<PAGE> 1
ISG FUNDS LOGO
P.O. Box 182239
Columbus, OH 43218-2239
1-800-852-0045
December 27,1999
IMPORTANT NEWS ABOUT YOUR SHARES IN THE ISG FUNDS
Dear ISG Shareholder:
A special shareholders' meeting has been called by the Board of Directors of the
ISG Funds for February 11, 2000.
With the recent merger of AMSOUTH and FIRST AMERICAN NATIONAL BANK, one of the
South's largest banking entities has been created. The next step in the process
is to consolidate under one umbrella the mutual fund investment advisory
activities of both banks.
As an ISG shareholder, you are being asked to approve the reorganization and
merger of the funds. Your approval will make available a diverse, expanded
mutual fund family--to be known as the AmSouth Funds--with 29 individual funds
and more than $7 billion in assets.
EXPANDED AMSOUTH FUND FAMILY
- 10 Equity Funds
- 6 Balanced Funds
- 4 Fixed Income Funds
- 4 Tax-Exempt Funds
- 5 Money Market Funds
WHAT'S THE IMPACT OF THESE CHANGES?
1. The value (aggregate) of the shares you hold before the merger will not
change and will be the same immediately after the merger has occurred.
2. The merger will be a tax-free event; it will not involve any sales loads,
commissions or transaction charges for you as a shareholder.
3. The investment objectives and policies of your new fund will be substantially
similar to your current fund's objectives and policies (please refer to the
enclosed proxy/registration statement for details).
WHAT ARE THE BENEFITS OF REORGANIZING?
- - An increase in the number of fund choices available to you. These range from
small cap to large cap; growth to value; domestic to international; and
taxable to tax-exempt.
- - Enhanced investment management expertise. You will have access to funds and
portfolio managers that represent the extraordinary depth of investment
management expertise produced by the combination of AmSouth and First American
National Bank.
- - Additional capabilities for research and market analysis.
- - Improved shareholder servicing.
- - Greater efficiencies in operational management.
AFTER CAREFUL REVIEW, THE INDEPENDENT DIRECTORS HAVE VOTED UNANIMOUSLY IN FAVOR
OF THE PROPOSED MERGER AND RECOMMEND YOU VOTE "FOR" THE PROPOSAL AT THIS TIME.
THE REORGANIZATION AND RELATED MATTERS ARE DISCUSSED IN THE ENCLOSED
PROSPECTUS/PROXY STATEMENT, WHICH YOU SHOULD READ CAREFULLY.
HOW CAN I VOTE?
Vote by mail using the enclosed proxy card. We urge you to read the enclosed
proxy statement and to vote now by completing, signing and returning the proxy
card(s) in the prepaid envelope. You also may vote by telephone or via the
Internet. If you own more than one ISG Fund, you will receive a proxy/ballot
card for each of your funds.
We are pleased with the opportunities that the merger of these two fund families
will offer to our investors. To ensure that your shares will be represented at
the shareholder meeting on February 11, please vote each proxy card that you
have received. Your vote is very important to us and we thank you in advance for
your response.
<PAGE> 2
IMPORTANT SHAREHOLDER INFORMATION
ISG FUNDS
The document you hold in your hands contains your Combined Prospectus/Proxy
Statement and proxy card. A proxy card is, in essence, a ballot. When you vote
your proxy, it tells us how to vote on your behalf on important issues relating
to your ISG Funds. If you simply sign the proxy without specifying a vote, your
shares will be voted in accordance with the recommendations of the Board of
Directors.
We urge you to spend a few minutes with the Combined Prospectus/Proxy
Statement, fill out your proxy card, and return it to us (or vote by telephone
or the Internet). By voting your proxy, and doing so promptly, you help us avoid
having to make additional mailings.
Please take a few moments to exercise your right to vote. Thank you.
The Combined Prospectus/Proxy Statement constitutes the Proxy Statement of
the ISG Funds for the meeting of their shareholders. It also constitutes the
Prospectus of AmSouth for 21 of its Funds which are to issue shares in
connection with the proposed reorganization of the ISG Funds with AmSouth Funds
described in the enclosed materials.
<PAGE> 3
ISG FUNDS
Columbus, OH 43219
December 22, 1999
To the Shareholders:
Enclosed you will find several documents being furnished to you in
connection with a special meeting of the shareholders of the ISG Funds to be
held on February 11, 2000 at the offices of BISYS Fund Services, 3435 Stelzer
Road, Columbus, OH 43219. We hope this material will receive your immediate
attention and that, if you cannot attend the meeting in person, you will vote
your proxy promptly.
As you may know, First American Corporation recently merged with AmSouth
Bancorporation on October 1, 1999. As a result, the new organization has since
taken steps to consolidate the mutual fund investment advisory activities of
both bank holding companies. Currently, First American National Bank, a
wholly-owned subsidiary of AmSouth Bancorporation, provides investment advisory
services to ISG Funds. AmSouth Bank, a wholly-owned subsidiary of AmSouth
Bancorporation, currently provides investment advisory services to AmSouth Funds
("AmSouth").
As the next step in the consolidation process, we are asking you to consider
and approve a proposed Agreement and Plan of Reorganization for your ISG Fund.
The Plan of Reorganization provides that each ISG Fund transfer all of its
assets to the corresponding AmSouth Fund, as listed in the chart below, in
return for Trust or Class A or Class B shares (collectively, "Shares") of such
AmSouth Fund and the assumption by such AmSouth Fund of all of the liabilities
of such ISG Fund. After the transfer, Shares of the corresponding AmSouth Fund
will be distributed to the ISG Fund's shareholders tax-free in liquidation of
such ISG Fund. As a result of these transactions, your ISG Fund shares, in
effect, would be exchanged at their net asset value and on a tax-free basis for
Shares of such AmSouth Fund. All ISG Fund shareholders will receive shares of
the AmSouth Class (Class A, Class B or Trust Class) that corresponds to the
class of ISG Fund shares ("ISG Shares") they hold. Each AmSouth Fund listed
below as a "New AmSouth Fund" recently has been organized for the purpose of
continuing the investment operations of the corresponding ISG Fund, and has no
assets or prior history of investment operations.
<TABLE>
<CAPTION>
ISG FUNDS NEW AMSOUTH FUNDS
--------- -----------------
<S> <C>
ISG International Equity Fund AmSouth International Equity Fund
ISG Mid-Cap Fund AmSouth Mid Cap Fund
ISG Capital Growth Fund AmSouth Capital Growth Fund
ISG Large-Cap Equity Fund AmSouth Large Cap Fund
ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund
ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund
ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund
ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund
ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio
ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio
ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio
ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income
Portfolio
ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio
</TABLE>
<TABLE>
<CAPTION>
ISG FUNDS PRE-EXISTING AMSOUTH FUNDS
--------- --------------------------
<S> <C>
ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund
ISG Equity Income Fund AmSouth Equity Income Fund
ISG Income Fund AmSouth Bond Fund
ISG Government Income Fund AmSouth Government Income Fund
ISG Limited Term Income Fund AmSouth Limited Term Bond Fund
ISG Municipal Income Fund AmSouth Municipal Bond Fund
ISG Prime Money Market Fund AmSouth Prime Money Market Fund
ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund
</TABLE>
First American National Bank has advised the ISG Funds' Directors that it
believes that the above-described transactions regarding the ISG Funds and the
AmSouth Funds offer the shareholders of the ISG Funds an opportunity to pursue
similar investment objectives more effectively with potentially lower expense
ratios over time. The reorganization of each ISG Fund will be tax-free and will
not involve any sales loads, commissions or transaction charges.
We also are asking you to approve the current investment advisory agreement
with First American National Bank and, if you are a shareholder of ISG
International Equity Fund, ISG Small-Cap Opportunity Fund or ISG Mid-Cap Fund,
the current sub-investment advisory agreement between First American National
Bank and the respective sub-adviser to those ISG Funds. These agreements became
effective as of the date First American Corporation merged with AmSouth
Bancorporation -- October 1, 1999 -- and will remain in effect, if approved by
shareholders, until the relevant ISG Fund's reorganization.
YOUR FUND'S DIRECTORS BELIEVE THAT THE PROPOSED COMBINATIONS OF THE ISG
FUNDS WITH THE AMSOUTH FUNDS AND APPROVAL OF THE INVESTMENT ADVISORY AND
SUB-INVESTMENT ADVISORY AGREEMENTS ARE IN THE BEST INTERESTS OF THE ISG FUNDS
AND THEIR SHAREHOLDERS AND RECOMMEND THAT YOU VOTE IN FAVOR OF SUCH PROPOSALS.
The Notice of Special Meeting of Shareholders, the accompanying Combined
Prospectus/Proxy Statement and proxy cards are enclosed. Please read them
carefully. If you are unable to attend the meeting in person, we urge you to
sign, date, and return the proxy card (or vote by telephone or the Internet) so
that your shares may be voted in accordance with your instructions.
SINCE THE MEETING IS LESS THAN EIGHT WEEKS AWAY, WE URGE YOU TO GIVE THE
ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO AS TO AVOID THE EXPENSE OF ADDITIONAL
MAILINGS.
Your vote is important to us. Thank you for taking the time to consider this
important proposal.
Sincerely yours,
/s/ Frederick S. Crown Jr.
Frederick S. Crown Jr., CFA
Chief Investment Officer
ISG Funds
<PAGE> 4
ISG FUNDS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of :
ISG International Equity Fund
ISG Small-Cap Opportunity Fund
ISG Mid-Cap Fund
ISG Capital Growth Fund
ISG Large-Cap Equity Fund
ISG Equity Income Fund
ISG Income Fund
ISG Government Income Fund
ISG Limited Term Income Fund
ISG Limited Term
U.S. Government Fund
ISG Tennessee Tax-Exempt Fund
ISG Limited Term Tennessee
Tax-Exempt Fund
ISG Municipal Income Fund
ISG Prime Money Market Fund
ISG Treasury Money Market Fund
ISG Tax-Exempt Money Market Fund
ISG Aggressive Growth Portfolio
ISG Growth Portfolio
ISG Growth & Income Portfolio
ISG Moderate Growth &
Income Portfolio
ISG Current Income Portfolio
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the
above-referenced funds (collectively, the "ISG Funds"), separate series of The
Infinity Mutual Funds, Inc. (the "Company"), will be held at BISYS Fund
Services, 3435 Stelzer Road, Columbus, OH on February 11, 2000 at 10:00 a.m.,
Eastern time, for the following purposes:
EACH ISG FUND WILL VOTE SEPARATELY ON PROPOSAL ONE
1. To consider and act upon an Agreement and Plan of Reorganization
("Agreement") pursuant to which each ISG Fund will transfer all of its assets
to a corresponding AmSouth Fund as listed below in exchange for Trust, Class
A and Class B shares (collectively, "Shares") of such AmSouth Fund and the
assumption by such AmSouth Fund of all of the liabilities of such ISG Fund,
followed by the liquidation of such ISG Fund, the distribution of Shares of
such AmSouth Fund to the shareholders of such ISG Fund and the dissolution of
the Company:
<TABLE>
<S> <C>
ISG International Equity Fund AmSouth International Equity Fund
ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund
ISG Mid-Cap Fund AmSouth Mid Cap Fund
ISG Capital Growth Fund AmSouth Capital Growth Fund
ISG Large-Cap Equity Fund AmSouth Large Cap Fund
ISG Equity Income Fund AmSouth Equity Income Fund
ISG Income Fund AmSouth Bond Fund
ISG Government Income Fund AmSouth Government Income Fund
ISG Limited Term Income Fund AmSouth Limited Term Bond Fund
ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund
ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund
ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund
ISG Municipal Income Fund AmSouth Municipal Bond Fund
ISG Prime Money Market Fund AmSouth Prime Money Market Fund
ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund
ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund
ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth
Portfolio
ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio
ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income
Portfolio
ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth
and Income Portfolio
ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income
Portfolio
</TABLE>
(Continued on following page)
<PAGE> 5
(Continued from previous page)
EACH ISG FUND WILL VOTE SEPARATELY ON PROPOSAL TWO
2. To consider and act upon a new Investment Advisory Agreement between the
Company, with respect to the ISG Funds, and First American National Bank, the
terms of which are identical in all material respects to the prior investment
advisory agreement for the ISG Funds. The new Investment Advisory Agreement
was approved by the Board of Directors, effective as of the date of the
merger (the "Merger") of First American Corporation, the former parent of the
ISG Funds' investment adviser, First American National Bank, with and into
AmSouth Bancorporation.
ISG INTERNATIONAL EQUITY FUND, ISG MID-CAP FUND AND ISG SMALL-CAP OPPORTUNITY
FUND
ONLY WILL EACH VOTE SEPARATELY ON PROPOSAL THREE
3. (a) To consider and act upon a new Sub-Investment Advisory Agreement between
Lazard Asset Management, the present sub-adviser to the ISG International
Equity Fund, and First American National Bank, with respect to the ISG
International Equity Fund, the terms of which are identical in all
material respects to the prior sub-advisory agreement for ISG
International Equity Fund;
(b) To consider and act upon a new Sub-Investment Advisory Agreement between
Bennett Lawrence Management, LLC, the present sub-adviser to the ISG
Mid-Cap Fund, and First American National Bank, on behalf of the ISG
Mid-Cap Fund, the terms of which are identical in all material respects
to the prior sub-advisory agreement for ISG Mid-Cap Fund; and
(c) To consider and act upon a new Sub-Investment Advisory Agreement between
Womack Asset Management, Inc., the present sub-adviser to the ISG
Small-Cap Opportunity Fund, and First American National Bank, on behalf
of the ISG Small-Cap Opportunity Fund, the terms of which are identical
in all material respects to the prior sub-advisory agreement for the ISG
Small-Cap Opportunity Fund.
The new Sub-Investment Advisory Agreements were approved by the Board of
Directors, effective as of the date of the Merger.
4. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
The proposed transaction is described in the attached Combined
Prospectus/Proxy Statement. A copy of the Agreement is appended as Appendix A
thereto.
Pursuant to actions of the Company's Board of Directors, the close of
business on December 3, 1999, has been designated as the record date for
determination of shareholders entitled to notice of, and to vote at, the
Meeting.
SHAREHOLDERS ARE REQUESTED TO PROMPTLY VOTE BY TELEPHONE OR THE INTERNET OR
EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD
WHICH IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT
TO ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME
BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON.
By Order of the Directors
/s/ William B. Blundin
William B. Blundin
President
The ISG Funds
Columbus, OH
December 22, 1999
<PAGE> 6
PROSPECTUS/PROXY STATEMENT
December 22, 1999
AMSOUTH FUNDS
Columbus, OH 43219
Tel. No. 1-800-451-8382
ISG FUNDS
Columbus, OH 43219
Tel. No. 1-800-852-0045
COMBINED PROSPECTUS/PROXY STATEMENT
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of proxies from the shareholders of the ISG Funds for use at a
Special Meeting of Shareholders of the ISG Funds for the purposes set forth in
the accompanying Notice of Special Meeting of Shareholders. Shareholders of
record at the close of business on December 3, 1999, are entitled to receive
notice of and to vote at the Meeting. It is proposed that each ISG Fund transfer
all of its assets and liabilities to the corresponding AmSouth Fund in exchange
for Trust Class, Class A and Class B shares (collectively "Shares"), followed by
the liquidation of the respective ISG Fund and the distribution of Shares to the
shareholders of the ISG Fund (the "Transaction") and the subsequent dissolution
of the Infinity Mutual Funds, Inc. As a result of the proposed Transaction, each
ISG Shareholder will receive on a tax-free basis, a number of full and
fractional Shares of the corresponding AmSouth Fund equal in value at the date
of the exchange to the net asset value of the ISG Shares transferred by each
Shareholder to the corresponding AmSouth Fund. All ISG shareholders will receive
shares of the AmSouth Class (Class A, Class B or Trust Class) that correspond to
the class of ISG Shares that they hold.
It is proposed that each ISG Fund transfer all of its assets, subject to
liabilities, to a corresponding AmSouth Fund as indicated below. Each AmSouth
Fund listed below as a "New AmSouth Fund" recently has been organized for the
purpose of continuing the investment operations of the corresponding ISG Fund,
and has no assets or prior history of investment operations.
<TABLE>
<CAPTION>
ISG FUNDS NEW AMSOUTH FUNDS
--------- -----------------
<S> <C>
ISG International Equity Fund AmSouth International Equity Fund
ISG Mid-Cap Fund AmSouth Mid Cap Fund
ISG Capital Growth Fund AmSouth Capital Growth Fund
ISG Large-Cap Equity Fund AmSouth Large Cap Fund
ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund
ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund
ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund
ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund
ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth
Portfolio
ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio
ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income
Portfolio
ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income
Portfolio
ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio
</TABLE>
<TABLE>
<CAPTION>
ISG FUNDS PRE-EXISTING AMSOUTH FUNDS
--------- --------------------------
<S> <C>
ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund
ISG Equity Income Fund AmSouth Equity Income Fund
ISG Income Fund AmSouth Bond Fund
ISG Government Income Fund AmSouth Government Income Fund
ISG Limited Term Income Fund AmSouth Limited Term Bond Fund
ISG Municipal Income Fund AmSouth Municipal Bond Fund
ISG Prime Money Market Fund AmSouth Prime Money Market Fund
ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund
</TABLE>
The Meeting also is being called to permit Shareholders of each ISG Fund to
consider and act upon a new Investment Advisory Agreement (the "New Advisory
Agreement") with First American National Bank. In addition, shareholders of the
ISG International Equity are asked to consider and act upon a new Sub-Investment
Advisory Agreement between First American National Bank and Lazard Asset
Management; shareholders of the ISG Mid-Cap are asked to consider and act upon a
new Sub-Investment Advisory Agreement between First American National Bank and
Bennett Lawrence Manage-
(Continued on following page)
<PAGE> 7
(Continued from previous page)
ment, LLC; and shareholders of the ISG Small-Cap Opportunity are asked to
consider and act upon a new Sub-Investment Advisory Agreement between First
American National Bank and Womack Asset Management, Inc. The new Sub-Investment
Advisory Agreements are collectively referred to as the "New Sub-Advisory
Agreements," and each may individually be referred to as a "New Sub-Advisory
Agreement." Consideration of the New Advisory Agreement and the New Sub-Advisory
Agreements has been made necessary by the merger (the "Merger") of First
American Corporation, the parent of First American National Bank prior to the
Merger, with and into AmSouth Bancorporation. The New Advisory Agreement and the
New Sub-Advisory Agreements took effect on the date that the Merger was
consummated -- October 1, 1999 -- and will continue, if approved by
Shareholders, until the relevant ISG Fund's reorganization, referred to above.
If a proposal is approved by one or more ISG Funds, and disapproved by the
other ISG Funds, the Proposal will be implemented only for each ISG Fund that
approved the Proposal.
The AmSouth Funds are separate series of AmSouth Funds ("AmSouth"), an
open-end management investment company. The ISG Funds are separate series of The
Infinity Mutual Funds, Inc. (the "Company"), an open-end management investment
company.
This Combined Prospectus/Proxy Statement explains concisely what you should
know before investing in the AmSouth Funds. Please read it and keep it for
future reference. This Combined Prospectus/Proxy Statement is accompanied by the
prospectuses relating to the AmSouth Funds, dated December 1, 1999 and December
14, 1999 (the "AmSouth Prospectuses"), which contain information about the
AmSouth Funds, as well as the current prospectuses relating to the ISG Funds
dated May 1, 1999 (the "ISG Prospectuses"), which contain information about the
ISG Funds, all of which are incorporated into this Combined Prospectus/Proxy
Statement by reference. The current Statements of Additional Information of the
AmSouth Funds, dated December 1, 1999 and December 14, 1999, and of the ISG
Funds, dated May 1, 1999, have been filed with the Securities and Exchange
Commission and are incorporated into this Combined Prospectus/Proxy Statement by
reference. The Statements of Additional Information may be obtained, without
charge, by writing to the relevant Fund, 3435 Stelzer Road, Columbus, Ohio 43219
or by calling 1-800-451-8382 for the AmSouth Funds or 1-800-852-0045 for the ISG
Funds. In addition, a Statement of Additional Information dated December 19,
1999 relating to the Transaction described in this Combined Prospectus/Proxy
Statement has been filed with the Securities and Exchange Commission and is also
incorporated into this Combined Prospectus/Proxy Statement by reference. Such
Statement of Additional Information may be obtained, without charge, by writing
AmSouth Funds at the above-listed address or by calling 1-800-451-8382.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT OR DETERMINED
WHETHER THIS COMBINED PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
AN INVESTMENT IN SHARES OF AN AMSOUTH FUND IS NOT A BANK DEPOSIT. IT IS NOT
GUARANTEED, ENDORSED OR INSURED BY ANY BANK, FINANCIAL INSTITUTION OR GOVERNMENT
ENTITY SUCH AS THE FDIC. YOU COULD LOSE MONEY, BUT YOU ALSO HAVE THE POTENTIAL
TO MAKE MONEY.
