Montgomery Road
Tuskegee, Alabama 36083
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<PAGE> 450
C. Dowd Ritter AmSouth Bancorporation
Chairman, President and CEO AmSouth Bank
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
Herbert A. Sklenar Chairman Emeritus
Director Vulcan Materials Company
Two Metroplex Drive
Birmingham, Alabama 35209
Michael C. Baker None
Senior Executive Vice President
O.B. Grayson Hall, Jr. None
Executive Vice President
David B. Edmonds None
Executive Vice President
Sloan D. Gibson, IV None
Senior Executive Vice President
and Chief Financial Officer
W. Charles Mayer, III None
Senior Executive Vice President
Candice W. Rogers None
Senior Executive Vice President
E.W. Stephenson, Jr. None
Senior Executive Vice President
Alfred W. Swan, Jr. None
Senior Executive Vice President
Stephen A. Yoder None
Executive Vice President
and General Counsel
ROCKHAVEN
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
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<PAGE> 451
AmSouth Bank (50%), and is headquartered in Pittsburgh, Pennsylvania.
As of March 1, 1998, 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.
Set forth below is 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 Investment President, Federated Investors, Pittsburgh, PA
Officer and Managing Partner
Michael C. Baker Senior Executive Vice President, AmSouth
Managing Partner Bank, Birmingham, Alabama
PEACHTREE
Peachtree Asset Management ("Peachtree") is the sub-adviser of the
AmSouth Capital Growth Fund. Peachtree is a division of Smith Barney Mutual
Funds Management Inc. ("SBMFM"), a wholly-owned subsidiary of Smith Barney
Holdings, Inc., which in turn is a wholly-owned subsidiary of Travelers Group
Inc. Peachtree has performed advisory services since 1994 for institutional
clients, and has its principal offices at 303 Peachtree Street, N.E., Atlanta,
GA 30308. SBMFM and its predecessors have been providing investment advisory
services to mutual funds since 1968. As of February 28, 1998, SBMFM had
aggregate assets under management of approximately $100 billion.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation) 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,
Peachtree Asset Management vocation, or employment
- -------------------------- -----------------------
Lamond Godwin N/A
Chairman & CEO
C-17
<PAGE> 452
Dennis A. Johnson N/A
President & Chief Investment Officer
SAWGRASS
Sawgrass Asset Management, LLC ("Sawgrass") serves as the investment
sub-advisor to the AmSouth Small Cap Fund. Sawgrass is 50% owned by AmSouth and
50% owned by Sawgrass Asset Management, Inc. Sawgrass Asset Management, Inc. is
controlled by Mr. Dean McQuiddy, Mr. Brian Monroe and Mr. Andrew Cantor.
Sawgrass was organized in January, 1998 to perform advisory services for
investment companies and other institutional clients and has its principal
offices at 4337 Pablo Oaks Court, Jacksonville, FL 32224.
Set forth below is 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,
Sawgrass Asset Management, LLC vocation or employment
- ------------------------------ ----------------------
Dean E. McQuiddy, Principal Barnett Capital Advisors
Andrew M. Cantor, Principal Barnett Capital Advisors
Brian K. Monroe, Principal Barnett Asset Management
OAKBROOK
OakBrook Investments, LLC ("OakBrook") serves as the investment
sub-advisor to the AmSouth Enhanced Market Fund and the AmSouth Large Cap Growth
Fund. OakBrook is 50% owned by AmSouth Bank and 50% jointly owned by Neil
Wright, Janna Sampson and Peter Jankovskis. OakBrook was organized in February,
1998 to perform advisory services for investment companies and other
institutional clients and has its principal offices at 701 Warrenville Road,
Suite 135, Lisle, IL 60532.
Set forth below is 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,
OakBrook Investments, LLC vocation or employment
- ------------------------- ----------------------
C-18
<PAGE> 453
Neil R. Wright Prior to 1/1/98, Chief Investment
Officer, ANB Investment Management &
Trust Co.; 1/1/98 -2/25/98, Northern
Trust Quantitative Advisors, Inc.
Janna L. Sampson Prior to 1/1/98, Senior Portfolio
Manager, ANB Investment Management &
Trust Co.; 1/1/98 - 2/25/98, Northern
Trust Quantitative Advisors, Inc.
Peter M. Jankovskis Prior to 1/1/98, Manager of Research,
ANB Investment Management & Trust Co.;
1/1/98 -2/25/98, Northern Trust
Quantitative Advisors, Inc.
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 American Performance Funds, The ARCH
Fund, Inc., The BB&T Mutual Funds Group, The Coventry Group, The Empire
Builder Tax Free Bond Fund, ESC Strategic Funds, Inc., The Eureka
Funds, Fountain Square Funds, Hirtle Callaghan Trust, HSBC Family of
Funds, The Infinity Mutual Funds, Inc., INTRUST Funds Trust, The Kent
Funds, Magna Funds, Meyers Investment Trust, MMA Praxis Mutual Funds,
M.S.D.&T. Funds, Pacific Capital Funds, Parkstone Group of Funds, The
Parkstone Advantage Fund, Pegasus Funds, The Republic Funds Trust, The
Republic Advisors Funds Trust, The Riverfront Funds, Inc., SBSF Funds,
Inc. dba Key Mutual Funds, Sefton Funds, The Sessions Group, Summit
Investment Trust, Variable Insurance Funds, The Victory Portfolios, The
Victory Variable Funds, and Vintage Mutual Funds, Inc. 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
C-19
<PAGE> 454
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)
(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, Inc.
3435 Stelzer Road
C-20
<PAGE> 455
Columbus, Ohio 43219
(Transfer and Shareholder Servicing Agent, Provider of Fund
Accounting Services)
(7) Peachtree Asset Management
A Division of Smith Barney Mutual Funds Management Inc.
One Peachtree Center
Atlanta, Georgia 30308
(Sub-Advisor to the Capital Growth Fund)
(8) Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, Florida 32224
(Sub-Advisor to the Small Cap Fund)
(9) OakBrook Investments, LLC
701 Warrenville Road, Suite 135
Lisle, Illinois 60532
(Sub-Advisor to the Enhanced Market Fund
and the Select Equity Fund)
Item 31. MANAGEMENT SERVICES
None.
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or
more trustees when requested to do so by the holders of at least 10%
of the outstanding voting shares of any series of the Trust and will
assist in shareholder communication in connection with calling a
meeting for the purpose of removing one or more trustees.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
C-21
<PAGE> 456
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this Amendment
No. 28 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 24 day of September, 1998.
AMSOUTH MUTUAL FUNDS,
Registrant
*/s/ George R. Landreth
---------------------------
George R. Landreth
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
28 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the 24 day of
September, 1998.
Signature Title Date
- --------- ----- ----
*/s/ George R. Landreth Chairman September 24, 1998
----------------------
George R. Landreth
*/s/ J. David Huber Trustee September 24, 1998
------------------
J. David Huber
*/s/ Charles L. Booth Treasurer September 24, 1998
--------------------
Charles L. Booth
*/s/ James H. Woodward, Jr. Trustee September 24, 1998
--------------------------
James H. Woodward, Jr.
*/s/ Homer H. Turner, Jr. Trustee September 24, 1998
------------------------
Homer H. Turner, Jr.
*/s/ Wendell D. Cleaver Trustee September 24, 1998
------------------------
Wendell D. Cleaver
*/s/ Dick D. Briggs, Jr. Trustee September 24, 1998
--------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest September 24, 1998
----------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
C-23
<PAGE> 457
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> 458
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> 459
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> 460
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> 461
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> 462
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> 463
POWER OF ATTORNEY
-----------------
Charles L. Booth, 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 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: February 26, 1998 /s/ Charles Booth
------------------------- -----------------------
Charles Booth
<PAGE> 464
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
5(c) Form of Amended Schedule A to the Investment Advisory Agreement
5(i) Investment Sub-Advisory Agreement between AmSouth Bank and
OakBrook Investments, LLC
6(b) Form of Amended Schedules A, B, C and D to the Distribution
Agreement
8(b) Form of Amended Schedule A to the Custodian Agreement
9(b) Form of Amended Schedule A to the Management and Administration
Agreement
9(d) Form of Schedules A and B to the Sub-Administration Agreement
between ASO Services Company and AmSouth Bank
9(f) Form of Schedules A and B to the Sub-Administration Agreement
between ASO Services Company and BISYS Fund Services
Limited Partnership
9(h) Form of Amended Schedules A and D to the Transfer Agency and
Shareholder Services Agreement
10 Opinion of Ropes & Gray
11(a) Consent of PricewaterhouseCoopers L.L.P.