(Continued on following page)
<PAGE> 8
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT IN
CONNECTION WITH THE OFFERING MADE BY THIS COMBINED PROSPECTUS/PROXY STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISG FUNDS OR BY AMSOUTH. THIS COMBINED
PROSPECTUS/ PROXY STATEMENT DOES NOT CONSTITUTE AN OFFERING BY AMSOUTH IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROPOSAL (1) APPROVAL OF AGREEMENT AND PLAN OF
REORGANIZATION.............................................. 1
FEE TABLES.................................................. 1
SYNOPSIS.................................................... 1
PRINCIPAL RISKS............................................. 17
INTRODUCTION................................................ 19
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF AGREEMENT AND
PLAN OF REORGANIZATION.................................... 21
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION...... 22
INFORMATION ABOUT THE REORGANIZATION........................ 23
APPROVAL OR DISAPPROVAL OF CERTAIN ADVISORY AGREEMENTS...... 30
AMSOUTH FUNDS............................................... 40
ISG FUNDS................................................... 42
FINANCIAL STATEMENTS........................................ 45
VOTING INFORMATION.......................................... 45
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 68
FORM OF AGREEMENT AND PLAN OF REORGANIZATION -- APPENDIX A
FEE TABLES -- APPENDIX B
AMSOUTH ANNUAL REPORT -- APPENDIX C
NEW ADVISORY AGREEMENT -- APPENDIX D
NEW SUB-ADVISORY AGREEMENT
(ISG MID-CAP FUND) -- APPENDIX E
NEW SUB-ADVISORY AGREEMENT
(ISG INTERNATIONAL EQUITY FUND) -- APPENDIX F
NEW SUB-ADVISORY AGREEMENT
(ISG SMALL-CAP OPPORTUNITY FUND) -- APPENDIX G
EXECUTIVE OFFICERS AND DIRECTORS OF AMSOUTH BANK -- APPENDIX
H
</TABLE>
i
<PAGE> 9
PROPOSAL ONE
APPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
At a meeting held on November 18, 1999, all of the Directors of the Company
unanimously approved the Agreement providing for the transfer of all of the
assets of each ISG Fund to its corresponding AmSouth Fund in exchange for Shares
of beneficial interest of such AmSouth Fund and the assumption by such AmSouth
Fund of all of the liabilities of such ISG Fund.
Following the transfer, the Shares received by the ISG Fund will be
distributed to its shareholders in liquidation of the ISG Fund, thereafter, the
Company will be dissolved. As a result of the proposed Transaction, shareholders
of each ISG Fund will receive, on a tax-free basis, a number of full and
fractional Shares equal in value at the date of the exchange to the net asset
value of the ISG Shares transferred by such Shareholder to the corresponding
AmSouth Fund attributable to the shareholder. All ISG Fund shareholders will
receive shares of the AmSouth Fund Class (Class A, Class B or Trust Class) that
corresponds to the class of ISG Shares that they hold.
For the reasons set forth below under "Background and Reasons for the
Proposed Reorganization," the Board of Directors of the Company and the Board of
Trustees of AmSouth, including those Board members who are not "interested
persons" of either the ISG Funds or the AmSouth Funds as defined in the
Investment Company Act of 1940 (the "1940 Act") (the "Independent Board
Members"), unanimously concluded that participation in the proposed Transaction
is in the best interests of the respective Funds and their existing shareholders
and that the economic interests of their respective existing shareholders will
not be diluted as a result of effecting the proposed Transaction.
In reaching this conclusion, each Board considered, among other things, the
qualifications and experience of AmSouth Bank (the "Advisor"); the projected
expense ratios of each AmSouth Fund compared to the corresponding ISG Fund, and
the potential economies of scale which could be realized over time by former ISG
Fund shareholders as each AmSouth Fund increases in size; the services to be
provided to AmSouth shareholders, including the availability of Funds with
objectives, policies and services similar to those of the ISG Funds; the
recommendation of the Advisor in favor of the Transaction; and the fact that the
Transaction will be free from Federal income taxes to the ISG Funds and the
AmSouth Funds and their shareholders.
FEE TABLES
Fee tables showing the current fees for the ISG Funds and AmSouth Funds, as
well as the pro forma fees after the reorganization, can be found in Appendix B
at the end of this Combined Prospectus/Proxy Statement. AmSouth Bank, the
investment adviser to the AmSouth Funds, has agreed that until October 1, 2001,
it will maintain for each AmSouth Fund total fund operating expenses that are
less than or equal to those of its corresponding ISG Fund as of the date of the
Merger (October 1, 1999). Thereafter, total fund operating expenses for the
AmSouth Funds may be higher since, in many cases, the rate of investment
advisory fee payable will be higher than the rate currently payable by the
corresponding ISG Funds.
SYNOPSIS OF PROSPECTUSES
Investment Objectives and Policies. Below is a brief comparison of the
investment objectives and policies of each ISG Fund and the corresponding
AmSouth Fund. The following discussion is qualified in its entirety by the
disclosure on such subjects contained in the AmSouth Prospectuses and the ISG
Prospectuses accompanying this Combined Prospectus/Proxy Statement. For a full
and detailed description of permitted investments, see the applicable AmSouth
and ISG Prospectuses.
The securities currently held by each ISG Fund are substantially similar to
those securities which the corresponding AmSouth Fund may hold. Consequently,
the proposed reorganizations of the ISG Funds should not result in higher than
normal portfolio turnover due to the corresponding AmSouth Fund's disposal of
investment securities.
1
<PAGE> 10
Equity Funds (or Capital Appreciation Funds) -- These Funds seek capital
appreciation and invest primarily in equity securities, principally common
stocks and, to a limited extent, preferred stocks and convertible securities.
AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth
Fund and AmSouth Large Cap Fund recently were organized for the purpose of
continuing the investment operations of the corresponding ISG Fund, and such
AmSouth Funds have no assets or prior history of investment operations.
ISG INTERNATIONAL EQUITY FUND AND AMSOUTH INTERNATIONAL EQUITY FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
International Equity and AmSouth International Equity Funds seek to provide
investors with capital appreciation.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth International Equity Fund are
identical to those of ISG International Equity Fund. Like ISG International
Equity Fund, AmSouth International Equity Fund will invest primarily in equity
securities of large non-U.S. companies (i.e., incorporated or organized outside
the United States). Lazard Asset Management, the Sub-Adviser of each Fund, looks
for established companies in economically developed countries that it believes
are undervalued based on their return on total capital or equity. The
Sub-Adviser attempts to identify undervalued securities through traditional
measures of value, including low price to earnings ratio, high yield,
unrecognized assets, potential for management change and the potential to
improve profitability.
As it currently does for ISG International Equity Fund, the Sub-Adviser
will focus on individual stock selection (a "bottom-up" approach) rather than on
forecasting stock market trends (a "top-down" approach). The percentage of the
Funds' assets invested in particular geographic sectors may shift from time to
time in accordance with the judgment of the Adviser and Sub-Adviser. Ordinarily,
the Fund will invest in at least three different foreign countries. Although the
Fund will invest primarily in the stocks of companies located in developed
foreign countries, it may invest up to 25% of its total assets in typically
large companies located, or doing significant business in emerging markets. In
addition, the Fund may have substantial investments in American and Global
Depositary Receipts.
ISG International Equity and AmSouth International Equity are
non-diversified Funds.
ISG SMALL-CAP OPPORTUNITY FUND AND AMSOUTH SMALL CAP FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Small-Cap Opportunity and AmSouth Small Cap seek to provide investors with
capital appreciation.
Principal Investment Strategies of the Funds ISG Small-Cap Opportunity
invests primarily in equity securities of U.S. companies with market
capitalizations of less than $1.5 billion. Womack Asset Management, the ISG
Fund's Sub-Adviser, seeks investment opportunities in smaller, well-managed U.S.
companies whose shares are undervalued relative to the companies' growth
potential. The Sub-Adviser employs a growth-oriented approach which involves
fundamental analysis of the company's published financial statements with
technical analysis (which relies on price and volume movements of the company's
stock) to discern potential and risk. The Sub-Adviser focuses on individual
stock selection (a "bottom-up" approach) rather than on forecasting stock market
trends (a "top-down" approach). The Sub-Adviser considers, among other factors:
projected earnings growth, relative price strength and business fundamentals.
Similarly, AmSouth Small Cap Fund invests primarily in common stocks of
companies with market capitalizations at the time of purchase in the range of
companies in the Russell 2000(R) Growth Index (currently between $50 million and
$2 billion). Womack Asset Management however, will not be the Sub-Adviser for
AmSouth Small Cap Fund. Sawgrass Asset Management, Inc., the AmSouth Fund's
Sub-Adviser, seeks smaller companies with above-average growth potential. The
Sub-Adviser considers factors including positive changes in earnings estimates
for future growth, higher than market average profitability, a strategic
position in a specialized market, earnings growth consistently above market and
fundamental value.
ISG Small-Cap Opportunity and AmSouth Small Cap are diversified Funds.
2
<PAGE> 11
ISG MID-CAP FUND AND AMSOUTH MID CAP FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Mid-Cap and AmSouth Mid Cap Funds seek to provide investors with capital
appreciation.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Mid Cap Fund are substantially
similar to those of ISG Mid-Cap Fund. ISG Mid-Cap invests primarily in equity
securities of companies publicly traded on U.S. exchanges that have market
capitalizations of $500 million to $5 billion. Similarly, AmSouth Mid Cap will
invest primarily in equity securities of companies publicly traded on U.S.
exchanges that are either included in the Russell Mid-Cap Growth Index or have
market capitalizations within the range of such included companies (from $1
billion to $11 billion as of June 30, 1999). Bennett Lawrence Management, the
Sub-Adviser of each Fund, seeks to identify industries that are benefiting from
major demand trends or themes and are therefore growing at a much faster rate
than the overall economy. The Sub-Adviser then typically gathers information on
the companies that are benefiting from these trends or themes. Generally, the
Fund will not invest in a company unless the Sub-Adviser has met with the
company's top management. The Sub-Adviser also seeks to talk to suppliers,
purchasers, and competitors to reinforce its analysis and monitor each Fund's
holdings. The Sub-Adviser's experience has been that when mid-sized companies
are backed by major demand trends, they can create attractive gains for
investors.
ISG Mid-Cap and AmSouth Mid Cap are diversified Funds.
ISG CAPITAL GROWTH FUND AND AMSOUTH CAPITAL GROWTH FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Capital Growth and AmSouth Capital Growth Funds seek to provide investors with
capital growth.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Capital Growth Fund are identical to
those of ISG Capital Growth Fund. Like ISG Capital Growth Fund, AmSouth Capital
Growth Fund will invest primarily in equity securities of U.S. companies with
market capitalizations of at least $500 million that the Adviser believes offer
opportunities for capital appreciation and growth of earnings. The Adviser first
will identify industries that it believes will expand over the next few years or
longer. The Adviser then will use fundamental analyses of company financial
statements to find large U.S. companies within these industries that offer the
prospect of solid earnings growth. The Adviser also may consider other factors
in selecting investments for the Fund, including the development of new or
improved products or services, opportunities for greater market share, more
effective management or other signs that the company will have greater than
average earnings growth and capital appreciation.
ISG Capital Growth and AmSouth Capital Growth are non-diversified Funds.
ISG LARGE-CAP EQUITY FUND AND AMSOUTH LARGE CAP FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Large-Cap Equity and AmSouth Large Cap Funds seek to provide investors with
long-term capital appreciation and, as a secondary objective, current income.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Large Cap Fund are identical to those
of ISG Large-Cap Equity Fund. Like ISG Large-Cap Equity Fund, AmSouth Large Cap
Fund will invest primarily in equity securities of large U.S. companies with
market capitalizations over $1 billion that the Adviser believes have the
potential to provide capital appreciation and growth of income. The Adviser's
strategy, as it currently is for ISG Large-Cap Equity Fund, will be to select
well-managed U.S. companies that have demonstrated sustained patterns of
profitability, strong balance sheets, and the potential to achieve predictable,
above-average earnings growth. The Adviser will seek to diversify the Fund's
portfolio within the various industries typically comprising, what the Adviser
believes to be, the classic growth segments of the U.S. economy: Technology,
Consumer Non-Durables, Health Care, Business Equipment and Services, Retail, and
Capital Goods.
ISG Large-Cap Equity and AmSouth Large Cap are diversified Funds.
3
<PAGE> 12
ISG EQUITY INCOME FUND AND AMSOUTH EQUITY INCOME FUND
Fund Investment Objective/Goals As its investment objective, ISG Equity
Income seeks to provide investors with current income and capital appreciation.
Similarly, AmSouth Equity Income 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.
Principal Investment Strategies of the Funds ISG Equity Income invests
primarily in dividend-paying equity securities of U.S. companies that the
Adviser expects to provide reasonable income and to have capital appreciation
potential. The Fund's Adviser's strategy is to identify financially stable,
mature companies that pay above-average dividends. The Adviser will select those
companies that it believes have the capacity to increase dividend payments in
the future. The Adviser takes into account factors, such as price-earnings
ratios, cash flow and the relationship of a company's asset value to the market
price of its securities. The Fund may invest in the securities of companies of
any size depending on the relative attractiveness of the company and the
industry in which it operates.
Similarly, the manager of AmSouth Equity Income seeks equity securities
which he believes represent investment value. In choosing individual securities,
the manager emphasizes those common stocks in each sector that have good value,
attractive yield, and dividend growth potential. The manager also will consider
higher valued companies that show the potential for growth. Factors affecting
selection include industry and company fundamentals, historical price
relationships, and/or underlying asset value. The Fund also utilizes convertible
securities because these securities typically offer higher yields and good
potential for capital appreciation as well as some downside protection.
ISG Equity Income is a non-diversified Fund while AmSouth Equity Income is
a diversified Fund.
Fixed Income Funds -- These Funds seek current income and invest primarily
in fixed income securities, such as U.S. Government securities, or corporate,
bank and commercial obligations. AmSouth Limited Term U.S. Government Fund
recently was organized for the purpose of continuing the investment operations
of ISG Limited Term U.S. Government Fund, and has no assets or prior history of
investment operations.
ISG INCOME FUND AND AMSOUTH BOND FUND
Fund Investment Objective/Goals As its investment objective, ISG Income
seeks to provide investors with current income without assuming undue risk.
Similarly, AmSouth Bond seeks current income consistent with the preservation of
capital.
Principal Investment Strategies of the Funds ISG Income invests primarily
in a broad range of investment grade, U.S. dollar denominated fixed income
securities of U.S. issuers. These securities include corporate and government
bonds, debentures and notes, convertible debt obligations, money market
instruments, municipal obligations, mortgage-related securities and asset-backed
securities. Investment grade securities are those rated at the time of purchase
in one of the four highest rating categories by a nationally recognized
statistical rating organization (an "NRSRO"), or are determined by the Fund's
Adviser to be of comparable quality. In choosing fixed income securities for the
Fund, the Fund's Adviser follows a controlled duration strategy which limits the
Fund's portfolio duration to 50% to 150% of the duration of its benchmark--the
Merrill Lynch Corporate/ Government Master Index. Duration is an indication of
how sensitive a bond or mutual fund portfolio may be to changes in interest
rates. Typically, the Fund will have an effective duration of between four and
seven years. When assessing a potential investment, the Adviser looks at a
variety of factors, including the company's credit history and financial
strength, the long-term economic trends of the industry or sector it belongs to,
the company's management and whether there is sufficient equity value in the
company.
Similarly, AmSouth Bond invests in bonds and other fixed-income securities,
including primarily U.S. corporate bonds and debentures and notes or bonds
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
The Fund invests in debt securities only if they are high grade (rated at time
of purchase in one of the three highest rating categories by an NRSRO, or are
determined by the portfolio manager to be of comparable quality). The Fund also
invests in zero-coupon obligations which are securities that do not provide
current income but represent ownership of future interest and principal payments
on U.S. Treasury bonds. The
4
<PAGE> 13
Fund may purchase fixed-income securities of any maturity and although there is
no limit on the Fund's average maturity, it is normally expected to be between
five and ten years. The Fund's manager uses a "top down" investment management
approach focusing on a security's maturity. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the Fund based upon
expectations about interest rates. The manager then selects individual
securities whose maturities fit this target and which the manager believes are
the best relative values.
ISG Income is a non-diversified Fund while AmSouth Bond is a diversified
Fund.
ISG GOVERNMENT INCOME FUND AND AMSOUTH GOVERNMENT INCOME FUND
Fund Investment Objective/Goals As its investment objective, ISG Government
Income seeks to provide investors with current income. Similarly, AmSouth
Government Income seeks current income consistent with the preservation of
capital.
Principal Investment Strategies of the Funds Both ISG Government Income and
AmSouth Government Income invest primarily in securities issued or guaranteed as
to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities. ISG Government Income may enter into repurchase agreements,
and for additional yield, invest in high quality (AA/Aa) corporate bonds,
mortgage-related securities, asset-backed securities and bank obligations. ISG
Government Income Fund also may purchase securities of any maturity (the average
maturity of the Fund's investments is less than 10 years).
Investments of AmSouth Government Income are principally mortgage-related
securities, but may also include U.S. Treasury obligations. The AmSouth
Government Income Fund's manager uses a "top down" investment management
approach focusing on a security's maturity. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the Fund based upon
expectations about interest rates. The manager then selects individual
securities whose maturities fit this target and which the manger believes are
the best relative values.
ISG Government Income and AmSouth Government Income are diversified Funds.
ISG LIMITED TERM INCOME FUND AND AMSOUTH LIMITED TERM BOND FUND
Fund Investment Objective/Goals As its investment objective, ISG Limited
Term Income seeks to provide investors with current income without assuming
undue risk. Similarly, AmSouth Limited Term Bond seeks current income consistent
with the preservation of capital.
Principal Investment Strategies of the Funds Each Fund invests primarily in
a broad range of U.S. dollar denominated fixed income securities of U.S.
issuers. These securities include corporate and government bonds, debentures and
notes, convertible debt obligations, money market instruments, municipal
obligations, mortgage-related securities and asset-backed securities. For ISG
Limited Term Income Fund, these securities must be considered investment grade
(rated at the time of purchase in one of the four highest rating categories by
an NRSRO, or are determined by the portfolio manager to be of comparable
quality). In choosing fixed income securities for ISG Limited Term Income, the
Adviser attempts to reduce interest rate risk by maintaining a portfolio
duration between one and four years and a dollar-weighted average portfolio life
between one and five years, depending on market conditions. Duration is an
indication of how sensitive a bond or mutual fund portfolio may be to changes in
interest rates. When assessing a potential investment, the Adviser looks at a
variety of factors, including the company's credit history and financial
strength, the long-term economic trends of the industry or sector it belongs to,
the company's management and whether there is sufficient equity value in the
company.
Similarly, AmSouth Limited Term Bond invests primarily in short-term fixed
income securities with maturities of five years or less, principally corporate
bonds and securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities. The Fund invests in debt securities only if they are
high-grade (rated at the time or purchase in one of the three highest rating
categories by an NRSRO, or are determined by the portfolio manager to be of
comparable quality). The AmSouth Fund's manager uses a "top down" investment
management approach focusing on a security's maturity. The manager sets, and
continually adjusts, a target for
5
<PAGE> 14
the interest rate sensitivity of the Fund based upon expectations about interest
rates and other economic factors. The manager then selects individual securities
whose maturities fit this target and which the manager believes are the best
relative values.
ISG Limited Term Income is a non-diversified Fund while AmSouth Limited
Term Bond is a diversified Fund.
ISG LIMITED TERM U.S. GOVERNMENT FUND AND AMSOUTH LIMITED TERM U.S. GOVERNMENT
FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Limited Term U.S. Government and AmSouth Limited Term U.S. Government Funds seek
to provide investors with high current income without assuming undue risk.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Limited Term U.S. Government Fund are
identical to those of ISG Limited Term U.S. Government Fund. Like ISG Limited
Term U.S. Government Fund, AmSouth Limited Term U.S. Government Fund will invest
in securities issued or guaranteed as to payment of principal and interest by
the U.S. Government, its agencies or instrumentalities, and enter into
repurchase agreements in respect of such securities. The Fund's Adviser will
follow a controlled duration strategy which limits how much the Fund's portfolio
durations will differ from its benchmark--the Merrill Lynch 1-5 Year Government
Bond Index. Typically, the Fund will have a portfolio duration between one and
four years and a dollar weighted average portfolio life between one and five
years, depending on market conditions. Duration is an indication of how
sensitive a bond or mutual fund portfolio may be to changes in interest rates.
The market price of a bond with a duration of six years should increase or
decline twice as much as the market price of a bond with a three-year duration.
ISG Limited Term U.S. Government is a non-diversified Fund while AmSouth
Limited Term U.S. Government is a diversified Fund.
Tax-Exempt Fixed Income Funds -- These Funds seek tax-exempt income and
invest primarily in municipal obligations which are exempt from Federal and, in
the case of the Tennessee Funds, Tennessee income taxes. AmSouth Tennessee
Tax-Exempt Fund and AmSouth Limited Term Tennessee Tax-Exempt Fund recently were
organized for the purpose of continuing investment operations of ISG Tennessee
Tax-Exempt Fund and ISG Limited Term Tennessee Tax-Exempt Fund, respectively,
and such AmSouth Funds have no assets or prior history of investment operations.
ISG TENNESSEE TAX-EXEMPT FUND AND AMSOUTH TENNESSEE TAX-EXEMPT FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Tennessee Tax-Exempt and AmSouth Tennessee Tax-Exempt Funds seek to provide
investors with current income exempt from Federal and Tennessee income taxes
without assuming undue risk.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Tennessee Tax-Exempt Fund are
identical to those of ISG Tennessee Tax-Exempt Fund. Like ISG Tennessee
Tax-Exempt Fund, AmSouth Tennessee Tax-Exempt Fund will invest substantially all
of its assets in municipal obligations of the State of Tennessee, its political
subdivisions, authorities and corporations, that provide income exempt from
Federal and Tennessee personal income taxes. The average dollar-weighted credit
rating of the municipal obligations held by the Fund will be at least A-. To
further limit credit risk, the Fund will invest only in investment grade
municipal obligations or the unrated equivalent as determined by the Adviser.
The Advisers will evaluate municipal obligations based on credit quality,
financial outlook and yield potential. Although the Fund will concentrate its
assets in Tennessee municipal obligations, as is the case with ISG Tennessee
Tax-Exempt Fund, the Adviser will strive to diversify the portfolios across
sectors and issuers within Tennessee. The Fund may purchase securities of any
maturity. Generally, the average maturity of the Fund's investments will
continue to be primarily between six and ten years.
ISG Tennessee Tax-Exempt and AmSouth Tennessee Tax-Exempt are
non-diversified Funds.
6
<PAGE> 15
ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND AND AMSOUTH LIMITED TERM TENNESSEE
TAX-EXEMPT FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Limited Term Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt
Funds seek to provide investors with current income exempt from Federal and
Tennessee income taxes without assuming undue risk.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Limited Term Tennessee Tax-Exempt
Fund are identical to those of ISG Limited Term Tennessee Tax-Exempt Fund. Like
ISG Limited Term Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-
Exempt Fund will invest substantially all of its assets in municipal obligations
of the State of Tennessee, its political subdivisions, authorities and
corporations, that provide income exempt from Federal and Tennessee personal
income taxes. The Fund's Adviser will attempt to reduce interest rate risk by
maintaining a portfolio duration of under five years and an effective average
portfolio maturity between three and five years, depending on market conditions.
Duration is an indication of how sensitive a bond or mutual fund portfolio may
be to changes in interest rates. The average dollar-weighted credit rating of
the municipal obligations held by the Funds will be at least A-. To further
limit credit risk, the Fund will invest only in investment grade municipal
obligations or the unrated equivalent as determined by the Adviser. The Adviser
will evaluate municipal obligations based on credit quality, financial outlook
and yield potential. Although the Fund will concentrate its assets in Tennessee
municipal obligations, as is the case with ISG Limited Term Tennessee Tax-Exempt
Fund, the Adviser will strive to diversify the portfolio across sectors and
issuers within Tennessee.
ISG Limited Term Tennessee Tax-Exempt and AmSouth Limited Term Tennessee
Tax-Exempt are non-diversified Funds.
ISG MUNICIPAL INCOME FUND AND AMSOUTH MUNICIPAL BOND FUND
Fund Investment Objective/Goals As its investment objective, ISG Municipal
Income seeks to provide investors with current income exempt from Federal income
tax. Similarly, AmSouth Municipal Bond seeks to produce as high a level of
current Federal tax-exempt income as is consistent with the preservation of
capital.
Principal Investment Strategies of the Funds ISG Municipal Income normally
invests substantially all of its assets in investment grade municipal
obligations, or the unrated equivalent as determined by the Adviser, that
provide income exempt from Federal income tax. The Adviser evaluates municipal
obligations based on credit quality, financial outlook and yield potential, and
seeks to diversify the Fund's investments across several different states,
sectors and issuers.
Similarly, AmSouth Municipal Bond invests primarily in municipal securities
that provide income that is exempt from Federal income tax and not subject to
the Federal alternative minimum tax for individuals. However, unlike ISG
Municipal Income, AmSouth Municipal Bond currently concentrates its investments
in municipal securities issued by the State of Alabama and its political
subdivisions. The Fund invests in debt securities only if they are high-grade
(rated at the time or purchase in one of the three highest rating categories by
an NRSRO, or are determined by the portfolio manager to be of comparable
quality). The Fund manager uses a "top down" investment management approach
focusing on a security's maturity. The manager sets, and continually adjusts, a
target for the interest rate sensitivity of the Fund based upon expectations
about interest rates and other economic factors. The manager then selects
individual securities whose maturities fit this target, have a certain level of
credit quality, and which the manager believes are the best relative values.
Both ISG Municipal Income and AmSouth Municipal Bond may purchase securities of
any maturity. The average maturity of the ISG Municipal Income is primarily
between one and five and six and ten years while that of AmSouth Municipal Bond
is primarily between five and ten years.
ISG Municipal Income and AmSouth Municipal Bond are diversified Funds.
Money Market Funds -- These Funds seek current income and liquidity and
invest primarily in short-term securities. Each Fund seeks to maintain a stable
price of $1.00 per share. AmSouth Treasury Reserve Money Market Fund recently
was organized for the purpose of continuing the investment operations of ISG
Treasury Money Market Fund, and has no assets or prior history of investment
operations.
7
<PAGE> 16
ISG PRIME MONEY MARKET FUND AND AMSOUTH PRIME MONEY MARKET FUND
Fund Investment Objective/Goals As its investment objective, ISG Prime
Money Market seeks to provide investors with as high a level of current income
as is consistent with the preservation of capital and the maintenance of
liquidity. Similarly, as a money market fund, AmSouth Prime Money Market seeks
current income with liquidity and stability of principal.
Principal Investment Strategies of the Funds Both ISG Prime Money Market
and AmSouth Prime Money Market invest only in U.S. dollar-denominated,
"high-quality" short-term debt securities, including the following:
- obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
- certificates of deposit, time deposits, bankers' acceptances and other
short-term securities issued by domestic or foreign banks or their
subsidiaries or branches;
- domestic and foreign commercial paper and other short-term corporate debt
obligations, including those with floating or variable rates of interest;
- obligations issued or guaranteed by one or more foreign governments or
their agencies or instrumentalities, including obligations of
supranational entities;
- asset-backed securities; and
- repurchase agreements collateralized by the types of securities listed
above.
ISG Prime Money Market buys and sells securities based on considerations of
safety of principal and liquidity, which means that the Fund may not necessarily
invest in securities paying the highest available yield at a particular time.
The Fund will attempt to increase its yield by trading to take advantage of
short-term market variations. The Adviser evaluates Fund investments based on
credit analysis and the interest rate outlook. The Fund normally will invest at
least 25% of its total assets in domestic or foreign bank obligations.
The manager of AmSouth Prime Money Market first considers safety of
principal and the quality of an investment. The manager then focuses on
generating a high level of income. The manager generally evaluates investments
based on interest rate sensitivity selecting those securities whose maturities
fit the Fund's interest rate sensitivity target and which the manager believes
to be the best relative values. The Fund does not have a policy of investing
over 25% of its assets in the banking industry, or in any other industry. ISG
Prime Money Market and AmSouth Prime Money Market are diversified Funds.
ISG TREASURY MONEY MARKET FUND AND AMSOUTH TREASURY RESERVE MONEY MARKET FUND
Fund Investment Objective/Goals As their investment objectives, both ISG
Treasury Money Market and AmSouth Treasury Reserve Money Market Funds seek to
provide investors with as high a level of current income as is consistent with
the preservation of capital and the maintenance of liquidity.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Treasury Reserve Money Market Fund
are identical to those of ISG Treasury Money Market Fund. Like ISG Treasury
Money Market Fund, AmSouth Treasury Reserve Money Market Fund will invest
primarily in U.S. Treasury securities and repurchase agreements in respect
thereof. The Fund also may invest up to 35% of its assets in other securities
guaranteed as to payment of principal and interest by the U.S. Government and
repurchase agreements in respect thereof. Similarly, AmSouth Treasury Reserve
Money Market Fund will invest based on considerations of safety of principal and
liquidity, which means that the Fund may not necessarily invest in securities
paying the highest available yield at a particular time. The Fund will attempt
to increase its yield by trading to take advantage of short-term market
variations. The Fund's Adviser generally will evaluate investments based on
interest rate sensitivity.
Both ISG Treasury Money Market and AmSouth Treasury Reserve Money Market
are diversified Funds.
8
<PAGE> 17
ISG TAX-EXEMPT MONEY MARKET FUND AND AMSOUTH TAX-EXEMPT MONEY MARKET FUND
Fund Investment Objective/Goals As its investment objective, ISG Tax-Exempt
Money Market seeks as high a level of current interest income exempt from
Federal income tax as is consistent with the preservation of capital and the
maintenance of liquidity. Similarly, as a money market fund, AmSouth Tax-Exempt
Money Market 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.
Principal Investment Strategies of the Funds ISG Tax-Exempt Money Market
normally invests substantially all of its assets in short-term municipal
obligations that provide income exempt from Federal income tax. Municipal
obligations are debt obligations issued by states, territories and possessions
of the United States and their political subdivisions, agencies and
instrumentalities, and certain other entities.
Similarly, AmSouth Tax-Exempt Money Market invests primarily in short-term
municipal securities that provide income that is exempt from federal income tax
and not subject to the federal alternative minimum tax for individuals.
Municipal securities purchased by the 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 be subject to a demand feature permitting the
Fund to demand payment within a year. The Fund may also invest up to 10% of its
total assets in the securities of money market mutual funds which invest
primarily in obligations exempt from Federal income tax. The Fund's manager
first considers safety of principal and the quality of an investment. The
manager then focuses on generating a high-level of income. The manager generally
evaluates investments based on interest rate sensitivity selecting those
securities whose maturities fit the Fund's interest rate sensitivity target and
which the manager believes to be the best relative values.
ISG Tax-Exempt Money Market and AmSouth Tax-Exempt Money Market are
diversified Funds.
Strategic Portfolios -- These Funds are "fund of funds" which will invest
substantially all of their assets in Institutional Class shares of the ISG Funds
or, after the reorganizations, Trust shares of the AmSouth Funds ("Underlying
Funds") as described below. The Underlying Funds are described above and in the
relevant Fund Prospectus. AmSouth Strategic Portfolios: Aggressive Growth
Portfolio ("Aggressive Growth Portfolio"), AmSouth Strategic Portfolios: Growth
Portfolio ("Growth Portfolio"), AmSouth Strategic Portfolios: Growth and Income
Portfolio ("Growth and Income Portfolio"), AmSouth Strategic Portfolios:
Moderate Growth and Income Portfolio ("Moderate Growth and Income Portfolio")
and AmSouth Strategic Portfolios: Current Income Portfolio ("Current Income
Portfolio") recently were organized for the purpose of continuing the investment
operations of the corresponding ISG Fund, and such AmSouth Funds have no assets
or prior history of investment operations.
ISG AGGRESSIVE GROWTH PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: AGGRESSIVE
GROWTH PORTFOLIO
Fund Investment Objective/Goals As their investment objectives, both ISG
Aggressive Growth and AmSouth Aggressive Growth Portfolios seek to provide
investors with capital growth.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Aggressive Growth Portfolio are
identical to those of ISG Aggressive Growth Portfolio. Like ISG Aggressive
Growth Portfolio, AmSouth Aggressive Growth Portfolio will allocate its assets
among the Underlying Funds within predetermined strategy ranges, as set forth
below. The Fund's Adviser will make allocation decisions according to its
outlook for the economy, financial markets and relative market valuation of the
Underlying Funds. The Fund will invest up to 100% of their total assets in five
Underlying Funds which invest primarily in equity securities and up to 30% of
their total assets in one Underlying Fund which invests in money market
instruments. ISG Aggressive Growth Portfolio currently invests, and AmSouth
Aggressive Growth
9
<PAGE> 18
Portfolio, after the reorganization, will invest, in the following Underlying
Funds within the strategy ranges (expressed as a percentage of each Fund's total
assets) indicated below:
ISG AGGRESSIVE GROWTH
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGES
--------------- ---------------
<S> <C>
ISG Large-Cap Equity Fund................................... 0-70%
ISG Capital Growth Fund..................................... 0-45%
ISG Mid-Cap Fund............................................ 0-30%
ISG Small-Cap Opportunity Fund.............................. 0-30%
ISG International Equity Fund............................... 0-20%
ISG Prime Money Market Fund................................. 0-30%
</TABLE>
AMSOUTH AGGRESSIVE GROWTH
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
AmSouth Large Cap Fund...................................... 0-70%
AmSouth Capital Growth Fund................................. 0-45%
AmSouth Mid Cap Fund........................................ 0-30%
AmSouth Small Cap Fund...................................... 0-30%
AmSouth International Equity Fund........................... 0-20%
AmSouth Prime Money Market Fund............................. 0-30%
</TABLE>
ISG Aggressive Growth is a non-diversified Fund while AmSouth Aggressive
Growth is a diversified Fund.
ISG GROWTH PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: GROWTH PORTFOLIO
Fund Investment Objective/Goals As their investment objectives, both ISG
Growth and AmSouth Growth Portfolios seek to provide investors with long-term
capital growth.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Growth Portfolio are identical to
those of ISG Growth Portfolio. Like ISG Growth Portfolio, AmSouth Growth
Portfolio will allocate its assets among the Underlying Funds within
predetermined strategy ranges, as set forth below. The Fund's Adviser will make
allocation decisions according to its outlook for the economy, financial markets
and relative market valuation of the Underlying Funds. The Fund will invest up
to 100% of its total assets in six Underlying Funds which invest primarily in
equity securities, up to 25% of its total assets in one Underlying Fund which
invests primarily in fixed income securities and up to 20% of its total assets
in one Underlying Fund which invests in money market instruments. ISG Growth
Portfolio currently invests, and
10
<PAGE> 19
AmSouth Growth Portfolio, after the reorganization, will invest, its assets in
the following Underlying Funds within the strategy ranges (expressed as a
percentage of each Fund's total assets) indicated below:
ISG GROWTH
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGES
--------------- ---------------
<S> <C>
ISG Large-Cap Equity Fund................................... 0-65%
ISG Capital Growth Fund..................................... 0-25%
ISG Equity Income Fund...................................... 0-25%
ISG Mid-Cap Fund............................................ 0-25%
ISG Small-Cap Opportunity Fund.............................. 0-25%
ISG International Equity Fund............................... 0-15%
ISG Government Income Fund.................................. 0-25%
ISG Prime Money Market Fund................................. 0-20%
</TABLE>
AMSOUTH GROWTH
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGES
--------------- ---------------
<S> <C>
AmSouth Large Cap Fund...................................... 0-65%
AmSouth Capital Growth Fund................................. 0-25%
AmSouth Equity Income Fund.................................. 0-25%
AmSouth Mid Cap Fund........................................ 0-25%
AmSouth Small Cap Fund...................................... 0-25%
AmSouth International Equity Fund........................... 0-15%
AmSouth Government Income Fund.............................. 0-25%
AmSouth Prime Money Market Fund............................. 0-20%
</TABLE>
ISG Growth Portfolio is a non-diversified Fund while AmSouth Growth
Portfolio is a diversified Fund.
ISG GROWTH & INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: GROWTH AND
INCOME PORTFOLIO
Fund Investment Objective/Goals As their investment objectives, both ISG
Growth & Income and AmSouth Growth and Income Portfolios seek to provide
investors with long-term capital growth and a moderate level of current income.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Growth and Income Portfolio are
identical to those of ISG Growth & Income Portfolio. Like ISG Growth & Income
Portfolio, AmSouth Growth and Income Portfolio will allocate its assets among
the Underlying Funds within predetermined strategy ranges, as set forth below.
The Funds' Adviser will make allocation decisions according to its outlook for
the economy, financial markets and relative market valuation of the Underlying
Funds. The Fund will invest up to 100% of its total assets in six Underlying
Funds which invest primarily in equity securities, up to 80% of its total assets
in two Underlying Funds which invest primarily in fixed income securities and up
to 20% of its total assets in one Underlying Fund which invests in money market
instruments. ISG Growth & Income Portfolio currently invests, and AmSouth Growth
and Income Portfolio, after
11
<PAGE> 20
the reorganization, will invest, its assets in the following Underlying Funds
within the strategy ranges (expressed as a percentage of each Fund's total
assets) indicated below:
ISG GROWTH & INCOME
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
ISG Large-Cap Equity Fund................................... 0-60%
ISG Capital Growth Fund..................................... 0-25%
ISG Equity Income Fund...................................... 0-25%
ISG Mid-Cap Fund............................................ 0-20%
ISG Small-Cap Opportunities Fund............................ 0-20%
ISG International Equity.................................... 0-15%
ISG Government Income Fund.................................. 0-60%
ISG Limited Term Income Fund................................ 0-20%
ISG Prime Money Market Fund................................. 0-20%
</TABLE>
AMSOUTH GROWTH AND INCOME
<TABLE>
<CAPTION>
UNDERLYING FUNDS STRATEGY RANGES
---------------- ---------------
<S> <C>
AmSouth Large Cap Fund...................................... 0-60%
AmSouth Capital Growth Fund................................. 0-25%
AmSouth Equity Income Fund.................................. 0-25%
AmSouth Mid Cap Fund........................................ 0-20%
AmSouth Small Cap Fund...................................... 0-20%
AmSouth International Equity Fund........................... 0-15%
AmSouth Government Income Fund.............................. 0-60%
AmSouth Limited Term Bond Fund.............................. 0-20%
AmSouth Prime Money Market Fund............................. 0-20%
</TABLE>
ISG Growth & Income Portfolio is a non-diversified Fund while AmSouth
Growth and Income Portfolio is a diversified Fund.
ISG MODERATE GROWTH & INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS:
MODERATE GROWTH AND INCOME PORTFOLIO
Fund Investment Objective/Goals As their investment objectives, both ISG
Moderate Growth and Income and AmSouth Strategic Portfolios: Moderate Growth and
Income Portfolios ("AmSouth Moderate Growth and Income Portfolio") seek to
provide investors with current income and a moderate level of capital growth.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Moderate Growth and Income Portfolio
are identical to those of ISG Moderate Growth & Income Portfolio. Like ISG
Moderate Growth & Income Portfolio, AmSouth Moderate Growth and Income Portfolio
will allocate its assets among the Underlying Funds within predetermined
strategy ranges, as set forth below. The Fund's Adviser will make allocation
decisions according to its outlook for the economy, financial markets and
relative market valuation of the Underlying Funds. The Fund will invest up to
80% of its total assets in three Underlying Funds which invest primarily in
equity securities, up to 100% of its total assets in two Underlying Funds which
invest primarily in fixed income securities and up to 20% of its total assets in
one Underlying Fund which invests in money market instruments. ISG Moderate
Growth and Income Portfolio currently invests, and AmSouth Moderate Growth and
Income Portfolio, after the reorganization, will invest, its assets in the
following
12
<PAGE> 21
Underlying Funds within the strategy ranges (expressed as a percentage of each
Fund's total assets) indicated below:
ISG MODERATE GROWTH & INCOME
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
ISG Government Income Fund.................................. 0-70%
ISG Limited Term Income Fund................................ 0-45%
ISG Large-Cap Equity Fund................................... 0-50%
ISG Capital Growth Fund..................................... 0-15%
ISG Equity Income Fund...................................... 0-15%
ISG Prime Money Market Fund................................. 0-20%
</TABLE>
AMSOUTH MODERATE GROWTH AND INCOME
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
AmSouth Government Income Fund.............................. 0-70%
AmSouth Limited Term Bond Fund.............................. 0-45%
AmSouth Large Cap Fund...................................... 0-50%
AmSouth Capital Growth Fund................................. 0-15%
AmSouth Equity Income Fund.................................. 0-15%
AmSouth Prime Money Market Fund............................. 0-20%
</TABLE>
ISG Moderate Growth & Income Portfolio is a non-diversified Fund while
AmSouth Moderate Growth and Income Portfolio is a diversified Fund.
ISG CURRENT INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: CURRENT INCOME
PORTFOLIO
Fund Investment Objective/Goals As their investment objectives, both ISG
Current Income and AmSouth Current Income seek to provide investors with current
income.
Principal Investment Strategies of the Funds As a New AmSouth Fund, the
principal investment strategies of AmSouth Current Income Portfolio are
identical to those of ISG Current Income Portfolio. Like ISG Current Income
Portfolio, AmSouth Current Income Portfolio will allocate its assets among the
Underlying Funds within predetermined strategy ranges as set forth below. The
Fund's Adviser will make allocation decisions according to its outlook for the
economy, financial markets and relative market valuation of the Underlying
Funds. The Fund will invest 75% to 100% of its total assets in two Underlying
Funds which invest primarily in fixed income securities and up to 30% of its
total assets in one Underlying Fund which invests in money market instruments.
ISG Current Income Portfolio currently invests, and AmSouth Current Income,
after the reorganization, will invest, its assets in the following Underlying
Funds within the strategy ranges (expressed as a percentage of each Fund's total
assets) indicated below:
ISG CURRENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
ISG Limited Term Income Fund................................ 40-60%
ISG Income Fund............................................. 35-55%
ISG Prime Money Market Fund................................. 0-25%
</TABLE>
13
<PAGE> 22
AMSOUTH CURRENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
--------------- --------------
<S> <C>
AmSouth Limited Term Bond Fund.............................. 40-60%
AmSouth Bond Fund........................................... 35-55%
AmSouth Prime Money Market Fund............................. 0-25%
</TABLE>
ISG Current Income Portfolio is a non-diversified Fund while AmSouth
Current Income Portfolio is a diversified Fund.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Management discussion of fund performance for the pre-existing AmSouth
Funds -- AmSouth Government Income, AmSouth Limited Term Bond, AmSouth Equity
Income, AmSouth Municipal Bond, AmSouth Small Cap, AmSouth Bond, AmSouth
Tax-Exempt Money Market and AmSouth Prime Money Market is incorporated by
reference from the annual report of the AmSouth Funds, dated July 31, 1999, and
attached hereto as Appendix C.
No management discussion of fund performance is included for the New
AmSouth Funds -- AmSouth Current Income, AmSouth Moderate Growth and Income,
AmSouth Growth and Income, AmSouth Growth, AmSouth Aggressive Growth, AmSouth
Mid Cap, AmSouth Large Cap, AmSouth International Equity, AmSouth Capital
Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee Tax-Exempt,
AmSouth Limited Term U.S. Government, and AmSouth Treasury Reserve Money Market
-- which had not yet commenced operations.