11(b) Consent of Ropes & Gray
18(b) Amended Schedule I to the Multiple Class Plan
18(e) Amended Schedule I to the Shareholder Servicing Plan
27 Financial Data Schedules
27(a) Financial Data Schedule for the Classic Shares of the
AmSouth Municipal Bond Fund
27(b) Financial Data Schedule for the Premier Shares of the
AmSouth Municipal Bond Fund
<PAGE> 465
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
27(c) Financial Data Schedule for the Class B Shares of the
AmSouth Capital Growth Fund
27(d) Financial Data Schedule for the Classic Shares of the
AmSouth Capital Growth Fund
27(e) Financial Data Schedule for the Premier Shares of the
AmSouth Capital Growth Fund
27(f) Financial Data Schedule for the Classic Shares of the
AmSouth Florida Tax-Free Fund
27(g) Financial Data Schedule for the Premier Shares of the
AmSouth Florida Tax-Free Fund
27(h) Financial Data Schedule for the Classic Shares of the
AmSouth Prime Obligations Fund
27(i) Financial Data Schedule for the Premier Shares of the
AmSouth Prime Obligations Fund
27(j) Financial Data Schedule for the Class B Shares of the
AmSouth Prime Obligations Fund
27(k) Financial Data Schedule for the Classic Shares of the
AmSouth Equity Income Fund is filed herewith.
27(l) Financial Data Schedule for the Premier Shares of the
AmSouth Equity Income Fund
27(m) Financial Data Schedule for the Class B Shares of the
AmSouth Equity Income Fund
27(n) Financial Data Schedule for the Classic Shares of the
AmSouth U.S. Treasury Fund
27(o) Financial Data Schedule for the Premier Shares of the
AmSouth U.S. Treasury Fund
-2-
<PAGE> 466
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
27(p) Financial Data Schedule for the Classic Shares of the
AmSouth Bond Fund
27(q) Financial Data Schedule for the Premier Shares of the
AmSouth Bond Fund
27(r) Financial Data Schedule for the Class B Shares of the
AmSouth Bond Fund
27(s) Financial Data Schedule for the Classic Shares of the
AmSouth Regional Equity Fund
27(t) Financial Data Schedule for the Premier Shares of the
AmSouth Regional Equity Fund
27(u) Financial Data Schedule for the Class B of the AmSouth
Regional Equity Fund
27(v) Financial Data Schedule for the Classic Shares of the
AmSouth Tax Exempt Fund
27(w) Financial Data Schedule for the Premier Shares of the
AmSouth Tax Exempt Fund
27(x) Financial Data Schedule for the Classic Shares of the
AmSouth Balanced Fund
27(y) Financial Data Schedule for the Premier Shares of the
AmSouth Balanced Fund
27(z) Financial Data Schedule for the Class B of the AmSouth
Balanced Fund
27(aa) Financial Data Schedule for the Classic Shares of the
AmSouth Government Income Fund
27(bb) Financial Data Schedule for the Premier Shares of the
AmSouth Government Income Fund
-3-
<PAGE> 467
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
27(cc) Financial Data Schedule for the Classic Shares of the
AmSouth Equity Fund
27(dd) Financial Data Schedule for the Premier Shares of the
AmSouth Equity Fund
27(ee) Financial Data Schedule for the Class B Shares of the
AmSouth Equity Fund
27(ff) Financial Data Schedule for the Classic Shares of the
AmSouth Small Cap Fund
27(gg) Financial Data Schedule for the Premier Shares of the
AmSouth Small Cap Fund
27(hh) Financial Data Schedule for the Class B Shares of the
AmSouth Small Cap Fund
27(ii) Financial Data Schedule for the Classic Shares of the
AmSouth Limited Maturity Fund
27(jj) Financial Data Schedule for the Premier Shares of the
AmSouth Limited Maturity Fund
-4-
<PAGE> 1
EXHIBIT 5(c)
<PAGE> 2
DATED: SEPTEMBER 15, 1998
FORM OF SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
DATED AS OF AUGUST 1, 1988 BETWEEN
AMSOUTH MUTUAL FUNDS (FORMERLY THE ASO OUTLOOK GROUP)
AND
AMSOUTH BANK (FORMERLY AMSOUTH BANK, N.A.)
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
Equity Fund percent (.80%) of AmSouth Mutual Funds Equity
Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one
Regional Equity Fund percent (.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
Balanced Fund percent (.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.
<PAGE> 3
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of
Government Income Fund one 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
Florida Tax-Free Fund one percent (.65%) of AmSouth Mutual Funds
Florida Tax-Free Fund's average daily net
assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of
Capital Growth Fund one percent (.80%) of AmSouth Mutual Funds
Capital Growth Fund's average daily net
assets.
AmSouth Mutual Funds Annual rate of one hundred twenty
Small Cap Fund one-hundredths of one percent (1.20%) of
AmSouth Mutual Funds Small Cap Fund's average
daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one
Equity Income Fund percent (.80%) of AmSouth Mutual Funds Equity
Income Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one
Institutional Prime Obligations percent (.20%) of the AmSouth Mutual Funds
Fund Institutional Prime Obligations Fund
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one
Institutional U.S. Treasury percent (.20%) of the AmSouth Mutual Funds
Fund Institutional U.S. Treasury Fund
AmSouth Mutual Funds Annual rate of forty-five one-hundredths of
Enhanced Market Fund one percent (.45%) of AmSouth Mutual Funds
Enhanced Market Fund's average daily net
assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one
Select Equity Fund percent (.80%) of AmSouth Mutual Funds Select
Equity Fund's average daily net assets.
<PAGE> 4
AMSOUTH BANK AMSOUTH MUTUAL FUNDS
By:______________________________ By:____________________________
Name:____________________________ Name:__________________________
Title:___________________________ Name:__________________________
<PAGE> 1
EXHIBIT 5(i)
<PAGE> 2
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of September 1, 1998 between AmSouth Bank, an
Alabama banking association with its principal place of business in Alabama
(herein called the "Investment Adviser") and OakBrook Investments, LLC, a
corporation with its principal place of business in Illinois (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 ("1940 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"); and
WHEREAS, the Board of Trustees of the Trust has duly approved this
Agreement upon consideration of the Trust's existing contractual arrangements
and applicable law; and
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
to act as sub-adviser with respect to the Fund. 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").
<PAGE> 3
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 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 its investment
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
<PAGE> 4
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
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 1940 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. AmSouth Bank, upon request, will supply the
Sub-Adviser with a list of "affiliated persons" for purposes of the 1940 Act.
<PAGE> 5
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.
8. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
of the 1940 Act, 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. The Sub-Adviser may retain a copy of Trust records solely for
the purpose of satisfying its record retention obligations under the 1940 Act
and the Investment Advisers Act of 1940, as amended.
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.
<PAGE> 6
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 1940 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.
(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
its investment 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, 2000. 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 1940 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
Alabama law.