Management discussion of fund performance for the ISG Funds is incorporated
by reference from the current prospectuses, annual report dated December 31,
1998 and semi-annual report dated June 30, 1999 of ISG Funds, which are
available upon request without charge by calling 1-800-852-0045.
OPERATING PROCEDURES.
Distributions. The dividends and distributions policies of each AmSouth
Fund and its corresponding ISG Fund are substantially similar.
For all Fixed Income Funds, all Tax-Exempt Fixed Income Funds, the ISG
Current Income Portfolio, the AmSouth Current Income Portfolio, the ISG Equity
Income Fund, and the AmSouth Equity Income Fund, dividends are declared and paid
monthly to all shareholders of record at the close of business on the day of
declaration. Distributions are made quarterly for all Equity Funds (other than
ISG International Equity and AmSouth International Equity Funds) and ISG
Aggressive Growth, ISG Growth, ISG Growth & Income, ISG Moderate Growth & Income
Portfolios and their corresponding AmSouth Funds. Distributions are made
annually for the ISG International Equity Fund and the AmSouth International
Equity Fund. Dividends on Money Market Funds are declared daily and generally
paid monthly although they are paid in cash not later than seven business days
after a shareholder's complete redemption of his or her shares.
Net realized capital gains, if any, are distributed at least annually to
shareholders of record. All distributions will be automatically reinvested in
additional Fund Shares unless the shareholder requests to receive all
distributions in cash. Dividends and distributions, when received in shares, 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. Dividends paid in additional shares receive the same tax treatment
as dividends paid in cash.
The amount of dividends payable on Institutional Shares of the ISG Funds
and Trust Shares of the AmSouth Funds generally will be more than dividends
payable on Class A and Class B Shares of the ISG Funds and AmSouth Funds because
of the distribution expenses charged to Class A and Class B Shares but not
charged to Institutional or Trust Shares.
14
<PAGE> 23
Purchase Procedures. Because the distributor for both ISG and AmSouth is
BISYS Fund Services Limited Partnership (the "Distributor"), purchase procedures
are generally identical for the two Fund groups. Purchase orders for Shares are
executed at a per Share price equal to the net asset value next determined after
the purchase order is effective (plus any applicable sales charge). No sales
charges are imposed on Institutional shares of the ISG Funds or Trust shares of
AmSouth Funds. A maximum sales charge of 4.5% of the offering price is imposed
on Class A Shares of AmSouth International Equity, AmSouth Mid Cap, AmSouth
Capital Growth, AmSouth Large Cap, AmSouth Aggressive Growth, AmSouth Growth,
AmSouth Growth and Income, AmSouth Moderate Growth and Income, AmSouth Equity
Income and AmSouth Small Cap, and a maximum sales charge of 4.75% of the
offering price is imposed on Class A Shares of ISG International Equity, ISG
Mid-Cap, ISG Capital Growth, ISG Large-Cap Equity, ISG Aggressive Growth, ISG
Growth, ISG Growth & Income, ISG Moderate Growth & Income, ISG Equity Income and
ISG Small-Cap Opportunity. A maximum sales charge of 4.0% is imposed on Class A
Shares of AmSouth Limited Term U.S. Government, AmSouth Tennessee Tax-Exempt,
AmSouth Limited Term Tennessee Tax-Exempt, AmSouth Current Income, AmSouth Bond,
AmSouth Government Income, AmSouth Limited Term Bond and AmSouth Municipal Bond,
and a maximum sales charge of 3.0% is imposed on Class A Shares of ISG Limited
Term U.S. Government, ISG Tennessee Tax-Exempt, ISG Limited Term Tennessee
Tax-Exempt, ISG Current Income, ISG Income, ISG Government Income, ISG Limited
Term Income and ISG Municipal Income. However, no sales charge will be imposed
on the Shares of the AmSouth Funds distributed by AmSouth in the Transaction. In
addition, until October 1, 2001, each Shareholder who participates in the
Transaction will be able to purchase additional Class A Shares of the relevant
AmSouth Fund subject to the lower initial sales charge, if any, applicable to
the AmSouth Class A Shares or the corresponding ISG Fund shares exchanged by the
Shareholder. For a comparison of the schedules of the initial sales charge
imposed on shares of the applicable ISG Funds and their corresponding AmSouth
Funds, see the relevant Fund's Prospectus.
Shares of both the ISG Funds and the AmSouth Funds are sold on a continuous
basis by the Distributor, either by mail, by wire, through an Automatic
Investment Plan or through financial institutions. The ISG Funds have a minimum
investment requirement of $1,000 for Class A and for Class B, $250 for Automatic
Investment, $100 for Retirement, and $100,000 for Institutional Class, while the
AmSouth Funds have a minimum investment requirement of $1,000 for Class A, Class
B and Automatic Investment, and $250 for Retirement. The ISG Funds have a
subsequent minimum investment requirement of $100 for Class A and for Class B,
$50 for Retirement, and $25 for Automatic Investment whereas the AmSouth Funds
generally have no subsequent minimum investment requirement for Class A and for
Class B, and $50 for Automatic Investment and for Retirement.
Purchases and redemption of Shares of the ISG Funds and the AmSouth Funds
may be made on days on which both The New York Stock Exchange ("NYSE") and the
Federal Reserve wire system are open for business ("Business Days").
AmSouth Class A Shares and Class B Shares are subject to a shareholder
servicing fee of .25%. AmSouth Trust Shares are subject to a shareholder
servicing fee of .15% effective as of March 13, 2000. ISG Funds are subject to a
shareholder servicing fee of .15% for Class A and Institutional Class (.25% for
ISG Treasury Money Market Fund and ISG Prime Money Market Fund) and .25% for
Class B.
Exchange Privilege. Shares will be exchanged at the next determined net
asset value. Shareholders of ISG Funds can exchange shares in one Fund for
shares of the same class of another ISG Fund, usually without paying additional
sales charges. When exchanging from a Fund that has no sales charge or a lower
sales charge to a Fund with a higher sales charge, the shareholder will pay the
difference. No transaction fees are charged for exchanges. Shareholders must
meet the minimum investment requirements for the Fund into which Shares are
being exchanged, and the Shares being exchanged must have a current value of at
least $500. If Shares of the Fund are purchased by check, those Shares cannot be
exchanged until the check has cleared. This could take 15 days or more. The Fund
may reject an exchange request from a shareholder who has made more than five
exchanges between investment portfolios offered by Fund management in a year, or
more than three exchanges in a calendar quarter. Although unlikely, the Funds
may reject any exchanges or, upon 60-days' notice to shareholders, change or
terminate the exchange privilege.
15
<PAGE> 24
Each AmSouth Fund's Shares may be exchanged for Shares of the class of the
various other Funds of AmSouth which the shareholder qualifies to purchase
directly so long as the shareholder maintains the applicable minimum account
balance in each Fund in which he or she owns Shares and satisfies the minimum
initial and subsequent purchase amounts of the Fund into which the Shares are
exchanged. AmSouth shareholders may exchange their Class A Shares for Trust
Shares of the same Fund if the shareholder becomes eligible to purchase Trust
Shares. No transaction fees are currently charged for exchanges. When exchanging
Trust Shares of a Fund for Class A Shares of a Fund, the shareholder will be
exempt from any applicable sales charge. For Class A Shares, when exchanging
from a Fund that has no sales charge or a lower sales charge to a Fund with a
higher sales charge, the shareholder will pay the difference. The Exchange
Privilege (including automatic exchanges) may be changed or eliminated at any
time upon 60-days' notice to shareholders.
Exchange privileges for shareholders in both the ISG Funds and the AmSouth
Funds are available only in states where the Shares of such Fund may be legally
sold. Exercise of the exchange privilege is generally treated as a sale for
Federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized by the exchanging shareholder.
Exchanges are made on the basis of the relative net asset values of the
shares exchanged plus any applicable sales charge. Neither ISG Funds nor AmSouth
Funds imposes a charge for processing exchanges of shares.
Redemption Procedures. Because the ISG Funds and the AmSouth Funds are
distributed by the same Distributor -- BISYS Fund Services Limited Partnership
-- redemption procedures are generally identical for the two Fund groups. Both
ISG Funds and AmSouth redeem shares at their net asset value next determined
after receipt by the Distributor of the redemption request. Redemptions will be
made on any Business Day without charge, except that the AmSouth Funds presently
charge $7 for wiring redemption proceeds to a shareholder's designated account.
Shares may be redeemed by mail, by telephone or through a pre-arranged
systematic withdrawal plan.
Each of the ISG Funds and AmSouth Funds reserves the right to make payment
on redemptions in securities rather than cash. Each of the ISG Funds and AmSouth
reserve the right to redeem shares at net asset value if a shareholder's account
has a value of less than the minimum initial purchase amount. Before a Fund
exercises its right to redeem such shares, a shareholder is given notice that
the value of shares in his or her account is less than the minimum amount and is
allowed 60 days to make an additional investment in the Fund. The minimum for an
ISG Fund is $500 while the minimum for an AmSouth Fund is $50.
Net Asset Value. The net asset value of shares of the non-money market ISG
Funds and the non-money market AmSouth Funds is determined daily as of 4:00
p.m., Eastern time on any Business Day.
The net asset value of shares of the ISG Money Market Funds (except the ISG
Tax-Exempt Money Market which is calculated as of 11:00 a.m. Eastern time) is
calculated as of 2:00 p.m., on each Business Day, based on the amortized cost
method. The net asset value of shares of the AmSouth money market funds (except
the Tax-Exempt Money Market which is calculated at 12:00 p.m. and 4:00 p.m.
Eastern time) is calculated as of 1:00 p.m. and 4:00 p.m. Eastern time, on each
Business Day, based on the amortized cost method. The amortized cost method
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.
The net asset value per Share of the ISG Strategic Portfolios and the
AmSouth Strategic Portfolios will be established on the basis of current
valuations of their portfolio securities provided by Muller Data Corporation or
Kenny S&P Evaluation Services, whose procedures are monitored by the
Administrator, and which valuations are the fair market value of such
securities.
Federal Tax Considerations. Consummation of each reorganization is subject
to the condition that the relevant ISG Fund and the corresponding AmSouth Fund
receive an opinion of Ropes & Gray, Counsel to AmSouth Funds, to the effect
that, based upon certain representations and assumptions and subject to certain
qualifications, the reorganization will not result in the recognition of gain or
loss for Federal income tax purposes to any of the ISG Funds, their shareholders
or the AmSouth Funds.
16
<PAGE> 25
PRINCIPAL RISKS
The investment objective and policies of each ISG Fund and its
corresponding AmSouth Fund are substantially similar. However, in some
instances, an AmSouth Fund may invest in certain securities in which the
corresponding ISG Fund may not invest. In some cases, although both the AmSouth
Fund and the corresponding ISG Fund may invest in the same securities, they may
do so subject to varying limitations. Each Fund is actively managed and, thus,
is subject to the risk that the Fund's principal investment strategies might not
achieve the Fund's goal. This discussion is qualified in its entirety by the
disclosure set forth in the AmSouth and ISG Funds Prospectuses accompanying this
Combined Prospectus/Proxy Statement.
Equity Funds -- Stocks and other equity securities fluctuate in price,
often based on factors unrelated to the issuers' value, and such fluctuations
can be pronounced. The value of your investment in any of these Funds will
fluctuate in response to movements in the stock market and the activities of
individual portfolio companies. As a result, you could lose money by investing
in an Equity Fund, ISG or AmSouth, particularly if there is a sudden decline in
share prices of the Fund's holdings or an overall decline in the stock market.
With respect to each of ISG International Equity Fund and AmSouth
International Equity Fund, the Fund's performance will be influenced by
political, social and economic factors affecting companies in foreign countries.
The securities of foreign issuers fluctuate in price, often based on factors
unrelated to the issuers' value, and such fluctuations can be pronounced.
Foreign securities include special risks such as exposure to currency
fluctuations, a lack of adequate company information, political instability, and
differing auditing and legal standards. Emerging market countries in which these
Funds may invest have economic structures that are generally less diverse and
mature, and political systems that are less stable, than those of developed
countries. As a result, their markets are more volatile.
The ISG Small-Cap Opportunity Fund and AmSouth Small Cap Fund each invest
in small-cap companies which carry additional risks. Smaller companies typically
have more limited product lines, markets and financial resources, and have less
predictable earnings than larger companies and their securities trade less
frequently and in more limited volume than those of larger, more established
companies. As a result, small-cap stocks and thus their Funds' shares may
fluctuate significantly more in value than larger-cap stocks and funds that
focus on them.
The ISG Mid-Cap Fund and AmSouth Mid Cap Fund each invest in mid-cap
companies which carry additional risks. These companies typically have less
predictable earnings than larger companies and their securities trade less
frequently and in more limited volume than those of larger, more established
companies. AS a result, mid-cap stocks and thus these Funds' shares may
fluctuate more in value than larger-cap stocks and funds that focus on them.
Each of ISG International Equity Fund, AmSouth International Equity Fund,
ISG Capital Growth Fund, AmSouth Capital Growth Fund and ISG Equity Income Fund
is non-diversified and may invest a greater percentage of its assets in a
particular company compared with other funds. Accordingly, the Fund's portfolio
may be more sensitive to changes in the market value of a single company or
industry.
Fixed Income Funds -- These Funds' investments in fixed income securities
will be subject primarily to interest rate, credit and, for mortgage-related and
asset-backed securities, prepayment risk.
Prices of fixed income securities, including U.S. Government securities,
tend to move inversely with changes in interest rates. The most immediate effect
of a rise in rates is usually a drop in the prices of such securities, and
therefore in the Fund's share price as well. Interest rate risk is usually
greater for fixed income securities with longer maturities or durations. To the
extent the Fund maintains a comparatively long duration, its share price will
react more to interest rate movements. A security backed by the U.S. Government
is guaranteed only as to timely payment of interest and principal when held to
maturity. Neither the market value of such securities nor the Fund's share price
is guaranteed. As a result, the value of your investment in a Fixed Income Fund,
ISG or AmSouth, will fluctuate and you could lose money by investing in the
Fund.
A Fixed Income Fund's investments in corporate bonds also are subject to
credit risk, which is the risk that the issuer of the security will fail to make
timely payments of interest or principal, or otherwise honor its
17
<PAGE> 26
obligations. Credit risk includes the possibility that any of the Funds'
investments will have its credit rating downgraded or will default.
Mortgage-related and asset-backed securities, which are derivative
instruments, are subject to both credit and prepayment risk, and may be more
volatile and less liquid than more traditional debt securities. If the borrowers
prepay some or all of the principal owed to the issuer much earlier than
expected, the Fund may have to replace the security by investing the proceeds in
a less attractive security which could reduce the Fund's share price or yield.
Each of ISG Income Fund, ISG Limited Term U.S. Government Fund and ISG
Limited Term Income Fund is non-diversified and may invest a greater percentage
of its assets in a particular issuer compared with other funds. Accordingly, the
Fund's portfolio may be more sensitive to changes in the market value of a
single issuer or industry.
Tax-Exempt Fixed Income Funds -- These Funds' investments in municipal
obligations will be subject primarily to interest rate and credit risk.
Prices of municipal obligations tend to move inversely with changes in
interest rates. The most immediate effect of a rise in rates is usually a drop
in the prices of such securities, and therefore in the Fund's share price as
well. Interest rate risk is usually greater for fixed income securities with
longer maturities or durations. If interest rates fall, it is possible that
issuers of callable bonds with high interest coupons will "call" (or prepay)
their bonds before their maturity date. If a call were exercised by the issuer
during a period of declining interest rates, the Fund is likely to replace such
called security with a lower yielding security. If that were to happen, it could
decrease the Fund's dividends. As a result, the value of your investment in a
Tax-Exempt Fixed Income Fund, ISG or AmSouth, will fluctuate and you could lose
money by investing in the Fund.
These Funds' investments also are subject to credit risk, which is the risk
that the issuer of the security will fail to make timely payments of interest or
principal, or to otherwise honor its obligations. Credit risk includes the
possibility that any of the Fund's investments will have its credit rating
downgraded or will default.
Because of the Tennessee Funds' concentration in Tennessee municipal
obligations, these Funds will be vulnerable to any development in Tennessee's
economy that weakens or jeopardizes the ability of Tennessee municipal
obligation issuers to pay interest and principal. As a result, the value of a
Tennessee Fund's shares may fluctuate more widely than those of a fund investing
in municipal obligations from a number of different states.
Although each ISG Tax-Exempt Fixed Income Fund's objective is to generate
income exempt from Federal and, in the case of each Tennessee Fund, Tennessee
income taxes, interest from some of the Fund's holdings may be subject tot he
Federal alternative minimum tax.
Each of ISG Tennessee Tax-Exempt Fund, AmSouth Tennessee Tax-Exempt Fund,
ISG Limited Term Tennessee Tax-Exempt Fund and AmSouth Limited Term Tennessee
Tax-Exempt Fund is non-diversified and may invest a greater percentage of its
assets in a particular issuer compared with other funds. Accordingly, the Fund's
portfolio may be more sensitive to changes in the market value of a single
issuer or industry.
Money Market Funds -- Although each of these Funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in a Money Market Fund, ISG or AmSouth. An investment in the Funds is
not insured or guaranteed by the FDIC or any other government agency.
Each Money Market Fund is subject to the risk that changes in interest
rates will affect the yield or value of the Fund's investment. The investments
of the ISG Prime Money Market Fund, AmSouth Prime Money Market Fund, ISG
Tax-Exempt Money Market Fund and AmSouth Tax-Exempt Money Market Fund also are
subject to credit risk, which is the risk that the issuer or guarantor of a debt
security will be unable or unwilling to make timely interest or principal
payments, or to otherwise honor its obligations. Credit risk includes the
possibility that any of the Fund's investments will have its credit rating
downgraded or will default.
The ISG Prime Money Market Fund usually invests at least 25% of its assets
in domestic and/or U.S. dollar denominated foreign bank obligations. Thus, it
will have correspondingly greater exposure to the risks generally associated
with investments in the banking industry. Sustained increases in interest rates,
for example, can
18
<PAGE> 27
adversely affect the availability and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the bank's exposure to credit losses. In addition, economic or regulatory
developments in or related to the banking industry, and competition within the
banking industry as well as with other types of financial institutions will
affect the Fund's return. The Fund, however, seeks to minimize its exposure to
such risks by investing only in debt securities which are determined to be of
high quality.
Strategic Portfolios -- These Funds' investments are concentrated in the
Underlying Fund, so the Fund's investment performance is directly related to the
performance of those Underlying Funds. Before investing in a Strategic
Portfolio, investors should assess the risks associated with the Underlying
Funds in which the Strategic Portfolio invests and the types of investments made
by such Underlying Funds. In addition, since each Strategic Portfolio must
allocate its investments among the Underlying Funds, the Strategic Portfolio
does not have the same flexibility to invest as a mutual fund without such
constraints. As a result, you could lose money by investing in a Strategic
Portfolio, ISG or AmSouth, particularly if there is a sudden decline in the
share prices of the Underlying Fund's holdings.
With respect to those Strategic Portfolios investing in Underlying Funds
that invest primarily in equity securities, stocks and other equity securities
fluctuate in price, often based on factors unrelated to the issuers' value, and
such fluctuations can be pronounced.
With respect to those Strategic Portfolios investing in Underlying Funds
that invest primarily in fixed income securities, such securities are subject to
interest rate and credit risk. Interest rate risk is the potential for a decline
in bond prices due to rising interest rates. Credit risk is the possibility that
the issuer of a fixed-income security will fail to make timely payments of
interest or principal, or that the security will have its credit rating
downgraded.
Each ISG Strategic Portfolio is non-diversified and may invest a greater
percentage of its assets in a particular issuer compared with other funds.
Accordingly, the Fund's portfolio may be more sensitive to changes in the market
value of a single issuer or industry.
* * * * *
There are also risks attached to particular types of investments made by
the ISG Funds and the AmSouth Funds. For a discussion of the risks associated
with a particular investment, see the Statement of Additional Information and
"Investment Objectives, Principal Investment Strategies and Related Risk" in any
AmSouth Prospectus or "Additional Strategies and Risks" in the relevant ISG
Prospectus accompanying this Combined Prospectus/Proxy Statement.
The above discussion is qualified in its entirety by the disclosure in the
ISG and AmSouth Prospectuses and Statements of Additional Information.
SPECIAL MEETING OF SHAREHOLDERS
Proxies will be solicited by and on behalf of the Company's Directors for
use at a Special Meeting of Shareholders of the ISG Funds. The Meeting is to be
held on February 11, 2000 at 10:00 a.m., Eastern standard time, at the office of
BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219. This Combined
Prospectus/Proxy Statement and the enclosed form of proxy are being mailed to
shareholders on or about December 22, 1999.
Any shareholder giving a proxy has the power to revoke it. The shareholder
revoking such proxy must either submit to ISG a subsequently dated proxy,
deliver to ISG a written notice of revocation, or otherwise give notice of
revocation in open meeting. All properly executed proxies received in time for
the meeting will be voted as specified in the proxy, or, if no specification is
made, FOR the proposals (set forth in items (1), (2) and (3) of the Notice of
Special Meeting) to implement the reorganization of the ISG Funds by the
transfer of all of their assets to the corresponding AmSouth Funds, in exchange
for AmSouth Class A, Class B and Trust Class shares of the corresponding AmSouth
Fund (collectively, "Shares") and the assumption by the corresponding AmSouth
Fund of all of the liabilities of the ISG Fund followed by the liquidation of
each ISG Fund and the distribution of
19
<PAGE> 28
Shares to the shareholders of the ISG Funds--all ISG shareholders will receive
shares of the AmSouth Class (Class A, Class B or Trust Class) that corresponds
to the Class of ISG that they hold; to consider and act upon a new Investment
Advisory Agreement between ISG and First American National Bank, the terms of
which are identical in all material respects to the prior investment advisory
agreement for the ISG Funds. The new Investment Advisory Agreement was approved
by the Board of Directors, effective as of the date of the merger (the "Merger")
of First American Corporation, the former parent of the ISG Funds' investment
adviser, First American National Bank, with and into AmSouth Bancorporation; to
consider and act upon a new Sub-Investment Advisory Agreement between Lazard
Asset Management, the present sub-adviser to the ISG International Equity Fund,
and First American National Bank, on behalf of the ISG International Equity
Fund, the terms of which are identical in all material respects to the prior
sub-advisory agreement for ISG International Equity Fund; to consider and act
upon a new Sub-Investment Advisory Agreement between Bennett Lawrence
Management, LLC, the present sub-adviser to the ISG Mid-Cap Fund, and First
American National Bank, on behalf of the ISG Mid-Cap Fund, the terms of which
are identical in all material respects to the prior sub-advisory agreement for
ISG Mid-Cap Fund; and to consider and act upon a new Sub-Investment Advisory
Agreement between Womack Asset Management, Inc., the present sub-adviser to the
ISG Small-Cap Opportunity Fund, and First American National Bank, on behalf of
the ISG Small-Cap Opportunity Fund, the terms of which are identical in all
material respects to the prior sub-advisory agreement for the ISG Small-Cap
Opportunity Fund. The new Sub-Investment Advisory Agreements were approved by
the Board of Directors, effective as of the date of the Merger.
As of November 11, 1999, there was outstanding the following amount of
shares of the Class A, Class B and Institutional Class of each ISG Fund:
<TABLE>
<S> <C> <C>
ISG Current Income.................................. 333.048 Class A shares
3,040.401 Class B shares
61,093.561 Institutional Class shares
ISG Treasury Money Market........................... 130,764,303.955 Class A shares
302,250,711.305 Institutional Class shares
ISG Moderate Growth & Income........................ 14,040.522 Class A shares
96,999.570 Class B shares
2,069,630.209 Institutional Class shares
ISG Growth & Income................................. 53,691.046 Class A shares
153,899.411 Class B shares
8,030,059.491 Institutional Class shares
ISG Growth.......................................... 13,124.886 Class A shares
74,339.283 Class B shares
864,084.113 Institutional Class shares
ISG Aggressive Growth............................... 32,245.330 Class A shares
42,004.670 Class B shares
1,573,512.950 Institutional Class shares
ISG Mid-Cap......................................... 95,230.333 Class A shares
52,632.155 Class B shares
1,466,108.704 Institutional Class shares
ISG Large-Cap Equity................................ 2,483,076.982 Class A shares
533,714.521 Class B shares
22,903,083.666 Institutional Class shares
ISG International Equity............................ 69,281.663 Class A shares
9,108.945 Class B shares
2,933,547.885 Institutional Class shares
</TABLE>
20
<PAGE> 29
<TABLE>
<S> <C> <C>
ISG Capital Growth............................................... 620,986.267 Class A shares
456,976.325 Class B shares
14,603,598.082 Institutional Class shares
ISG Tennessee Tax-Exempt......................................... 324,769.191 Class A shares
136,142.748 Class B shares
8,165,969.910 Institutional Class shares
ISG Limited Term Tennessee Tax-Exempt............................ 1,971,200.317 Class A shares
71,287.838 Class B shares
N/A Institutional Class shares
ISG Limited Term U.S. Government................................. 337,195.786 Class A shares
48,211.116 Class B shares
4,366,161.854 Institutional Class shares
ISG Government Income............................................ 241,517.789 Class A shares
61,709.971 Class B shares
36,996,047.920 Institutional Class shares
ISG Limited Term Income.......................................... 693,038.122 Class A shares
72,190.341 Class B shares
9,734,234.622 Institutional Class shares
ISG Equity Income................................................ 628,193.117 Class A shares
774,966.627 Class B shares
8,286,154.411 Institutional Class shares
ISG Municipal Income............................................. 296,081.151 Class A shares
33,840.208 Class B shares
7,247,931.572 Institutional Class shares
ISG Small-Cap Opportunity........................................ 1,092,348.724 Class A shares
28,741.741 Class B shares
6,673,692.251 Institutional Class shares
ISG Tax-Exempt Money Market...................................... 10,402,505.630 Class A shares
107,598,528.370 Institutional Class shares
ISG Prime Money Market........................................... 492,117,600.391 Class A shares
575,615.020 Class B shares
239,720,486.684 Institutional Class shares
ISG Income....................................................... 348,671.457 Class A shares
136,195.361 Class B shares
9,817,088.894 Institutional Class shares
</TABLE>
Only shareholders of record on the close of business on December 3, 1999,
will be entitled to notice of and to vote at the meeting. Each share is entitled
to one vote as of the close of business on December 3, 1999.
ISG's Directors know of no matters other than those set forth herein to be
brought before the meeting. If, however, any other matters properly come before
the meeting, it is the Directors' intention that proxies will be voted on such
matters in accordance with the judgment of the persons named in the enclosed
form of proxy.
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
The shareholders of each ISG Fund are being asked to approve or disapprove
the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth
dated as of November 23, 1999 (the "Agreement"), a copy of which is attached to
this Combined Prospectus/Proxy Statement as Appendix A. The Agreement provides,
among other things, for the transfer of all of the assets of each ISG Fund to
the corresponding AmSouth
21
<PAGE> 30
Fund in exchange for the assumption by the corresponding AmSouth Fund of all of
the liabilities of the ISG Fund and for a number of Shares calculated based on
the value of the net assets of the ISG Fund acquired by the AmSouth Fund and the
net asset value per share of the AmSouth Fund, all as more fully described below
under "Information about the Reorganization." After receipt of Shares each ISG
Fund will distribute the Shares to its shareholders in complete liquidation, and
each ISG Fund will be terminated; thereafter, the Company will be dissolved.
Prior to the date of such transfer (the "Exchange Date"), each ISG Fund will
declare a distribution to their respective shareholders which, together with all
previous distributions, will have the effect of distributing to their respective
shareholders all of their investment company taxable income (computed without
regard to the deduction for dividends paid) and net realized capital gains, if
any, through the Exchange Date.
At a meeting held on November 18, 1999, the Company's Directors in
attendance voted unanimously to approve the Transaction and to recommend that
shareholders of each ISG Fund also approve the Transaction. Approval of each
reorganization of an ISG Fund requires the affirmative vote of a majority of all
votes attributable to the voting securities of that ISG Fund voting separately
as a Fund.
A shareholder of any ISG Fund objecting to the proposed Transaction is not
entitled under either Maryland law or the Company's Articles of Incorporation or
Bylaws to demand payment for and an appraisal of his or her particular ISG Fund
shares if the Transaction is consummated over his or her objection. However,
shares of the AmSouth Funds are redeemable for cash at their net asset value on
days on which the New York Stock Exchange is open for business ("Business
Days").
In the event that this proposal is not approved by the shareholders of an
ISG Fund, such ISG Fund will continue to be managed as a separate fund in
accordance with its current investment objectives and policies, and the
Company's Directors may consider alternatives in the best interests of
shareholders. However, the reorganization of the ISG Funds for which approval of
the Agreement is obtained will be consummated.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
The primary reason for the Transaction is the recently completed Merger of
First American Corporation, the former parent company of First American National
Bank ("FANB") with AmSouth Bancorporation. The Transaction presents the
opportunity to combine the separate ISG Funds and AmSouth Funds into a single,
larger consolidated group. AmSouth Bank and FANB have recommended that each ISG
Fund be reorganized into the corresponding AmSouth Fund as described in this
Prospectus/Proxy Statement.
A meeting was held on November 18, 1999, for the Company's Directors, and a
meeting was held on November 23, 1999, for the AmSouth Trustees, at which
meetings the Directors and Trustees of the respective Funds, including the
Independent Board Members, unanimously determined that the reorganization would
be in the best interests of their respective registered investment companies and
existing Fund shareholders and that the economic interests of their respective
existing shareholders would not be diluted as a result of effecting the
reorganization. At these same meetings, the Directors and Trustees of the
respective Funds, including the Independent Board Members, unanimously approved
the proposed reorganization. The Company's Directors also unanimously
recommended that each ISG Fund's shareholders approve the reorganization.
In electing to approve the Agreement and recommend it to shareholders of
the ISG Funds, the Company's Directors acted upon information provided to them,
indicating that the proposed transaction would be in the best interests of ISG
shareholders. In particular, the Directors determined that the proposed
transaction offered the following benefits:
- Participation in the Larger Fund Complex: The Directors were informed
that the proposed transaction would, if effected, result in a mutual fund
complex consisting of thirty-one portfolios and total anticipated assets
in excess of $7 billion. ISG Fund shareholders who would, as part of the
proposed transaction, become part of the AmSouth complex, would be able
to exchange their shares for shares of a significantly larger number of
funds than is currently the case within the ISG Funds and would find
compatibility of the ISG and AmSouth Funds' investment objectives,
policies and shareholder services. In addition, the Directors received
information to the effect that a larger, more diverse complex can appeal
to a broader
22
<PAGE> 31
class of institutional and retail investors, may be able to achieve
economies of scale more quickly or efficiently and may be able to reduce
costs by taking advantage of its relatively larger size.
- Continuity of Management: The Directors were provided with information
detailing the consolidation efforts involving First American National
Bank, the adviser to the ISG Funds from its inception, and AmSouth Bank.
It was represented to the Directors that, in many instances the
post-reorganization portfolios of AmSouth would be managed on a
day-to-day basis by the same persons who had previously been responsible
for managing various ISG Fund portfolios.
- Tax-Free Nature of Transaction, Lack of Dilution: The Directors were
informed that the proposed transaction involving ISG and AmSouth would be
accomplished without the imposition of Federal income taxes on any ISG
Fund or its shareholders. In addition, the Directors received
representations from AmSouth Bank to the effect that AmSouth Bank would
defray the ISG Fund's costs directly associated with participation in the
proposed transaction. Finally, the Directors were informed that the
interests of ISG Fund shareholders would not be diluted as a result of
the proposed transaction, and that the ISG Fund shareholders would
receive shares of the corresponding AmSouth Fund equal in value to the
market value (or, where relevant, amortized cost value) of the ISG Fund's
assets.
- Performance of AmSouth; Fees and Expenses: The Board received information
relating to the performance of various AmSouth Funds into which the
interests of shareholders of the ISG Funds would be merged. The Directors
were given details on the performance record for each pre-existing
AmSouth Fund, both on an absolute basis and in comparison to relevant
benchmarks and industry averages. The Directors also received information
about the fees and expenses charged or to be charged to AmSouth
shareholders, which information tended to show that, after implementation
of expense caps, ISG Fund shareholders who become AmSouth shareholders as
a result of the proposed transaction would be subject to fees and
expenses that were no higher than the fee and expense level previously
approved by the ISG Board. The Directors received a commitment from
AmSouth Bank that fees and expenses of AmSouth Funds combining with ISG
Funds would not exceed the approved levels of fees and expenses for the
respective ISG Funds for a period of two years following the proposed
reorganization.
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization. The proposed Agreement provides that
each AmSouth Fund will acquire all of the assets of the corresponding ISG Fund
in exchange for the assumption by the AmSouth Fund of all of the liabilities of
the corresponding ISG Fund and the issuance of Shares to that ISG Fund equal to
the value of that Fund's net assets, such exchange to occur as of the Exchange
Date (defined in the Agreement to be March 13, 2000 or such other date as
mutually agreed upon by the Company and AmSouth). The following discussion of
the Agreement is qualified in its entirety by reference to the form of Agreement
attached as Appendix A to this Combined Prospectus/Proxy Statement.
As a result of the Transaction, each shareholder of the ISG Funds will
receive that number of full and fractional Shares equal in value at the Exchange
Date to the value of the portion of the net assets of the ISG Fund transferred
to the corresponding AmSouth Fund attributable to the shareholder (based on the
proportion of the outstanding shares of the ISG Fund owned by the shareholder as
of the Valuation Time). The portfolio securities of the ISG Funds will be valued
in accordance with the generally employed valuation procedures of the relevant
ISG Fund. Each reorganization is being accounted for as a tax-free business
combination. At separate meetings held on November 18, 1999, for ISG Directors
and November 23, 1999, for AmSouth Trustees, all of the Directors and Trustees
of each of ISG and AmSouth, including the Independent Board Members, unanimously
determined that the reorganization would be in the best interests of their
respective registered investment companies and existing shareholders and that
the economic interests of their respective existing shareholders would not be
diluted as a result of effecting the reorganization.
Immediately following the Exchange Date, each ISG Fund will distribute pro
rata to its respective shareholders of record as of the close of business on the
Exchange Date the full and fractional Shares received by it and such ISG Fund
will be liquidated. Such distribution will be accomplished by the establishment
of accounts
23
<PAGE> 32
on the share records of the AmSouth Funds in the name of such ISG Fund's
shareholders, each account representing the respective number of full and
fractional Shares due such shareholder. All ISG Fund shareholders will receive
shares of the AmSouth Class (Class A, Class B or Trust Class) that corresponds
to the Class of ISG Fund shares that they hold.
The consummation of the reorganization is subject to the conditions set
forth in the Agreement. The Agreement may be terminated and the reorganization
abandoned at any time, before or after approval by the shareholders, prior to
the Exchange Date by mutual consent of the Company and AmSouth or, if any
condition set forth in the Agreement has not been fulfilled and has not been
waived by the party entitled to its benefits, by such party.
All fees and expenses, including accounting expenses, portfolio transfer
taxes (if any) or other similar expenses incurred directly in connection with
the consummation of the Transaction contemplated by the Agreement will be borne
by AmSouth Bank including the costs of proxy materials, proxy solicitation, and
legal expenses. Fees and expenses not incurred directly in connection with the
consummation of the Transaction will be borne by the party incurring such fees
and expenses. The Board of Trustees of AmSouth and the Board of Directors of the
Company have determined that the interests of the existing shareholders of
AmSouth and the ISG Funds will not be diluted as a result of the Transaction.
Full and fractional Shares will be issued to the ISG Funds' shareholders in
accordance with the procedure under the Agreement as described above. Each
AmSouth Share will be fully paid and nonassessable when issued, will be
transferable without restriction, and will have no preemptive or conversion
rights. AmSouth's Declaration of Trust permits AmSouth to divide its shares of
any series, without shareholder approval, into one or more classes of shares
having such preferences and special or relative rights and privileges as the
Trustees may determine. Shares of certain of the AmSouth Funds are currently
divided into three classes: Class A, Class B and Trust Shares. AmSouth Treasury
Reserve Money Market and AmSouth Tax-Exempt Money Market do not offer Class B
shares. Class A, Class B and Trust shares will be distributed as applicable by
AmSouth in connection with the Transaction. The Company's Articles of
Incorporation and Bylaws also permit multiple classes of shares, and shares of
certain of the ISG Funds are currently divided into three classes: Class A,
Class B and Institutional Class shares. ISG Treasury Money Market and ISG
Tax-Exempt Money Market Funds do not offer Class B shares.
Under Massachusetts law, AmSouth shareholders, could, under certain
circumstances, be held personally liable for the obligations of AmSouth.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of AmSouth. The Declaration of Trust provides for indemnification
out of AmSouth property for all loss and expense of any shareholder held
personally liable for the obligations of AmSouth. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which AmSouth would be unable to meet its
obligations. The likelihood of such circumstances is remote.
Federal Income Tax Consequences. The Federal income tax consequences of
each reorganization will be as follows: (i) under Section 361 of the Code, no
gain or loss will be recognized by an ISG Fund upon the transfer of its assets
to the corresponding AmSouth Fund in exchange for AmSouth Fund Shares and the
assumption by the AmSouth Fund of the liabilities of the ISG Fund, or upon the
distribution of the AmSouth Fund Shares by the ISG Fund to its Shareholders in
liquidation; (ii) under Section 354 of the Code, no gain or loss will be
recognized by the ISG Fund shareholders upon the exchange of their shares of the
ISG Fund for the Shares; (iii) under Section 358 of the Code, the aggregate
basis of Shares an ISG shareholder receives in connection with the
reorganization will be the same as the aggregate basis of his or her ISG Fund
shares exchanged therefor; (iv) under Section 1223(1) of the Code, an ISG Fund's
shareholder's holding period for his or her Shares will be determined by
including the period for which he or she held the ISG Fund shares exchanged
therefor provided that he or she held the ISG shares as capital assets; (v) no
gain or loss will be recognized by an AmSouth Fund upon the receipt of the
assets of the corresponding ISG Fund in exchange for Shares and the assumption
by the AmSouth Fund of the liabilities of the ISG Fund, (vi) the basis in the
hands of an AmSouth Fund of the assets of the corresponding ISG Fund transferred
to the AmSouth Fund in the reorganization will be the same as the basis of such
assets in the hands of the ISG Fund immediately prior to the transfer; and (vii)
the holding period of the assets of an ISG Fund in the hands of the
corresponding AmSouth Fund will include the periods during which such assets
were held by the ISG Fund. As a condition to AmSouth and ISG Fund's obligations
to consummate the reorganization, ISG and AmSouth will receive an opinion from
Ropes & Gray, counsel to AmSouth, to the
24
<PAGE> 33
effect that, on the basis of the existing provisions of the Code, current
administrative rules, court decisions, and certain representations by the
AmSouth and ISG, for federal income tax purposes the above stated tax
consequences will be applicable to each reorganization.
Voting Rights. Each shareholder of an AmSouth Fund and an ISG Fund is
entitled to one vote per share and a proportionate fractional vote for any
fractional share. Holders of Class A or Class B Shares of the AmSouth Funds will
vote separately as a fund or a class on matters relating solely to that fund or
class. On all other matters, they vote in the aggregate with shareholders of all
of the AmSouth Funds. When the former shareholders of each ISG Fund vote in the
aggregate as shareholders of each corresponding AmSouth Fund, the voting power
they will have will be less than the voting power they had when the ISG Funds
voted in the aggregate. For a more detailed discussion of AmSouth's voting
procedures, see the AmSouth Prospectuses "GENERAL INFORMATION -- Miscellaneous."
Capitalization. The following tables set forth as of September 30, 1999,
(i) the capitalization of each ISG Fund, (ii) the capitalization of each AmSouth
Fund, and (iii) the pro forma capitalization of each AmSouth Fund as adjusted
giving effect to the proposed acquisition of assets at net asset value:
CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999
ISG CURRENT INCOME PORTFOLIO AND AMSOUTH CURRENT INCOME PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 3,157 28,913 264,475 N/A N/A N/A
Shares............... 331 3,024 27,590 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.54 9.56 9.59 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 3,157 28,913 264,475
Shares............... 331 3,024 27,590
Net Asset Value per
Share ($)........... 9.54 9.56 9.59
</TABLE>
ISG TREASURY MONEY MARKET FUND AND AMSOUTH TREASURY RESERVE
MONEY MARKET FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A INSTITUTIONAL CLASS A TRUST
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 147,468,354 327,667,608 N/A N/A
Shares............... 147,475,842 327,681,802 N/A N/A
Net Asset Value per
Share ($)........... 1.00 1.00 N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A TRUST
----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 147,468,354 327,667,608
Shares............... 147,475,842 327,681,802
Net Asset Value per
Share ($)........... 1.00 1.00
</TABLE>
ISG MODERATE GROWTH & INCOME PORTFOLIO AND AMSOUTH MODERATE
GROWTH AND INCOME PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 134,231 883,919 7,068,796 N/A N/A N/A
Shares............... 13,842 91,178 727,960 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.70 9.69 9.71 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 134,231 883,919 7,068,796
Shares............... 13,842 91,178 727,960
Net Asset Value per
Share ($)........... 9.70 9.69 9.71
</TABLE>
- ---------------
(1) The adjusted balances are presented as if the Reorganization were effective
as of September 30, 1999 for information purposes only. The actual Effective
Time of the Reorganization is expected to be March 13, 2000 at which time
the results would be reflective of the actual composition of the
shareholders' equity at that date.
25
<PAGE> 34
CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 (CONTINUED)
ISG GROWTH & INCOME PORTFOLIO AND AMSOUTH GROWTH AND INCOME PORTFOLIO
(UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 529,923 1,566,791 42,168,011 N/A N/A N/A
Shares............... 53,571 158,244 4,252,549 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.89 9.90 9.92 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 529,923 1,566,791 42,168,011
Shares............... 53,571 158,244 4,252,549
Net Asset Value per
Share ($)........... 9.89 9.90 9.92
</TABLE>
ISG GROWTH PORTFOLIO AND AMSOUTH GROWTH PORTFOLIO (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 130,735 715,281 5,575,213 N/A N/A N/A
Shares............... 13,418 73,472 570,475 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.74 9.74 9.77 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 130,735 715,281 5,575,213
Shares............... 13,418 73,472 570,475
Net Asset Value per
Share ($)........... 9.74 9.74 9.77
</TABLE>
ISG AGGRESSIVE GROWTH PORTFOLIO AND AMSOUTH AGGRESSIVE GROWTH PORTFOLIO
(UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 318,933 298,867 11,249,486 N/A N/A N/A
Shares.............. 31,744 29,946 1,121,629 N/A N/A N/A
Net Asset Value per
Share ($).......... 10.05 9.98 10.03 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 318,933 298,867 11,249,486
Shares.............. 31,744 29,946 1,121,629
Net Asset Value per
Share ($).......... 10.05 9.98 10.03
</TABLE>
ISG MID-CAP FUND AND AMSOUTH MID CAP FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 990,932 583,691 14,674,325 N/A N/A N/A
Shares............... 86,316 50,956 1,276,810 N/A N/A N/A
Net Asset Value per
Share ($)........... 11.48 11.45 11.49 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 990,932 583,691 14,674,325
Shares............... 86,316 50,956 1,276,810
Net Asset Value per
Share ($)........... 11.48 11.45 11.49
</TABLE>
ISG LARGE-CAP EQUITY FUND AND AMSOUTH LARGE CAP FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 71,311,649 14,289,404 655,207,824 N/A N/A N/A
Shares............... 2,505,610 505,257 23,026,809 N/A N/A N/A
Net Asset Value per
Share ($)........... 28.46 28.28 28.45 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 71,311,649 14,289,404 655,207,824
Shares............... 2,505,610 505,257 23,026,809
Net Asset Value per
Share ($)........... 28.46 28.28 28.45
</TABLE>
- ---------------
(1) The adjusted balances are presented as if the Reorganization were effective
as of September 30, 1999 for information purposes only. The actual Effective
Time of the Reorganization is expected to be March 13, 2000 at which time
the results would be reflective of the actual composition of the
shareholders' equity at that date.