<PAGE> 7
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 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
By: /s/ M. Baker
Title: Sr. EVP
(SEAL) OAKBROOK INVESTMENTS, LLC
By: /s/ Janna Sampson
Title: Director
<PAGE> 8
SCHEDULE A
To Sub-Advisory Agreement
dated as of September 1, 1998
between AmSouth Bank and OakBrook Investments, LLC
NAME OF FUND COMPENSATION
- ------------ ------------
AmSouth Select Equity Fund Annual rate of fifty-six
one-hundredths of one
percent (.56%) of the
AmSouth Select Equity
Fund's average daily net
assets
AmSouth Enhanced Market Fund Annual rate of thirty-two
one-hundredths of one
percent (.32%) of the
AmSouth Enhanced Market
Fund's average daily net
assets
Consented to by:
Date: September 1, 1998 AMSOUTH BANK
By: /s/ M.Baker
Date: August 25, 1998 OAKBROOK INVESTMENTS, LLC
By: /s/ Janna Sampson
A-1
<PAGE> 1
EXHIBIT 6(b)
<PAGE> 2
Dated: September 15, 1998
FORM OF SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 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 Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: ______________________
A-1
<PAGE> 3
Dated: September 15, 1998
FORM OF SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
Servicing Plan Funds
- --------------------
Classic Shares of the AmSouth Prime Obligations Fund
Classic Shares of the AmSouth U.S. Treasury Fund
Classic Shares of the AmSouth Tax Exempt Fund
Classic Shares of the AmSouth Equity Fund
Classic Shares of the AmSouth Regional Equity Fund
Classic Shares of the AmSouth Bond Fund
Classic Shares of the AmSouth Limited Maturity Fund
Classic Shares of the AmSouth Municipal Bond Fund
Classic Shares of the AmSouth Balanced Fund
Classic Shares of the AmSouth Government Income Fund
Classic Shares of the AmSouth Florida Tax-Free Fund
Classic Shares of the AmSouth Capital Growth Fund
Classic Shares of the AmSouth Small Cap Fund
Classic Shares of the AmSouth Equity Income Fund
Classic Shares of the AmSouth Enhanced Market Fund
Classic Shares of the AmSouth Select Equity Fund
Distribution Plan Funds
- -----------------------
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
Class B Shares of the AmSouth Enhanced Market Fund
Class B Shares of the AmSouth Select Equity Fund
Class II Shares of the AmSouth Institutional Prime Obligations Fund
Class III Shares of the AmSouth Institutional Prime Obligations Fund
Class II Shares of the AmSouth Institutional U.S. Treasury Fund
Class III Shares of the AmSouth Institutional U.S. Treasury Fund
<PAGE> 4
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: _______________________
B-2
<PAGE> 5
Dated: September 15, 1998
FORM OF SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
Classic Shares of the AmSouth Equity Fund
Classic Shares of the AmSouth Regional Equity Fund
Classic Shares of the AmSouth Bond Fund
Classic Shares of the AmSouth Limited Maturity Fund
Classic Shares of the AmSouth Municipal Bond Fund
Classic Shares of the AmSouth Balanced Fund
Classic Shares of the AmSouth Government Income Fund
Classic Shares of the AmSouth Florida Tax-Free Fund
Classic Shares of the AmSouth Capital Growth Fund
Classic Shares of the AmSouth Small Cap Fund
Classic Shares of the AmSouth Equity Income Fund
Classic Shares of the AmSouth Select Equity Fund
Classic Shares of the AmSouth Enhanced Market Fund
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: _______________________
<PAGE> 6
Dated: September 15, 1998
FORM OF SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 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
D-2
<PAGE> 7
Class B Shares of the AmSouth
Enhanced Market Fund
Class B Shares of the AmSouth
Select Equity Fund
Class II Shares of the AmSouth
Institutional Prime Obligations Fund
Class III Shares of the AmSouth
Institutional Prime Obligations Fund
Class II Shares of the AmSouth
Institutional U.S. Treasury Fund
Class III Shares of the AmSouth
Institutional U.S. Treasury Fund
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: _______________________
D-3
<PAGE> 1
EXHIBIT 8(b)
<PAGE> 2
Dated: September 15, 1998
FORM OF SCHEDULE A
TO THE CUSTODY AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
AMSOUTH BANK
DATED APRIL 17, 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 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
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AMSOUTH MUTUAL FUNDS
By: _______________________________
Title: ___________________________
AMSOUTH BANK
By: ______________________________
Title: ___________________________
<PAGE> 1
EXHIBIT 9(b)
<PAGE> 2
Dated: September 15, 1998
FORM OF SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS AND
ASO SERVICES COMPANY
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund, AmSouth Annual Rate of twenty
U.S. Treasury Fund, AmSouth Tax Exempt one-hundredths of one
Fund, AmSouth Equity Fund, AmSouth Regional percent (0.20%) of each
Equity Fund, AmSouth Balanced Fund, AmSouth such Fund's average daily
Bond Fund, AmSouth Limited Maturity Fund, net assets
AmSouth Municipal Bond Fund, AmSouth
Government Income Fund, AmSouth Florida
Tax-Free Fund, AmSouth Capital Growth Fund,
AmSouth Small Cap Fund, AmSouth Equity
Income Fund, AmSouth Enhanced Market Fund,
and AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund Annual Rate of ten
and AmSouth Institutional U.S. Treasury Fund one-hundredths of one
percent (0.10%) of each
such Fund's average daily
net assets
AMSOUTH MUTUAL FUNDS
By: _______________________________
Title: _____________________________
ASO SERVICES COMPANY
By: _______________________________
Title: ____________________________
- ---------------------
*All fees are computed daily and paid periodically.
<PAGE> 1
EXHIBIT 9(d)
<PAGE> 2
Dated: September 15, 1998
FORM OF SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK
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
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
ASO SERVICES COMPANY
By: ___________________________
Name: _________________________
Title: ________________________
AMSOUTH BANK
By: ___________________________
Name: _________________________
Title: ________________________
<PAGE> 1
EXHIBIT 9(f)
<PAGE> 2
Dated: September 15, 1998
FORM OF 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
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
ASO SERVICES COMPANY
By: ___________________________
Title: ________________________
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: ___________________________
Title: ________________________
<PAGE> 3
Dated: September 15, 1998
FORM OF 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 ASO's
AmSouth U.S. Treasury Fund compensation received pursuant
AmSouth Tax Exempt Fund to the Management and
AmSouth Equity Fund Administration Agreement with
AmSouth Regional Equity Fund the Trust as shall be agreed
AmSouth Balanced Fund upon from time to time between
AmSouth Bond Fund the parties.
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
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
ASO SERVICES COMPANY
By: ___________________________
Title: ________________________
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: ___________________________
Title: ________________________
- ------------------
*All fees are computed daily and paid periodically
B-1
<PAGE> 1
EXHIBIT 9(h)
B-2
<PAGE> 2
DATED: SEPTEMBER 15, 1998
FORM OF SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS
AND BISYS FUND SERVICES OHIO, INC.
Name of Fund
- ------------
AmSouth Prime Obligations Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth U.S. Treasury Fund
Classic Shares
Premier Shares
AmSouth Tax Exempt Fund
Classic Shares
Premier Shares
AmSouth Equity Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Regional Equity Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Balanced Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Bond Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Limited Maturity Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Municipal Bond Fund
Classic Shares
Premier Shares
Class B Shares
B-3
<PAGE> 3
Name of Fund
- ------------
AmSouth Government Income Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Florida Tax-Free Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Capital Growth Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Small Cap Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Equity Income Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Select Equity Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Enhanced Market Fund
Classic Shares
Premier Shares
Class B Shares
AmSouth Institutional Prime Obligations Fund
Class I Shares
Class II Shares
Class III Shares
AmSouth Institutional U.S. Treasury Fund
Class I Shares
Class II Shares
Class III Shares
B-4
<PAGE> 4
AMSOUTH MUTUAL FUNDS
By:________________________
Name: _____________________
Title: ____________________
BISYS FUND SERVICES
OHIO, INC.
By:________________________
Name: _____________________
Title: ___________________
B-5
<PAGE> 5
Dated: September 15, 1998
FORM OF AMENDMENT TO SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS
AND BISYS FUND SERVICES OHIO, INC.
Revised Fee Schedule for the AmSouth Mutual Funds (formally the ASO Outlook
Group) effective October 3, 1997.
A. Annual Fee
----------
1. Base Fee shall be equal to 1.5 basis points of the Group's
total assets, such Base Fee shall then be allocated to each
portfolio/class based on their relative total asset size.
2. The total Base Fee shall not equal less than $10,000 per
portfolio/class.
B. Additional Fees
---------------
1. Each portfolio utilizing the payroll deduction feature will
pay a fee of $.50 per transaction plus a $500 set-up fee.
2. Each portfolio will pay a $20.00 fee per T.I.N. per year for
each I.R.A.
3. Each portfolio with asset allocation will pay the following
fees:
$3,000 annually (quarterly rebalancing)
$4,000 annually (monthly rebalancing)
$.05 per transaction fee
C. Other Provisions
----------------
All fees are subject to increases as agreed in writing between the
parties.
AMSOUTH MUTUAL FUNDS
By:________________________
Name: _____________________
Title: ____________________
BISYS FUND SERVICES
OHIO, INC.
By:________________________
Name: _____________________
Title: ___________________
<PAGE> 1
EXHIBIT 10
<PAGE> 2
ROPES & GRAY
One Franklin Square
1301 K Street, NW
Suite 800 East
Washington, DC 20005
WRITER'S DIRECT DIAL NUMBER: (202) 626-3923
September 25, 1998
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
<PAGE> 3
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
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
<PAGE> 1
EXHIBIT 11(b)
<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. 28 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.