26
<PAGE> 35
CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 (CONTINUED)
ISG INTERNATIONAL EQUITY FUND AND AMSOUTH INTERNATIONAL EQUITY FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 681,422 76,374 34,651,938 N/A N/A N/A
Shares............... 57,991 6,527 2,951,412 N/A N/A N/A
Net Asset Value per
Share ($)........... 11.75 11.70 11.74 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 681,422 76,374 34,657,938
Shares............... 57,991 6,527 2,951,412
Net Asset Value per
Share ($)........... 11.75 11.70 11.74
</TABLE>
ISG CAPITAL GROWTH FUND AND AMSOUTH CAPITAL GROWTH FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 8,673,676 6,171,630 209,604,962 N/A N/A N/A
Shares............... 605,222 441,275 14,713,283 N/A N/A N/A
Net Asset Value per
Share ($)........... 14.33 13.99 14.25 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 8,673,676 6,171,630 209,604,962
Shares............... 605,222 441,275 14,713,283
Net Asset Value per
Share ($)........... 14.33 13.99 14.25
</TABLE>
ISG TENNESSEE TAX-EXEMPT FUND AND AMSOUTH TENNESSEE TAX-EXEMPT FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 3,034,667 1,386,106 80,481,316 N/A N/A N/A
Shares............... 312,343 142,370 8,284,294 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.72 9.74 9.71 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 3,034,667 1,386,106 80,481,316
Shares............... 312,343 142,370 8,284,294
Net Asset Value per
Share ($)........... 9.72 9.74 9.71
</TABLE>
ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND AND AMSOUTH LIMITED TERM
TENNESSEE TAX-EXEMPT FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 19,238,246 787,525 N/A N/A N/A N/A
Shares............... 1,957,905 80,158 N/A N/A N/A N/A
Net Asset Value per
Share ($)........... 9.83 9.82 N/A N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 19,238,246 787,525 N/A
Shares............... 1,957,905 80,158 N/A
Net Asset Value per
Share ($)........... 9.83 9.82 N/A
</TABLE>
ISG LIMITED TERM U.S. GOVERNMENT FUND AND AMSOUTH LIMITED TERM
U.S. GOVERNMENT FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 3,207,783 484,877 43,994,681 N/A N/A N/A
Shares............... 322,103 48,650 4,418,101 N/A N/A N/A
Net Asset Value per
Share ($)........... 9.96 9.97 9.96 N/A N/A N/A
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 3,207,783 484,877 43,994,681
Shares............... 322,103 48,650 4,418,101
Net Asset Value per
Share ($)........... 9.96 9.97 9.96
</TABLE>
- ---------------
(1) The adjusted balances are presented as if the Reorganization were effective
as of September 30, 1999 for information purposes only. The actual Effective
Time of the Reorganization is expected to be March 13, 2000 at which time
the results would be reflective of the actual composition of the
shareholders' equity at that date.
27
<PAGE> 36
CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 (CONTINUED)
ISG GOVERNMENT INCOME FUND AND AMSOUTH GOVERNMENT INCOME FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 2,263,107 599,607 364,909,326 4,600,945 N/A 3,428,859
Shares............... 231,424 61,504 37,351,764 477,828 N/A 356,003
Net Asset Value per
Share ($)........... 9.78 9.75 9.77 9.63 N/A 9.63
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 6,864,052 599,607 368,338,185
Shares............... 712,778 62,264 38,249,033
Net Asset Value per
Share ($)........... 9.63 9.63 9.63
</TABLE>
ISG LIMITED TERM INCOME FUND AND AMSOUTH LIMITED TERM BOND FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 6,766,653 698,989 9,356,262 2,903,115 2,027,331 107,105,408
Shares............... 693,960 71,974 959,616 282,887 197,860 10,436,855
Net Asset Value per
Share ($)........... 9.75 9.71 9.75 10.26 10.25 10.26
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 9,669,768 2,726,320 116,461,670
Shares............... 942,473 265,982 11,351,040
Net Asset Value per
Share ($)........... 10.26 10.25 10.26
</TABLE>
ISG EQUITY INCOME FUND AND AMSOUTH EQUITY INCOME FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 5,808,153 7,302,260 77,415,127 19,856,727 7,485,633 10,941,793
Shares............... 616,356 781,774 8,209,415 1,559,312 590,035 859,179
Net Asset Value per
Share ($)........... 9.42 9.34 9.43 12.73 12.69 12.74
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 25,664,880 14,847,893 88,356,920
Shares............... 2,016,094 1,170,047 6,935,394
Net Asset Value per
Share ($)........... 12.73 12.69 12.74
</TABLE>
ISG MUNICIPAL INCOME FUND AND AMSOUTH MUNICIPAL BOND FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 3,064,056 342,822 75,796,243 2,855,942 65,853 322,939,140
Shares............... 301,466 33,824 7,458,651 292,135 6,743 33,024,456
Net Asset Value per
Share ($)........... 10.16 10.14 10.16 9.78 9.77 9.78
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 5,919,998 408,675 398,735,383
Shares............... 605,317 41,830 40,770,489
Net Asset Value per
Share ($)........... 9.78 9.77 9.78
</TABLE>
ISG SMALL CAP OPPORTUNITY FUND AND AMSOUTH SMALL CAP FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 8,592,761 340,945 82,094,192 977,508 858,551 23,784,982
Shares............... 697,283 27,925 6,679,370 114,344 101,594 2,768,509
Net Asset Value per
Share ($)........... 12.32 12.21 12.29 8.55 8.45 8.59
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 9,570,269 1,199,496 105,879,174
Shares............... 1,119,330 141,952 12,325,864
Net Asset Value per
Share ($)........... 8.55 8.45 8.59
</TABLE>
- ---------------
(1) The adjusted balances are presented as if the Reorganization were effective
as of September 30, 1999 for information purposes only. The actual
Effective Time of the Reorganization is expected to be March 13, 2000 at
which time the results would be reflective of the actual composition of the
shareholders' equity at that date.
28
<PAGE> 37
CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 (CONTINUED)
ISG TAX-EXEMPT MONEY MARKET FUND AND AMSOUTH TAX-EXEMPT MONEY MARKET FUND
(UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A INSTITUTIONAL CLASS A TRUST
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 10,860,885 94,548,102 24,707,467 68,733,102
Shares............... 10,866,588 94,663,829 24,707,340 68,734,370
Net Asset Value per
Share ($)........... 1.00 1.00 1.00 1.00
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A TRUST
----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 35,568,352 163,281,204
Shares............... 35,573,928 163,398,199
Net Asset Value per
Share ($)........... 1.00 1.00
</TABLE>
ISG PRIME MONEY MARKET FUND AND AMSOUTH PRIME MONEY MARKET FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 443,019,384 347,030 211,833,097 154,031,214 468,095 559,375,905
Shares............... 443,055,722 347,070 211,899,694 154,036,885 468,095 559,391,132
Net Asset Value per
Share ($)........... 1.00 1.00 1.00 1.00 1.00 1.00
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 597,050,598 815,125 771,209,002
Shares............... 597,092,607 815,165 771,290,826
Net Asset Value per
Share ($)........... 1.00 1.00 1.00
</TABLE>
ISG INCOME FUND AND AMSOUTH BOND FUND (UNAUDITED)
<TABLE>
<CAPTION>
ISG AMSOUTH
----------------------------------------- ---------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST
----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ($)....... 3,392,384 1,309,865 93,694,072 7,359,492 2,377,261 383,905,716
Shares............... 348,245 134,549 9,621,662 694,888 224,974 36,244,789
Net Asset Value per
Share ($)........... 9.74 9.74 9.74 10.59 10.57 10.59
<CAPTION>
PRO FORMA COMBINED(1)
---------------------------------------
CLASS A CLASS B TRUST
----------- ----------- -----------
<S> <C> <C> <C>
Net Assets ($)....... 10,751,876 3,687,126 477,599,788
Shares............... 1,015,286 348,829 45,099,130
Net Asset Value per
Share ($)........... 10.59 10.57 10.59
</TABLE>
- ---------------
(1) The adjusted balances are presented as if the Reorganization were effective
as of September 30, 1999 for information purposes only. The actual Effective
Time of the Reorganization is expected to be March 13, 2000 at which time
the results would be reflective of the actual composition of the
shareholders' equity at that date.
Unaudited pro forma combined financial statements of each ISG Fund and each
AmSouth Fund as of and for the period ended July 31, 1999 are included in the
Statement of Additional Information. Because the Agreement provides that the
AmSouth Funds will be the surviving funds following the reorganization and
because the AmSouth Funds' investment objectives and policies will remain
unchanged, the pro forma combined financial statements reflect the transfer of
the assets and liabilities of each ISG Fund to the corresponding AmSouth Fund as
contemplated by the Agreement.
29
<PAGE> 38
PROPOSALS TWO AND THREE
APPROVAL OR DISAPPROVAL OF
CERTAIN ADVISORY AGREEMENTS
INTRODUCTION
At the Meeting, Shareholders of each ISG Fund also will be asked to approve
or disapprove the New Advisory Agreement, which is being submitted in connection
with the Merger of First American Corporation, the former parent corporation of
First American National Bank ("FANB"), with and into AmSouth Bancorporation on
October 1, 1999, and the payment of advisory fees to FANB during the interim
period from the date of the Merger through the earlier of the date of
Shareholder approval or March 31, 2000. In addition, in connection with the
Merger, Shareholders of ISG Mid-Cap Fund, ISG International Equity Fund, and ISG
Small-Cap Opportunity Fund will be asked to ratify and approve or disapprove the
New Sub-Advisory Agreements between FANB and Bennett Lawrence Management, LLC
("Bennett Lawrence"), Lazard Asset Management ("Lazard"), and Womack Asset
Management, Inc. ("Womack"), respectively. As a result of the Merger, the
investment advisory agreement with FANB then in effect (the "Former Advisory
Agreement") automatically terminated in accordance with its terms and as
required by the 1940 Act. Similarly, the sub-investment advisory agreement
between FANB and Bennett Lawrence then in effect (the "Former Bennett Lawrence
Sub-Advisory Agreement"), the sub-investment advisory agreement between FANB and
Lazard then in effect (the "Former Lazard Sub-Advisory Agreement"), and the
sub-investment advisory agreement between FANB and Womack then in effect (the
"Former Womack Agreement") each automatically terminated as a result of the
Merger.
To assure the continued supervision of the investments of the ISG Funds
after the Merger, at a meeting held on September 22, 1999, the Company's Board
of Directors, including a majority of the Independent Board Members, approved,
subject to Shareholder approval, the New Advisory Agreement and the New
Sub-Advisory Agreements. Since the date of the Merger, FANB has provided
advisory services to the ISG Funds under the New Advisory Agreement dated
October 1, 1999, which provides for the same services at the same advisory fee
rate for the relevant ISG Fund as the Former Advisory Agreement. Bennett
Lawrence, Lazard, and Womack also have provided sub-advisory services since the
date of the Merger to ISG Mid-Cap Fund, ISG International Equity Fund, and ISG
Small-Cap Opportunity Fund, respectively, under the relevant New Sub-Advisory
Agreement dated October 1, 1999, which each provides for the same services at
the same sub-advisory fee rate as the relevant Former Sub-Advisory Agreement.
Under the 1940 Act, investment advisory agreements such as the New Advisory
Agreement and New Sub-Advisory Agreements must be approved by shareholders. The
ISG Funds, FANB, Bennett Lawrence, Lazard, and Womack have received from the
Securities and Exchange Commission an order of exemption (the "Order")
permitting the implementation, without shareholder approval, of the New Advisory
Agreement and New Sub-Advisory Agreements during the interim period commencing
on the date of the Merger until such time as the relevant ISG Fund's
shareholders vote on the approval of the New Advisory Agreement and New
Sub-Advisory Agreements, but in no event later than March 31, 2000 (the "Interim
Period"). As a condition to receiving the Order, the fees payable to FANB,
Bennett Lawrence, Lazard, and Womack under the respective new agreements during
the Interim Period are paid into an interest-bearing escrow account maintained
by an independent escrow agent. The escrow agent will release the amounts held
in the escrow account (including any interest earned) to FANB and Bennett
Lawrence, Lazard, and Womack as the case may be, only upon approval of the
relevant new agreement by the shareholders of the relevant ISG Fund. If the
requisite shareholder approval is not received for an ISG Fund or new agreement
prior to the end of the Interim Period, the relevant amounts held in the escrow
account will be released to the appropriate ISG Fund.
The terms of the New Advisory Agreement and the New Sub-Advisory Agreements
with Bennett Lawrence, Lazard, and Womack are identical in all material respects
to the Former Advisory Agreement and Former Bennett Lawrence Sub-Advisory
Agreement, Former Lazard Sub-Advisory Agreement, and Former Womack Agreement,
respectively, except for the effective dates and escrow provisions. In each
case, the effective date is the date of the Merger -- October 1, 1999.
30
<PAGE> 39
Shareholders should consider the following factors in determining whether
it is fair to compensate the ISG Fund's adviser for their continued services
during the Interim Period and thus to ratify and approve the New Advisory
Agreement (and, in the case of shareholders of the ISG Mid-Cap Fund, the ISG
International Equity Fund, and the ISG Small-Cap Opportunity Fund, whether to
ratify and approve the respective New Sub-Advisory Agreement):
- the Board of Directors of ISG has unanimously approved the New Advisory
Agreement for all of the ISG Funds, and the New Sub-Advisory Agreements
for the affected ISG Funds;
- no change in any ISG Fund's investment objective or investment policies
and restrictions has taken or will take place during the Interim Period;
- there has been and will be no change in the fees payable by an ISG Fund
to FANB for advisory services or the fees payable by FANB to any
sub-adviser during the Interim Period;
- investment personnel presently employed by FANB, who are experienced in
managing the ISG Funds, have managed and are expected to continue to
manage the ISG Funds' investment programs under the New Advisory
Agreement during the Interim Period; and
- there has not been nor is there expected to be any change in the
personnel at the sub-advisers who manage the assets of the ISG Mid-Cap
Fund, the ISG International Equity Fund, and the ISG Small-Cap
Opportunity Fund during the Interim Period.
If the holders of a majority (as defined in the 1940 Act) of the
outstanding voting securities of an ISG Fund do not approve the New Advisory
Agreement or a New Sub-Advisory Agreement (if applicable), the Board of
Directors will consider what action to take in the best interests of the
shareholders of that ISG Fund.
PROPOSAL 2: APPROVAL OR DISAPPROVAL OF THE NEW ADVISORY AGREEMENT
Under the New Advisory Agreement, FANB continues to be responsible for
providing advisory services to the ISG Funds. A copy of the New Advisory
Agreement is attached as Appendix D to this Prospectus/Proxy Statement. As more
fully described below, the terms and conditions of the New Advisory Agreement
are identical in all material respects to the Former Advisory Agreement. The
sole differences between the Former Advisory Agreement and the New Advisory
Agreement are the effective date which, in the case of the New Advisory
Agreement, is the Merger Date, and the escrow provisions. THE NEW ADVISORY
AGREEMENT DOES NOT INCREASE THE RATE OF ADVISORY FEES PAYABLE BY ANY ISG FUND,
AND DOES NOT CHANGE THE TYPE OR EXTENT OF SERVICES PROVIDED TO THE ISG FUNDS BY
FANB.
INFORMATION ABOUT THE FORMER ADVISORY AGREEMENT
The Former Advisory Agreement was most recently approved by the Company's
Board of Directors, including a majority of the Independent Board Members, with
respect to each ISG Fund, on November 18, 1998. The Distributor, as the initial
shareholder of each ISG Fund, approved the Former Advisory Agreement for each
ISG Fund prior to the Fund's commencement of operations.
The Former Advisory Agreement provided that FANB provide investment
management services to the ISG Funds, subject to the supervision of the
Company's Board of Directors.
The table below sets forth: (i) the net assets for each ISG Fund as of
December 31, 1998; (ii) the rates of advisory fees, computed daily and payable
daily, to which FANB was entitled for the services provided and expenses
assessed pursuant to the Former Advisory Agreement; (iii) the effective rates of
each of the advisory fees (net of waivers) expressed as a percentage of average
net assets for the fiscal year ended December 31, 1998; and (iv) advisory fees
(net of waivers) paid by each ISG Fund for the fiscal year ended December 31,
1998:
31
<PAGE> 40
ASSETS OF ISG FUND AND ADVISORY FEES PAID TO FANB
<TABLE>
<CAPTION>
ANNUAL ACTUAL
ADVISORY FEE ADVISORY FEE ADVISORY FEE
NET ASSETS AS OF RATE (BASED RATE PAID (NET PAID (NET OF
DECEMBER 31, ON AVERAGE OF WAIVERS) WAIVERS)*
1998 ($) NET ASSETS) (%) (%) ($)
---------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
ISG International Equity Fund.......... 28,125,923 1.00 .68 162,141
ISG Small-Cap Opportunity Fund......... 107,453,528 .95 .95 874,343
ISG Mid-Cap Fund....................... n/a n/a n/a n/a
ISG Capital Growth Fund................ 181,027,242 .65 .64 995,024
ISG Large-Cap Equity Fund.............. 844,333,854 .75 .75 4,767,781
ISG Equity Income Fund................. 83,688,877 .65 .64 496,950
ISG Income Fund........................ 81,970,472 .50 .49 390,583
ISG Government Income Fund............. 295,429,554 .60 .60 1,364,121
ISG Limited Term Income Fund........... 93,509,941 .50 .50 457,120
ISG Limited Term U.S. Government
Fund................................. 49,211,391 .50 .34 72,623
ISG Tennessee Tax-Exempt Fund.......... 96,002,354 .50 .49 491,735
ISG Limited Term Tennessee Tax-Exempt
Fund................................. 20,171,315 .50 .39 87,062
ISG Municipal Income Fund.............. 56,558,693 .60 .30 136,582
ISG Prime Money Market Fund............ 377,102,322 .25 .25 328,794
ISG Treasury Money Market Fund......... 477,454,108 .25 .25 480,809
ISG Tax-Exempt Money Market Fund....... n/a n/a n/a n/a
ISG Aggressive Growth Portfolio........ n/a n/a n/a n/a
ISG Growth Portfolio................... n/a n/a n/a n/a
ISG Growth & Income Portfolio.......... n/a n/a n/a n/a
ISG Moderate Growth & Income
Portfolio............................ n/a n/a n/a n/a
ISG Current Income Portfolio........... n/a n/a n/a n/a
--------------
TOTAL ISG FUNDS.............. $2,792,039,574
==============
</TABLE>
- ---------------
* A fee waiver represents a percentage of daily net assets of the ISG Fund
calculated at an annualized rate. Fee waivers and reimbursements are voluntary
and may be modified or terminated by FANB at any time at its sole discretion.
For the fiscal year or periods ended December 31, 1998, the amounts paid by
the indicated Funds for brokerage commissions, gross spreads and concessions
on principal transactions, none of which was paid to the Distributor, were as
follows:
<TABLE>
<CAPTION>
FUND 1998
---- --------
<S> <C>
ISG Large-Cap Equity........................................ $ 76,036(1)
ISG Capital Growth.......................................... $494,130
ISG Small-Cap Opportunity................................... $318,620(1)
ISG Equity Income........................................... $314,269
ISG International Equity.................................... $ 68,007(1)
</TABLE>
- ---------------
(1) For the period March 1, 1998 through December 31, 1998.
32
<PAGE> 41
The ISG Income Fund, ISG Government Income Fund, ISG Limited Term Income
Fund, ISG Limited Term U.S. Government Fund, ISG Tennessee Tax-Exempt Fund, ISG
Limited Term Tennessee Tax-Exempt Fund, ISG Municipal Income Fund, ISG Prime
Money Market Fund and ISG Treasury Money Market Fund paid no brokerage
commissions and did not enter into any brokerage transactions during the fiscal
year ended December 31, 1999, however, engaged in transactions with dealers
acting as principal and the costs of such transactions involve dealer spreads
rather than brokerage commissions.
INFORMATION ABOUT THE NEW ADVISORY AGREEMENT
Under the New Advisory Agreement, FANB continues to manage the ISG Funds'
investments. Subject to the direction of the Company's Board of Directors, FANB
provides investment research and supervision of the investments of each ISG
Fund, and conducts a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each ISG Fund's
assets. The New Advisory Agreement provides that FANB shall continue to
determine from time to time what securities or other instruments will be
purchased, retained or sold by ISG with respect to each ISG Fund. FANB, in its
supervision of the assets of each ISG Fund, is guided by each ISG Fund's
investment objective and policies, and the provisions and restrictions contained
in the Company's Articles of Incorporation and Bylaws and as set forth in the
ISG Funds' prospectuses and statements of additional information that are on
file with the Securities and Exchange Commission.
The New Advisory Agreement states that the Adviser shall pay all expenses
incurred by it in performing its services and duties as investment adviser and
shall pay all fees of each Sub-Adviser in connection with such Sub-Adviser's
duties in respect of the Company. All other expenses incurred in the operation
of the Company will be borne by the Company, except to the extent specifically
assumed by others. The expenses to be borne by the Company include, without
limitation, the following: organizational costs, taxes, interest, brokerage fees
and commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser, any Sub-Adviser or the Administrator, or any of their affiliates,
Commission fees, state Blue Sky qualification fees, advisory and administration
fees, charges of custodians, transfer and dividend disbursing agents' fees,
certain insurance premiums, industry association fees, auditing and legal
expenses, costs of maintaining corporate existence, costs of independent pricing
services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of calculating the net
asset value of the ISG Funds' shares, costs of shareholders' reports and
corporate meeting, costs of preparing and printing certain prospectuses and
statements of additional information, any extraordinary expenses.
New Advisory Agreement. THE RATE OF ADVISORY FEES PAYABLE TO FANB BY THE
ISG FUNDS UNDER THE NEW ADVISORY AGREEMENT IS IDENTICAL TO THAT PAYABLE TO FANB
UNDER THE FORMER ADVISORY AGREEMENT. The rate of advisory fees payable under the
New Advisory Agreement by each ISG Fund is equal to the rate for such Fund
payable under the Former Advisory Agreement as listed above. From time to time,
FANB may waive its fee or reimburse an ISG Fund for certain of its expenses in
order to reduce the ISG Fund's expense ratio. As a result, the ISG Fund's return
and yield would be higher than it would be if the fees and such expenses had
been paid by the ISG Fund.
As in the Former Advisory Agreement, the New Advisory Agreement provides
that in the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties of FANB under the New Advisory
Agreement, FANB and its affiliates shall not be liable to ISG or to any
shareholder for any act or omission in the course of, or connected in any way
with, rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security.
If approved by shareholders of the ISG Funds at the Meeting, the New
Advisory Agreement will continue until December 31, 2000, unless terminated, and
may be continued from year to year thereafter by the Board of Directors. The
continuation of the New Advisory Agreement must be approved by a majority vote
of the Directors, including a majority of the Independent Board Members, cast in
person at a meeting called for that purpose. Under the New Advisory Agreement,
FANB has the right, in any year, to notify ISG in writing at least 60 days
before the New Advisory Agreement's anniversary date that it does not desire a
renewal of the New Advisory Agreement. The Directors, or a majority of the
outstanding voting shares of ISG, may terminate the New Advisory Agreement at
any time without penalty by giving FANB 60 days' written notice. The New
33
<PAGE> 42
Advisory Agreement may not be assigned by FANB and will terminate automatically
in the event of its assignment. The New Advisory Agreement will terminate
automatically, with respect to the relevant ISG Fund, upon consummation of the
reorganization of such ISG Fund.
INFORMATION ABOUT FANB
FANB has served as the investment adviser to the ISG Funds since February
15, 1994, the date the ISG Funds were established. FANB is an investment adviser
registered under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), providing investment management services to individuals and institutional
clients. FANB's address is 315 Deaderick Street, Nashville, Tennessee 37237.
FANB, a national banking association, is a wholly-owned subsidiary of AmSouth
Bancorporation. FANB and its affiliates provide personal trust, estate, employee
benefit trust, corporate trust and custody services to over 7,000 accounts and
investment advisory services. As of June 30, 1999, FANB and its affiliates had
approximately $11 billion under trust and approximately $6 billion under
management. AmSouth Bancorporation is a registered bank holding company and a
financial services company headquartered in Birmingham, Alabama. Through its
related banking subsidiaries, including AmSouth Bank, AmSouth Bancorporation
provides retail and commercial banking and trust operation services. On
September 30, 1999, AmSouth Bancorporation and its affiliates had total assets
of approximately $20 billion . The principal executive officer and directors of
AmSouth Bank are listed in Appendix H.
DIRECTORS' CONSIDERATIONS
The New Advisory Agreement was unanimously approved on behalf of each ISG
Fund by the Company's Board of Directors, including the Independent Board
Members, at a meeting held on September 22, 1999. The Directors considered
information relating to FANB, AmSouth Bancorporation, AmSouth Bank and the
consolidated entity that would result from the consummation of the Merger,
including information provided by AmSouth Bank concerning its capabilities and
expertise in serving as investment adviser to the ISG Funds. The Directors
reviewed the terms of the New Advisory Agreement and noted that the New Advisory
Agreement is identical to the Former Advisory Agreement, except for its date and
the escrow provisions.
Specifically, in connection with approval of the New Advisory Agreement on
behalf of each ISG Fund, the Board considered that the terms of the Merger did
not require or result in any changes in the ISG Funds' investment objectives or
policies, the investment management or operation of the ISG Funds, the
investment personnel managing the ISG Funds, or the shareholder services or
other business activities of the ISG Funds.
In approving the New Advisory Agreement, the Board noted FANB's record of
service to the ISG Funds and the expectation that the Merger should not have any
material adverse effect on the ISG Funds' ongoing operations or on the extent or
quality of services provided to the ISG Funds, or increase the cost to the ISG
Funds of such services.
Section 15(f) of the 1940 Act provides that in connection with the sale of
any interest in any investment adviser which results in the "assignment" of an
investment advisory agreement, an investment adviser of a registered investment
company, such as the ISG Funds, or an affiliated person of such investment
adviser, may receive any amount or benefit if (i) for a period of three years
after the sale, at least 75% of the members of the board of the investment
company are not interested persons of the investment adviser or the predecessor
adviser, and (ii) there is no "unfair burden" imposed on the investment company
as a result of such sale or any express or implied terms, conditions or
understanding applicable thereto. For this purpose, "unfair burden" is defined
to include any arrangement during the two-year period after the transaction,
whereby the investment adviser or its predecessor or successor investment
advisers, or any interested persons of any such adviser, receives or is entitled
to receive any compensation directly or indirectly (i) from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company other than bona fide ordinary compensation
as principal underwriter for such company, or (ii) from the investment company
or its security holders for other than bona fide investment advisory or other
services. This provision of the 1940 Act was enacted by Congress in 1975 to make
it clear that an investment adviser (or an affiliated person of the adviser) can
realize a profit on the sale of the adviser's business subject to the two
safeguards described above. The Board has
34
<PAGE> 43
requested and received a written representation from FANB and assurances from
AmSouth Bancorporation that no "unfair burden" will be imposed on the ISG Funds
as a result of the Merger and the proposed transactions.
Based upon the considerations set forth above, the Directors have
determined that the New Advisory Agreement is in the best interest of each ISG
Fund and its shareholders. In addition, management expects that there will be no
diminution in the scope and quality of services provided to ISG as a result of
these transactions. In fact, as described above, the New Advisory Agreement is
identical in all material respects, except as to its date and the escrow
provisions, as the Former Advisory Agreement. The Board believes that the ISG
Funds will receive investment management services under the New Advisory
Agreement equivalent to those that they received under the Former Advisory
Agreement, and at the same fee and expense levels.
REQUIRED VOTE AND DIRECTORS' RECOMMENDATION
With respect to each ISG Fund, approval of this proposal requires the
affirmative vote of (a) 67% of the ISG Fund's voting securities present at this
Meeting, if the holders of more than 50% of the ISG Fund's outstanding voting
securities are present or represented by proxy, or (b) more than 50% of the ISG
Fund's outstanding voting securities, whichever is less.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW ADVISORY AGREEMENT.
PROPOSAL 3: APPROVAL OR DISAPPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS
A. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND BENNETT LAWRENCE MANAGEMENT
(APPLIES ONLY TO ISG MID-CAP FUND)
As indicated above, consummation of the Merger caused a change in ownership
of FANB which, in turn, automatically terminated the Former Bennett Lawrence
Sub-Advisory Agreement. Thus, although the Merger had no effect on Bennett
Lawrence, the change in ownership of FANB requires approval by the Shareholders
of ISG Mid-Cap Fund of a new Sub-Advisory Agreement (the "New Bennett Lawrence
Sub-Advisory Agreement") between FANB, with respect to the ISG Mid-Cap Fund, and
Bennett Lawrence. A copy of the New Bennett Lawrence Sub-Advisory Agreement is
attached as Appendix E to this Prospectus/Proxy Statement.
The terms of the New Bennett Lawrence Sub-Advisory Agreement are identical
in all material respects to the Former Bennett Lawrence Sub-Advisory Agreement,
except for the effective date, which, in the case of the New Bennett Lawrence
Sub-Advisory Agreement, is the Merger date, and the escrow provisions.
The Former Bennett Lawrence Sub-Advisory Agreement was approved by the
Board of Directors, including a majority of the Independent Board Members on
August 12, 1998.
Pursuant to the terms of the Former Bennett Lawrence Sub-Advisory Agreement
and the New Bennett Lawrence Sub-Advisory Agreement, subject to the direction of
FANB, Bennett Lawrence makes all determinations with respect to the ISG Mid-Cap
Fund's investments other than cash and cash equivalents, and takes such steps as
may be necessary to implement such determinations, including the placement of
purchase and sale orders on behalf of the ISG Mid-Cap Fund.
The Former Bennett Lawrence Sub-Advisory Agreement and the New Bennett
Lawrence Sub-Advisory Agreement provide that Bennett Lawrence will pay the
expenses incurred by it and its staff in connection with the performance of its
services under each Bennett Lawrence Sub-Advisory Agreement, including the
payment of salaries of all officers and employees who are employed by Bennett
Lawrence. Under the Former Bennett Lawrence Sub-Advisory Agreement and the New
Bennett Lawrence Sub-Advisory Agreement, FANB has agreed to pay Bennett Lawrence
an annual fee based on the average daily net assets of the Mid-Cap Fund as
follows: 0.75% of the average daily net assets on the first $25 million; 0.625%
of the average daily net assets on the next $50 million; 0.50% of the average
daily net assets on assets in excess of $75 million. THE FEE ARRANGEMENT BETWEEN
FANB AND BENNETT LAWRENCE MANAGEMENT IS IDENTICAL IN THE FORMER BENNETT LAWRENCE
SUB-ADVISORY AGREEMENT AND THE NEW BENNETT LAWRENCE SUB-ADVISORY AGREEMENT.
35
<PAGE> 44
The New Bennett Lawrence Sub-Advisory Agreement provides that, if approved
by shareholders of the ISG Mid-Cap Fund, it will remain in effect until December
31, 2000 and may continue in effect for successive one-year periods thereafter,
provided such continuance is specifically approved at least annually by vote of
a majority of Directors, including a majority of the Independent Board Members,
cast in person at a meeting called for the purpose of voting on such approval.
Bennett Lawrence has the right, in any year, to notify FANB in writing, at least
60 days before the New Bennett Lawrence Sub-Advisory Agreement's anniversary
date, that it does not desire a renewal of the New Bennett Lawrence Sub-Advisory
Agreement. The New Bennett Lawrence Sub-Advisory Agreement may be terminated by
the Directors at any time without penalty, or by a vote of a majority of the
outstanding shares of the ISG Mid-Cap Fund on 60 days' written notice. The New
Bennett Lawrence Sub-Advisory Agreement will automatically terminate in the
event of its assignment (as such term is defined in the 1940 Act) or in the
event of the termination of ISG's then-effective advisory agreement with FANB.
If the Transaction is approved by shareholders, then Bennett Lawrence will serve
as Sub-Adviser to the AmSouth Mid Cap Fund.
If the New Bennett Lawrence Sub-Advisory Agreement and the New Advisory
Agreement are approved by shareholders of the ISG Mid-Cap Fund, the New Bennett
Lawrence Sub-Advisory Agreement will become effective as of October 1, 1999. If
the New Advisory Agreement is approved but the New Bennett Lawrence Sub-
Advisory Agreement is not approved by the shareholders of the ISG Mid-Cap Fund,
FANB would be fully responsible for the Fund's investment activities. If neither
the New Advisory Agreement nor the New Bennett Lawrence Sub-Advisory Agreement
is approved by the shareholders of the ISG Mid-Cap Fund, the Board of Directors
will consider what actions should be taken.
DIRECTORS' CONSIDERATIONS
The New Bennett Lawrence Sub-Advisory Agreement was unanimously approved on
behalf of the ISG Mid-Cap Fund by the Company's Board of Directors, including
the Independent Board Members, at a meeting held on September 22, 1999. The
Directors considered information relating to Bennett Lawrence, FANB, AmSouth
Bancorporation, AmSouth Bank and the consolidated entity that would result from
the completion of the Merger. The Board considered Bennett Lawrence Management's
capabilities and expertise in serving as sub-adviser to the ISG Mid-Cap Fund.
The Directors reviewed the terms of the New Bennett Lawrence Sub-Advisory
Agreement, including the fact that the sub-advisory services would continue to
be performed at the same costs and by the same personnel at Bennett Lawrence
Management as they were under the Former Bennett Lawrence Sub-Advisory
Agreement.
The section entitled "Directors' Considerations" under Proposal 2 discusses
additional factors considered by the Directors, as well as matters such as
"assignment" of an investment advisory Agreement and "unfair burden" with
respect to the realization of a profit by FANB or its parent as a result of the
Merger. These statements are also applicable to shareholders of the ISG Mid-Cap
Fund with respect to the ratification and approval or disapproval of the New
Bennett Lawrence Sub-Advisory Agreement. Shareholders should therefore review
this information prior to determining whether to ratify and approve the New
Bennett Lawrence Sub-Advisory Agreement.
REQUIRED VOTE AND DIRECTORS' RECOMMENDATION
With respect to ISG Mid-Cap Fund, approval of this proposal requires the
affirmative vote of (a) 67% of the ISG Mid-Cap Fund's voting securities present
at this meeting, if the holders of more than 50% of the ISG Mid-Cap Fund's
outstanding voting securities are present or represented by proxy, or (b) more
than 50% of the ISG Mid-Cap Fund's outstanding voting securities, whichever is
less.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW BENNETT LAWRENCE
SUB-ADVISORY AGREEMENT.
B. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND LAZARD (APPLIES ONLY TO ISG
INTERNATIONAL EQUITY FUND)
36
<PAGE> 45
As indicated above, consummation of the Merger caused a change in ownership
of FANB which, in turn, automatically terminated the Former Lazard Sub-Advisory
Agreement. Thus, although the Merger had no effect on Lazard, the change in
ownership of FANB requires approval by the Shareholders of ISG International
Equity Fund of a new Sub-Investment Advisory Agreement (the "New Lazard
Sub-Advisory Agreement") between FANB, with respect to the ISG International
Equity Fund, and Lazard. A copy of the New Lazard Sub-Advisory Agreement is
attached as Appendix F to this Prospectus/Proxy Statement.
The terms of the New Lazard Sub-Advisory Agreement are identical in all
material respects to the Former Lazard Sub-Advisory Agreement, except for the
effective date, which, in the case of the New Lazard Sub-Advisory Agreement, is
the Merger date, and the escrow provisions.
The Former Lazard Sub-Advisory Agreement was approved by the Board of
Directors, including a majority of the Independent Board Members on May 14,
1998.
Under the terms of the Former Lazard Sub-Advisory Agreement and the New
Lazard Sub-Advisory Agreement, subject to the direction of FANB, Lazard makes
all determinations with respect to the ISG International Equity Fund's
investments and takes all steps as may be necessary to implement its investment
decisions, including the placement of purchase and sale orders on behalf of the
ISG International Equity Fund.
The Former Lazard Sub-Advisory Agreement and the New Lazard Sub-Advisory
Agreement provide that Lazard will pay the expenses incurred by it and its staff
in connection with the performance of its services under each Lazard
Sub-Advisory Agreement, including the payment of salaries of all officers and
employees who are employed by Lazard. FANB will pay Lazard an annual
sub-advisory fee equal to 0.50% of the average daily net assets of the ISG
International Equity Fund. The sub-advisory fee is calculated by FANB, is
accrued daily, and paid monthly, to Lazard. THE FEE ARRANGEMENT BETWEEN FANB AND
LAZARD IS IDENTICAL IN THE FORMER LAZARD SUB-ADVISORY AGREEMENT AND THE NEW
LAZARD SUB-ADVISORY AGREEMENT.
If approved by shareholders of the ISG International Equity Fund at the
Meeting, the New Lazard Sub-Advisory Agreement will remain in effect until
December 31, 2000, unless terminated, and may be continued from year to year
thereafter by the Board of Directors. The continuation of the New Lazard
Sub-Advisory Agreement must be approved by a majority vote of the Directors,
including a majority of the Independent Board Members, cast in person at a
meeting called for that purpose. Lazard has the right, in any year, to notify
FANB in writing at least 60 days before the New Lazard Sub-Advisory Agreement's
anniversary date, that it does not desire a renewal of the New Lazard
Sub-Advisory Agreement. The Directors, or a majority of the outstanding voting
shares of the ISG International Equity Fund, may terminate the New Lazard
Sub-Advisory Agreement at any time without penalty by giving Lazard 60 days'
written notice. The New Lazard Sub-Advisory Agreement will terminate
automatically in the event of any assignment (as defined in the 1940 Act) or in
the event of the termination of the Advisor Agreement with FANB. If the
Transaction is approved by shareholders, then Lazard will serve as Sub-Adviser
to the AmSouth International Equity Fund.
If the New Lazard Sub-Advisory Agreement and the New Advisory Agreement are
approved by shareholders of the ISG International Equity Fund, the New Lazard
Sub-Advisory Agreement will become effective as of October 1, 1999. If the New
Advisory Agreement is approved but the New Lazard Sub-Advisory Agreement is not
approved by the shareholders of the ISG International Equity Fund, FANB would be
fully responsible for the ISG International Equity Fund's investment activities.
If neither the New Advisory Agreement nor the New Lazard Sub-Advisory Agreement
is approved by the shareholders of the ISG International Equity Fund, the Board
of Directors will consider what actions should be taken.
DIRECTORS' CONSIDERATIONS
The Lazard New Sub-Advisory Agreement was unanimously approved on behalf of
the ISG International Equity Fund by the Company's Board of Directors, including
the Independent Board Members, at a meeting held on September 22, 1999. The
Directors considered information relating to Lazard, FANB, AmSouth
Bancorporation, AmSouth Bank and the consolidated entity that would result from
the completion of the Merger. The Board considered Lazard's capabilities and
expertise in serving as sub-adviser to the ISG International Equity Fund. The
Directors reviewed the terms of the New Lazard Sub-Advisory Agreement, including
the fact that the sub-
37
<PAGE> 46
advisory services would continue to be performed at the same costs and by the
same personnel at Lazard as they were under the Former Lazard Sub-Advisory
Agreement. It was noted that Lazard has served as the sub-adviser to the ISG
International Equity Fund's predecessor since its inception.
The section entitled "Directors' Considerations" under Proposal 2 discusses
additional factors considered by the Directors, as well as matters such as
"assignment" of an investment advisory Agreement and "unfair burden" with
respect to the realization of profit by FANB or its parent as a result of the
Merger. These statements are also applicable to shareholders of the ISG
International Equity Fund with respect to the ratification and approval or
disapproval of the New Lazard Sub-Advisory Agreement. Shareholders should
therefore review this information prior to determining whether to ratify and
approve the New Lazard Sub-Advisory Agreement.
REQUIRED VOTE AND DIRECTORS' RECOMMENDATION
With respect to ISG International Equity Fund, approval of this proposal
requires the affirmative vote of (a) 67% of the ISG International Equity Fund's
voting securities present at this meeting, if the holders of more than 50% of
the ISG International Equity Fund's outstanding voting securities are present or
represented by proxy, or (b) more than 50% of the ISG International Equity
Fund's outstanding voting securities, whichever is less.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW LAZARD SUB-ADVISORY
AGREEMENT.
C. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND WOMACK (APPLIES ONLY TO ISG
SMALL-CAP OPPORTUNITY FUND)
As indicated above, consummation of the Merger caused a change in ownership
of FANB which, in turn, automatically terminated the Former Womack Sub-Advisory
Agreement. Thus, although the Merger had no effect on Womack, the change in
ownership of FANB requires approval by the Shareholders of ISG Small-Cap
Opportunity Fund of a new Sub-Advisory Agreement (the "New Womack Sub-Advisory
Agreement") between FANB, with respect to the ISG Small-Cap Opportunity Fund,
and Womack. A copy of the New Womack Sub-Advisory Agreement is attached as
Appendix G to this Prospectus/Proxy Statement.
The terms of the New Womack Sub-Advisory Agreement are identical in all
material respects to the Former Womack Sub-Advisory Agreement, except for the
effective date, which, in the case of the New Womack Sub-Advisory Agreement, is
the Merger date, and the escrow provisions.
The Former Womack Sub-Advisory Agreement was approved by the Board of
Directors, including a majority of the Independent Board Members on May 14,
1998.
Pursuant to the terms of the Former Womack Sub-Advisory Agreement and the
New Womack Sub-Advisory Agreement, subject to the direction of FANB, Womack
makes all determinations with respect to the ISG Small-Cap Opportunity Fund's
investments, and takes such steps as may be necessary to implement such
determinations, including the placement of purchase and sale orders on behalf of
the ISG Small-Cap Opportunity Fund.