September 25, 1998
<PAGE> 1
EXHIBIT 18(b)
<PAGE> 2
Dated: September 15, 1998
SCHEDULE I
MULTIPLE CLASS PLAN
FOR AMSOUTH MUTUAL FUNDS
MARCH 17, 1998
Retail 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 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
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
Institutional Funds
-------------------
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
<PAGE> 1
EXHIBIT 18(e)
<PAGE> 2
Dated: September 15, 1998
SCHEDULE I
TO THE
SHAREHOLDER SERVICING PLAN
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
AmSouth Select Equity Fund Classic Class
AmSouth Enhanced Market Fund Classic Class
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> REGIONAL EQUITY FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 96,315
<INVESTMENTS-AT-VALUE> 139,231
<RECEIVABLES> 531
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 139,787
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 180
<TOTAL-LIABILITIES> 180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,546
<SHARES-COMMON-STOCK> 1,571
<SHARES-COMMON-PRIOR> 5,307
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 7,146
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,916
<NET-ASSETS> 139,607
<DIVIDEND-INCOME> 2,406
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,886
<NET-INVESTMENT-INCOME> 520
<REALIZED-GAINS-CURRENT> 8,874
<APPREC-INCREASE-CURRENT> (9,341)
<NET-CHANGE-FROM-OPS> 53
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133
<DISTRIBUTIONS-OF-GAINS> 1,577
<DISTRIBUTIONS-OTHER> 8
<NUMBER-OF-SHARES-SOLD> 1,076
<NUMBER-OF-SHARES-REDEEMED> 1,354
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> (10,231)
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> 3,340
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,264
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,907
<AVERAGE-NET-ASSETS> 58,794,851
<PER-SHARE-NAV-BEGIN> 28.23
<PER-SHARE-NII> 0.052
<PER-SHARE-GAIN-APPREC> (0.085)
<PER-SHARE-DIVIDEND> 0.082
<PER-SHARE-DISTRIBUTIONS> 0.935
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.18
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> REGIONAL EQUITY FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 96,315
<INVESTMENTS-AT-VALUE> 139,231
<RECEIVABLES> 531
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 139,787
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 180
<TOTAL-LIABILITIES> 180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,546
<SHARES-COMMON-STOCK> 3,489
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 7,146
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,916
<NET-ASSETS> 139,607
<DIVIDEND-INCOME> 2,406
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,886
<NET-INVESTMENT-INCOME> 520
<REALIZED-GAINS-CURRENT> 8,874
<APPREC-INCREASE-CURRENT> (9,341)
<NET-CHANGE-FROM-OPS> 53
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 390
<DISTRIBUTIONS-OF-GAINS> 3,440
<DISTRIBUTIONS-OTHER> 18
<NUMBER-OF-SHARES-SOLD> 1,076
<NUMBER-OF-SHARES-REDEEMED> 1,354
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> (10,231)
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> 3,340
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,264
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,907
<AVERAGE-NET-ASSETS> 107,536,607
<PER-SHARE-NAV-BEGIN> 27.95
<PER-SHARE-NII> 0.128
<PER-SHARE-GAIN-APPREC> 0.172
<PER-SHARE-DIVIDEND> 0.112
<PER-SHARE-DISTRIBUTIONS> 0.935
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.20
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> REGIONAL EQUITY FUND
<SERIES>
<NUMBER>
<NAME> B-SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 96,315
<INVESTMENTS-AT-VALUE> 139,231
<RECEIVABLES> 531
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 139,787
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 180
<TOTAL-LIABILITIES> 180
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,546
<SHARES-COMMON-STOCK> 74
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 7,146
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,916
<NET-ASSETS> 139,607
<DIVIDEND-INCOME> 2,406
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,886
<NET-INVESTMENT-INCOME> 520
<REALIZED-GAINS-CURRENT> 8,874
<APPREC-INCREASE-CURRENT> (9,341)
<NET-CHANGE-FROM-OPS> 53
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 26
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,076
<NUMBER-OF-SHARES-REDEEMED> 1,354
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> (10,231)
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> 3,340
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,264
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,907
<AVERAGE-NET-ASSETS> 1,267,684
<PER-SHARE-NAV-BEGIN> 28.49
<PER-SHARE-NII> (0.051)
<PER-SHARE-GAIN-APPREC> (0.454)
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.935
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.05
<EXPENSE-RATIO> 2.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 693,045
<INVESTMENTS-AT-VALUE> 1,024,129
<RECEIVABLES> 6,609
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,030,768
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,099
<TOTAL-LIABILITIES> 2,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 597,389
<SHARES-COMMON-STOCK> 2,974
<SHARES-COMMON-PRIOR> 41,750
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 14
<ACCUMULATED-NET-GAINS> 100,210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 331,084
<NET-ASSETS> 1,028,669
<DIVIDEND-INCOME> 22,664
<INTEREST-INCOME> 420
<OTHER-INCOME> 0
<EXPENSES-NET> 11,082
<NET-INVESTMENT-INCOME> 12,002
<REALIZED-GAINS-CURRENT> 124,775
<APPREC-INCREASE-CURRENT> (21,447)
<NET-CHANGE-FROM-OPS> 115,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,668
<DISTRIBUTIONS-OF-GAINS> 3,043
<DISTRIBUTIONS-OTHER> 1
<NUMBER-OF-SHARES-SOLD> 8,021
<NUMBER-OF-SHARES-REDEEMED> 8,575
<SHARES-REINVESTED> 664
<NET-CHANGE-IN-ASSETS> 53,684
<ACCUMULATED-NII-PRIOR> 308
<ACCUMULATED-GAINS-PRIOR> 26,192
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,982
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,102
<AVERAGE-NET-ASSETS> 141,710,656
<PER-SHARE-NAV-BEGIN> 23.35
<PER-SHARE-NII> 0.207
<PER-SHARE-GAIN-APPREC> 2.537
<PER-SHARE-DIVIDEND> 0.246
<PER-SHARE-DISTRIBUTIONS> 1.247
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.60
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 693,045
<INVESTMENTS-AT-VALUE> 1,024,129
<RECEIVABLES> 6,609
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,030,768
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,099
<TOTAL-LIABILITIES> 2,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 597,389
<SHARES-COMMON-STOCK> 38,563
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 14
<ACCUMULATED-NET-GAINS> 100,210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 331,084
<NET-ASSETS> 1,028,669
<DIVIDEND-INCOME> 22,664
<INTEREST-INCOME> 420
<OTHER-INCOME> 0
<EXPENSES-NET> 11,082
<NET-INVESTMENT-INCOME> 12,002
<REALIZED-GAINS-CURRENT> 124,775
<APPREC-INCREASE-CURRENT> (21,447)
<NET-CHANGE-FROM-OPS> 115,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,624
<DISTRIBUTIONS-OF-GAINS> 47,629
<DISTRIBUTIONS-OTHER> 13
<NUMBER-OF-SHARES-SOLD> 8,021
<NUMBER-OF-SHARES-REDEEMED> 8,575
<SHARES-REINVESTED> 664
<NET-CHANGE-IN-ASSETS> 53,684
<ACCUMULATED-NII-PRIOR> 308
<ACCUMULATED-GAINS-PRIOR> 26,192
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,982
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,102
<AVERAGE-NET-ASSETS> 934,618,172
<PER-SHARE-NAV-BEGIN> 22.51
<PER-SHARE-NII> 0.278
<PER-SHARE-GAIN-APPREC> 3.306
<PER-SHARE-DIVIDEND> 0.275
<PER-SHARE-DISTRIBUTIONS> 1.247
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.57
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 693,045
<INVESTMENTS-AT-VALUE> 1,024,129
<RECEIVABLES> 6,609
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,030,768
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,099
<TOTAL-LIABILITIES> 2,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 597,389
<SHARES-COMMON-STOCK> 323
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 14
<ACCUMULATED-NET-GAINS> 100,210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 331,084
<NET-ASSETS> 1,028,669
<DIVIDEND-INCOME> 22,664
<INTEREST-INCOME> 420
<OTHER-INCOME> 0
<EXPENSES-NET> 11,082
<NET-INVESTMENT-INCOME> 12,002
<REALIZED-GAINS-CURRENT> 124,775
<APPREC-INCREASE-CURRENT> (21,447)
<NET-CHANGE-FROM-OPS> 115,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18
<DISTRIBUTIONS-OF-GAINS> 85
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,021
<NUMBER-OF-SHARES-REDEEMED> 8,575
<SHARES-REINVESTED> 664
<NET-CHANGE-IN-ASSETS> 53,684
<ACCUMULATED-NII-PRIOR> 308
<ACCUMULATED-GAINS-PRIOR> 26,192
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,982
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,102
<AVERAGE-NET-ASSETS> 3,676,026
<PER-SHARE-NAV-BEGIN> 23.15
<PER-SHARE-NII> 0.092
<PER-SHARE-GAIN-APPREC> 2.683
<PER-SHARE-DIVIDEND> 0.120
<PER-SHARE-DISTRIBUTIONS> 1.247
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.55
<EXPENSE-RATIO> 2.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY INCOME FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 40,924
<INVESTMENTS-AT-VALUE> 42,661
<RECEIVABLES> 190
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,885
<PAYABLE-FOR-SECURITIES> 225
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 379
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,893
<SHARES-COMMON-STOCK> 2,244
<SHARES-COMMON-PRIOR> 1,900
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 875
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,737
<NET-ASSETS> 42,506
<DIVIDEND-INCOME> 991
<INTEREST-INCOME> 168
<OTHER-INCOME> 0
<EXPENSES-NET> 489
<NET-INVESTMENT-INCOME> 670
<REALIZED-GAINS-CURRENT> 1,649
<APPREC-INCREASE-CURRENT> (405)
<NET-CHANGE-FROM-OPS> 1,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 500
<DISTRIBUTIONS-OF-GAINS> 763
<DISTRIBUTIONS-OTHER> 2
<NUMBER-OF-SHARES-SOLD> 2,121
<NUMBER-OF-SHARES-REDEEMED> 563
<SHARES-REINVESTED> 118
<NET-CHANGE-IN-ASSETS> 20,233
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> 248
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 560
<AVERAGE-NET-ASSETS> 24,190,270
<PER-SHARE-NAV-BEGIN> 11.72
<PER-SHARE-NII> 0.240
<PER-SHARE-GAIN-APPREC> 0.587
<PER-SHARE-DIVIDEND> 0.245
<PER-SHARE-DISTRIBUTIONS> 0.410
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY INCOME FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 40,924
<INVESTMENTS-AT-VALUE> 42,661
<RECEIVABLES> 190
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,885
<PAYABLE-FOR-SECURITIES> 225
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 379
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,893
<SHARES-COMMON-STOCK> 680
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 875
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,737
<NET-ASSETS> 42,506
<DIVIDEND-INCOME> 991
<INTEREST-INCOME> 168
<OTHER-INCOME> 0
<EXPENSES-NET> 489
<NET-INVESTMENT-INCOME> 670
<REALIZED-GAINS-CURRENT> 1,649
<APPREC-INCREASE-CURRENT> (405)
<NET-CHANGE-FROM-OPS> 1,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 132
<DISTRIBUTIONS-OF-GAINS> 189
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,121
<NUMBER-OF-SHARES-REDEEMED> 563
<SHARES-REINVESTED> 118
<NET-CHANGE-IN-ASSETS> 20,233
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> 248
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 560
<AVERAGE-NET-ASSETS> 6,253,128
<PER-SHARE-NAV-BEGIN> 11.35
<PER-SHARE-NII> 0.250
<PER-SHARE-GAIN-APPREC> 0.951
<PER-SHARE-DIVIDEND> 0.249
<PER-SHARE-DISTRIBUTIONS> 0.410
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> EQUITY INCOME FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 40,924
<INVESTMENTS-AT-VALUE> 42,661
<RECEIVABLES> 190
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,885
<PAYABLE-FOR-SECURITIES> 225
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 379
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,893
<SHARES-COMMON-STOCK> 652
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 875
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,737
<NET-ASSETS> 42,506
<DIVIDEND-INCOME> 991
<INTEREST-INCOME> 168
<OTHER-INCOME> 0
<EXPENSES-NET> 489
<NET-INVESTMENT-INCOME> 670
<REALIZED-GAINS-CURRENT> 1,649
<APPREC-INCREASE-CURRENT> (405)
<NET-CHANGE-FROM-OPS> 1,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53
<DISTRIBUTIONS-OF-GAINS> 67
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,121
<NUMBER-OF-SHARES-REDEEMED> 563
<SHARES-REINVESTED> 118
<NET-CHANGE-IN-ASSETS> 20,233
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> 248
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 560
<AVERAGE-NET-ASSETS> 3,919,087
<PER-SHARE-NAV-BEGIN> 11.60
<PER-SHARE-NII> 0.146
<PER-SHARE-GAIN-APPREC> 0.681
<PER-SHARE-DIVIDEND> 0.157
<PER-SHARE-DISTRIBUTIONS> 0.410
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> CAPITAL GROWTH FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 13,851
<INVESTMENTS-AT-VALUE> 15,161
<RECEIVABLES> 54
<ASSETS-OTHER> 835
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,050
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,572
<SHARES-COMMON-STOCK> 837
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,310
<NET-ASSETS> 16,021
<DIVIDEND-INCOME> 87
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 126
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 177
<APPREC-INCREASE-CURRENT> 1,310
<NET-CHANGE-FROM-OPS> 1,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,467
<NUMBER-OF-SHARES-REDEEMED> 87
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224
<AVERAGE-NET-ASSETS> 5,151,495
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.025)
<PER-SHARE-GAIN-APPREC> 1.648
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.62
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> CAPITAL GROWTH FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 13,851
<INVESTMENTS-AT-VALUE> 15,161
<RECEIVABLES> 54
<ASSETS-OTHER> 835
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,050
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,572
<SHARES-COMMON-STOCK> 242
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,310
<NET-ASSETS> 16,021
<DIVIDEND-INCOME> 87
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 126
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 177
<APPREC-INCREASE-CURRENT> 1,310
<NET-CHANGE-FROM-OPS> 1,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,467
<NUMBER-OF-SHARES-REDEEMED> 87
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224
<AVERAGE-NET-ASSETS> 2,373,729
<PER-SHARE-NAV-BEGIN> 9.55
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 2.099
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.65
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> CAPITAL GROWTH FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 13,851
<INVESTMENTS-AT-VALUE> 15,161
<RECEIVABLES> 54
<ASSETS-OTHER> 835
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,050
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,572
<SHARES-COMMON-STOCK> 301
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,310
<NET-ASSETS> 16,021
<DIVIDEND-INCOME> 87
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 126
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 177
<APPREC-INCREASE-CURRENT> 1,310
<NET-CHANGE-FROM-OPS> 1,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,467
<NUMBER-OF-SHARES-REDEEMED> 87
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,021
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224
<AVERAGE-NET-ASSETS> 1,768,035
<PER-SHARE-NAV-BEGIN> 9.82
<PER-SHARE-NII> (0.060)
<PER-SHARE-GAIN-APPREC> 1.781
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.54
<EXPENSE-RATIO> 2.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> SMALL CAP FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 7,381
<INVESTMENTS-AT-VALUE> 7,301
<RECEIVABLES> 12
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,329
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14
<TOTAL-LIABILITIES> 14
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,975
<SHARES-COMMON-STOCK> 150
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 579
<ACCUM-APPREC-OR-DEPREC> (80)
<NET-ASSETS> 7,315
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 7
<OTHER-INCOME> 0
<EXPENSES-NET> 45
<NET-INVESTMENT-INCOME> (19)
<REALIZED-GAINS-CURRENT> (579)
<APPREC-INCREASE-CURRENT> (80)
<NET-CHANGE-FROM-OPS> (678)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 815
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,315
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 118
<AVERAGE-NET-ASSETS> 1,061,926
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> (0.026)
<PER-SHARE-GAIN-APPREC> (0.797)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.14
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> SMALL CAP FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 7,381
<INVESTMENTS-AT-VALUE> 7,301
<RECEIVABLES> 12
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,329
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14
<TOTAL-LIABILITIES> 14
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,975
<SHARES-COMMON-STOCK> 554
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 579
<ACCUM-APPREC-OR-DEPREC> (80)
<NET-ASSETS> 7,315
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 7
<OTHER-INCOME> 0
<EXPENSES-NET> 45
<NET-INVESTMENT-INCOME> (19)
<REALIZED-GAINS-CURRENT> (579)
<APPREC-INCREASE-CURRENT> (80)
<NET-CHANGE-FROM-OPS> (678)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1
<NUMBER-OF-SHARES-SOLD> 815
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,315
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 118
<AVERAGE-NET-ASSETS> 5,168,515
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.018)
<PER-SHARE-GAIN-APPREC> (0.835)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.15
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> SMALL CAP FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 7,381
<INVESTMENTS-AT-VALUE> 7,301
<RECEIVABLES> 12
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,329
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14
<TOTAL-LIABILITIES> 14
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,975
<SHARES-COMMON-STOCK> 96
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 579
<ACCUM-APPREC-OR-DEPREC> (80)
<NET-ASSETS> 7,315
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 7
<OTHER-INCOME> 0
<EXPENSES-NET> 45
<NET-INVESTMENT-INCOME> (19)
<REALIZED-GAINS-CURRENT> (579)
<APPREC-INCREASE-CURRENT> (80)
<NET-CHANGE-FROM-OPS> (678)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 815
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,315
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 118
<AVERAGE-NET-ASSETS> 509,193
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.042)
<PER-SHARE-GAIN-APPREC> (0.845)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.11
<EXPENSE-RATIO> 2.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BALANCED FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 304,301
<INVESTMENTS-AT-VALUE> 378,693
<RECEIVABLES> 4,317
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 383,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,270
<TOTAL-LIABILITIES> 1,270
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 280,034
<SHARES-COMMON-STOCK> 3,083
<SHARES-COMMON-PRIOR> 24,504
<ACCUMULATED-NII-CURRENT> 340
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,983
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 74,392
<NET-ASSETS> 381,749
<DIVIDEND-INCOME> 4,543
<INTEREST-INCOME> 10,620
<OTHER-INCOME> 0
<EXPENSES-NET> 4,259
<NET-INVESTMENT-INCOME> 10,904
<REALIZED-GAINS-CURRENT> 36,908
<APPREC-INCREASE-CURRENT> (13,602)
<NET-CHANGE-FROM-OPS> 34,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,131
<DISTRIBUTIONS-OF-GAINS> 3,102
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,447
<NUMBER-OF-SHARES-REDEEMED> 7,345
<SHARES-REINVESTED> 1,540
<NET-CHANGE-IN-ASSETS> 8,980
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13,483
<OVERDISTRIB-NII-PRIOR> 102
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,279
<AVERAGE-NET-ASSETS> 77,259,112
<PER-SHARE-NAV-BEGIN> 15.21
<PER-SHARE-NII> 0.382
<PER-SHARE-GAIN-APPREC> 0.976
<PER-SHARE-DIVIDEND> 0.409
<PER-SHARE-DISTRIBUTIONS> 0.974
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.19
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BALANCED FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 304,301
<INVESTMENTS-AT-VALUE> 378,693
<RECEIVABLES> 4,317
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 383,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,270
<TOTAL-LIABILITIES> 1,270
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 280,034
<SHARES-COMMON-STOCK> 21,712
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 340
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,983
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 74,392
<NET-ASSETS> 381,749
<DIVIDEND-INCOME> 4,543
<INTEREST-INCOME> 10,620
<OTHER-INCOME> 0
<EXPENSES-NET> 4,259
<NET-INVESTMENT-INCOME> 10,904
<REALIZED-GAINS-CURRENT> 36,908
<APPREC-INCREASE-CURRENT> (13,602)
<NET-CHANGE-FROM-OPS> 34,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,628
<DISTRIBUTIONS-OF-GAINS> 19,894
<DISTRIBUTIONS-OTHER> 1
<NUMBER-OF-SHARES-SOLD> 6,447
<NUMBER-OF-SHARES-REDEEMED> 7,345
<SHARES-REINVESTED> 1,540
<NET-CHANGE-IN-ASSETS> 8,980
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13,483
<OVERDISTRIB-NII-PRIOR> 102
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,279
<AVERAGE-NET-ASSETS> 324,842,587
<PER-SHARE-NAV-BEGIN> 14.77
<PER-SHARE-NII> 0.410
<PER-SHARE-GAIN-APPREC> 1.381
<PER-SHARE-DIVIDEND> 0.405
<PER-SHARE-DISTRIBUTIONS> 0.974
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.18
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BALANCED FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 304,301
<INVESTMENTS-AT-VALUE> 378,693
<RECEIVABLES> 4,317
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 383,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,270
<TOTAL-LIABILITIES> 1,270
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 280,034
<SHARES-COMMON-STOCK> 350
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 340
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,983
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 74,392
<NET-ASSETS> 381,749
<DIVIDEND-INCOME> 4,543
<INTEREST-INCOME> 10,620
<OTHER-INCOME> 0
<EXPENSES-NET> 4,259
<NET-INVESTMENT-INCOME> 10,904
<REALIZED-GAINS-CURRENT> 36,908
<APPREC-INCREASE-CURRENT> (13,602)
<NET-CHANGE-FROM-OPS> 34,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 43
<DISTRIBUTIONS-OF-GAINS> 71
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,447
<NUMBER-OF-SHARES-REDEEMED> 7,345
<SHARES-REINVESTED> 1,540
<NET-CHANGE-IN-ASSETS> 8,980
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13,483
<OVERDISTRIB-NII-PRIOR> 102
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,279
<AVERAGE-NET-ASSETS> 2,338,159
<PER-SHARE-NAV-BEGIN> 14.99
<PER-SHARE-NII> 0.279
<PER-SHARE-GAIN-APPREC> 1.154
<PER-SHARE-DIVIDEND> 0.290
<PER-SHARE-DISTRIBUTIONS> 0.974
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.16
<EXPENSE-RATIO> 2.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BOND FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 320,968
<INVESTMENTS-AT-VALUE> 333,927
<RECEIVABLES> 8,807
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 342,742
<PAYABLE-FOR-SECURITIES> 5,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,874
<TOTAL-LIABILITIES> 7,338
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 320,396
<SHARES-COMMON-STOCK> 636
<SHARES-COMMON-PRIOR> 28,548
<ACCUMULATED-NII-CURRENT> 273
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,776
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,959
<NET-ASSETS> 335,404
<DIVIDEND-INCOME> 208
<INTEREST-INCOME> 20,211
<OTHER-INCOME> 0
<EXPENSES-NET> 2,297
<NET-INVESTMENT-INCOME> 18,122
<REALIZED-GAINS-CURRENT> 3,531
<APPREC-INCREASE-CURRENT> 1,192
<NET-CHANGE-FROM-OPS> 22,845
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,784
<DISTRIBUTIONS-OF-GAINS> 18
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,081
<NUMBER-OF-SHARES-REDEEMED> 7,771
<SHARES-REINVESTED> 485
<NET-CHANGE-IN-ASSETS> 23,523
<ACCUMULATED-NII-PRIOR> 384
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 691
<GROSS-ADVISORY-FEES> 2,056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,054
<AVERAGE-NET-ASSETS> 32,889,384
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> 1.408
<PER-SHARE-GAIN-APPREC> (0.620)
<PER-SHARE-DIVIDEND> 0.632
<PER-SHARE-DISTRIBUTIONS> 0.029
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.05
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BOND FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 320,968
<INVESTMENTS-AT-VALUE> 333,927
<RECEIVABLES> 8,807
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 342,742
<PAYABLE-FOR-SECURITIES> 5,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,874
<TOTAL-LIABILITIES> 7,338
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 320,396
<SHARES-COMMON-STOCK> 29,667
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 273
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,776
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,959
<NET-ASSETS> 335,404
<DIVIDEND-INCOME> 208
<INTEREST-INCOME> 20,211
<OTHER-INCOME> 0
<EXPENSES-NET> 2,297
<NET-INVESTMENT-INCOME> 18,122
<REALIZED-GAINS-CURRENT> 3,531
<APPREC-INCREASE-CURRENT> 1,192
<NET-CHANGE-FROM-OPS> 22,845
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16,698
<DISTRIBUTIONS-OF-GAINS> 788
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,081
<NUMBER-OF-SHARES-REDEEMED> 7,771
<SHARES-REINVESTED> 485
<NET-CHANGE-IN-ASSETS> 23,523
<ACCUMULATED-NII-PRIOR> 384
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 691
<GROSS-ADVISORY-FEES> 2,056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,054
<AVERAGE-NET-ASSETS> 310,452,322
<PER-SHARE-NAV-BEGIN> 10.72
<PER-SHARE-NII> 0.575
<PER-SHARE-GAIN-APPREC> 0.379
<PER-SHARE-DIVIDEND> 0.591
<PER-SHARE-DISTRIBUTIONS> 0.029
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.05
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> BOND FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 320,968
<INVESTMENTS-AT-VALUE> 333,927
<RECEIVABLES> 8,807
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 342,742
<PAYABLE-FOR-SECURITIES> 5,464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,874
<TOTAL-LIABILITIES> 7,338
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 320,396
<SHARES-COMMON-STOCK> 40
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 273
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,776
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,959
<NET-ASSETS> 335,404
<DIVIDEND-INCOME> 208
<INTEREST-INCOME> 20,211
<OTHER-INCOME> 0
<EXPENSES-NET> 2,297
<NET-INVESTMENT-INCOME> 18,122
<REALIZED-GAINS-CURRENT> 3,531
<APPREC-INCREASE-CURRENT> 1,192
<NET-CHANGE-FROM-OPS> 22,845
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,081
<NUMBER-OF-SHARES-REDEEMED> 7,771
<SHARES-REINVESTED> 485
<NET-CHANGE-IN-ASSETS> 23,523
<ACCUMULATED-NII-PRIOR> 384
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 691
<GROSS-ADVISORY-FEES> 2,056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,054
<AVERAGE-NET-ASSETS> 177,322
<PER-SHARE-NAV-BEGIN> 10.88
<PER-SHARE-NII> 0.458
<PER-SHARE-GAIN-APPREC> 0.239
<PER-SHARE-DIVIDEND> 0.508
<PER-SHARE-DISTRIBUTIONS> 0.029
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> GOVERNMENT INCOME FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 10,452
<INVESTMENTS-AT-VALUE> 10,690
<RECEIVABLES> 96
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,789
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92
<TOTAL-LIABILITIES> 92
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,867
<SHARES-COMMON-STOCK> 829
<SHARES-COMMON-PRIOR> 1,192
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 411
<ACCUM-APPREC-OR-DEPREC> 238
<NET-ASSETS> 10,697
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 694
<OTHER-INCOME> 0
<EXPENSES-NET> 75
<NET-INVESTMENT-INCOME> 632
<REALIZED-GAINS-CURRENT> 145
<APPREC-INCREASE-CURRENT> 2
<NET-CHANGE-FROM-OPS> 779
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 513
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 48
<NUMBER-OF-SHARES-SOLD> 310
<NUMBER-OF-SHARES-REDEEMED> 451
<SHARES-REINVESTED> 33
<NET-CHANGE-IN-ASSETS> (925)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 62
<OVERDIST-NET-GAINS-PRIOR> 490
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191
<AVERAGE-NET-ASSETS> 9,509,999
<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> 0.632
<PER-SHARE-GAIN-APPREC> 0.079
<PER-SHARE-DIVIDEND> 0.591
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.87
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> GOVERNMENT INCOME FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 10,452
<INVESTMENTS-AT-VALUE> 10,690
<RECEIVABLES> 96
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,789
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92
<TOTAL-LIABILITIES> 92
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,867
<SHARES-COMMON-STOCK> 255
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 411
<ACCUM-APPREC-OR-DEPREC> 238
<NET-ASSETS> 10,697
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 694
<OTHER-INCOME> 0
<EXPENSES-NET> 75
<NET-INVESTMENT-INCOME> 632
<REALIZED-GAINS-CURRENT> 145
<APPREC-INCREASE-CURRENT> 2
<NET-CHANGE-FROM-OPS> 779
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 57
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 15
<NUMBER-OF-SHARES-SOLD> 310
<NUMBER-OF-SHARES-REDEEMED> 451
<SHARES-REINVESTED> 33
<NET-CHANGE-IN-ASSETS> (925)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 62
<OVERDIST-NET-GAINS-PRIOR> 490
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191
<AVERAGE-NET-ASSETS> 1,269,891
<PER-SHARE-NAV-BEGIN> 9.66
<PER-SHARE-NII> 0.587
<PER-SHARE-GAIN-APPREC> 0.171
<PER-SHARE-DIVIDEND> 0.552
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.87
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> LIMITED MATURITY FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 107,181
<INVESTMENTS-AT-VALUE> 108,906
<RECEIVABLES> 2,192
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 111,101
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 617
<TOTAL-LIABILITIES> 617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,050
<SHARES-COMMON-STOCK> 338
<SHARES-COMMON-PRIOR> 13,302
<ACCUMULATED-NII-CURRENT> 63
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,354
<ACCUM-APPREC-OR-DEPREC> 1,725
<NET-ASSETS> 110,484
<DIVIDEND-INCOME> 61
<INTEREST-INCOME> 7,597
<OTHER-INCOME> 0
<EXPENSES-NET> 873
<NET-INVESTMENT-INCOME> 6,785
<REALIZED-GAINS-CURRENT> 847
<APPREC-INCREASE-CURRENT> (738)
<NET-CHANGE-FROM-OPS> 6,894
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 794
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,930
<NUMBER-OF-SHARES-REDEEMED> 4,702
<SHARES-REINVESTED> 61
<NET-CHANGE-IN-ASSETS> (28,191)
<ACCUMULATED-NII-PRIOR> 33
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,139
<GROSS-ADVISORY-FEES> 774
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,162
<AVERAGE-NET-ASSETS> 15,002,975
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> 0.849
<PER-SHARE-GAIN-APPREC> (0.248)
<PER-SHARE-DIVIDEND> 0.594
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.43
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> LIMITED MATURITY FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 107,181
<INVESTMENTS-AT-VALUE> 108,906
<RECEIVABLES> 2,192
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 111,101
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 617
<TOTAL-LIABILITIES> 617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,050
<SHARES-COMMON-STOCK> 10,253
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 63
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,354
<ACCUM-APPREC-OR-DEPREC> 1,725
<NET-ASSETS> 110,484
<DIVIDEND-INCOME> 61
<INTEREST-INCOME> 7,597
<OTHER-INCOME> 0
<EXPENSES-NET> 873
<NET-INVESTMENT-INCOME> 6,785
<REALIZED-GAINS-CURRENT> 847
<APPREC-INCREASE-CURRENT> (738)
<NET-CHANGE-FROM-OPS> 6,894
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,023
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,930
<NUMBER-OF-SHARES-REDEEMED> 4,702
<SHARES-REINVESTED> 61
<NET-CHANGE-IN-ASSETS> (28,191)
<ACCUMULATED-NII-PRIOR> 33
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,139
<GROSS-ADVISORY-FEES> 774
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,162
<AVERAGE-NET-ASSETS> 114,094,705
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> 0.547
<PER-SHARE-GAIN-APPREC> 0.100
<PER-SHARE-DIVIDEND> 0.555
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.43
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000000000
<NAME> FLORIDA TAX-FREE FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 61,594
<INVESTMENTS-AT-VALUE> 63,523
<RECEIVABLES> 774
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,299
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 267
<TOTAL-LIABILITIES> 267
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,902
<SHARES-COMMON-STOCK> 829
<SHARES-COMMON-PRIOR> 5,112
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 202
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,929
<NET-ASSETS> 64,032
<DIVIDEND-INCOME> 53
<INTEREST-INCOME> 2,665
<OTHER-INCOME> 0
<EXPENSES-NET> 283
<NET-INVESTMENT-INCOME> 2,435
<REALIZED-GAINS-CURRENT> 418
<APPREC-INCREASE-CURRENT> (353)
<NET-CHANGE-FROM-OPS> 2,500
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 413
<DISTRIBUTIONS-OF-GAINS> 25
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,383
<NUMBER-OF-SHARES-REDEEMED> 1,392
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> 10,344
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 131
<OVERDISTRIB-NII-PRIOR> 6
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 369
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 594
<AVERAGE-NET-ASSETS> 10,129,199
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> 0.451
<PER-SHARE-GAIN-APPREC> 0.005
<PER-SHARE-DIVIDEND> 0.437
<PER-SHARE-DISTRIBUTIONS> 0.070
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> FLORIDA TAX-FREE FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 61,594
<INVESTMENTS-AT-VALUE> 63,523
<RECEIVABLES> 774
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,299
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 267
<TOTAL-LIABILITIES> 267
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,902
<SHARES-COMMON-STOCK> 5,295
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 202
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,929
<NET-ASSETS> 64,032
<DIVIDEND-INCOME> 53
<INTEREST-INCOME> 2,665
<OTHER-INCOME> 0
<EXPENSES-NET> 283
<NET-INVESTMENT-INCOME> 2,435
<REALIZED-GAINS-CURRENT> 418
<APPREC-INCREASE-CURRENT> (353)
<NET-CHANGE-FROM-OPS> 2,500
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,016
<DISTRIBUTIONS-OF-GAINS> 322
<DISTRIBUTIONS-OTHER> 1
<NUMBER-OF-SHARES-SOLD> 2,383
<NUMBER-OF-SHARES-REDEEMED> 1,392
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> 10,344
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 131
<OVERDISTRIB-NII-PRIOR> 6
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 369
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 594
<AVERAGE-NET-ASSETS> 51,178,625
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> 0.409
<PER-SHARE-GAIN-APPREC> 0.139
<PER-SHARE-DIVIDEND> 0.411
<PER-SHARE-DISTRIBUTIONS> 0.070
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> 0.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> MUNICIPAL BOND FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 315,121
<INVESTMENTS-AT-VALUE> 325,236
<RECEIVABLES> 5,223
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330,467
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,314
<TOTAL-LIABILITIES> 1,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 316,197
<SHARES-COMMON-STOCK> 266
<SHARES-COMMON-PRIOR> 33,279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,841
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,115
<NET-ASSETS> 329,153
<DIVIDEND-INCOME> 227
<INTEREST-INCOME> 16,022
<OTHER-INCOME> 0
<EXPENSES-NET> 2,115
<NET-INVESTMENT-INCOME> 14,134
<REALIZED-GAINS-CURRENT> 3,647
<APPREC-INCREASE-CURRENT> (3,346)
<NET-CHANGE-FROM-OPS> 14,435
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,218
<DISTRIBUTIONS-OF-GAINS> 5
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,391
<NUMBER-OF-SHARES-REDEEMED> 6,210
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (8,780)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 21
<OVERDISTRIB-NII-PRIOR> 5
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,170
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,230
<AVERAGE-NET-ASSETS> 31,426,889
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.858
<PER-SHARE-GAIN-APPREC> (0.422)
<PER-SHARE-DIVIDEND> 0.422
<PER-SHARE-DISTRIBUTIONS> 0.025
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> MUNICIPAL BOND FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 315,121
<INVESTMENTS-AT-VALUE> 325,236
<RECEIVABLES> 5,223
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330,467
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,314
<TOTAL-LIABILITIES> 1,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 316,197
<SHARES-COMMON-STOCK> 32,204
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,841
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,115
<NET-ASSETS> 329,153
<DIVIDEND-INCOME> 227
<INTEREST-INCOME> 16,022
<OTHER-INCOME> 0
<EXPENSES-NET> 2,115
<NET-INVESTMENT-INCOME> 14,134
<REALIZED-GAINS-CURRENT> 3,647
<APPREC-INCREASE-CURRENT> (3,346)
<NET-CHANGE-FROM-OPS> 14,435
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,218
<DISTRIBUTIONS-OF-GAINS> 816
<DISTRIBUTIONS-OTHER> 6
<NUMBER-OF-SHARES-SOLD> 5,391
<NUMBER-OF-SHARES-REDEEMED> 6,210
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (8,780)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 21
<OVERDISTRIB-NII-PRIOR> 5
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,170
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,230
<AVERAGE-NET-ASSETS> 331,464,385
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> 0.393
<PER-SHARE-GAIN-APPREC> 0.136
<PER-SHARE-DIVIDEND> 0.397
<PER-SHARE-DISTRIBUTIONS> 0.025
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> PRIME OBLIGATIONS FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 603,844
<INVESTMENTS-AT-VALUE> 603,844
<RECEIVABLES> 901
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 604,759
<PAYABLE-FOR-SECURITIES> 5,028
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,796
<TOTAL-LIABILITIES> 7,824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 596,944
<SHARES-COMMON-STOCK> 116,967
<SHARES-COMMON-PRIOR> 111,033
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 9
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 596,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,480
<NET-INVESTMENT-INCOME> 31,203
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31,203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,957
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,553,766
<NUMBER-OF-SHARES-REDEEMED> 1,492,634
<SHARES-REINVESTED> 7,810
<NET-CHANGE-IN-ASSETS> 68,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 9
<GROSS-ADVISORY-FEES> 2,516
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,683
<AVERAGE-NET-ASSETS> 122,116,124
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.049
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> PRIME OBLIGATIONS FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 603,844
<INVESTMENTS-AT-VALUE> 603,844
<RECEIVABLES> 901
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 604,759
<PAYABLE-FOR-SECURITIES> 5,028
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,796
<TOTAL-LIABILITIES> 7,824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 596,944
<SHARES-COMMON-STOCK> 479,990
<SHARES-COMMON-PRIOR> 416,983
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 9
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 596,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,480
<NET-INVESTMENT-INCOME> 31,203
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31,203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,246
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,553,766
<NUMBER-OF-SHARES-REDEEMED> 1,492,634
<SHARES-REINVESTED> 7,810
<NET-CHANGE-IN-ASSETS> 68,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 9
<GROSS-ADVISORY-FEES> 2,516
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,683
<AVERAGE-NET-ASSETS> 506,782,957
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> PRIME OBLIGATIONS FUND
<SERIES>
<NUMBER>
<NAME> B SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 603,844
<INVESTMENTS-AT-VALUE> 603,844
<RECEIVABLES> 901
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 604,759
<PAYABLE-FOR-SECURITIES> 5,028
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,796
<TOTAL-LIABILITIES> 7,824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 596,944
<SHARES-COMMON-STOCK> 1
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 9
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 596,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,683
<OTHER-INCOME> 0
<EXPENSES-NET> 4,480
<NET-INVESTMENT-INCOME> 31,203
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31,203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,553,766
<NUMBER-OF-SHARES-REDEEMED> 1,492,634
<SHARES-REINVESTED> 7,810
<NET-CHANGE-IN-ASSETS> 68,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 9
<GROSS-ADVISORY-FEES> 2,516
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,683
<AVERAGE-NET-ASSETS> 938
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.005
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.005
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> U.S. TREASURY FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 359,547
<INVESTMENTS-AT-VALUE> 359,547
<RECEIVABLES> 2,019
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 361,573
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,448
<TOTAL-LIABILITIES> 1,448
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 360,117
<SHARES-COMMON-STOCK> 8,069
<SHARES-COMMON-PRIOR> 9,885
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 360,125
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,854
<OTHER-INCOME> 0
<EXPENSES-NET> 2,200
<NET-INVESTMENT-INCOME> 14,654
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,661
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,860
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 969,887
<NUMBER-OF-SHARES-REDEEMED> 923,826
<SHARES-REINVESTED> 737
<NET-CHANGE-IN-ASSETS> 40,879
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,221
<AVERAGE-NET-ASSETS> 7,657,216
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.046
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> U.S. TREASURY FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> JUL-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 359,547
<INVESTMENTS-AT-VALUE> 359,547
<RECEIVABLES> 2,019
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 361,573
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,448
<TOTAL-LIABILITIES> 1,448
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 360,117
<SHARES-COMMON-STOCK> 352,047
<SHARES-COMMON-PRIOR> 100,350
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 360,125
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,854
<OTHER-INCOME> 0
<EXPENSES-NET> 2,200
<NET-INVESTMENT-INCOME> 14,654
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,661
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,938
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 969,887
<NUMBER-OF-SHARES-REDEEMED> 923,826
<SHARES-REINVESTED> 737
<NET-CHANGE-IN-ASSETS> 40,879
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> TAX-EXEMPT FUND
<SERIES>
<NUMBER>
<NAME> CLASSIC
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
<NAME> TAX-EXEMPT FUND
<SERIES>
<NUMBER>
<NAME> PREMIER
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
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<NET-ASSETS> 90,741
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<INTEREST-INCOME> 3,164
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<EXPENSES-NET> 468
<NET-INVESTMENT-INCOME> 2,696
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</TABLE>