The Former Womack Sub-Advisory Agreement and the New Womack Sub-Advisory
Agreement provide that Womack will pay the expenses incurred by it and its staff
in connection with the performance of its services under each Womack
Sub-Advisory Agreement, including the payment of salaries of all officers and
employees who are employed by Womack. Under the Former Womack Sub-Advisory
Agreement and the New Womack Sub-Advisory Agreement, FANB will pay Womack a
monthly fee at the annual rate of .35% of the average daily net assets of the
Small-Cap Opportunity Fund. THE FEE ARRANGEMENT BETWEEN FANB AND WOMACK IS
IDENTICAL IN THE FORMER WOMACK SUB-ADVISORY AGREEMENT AND THE NEW WOMACK
SUB-ADVISORY AGREEMENT.
The New Womack Sub-Advisory Agreement provides that, if approved by
shareholders of the ISG Small-Cap Opportunity Fund, it will remain in effect
until December 31, 2000 unless terminated, and will continue in effect for
successive one-year periods, provided such continuance is specifically approved
at least annually by vote of a majority of Directors, including a majority of
the Independent Board Members, cast in person at a meeting called for the
purpose of voting on such approval. Womack has the right, in any year, to notify
FANB in writing, at least 60 days before the New Womack Sub-Advisory Agreement's
anniversary date, that it does not
38
<PAGE> 47
desire a renewal of the New Womack Sub-Advisory Agreement. The New Womack
Sub-Advisory Agreement may be terminated by the Directors at any time without
penalty, or by a vote of a majority of the outstanding shares of the ISG
Small-Cap Opportunity Fund on 60 days' written notice. The New Womack
Sub-Advisory Agreement will terminate automatically in the event of its
assignment (as such term is defined in the 1940 Act) or in the event of the
termination of ISG's then-effective advisory agreement with FANB. If the
Transaction is approved by shareholders, then Sawgrass Asset Management, Inc.
will serve as Sub-Adviser to the AmSouth Small Cap Fund, and Womack will no
longer serve as Sub-Adviser to the AmSouth Small Cap Fund.
If the New Womack Sub-Advisory Agreement and the New Advisory Agreement are
approved by shareholders of the ISG Small-Cap Opportunity Fund, the New Womack
Sub-Advisory Agreement will become effective as of October 1, 1999. If the New
Advisory Agreement is approved but the New Womack Sub-Advisory Agreement is not
approved by the shareholders of the ISG Small-Cap Opportunity Fund, FANB would
be fully responsible for the Fund's investment activities. If neither the New
Advisory Agreement nor the New Womack Sub-Advisory Agreement is approved by the
shareholders of the ISG Small-Cap Opportunity Fund, the Board of Directors will
consider what actions should be taken.
DIRECTORS' CONSIDERATIONS
The New Womack Sub-Advisory Agreement was unanimously approved on behalf of
the ISG Small-Cap Opportunity Fund by the Company's Board of Directors,
including the Independent Board Members, at a meeting held on September 22,
1999. The Directors considered information relating to Womack, FANB, AmSouth
Bancorporation, AmSouth Bank and the consolidated entity that would result from
the completion of the Merger. The Board considered Womack's capabilities and
expertise in serving as sub-adviser to the ISG Small-Cap Opportunity Fund. The
Directors reviewed the terms of the New Womack Sub-Advisory Agreement, including
the fact that the sub-advisory services would continue to be performed at the
same costs and by the same personnel at Womack as they were under the Former
Womack Sub-Advisory Agreement. It was also noted that Womack has served as the
sub-adviser to the ISG Small-Cap Opportunity Fund's predecessor since March
1997, and that Mr. Womack has acted as the Fund's portfolio manager since its
inception.
The section entitled "Directors' Considerations" under Proposal 2 discusses
additional factors considered by the Directors, as well as matters such as
"assignment" of an investment advisory Agreement and "unfair burden" with
respect to the realization of a profit by FANB or its parent as a result of the
Merger. These statements are also applicable to shareholders of the ISG
Small-Cap Opportunity Fund with respect to the ratification and approval or
disapproval of the New Womack Sub-Advisory Agreement. Shareholders should
therefore review this information prior to determining whether to ratify and
approve the New Womack Sub-Advisory Agreement.
REQUIRED VOTE AND DIRECTORS' RECOMMENDATION
With respect to ISG Small-Cap Opportunity Fund, approval of this proposal
requires the affirmative vote of (a) 67% of the ISG Small-Cap Opportunity Fund's
voting securities present at this meeting, if the holders of more than 50% of
the ISG Small-Cap Opportunity Fund's outstanding voting securities are present
or represented by proxy, or (b) more than 50% of the ISG Small-Cap Opportunity
Fund's outstanding voting securities, whichever is less.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW WOMACK SUB-ADVISORY
AGREEMENT.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTION
AmSouth Bancorporation and its subsidiaries, AmSouth Bank and FANB may be
deemed to have an interest in the Agreement and Plan of Reorganization and the
Transaction because AmSouth Bank and First American National Bank provide
investment advisory services to the AmSouth Funds and the ISG Funds,
respectively, pursuant to separate advisory agreements with each Fund group.
AmSouth Bank and First American National Bank receive compensation from the
AmSouth Funds and the ISG Funds, respectively, for services they provide
pursuant to these agreements. The terms and provisions of these arrangements are
described in the AmSouth and
39
<PAGE> 48
ISG Prospectuses. In addition, AmSouth Bank also serves as custodian and
sub-administrator to the AmSouth Funds (The Bank of New York serves as custodian
to the International Equity Fund) for which services it receives a fee as
described in the AmSouth Prospectuses. AmSouth Bank may also act as a service
provider pursuant to the Shareholder Services Plan adopted by AmSouth for which
services it would also receive a fee as described in the AmSouth Prospectuses.
AMSOUTH FUNDS
GENERAL
For a general discussion of the AmSouth Funds, see the AmSouth
Prospectuses. For the convenience of ISG shareholders, certain cross-references
to those prospectuses are set forth below.
FINANCIAL INFORMATION
For information on per-share income and capital changes of an AmSouth Fund,
see "Financial Highlights" in the AmSouth Prospectus pertaining to such Fund.
EXPENSES
For a discussion of an AmSouth Fund's expenses, see "Fee Table" in the
AmSouth Prospectus pertaining to such Fund.
INVESTMENT OBJECTIVES AND POLICIES
For a discussion of an AmSouth Fund's investment objective and policies,
see "Investment Objective" and "Investment Policies" in the AmSouth Prospectus
pertaining to such Fund.
TRUSTEES
Overall responsibility for management of AmSouth rests with its Board of
Trustees who are elected by the shareholders of AmSouth. There are currently
five Trustees, one of whom is considered to be an "interested person" of AmSouth
as defined in the 1940 Act. The Trustees, in turn, elect the officers of AmSouth
to supervise actively its day-to-day operations.
40
<PAGE> 49
The Trustees of AmSouth, their addresses and principal occupations during
the past five years are set forth as follows:
<TABLE>
<CAPTION>
POSITION(S)
HELD
WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE AMSOUTH DURING PAST 5 YEARS
---------------- --- ----------- --------------------
<S> <C> <C> <C>
J. David Huber* 53 Chairman From June 1987 to present, employee
3435 Stelzer Road of BISYS Fund Services Limited
Columbus, Ohio 43219 Partnership
Dick D. Briggs, Jr., M.D. 65 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, Univ. of
Alabama Health Services Foundation;
from 1981 to 1995, Professor and
Vice Chairman, Dept. of Birmingham
School of Medicine; from 1988 to
1992, President, CEO and Medical
Director, Univ. of Alabama Health
Services Foundation
Wendell D. Cleaver 64 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
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired;
751 Cary Drive until June 1991, Vice President,
Auburn, Alabama 36830-2505 Birmingham Division, Alabama Power
Company
James H. Woodward, Jr. 59 Trustee From July 1989 to present,
The University of North chancellor, The University of North
Carolina at Charlotte Carolina at Charlotte; from April
Charlotte, North Carolina 28223 1997 to present, Trustee, BISYS
Variable Insurance Funds; from 1996
to present, Trustee, the Sessions
Group; from August 1984 to July
1989, Senior Vice President,
University College, University of
Alabama at Birmingham
</TABLE>
- ---------------
* Mr. Huber is considered to be an "interested person" of AmSouth as defined in
the 1940 Act.
INVESTMENT ADVISER
For a discussion of AmSouth Bank and the services performed by it and its
fees with respect to an AmSouth Fund, see "The Adviser" in the AmSouth
Prospectus pertaining to such Fund. For a discussion of Lazard, which serves as
sub-adviser to AmSouth International Equity, Bennett Lawrence, which serves as
sub-adviser to AmSouth Mid Cap, Rockhaven Asset Management, LLC, which serves as
sub-adviser to AmSouth Equity Income, and Sawgrass Asset Management, LLC, which
serves as sub-adviser to AmSouth Small Cap, see "The Sub-Adviser" in the
applicable AmSouth Prospectuses.
41
<PAGE> 50
ADMINISTRATOR
For a discussion of ASO Services Company's activities as the AmSouth Funds'
administrator, the services performed by it and its fees with respect to an
AmSouth Fund, see "The Administrator" in the AmSouth Prospectus pertaining to
such Fund.
DISTRIBUTOR
For a discussion of the Distributor's activities, see "The Distributor" in
any AmSouth Prospectus.
SHARES
For a discussion of voting rights of the AmSouth Funds, see "Miscellaneous"
in any AmSouth Prospectus.
REDEMPTION OR REPURCHASE OF SHARES
For a discussion concerning redemption or repurchase of shares of the
AmSouth Funds, see "Redemption of Shares" in any AmSouth Prospectus.
DIVIDENDS AND DISTRIBUTIONS
For a discussion of the AmSouth Funds' policies with respect to dividends
and distributions of an AmSouth Fund, see "Dividends" in the AmSouth Prospectus
pertaining to such Fund.
EXCHANGE PRIVILEGES
For a discussion of an AmSouth shareholder's right to exchange particular
Class shares of an AmSouth Fund for other Class shares of the same AmSouth Fund,
or the same Class shares or other Class shares of another AmSouth Fund, see
"Exchange Privileges" in any AmSouth Prospectus.
LEGAL PROCEEDINGS
There are no pending material legal proceedings to which AmSouth is a
party.
SHAREHOLDER INQUIRIES
Shareholder inquiries relating to the AmSouth Funds may be addressed to
AmSouth's administrator by writing to ASO Services Company, 3435 Stelzer Road,
Columbus, Ohio 43219 or by calling 1-800-451-8382.
THE ISG FUNDS
GENERAL
For a general discussion of the ISG Funds, see the ISG Prospectuses. For
the convenience of ISG shareholders, certain cross-references to the ISG
Prospectuses are set forth below.
FINANCIAL INFORMATION
For information on per share income and capital changes of an ISG Fund, see
"Financial Highlights" in the ISG Prospectus pertaining to such Fund.
EXPENSES
For a discussion of an ISG Fund's expenses, see "Description of the
Funds -- Objectives, Risk/Return and Expenses -- Fees and Expenses" in the ISG
Prospectus pertaining to such Fund.
42
<PAGE> 51
INVESTMENT OBJECTIVES AND POLICIES
For a discussion of an ISG Fund's investment objective and policies, see
"Description of the Funds -- Objectives, Risk/Return and Expenses -- Investment
Objective" and "Principal Investment Strategies" in the ISG Prospectus.
DIRECTORS
Overall responsibility for management of the ISG Funds rests with the
Company's Board of Directors. There are currently five Directors, one of whom is
considered to be an "interested person" of the ISG Funds as defined in the 1940
Act. The Directors, in turn, elect the officers of the Company to supervise
actively its day-to-day operations.
The Directors of ISG Funds their addresses and principal occupations during
the past five years are set forth as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH AMSOUTH DURING PAST 5 YEARS
---------------- --- ---------------- --------------------
<S> <C> <C> <C>
William B. Blundin* 60 President and Since August 1999,
767 Third Avenue Chairman of the Board business consultant. For
New York, New York 10017 of Directors more than five years prior
thereto, he was an
employee of BISYS Fund
Services, Inc., general
partner of the
Distributor. Mr. Blundin
also is an officer of
other investment companies
administered by the
Administrator or its
affiliates
Norma A. Coldwell 72 Director International Economist
3330 Southwestern and Consultant; Executive
Boulevard Vice President of Coldwell
Dallas, Texas 75225 Financial Consultants;
Trustee and Treasurer of
Meridian House
International
(International Education
and Cultural Group);
Member of the Board of
Advisors of Meridian
International Center and
Emerging Capital markets,
S.A. (Montevideo,
Uruguay): formerly, Chief
International Economist of
Riggs National Bank,
Washington, D.C.
Richard H. Francis 66 Director Former Executive Vice
40 Grosvenor Road President and Chief
Short Hills, New Jersey Financial Officer of Pan
07078 American World Airways,
Inc., March 1988 to
October 1991; Senior Vice
President and Chief
Financial Officer of
American Standard Inc.,
1960 to March 1988. Mr.
Francis is a director of
The Indonesia Fund, Inc.
and the Warburg Pincus
Funds.
</TABLE>
43
<PAGE> 52
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH AMSOUTH DURING PAST 5 YEARS
---------------- --- ---------------- --------------------
<S> <C> <C> <C>
William W. McInnees 48 Director Private investor. From
116 30th Avenue South July 1978 to February
Nashville, Tennessee 37212 1993, he was
Vice-President--Finance
and Treasurer of Hospital
Corp. of America. He is
also a director of Gulf
South Medical Supply and
Diversified Trust Co.
Robert A Robertson 71 Director Private investor. Since
2 Hathaway Common 1991, President Emeritus,
New Canaan, Connecticut and from 1968 to 1991,
06840 President of The Church
Pension Group, NYC. From
1956 to 1966, Senior Vice
President of Colonial Bank
& Trust Co. He is also a
director of Mariner
Institutional Funds, Inc.,
Mariner Tax-Free
Institutional Funds, Inc.,
UST Master Funds, UST
Master Tax Exempt Funds,
H.B. and F.H. Bugher
Foundation,
Morehouse-Barlow Co.
Publishers, The Canterbury
Cathedral Trust in
America, The Living Church
Foundation and Hoosac
School.
</TABLE>
- ---------------
* Mr. Blundin is considered to be an "interested person" of ISG as defined in
the 1940 Act.
INVESTMENT ADVISER
For a discussion of First American National Bank, and the services
performed by it and its fees with respect to an ISG Fund, and of Womack, which
serves as sub-adviser to ISG Small-Cap Opportunity, Lazard, which serves as
sub-adviser to ISG International Equity and Bennett Lawrence, which serves as
sub-adviser to ISG Mid-Cap, see "Fund Management -- Investment Adviser" in the
applicable ISG Prospectus.
ADMINISTRATOR
For a discussion of BISYS Fund Services Ohio, Inc.'s activities as the ISG
Funds' administrator, the services performed by it and its fees with respect to
an ISG Fund, see "Fund Management -- Administrator and Distributor," in the ISG
Prospectus pertaining to such Fund.
DISTRIBUTOR
For a discussion of the Distributor's activities, see "Fund Mangement
-- Administrator and Distributor" in any ISG Prospectus.
SHARES
For a discussion of voting rights of the ISG Funds, see "Voting Rights" in
any ISG Statement of Additional Information.
44
<PAGE> 53
REDEMPTION OR REPURCHASE OF SHARES
For a discussion concerning redemption or repurchase of shares of the ISG
Funds, see "Shareholder Information -- Selling Your Shares" in any ISG
Prospectus.
DIVIDENDS AND DISTRIBUTIONS
For a discussion of the ISG Funds' policies with respect to dividends and
distributions of an ISG Fund, see "Shareholder Information -- Dividends,
Distributions and Taxes" in the ISG Prospectus pertaining to such Fund.
EXCHANGE PRIVILEGES
For a discussion of an ISG shareholder's right to exchange particular Class
shares of an ISG Fund for particular Class shares of another ISG Fund, see
"Shareholder Information -- Exchanging Your Shares" in the ISG Prospectus.
LEGAL PROCEEDINGS
There are no pending material legal proceedings to which ISG is a party.
SHAREHOLDER INQUIRIES
Shareholder inquiries relating to the ISG Funds may be addressed to ISG's
administrator by writing to BISYS Fund Services Ohio, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-3035 or by calling 1-800-852-0045.
FINANCIAL STATEMENTS
The financial statements and financial highlights for the ISG Funds
included in the ISG Prospectuses and the related statement of additional
information have been audited by KPMG LLP for the periods indicated in their
report thereon which is also included in the statements of additional
information. The financial statements and financial highlights audited by KPMG
LLP have been incorporated herein by reference in reliance on their report given
on their authority as experts in accounting and auditing. Unaudited financial
statements and financial highlights for the ISG Funds for the period ended
September 30, 1999 are filed herewith.
The financial statements and financial highlights for the AmSouth Funds for
each of the periods indicated therein included in the AmSouth Prospectuses and
related statement of additional information have been incorporated by reference
in this Combined Prospectus/Proxy Statement in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of that
Firm as experts in accounting and auditing.
VOTING INFORMATION
Proxies are being solicited from shareholders of each ISG Fund by the
Company's Directors for the Special Meeting of Shareholders to be held on
February 11, 2000, at the office of BISYS Fund Services, 3534 Stelzer Road,
Columbus, OH 43219 at 10:00 a.m., Eastern time, or at such later time made
necessary by adjournment. A proxy may be revoked at any time at or before the
meeting by submitting to ISG a subsequently dated proxy, delivering a written
notice of revocation to ISG at LOCATION. Unless revoked, all valid proxies will
be voted in accordance with the instructions thereon or, in the absence of
instructions, will be voted FOR approval of the Agreement and Plan of
Reorganization. The Transaction contemplated by the Agreement and Plan of
Reorganization will be consummated only if approved by the affirmative vote of a
majority of all votes attributable to the voting securities of each ISG Fund
voting separately as a Fund, as described above. In the event the shareholders
do not approve the reorganization, the Directors will consider possible
alternative arrangements in the best interests of the ISG Fund and shareholders.
Proxies are being solicited by mail. Shareholders of record of each ISG
Fund at the close of business on December 3, 1999 (the "Record Date"), will be
entitled to vote at the Special Meeting of Shareholders or any
45
<PAGE> 54
adjournment thereof. The holders of one-third of votes attributable to the
outstanding voting shares of an ISG Fund represented in person or by proxy at
the meeting will constitute a quorum for such Fund for the meeting, and a
majority of the shares of an ISG Fund entitled to vote on the Transaction is
necessary to approve the Transaction. Shareholders are entitled to one vote per
share and a proportionate fractional vote for any fractional share.
Votes cast by proxy, telephone, Internet or in person at the meeting will
be counted by the inspector of election appointed by ISG. The inspector of
election will count the total number of votes cast "for" approval of the
proposal for purposes of determining whether sufficient affirmative votes have
been cast. The inspector of election will count shares represented by proxies
that reflect abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have the discretionary voting power on a particular matter) as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. For purposes of determining whether an issue has been
approved, abstentions and broker non-votes have the effect of a negative vote on
the proposals.
As of December 3, 1999, the officers and Directors of ISG Funds as a group
beneficially owned less than 1% of the outstanding shares of Class A, Class B
and Institutional Class shares of any of the ISG Funds. The information in the
following table shows, to the best of the knowledge of ISG Funds, the
shareholders who owned of record or beneficially 5% or more of the indicated
Fund and Class. The table also shows, as far as practicable, the percentage of
record and beneficial ownership of these same shareholders upon consummation of
the Transaction calculated on the basis of holdings as of December 3, 1999
record date. Those shareholders who beneficially own 25% or more of the
outstanding shares of a Fund may be deemed to be controlling persons of that
Fund under the 1940 Act.
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
ISG CAPITAL GROWTH FUND:
JC Bradford Company................. 5.2782% (Class A Shares) 5.2782% 5.2782% 5.2782%
F/B/O Robert Jernigan
330 Commerce Street
Nashville, TN 37201-1899
NFSC FEBO FAN 195251
The Bristol Public Library.......... 5.4665% (Class A Shares) 5.4665% 5.4665% 5.4665%
Suite B
Bristol, TN 37260
First American National Bank........ 27.7937% (Class A Shares) 21.957% 27.7937% 21.957%
Reinvest Reinvest 38.2451% (Institutional Class) 30.2136% 38.2451% 30.2136%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 23.1288 (Class A Shares) 18.2718% 23.1288% 18.2718%
Cash Reinvest 50.8010% (Institutional Shares) 40.1328% 50.8010% 40.1328%
300 Union St. NA 052
Nashville, TN 37237
ISG EQUITY INCOME FUND:
First American National Bank........ 25.9943% (Class A Shares) 22.8750% 5.3573% 4.7144%
Cash Reinvest 78.6564% (Institutional Shares) 69.2176% 69.0182% 60.7360%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 33.3013% (Class A Shares) 29.3051% 6.8632% 6.0392%
Reinvest Reinvest 7.6279% (Institutional Shares) 6.7126% 6.6932% 5.8901%
300 Union St. NA 052
Nashville, TN 37237
</TABLE>
46
<PAGE> 55
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
First American National Bank........ 6.5057% (Institutional Shares) 5.7250% 5.7085% 5.0235%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
ISG LARGE-CAP EQUITY FUND:
First American National Bank........ 29.8848% (Institutional Shares) 23.6090% 29.8848% 23.6090%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 54.4908% (Institutional Shares) 43.0477% 54.4908% 43.0477%
Reinvest Reinvest
300 Union St. NA 052
Nashville, TN 37237
ISG SMALL-CAP OPPORTUNITY FUND:
First American National Bank........ 31.7128% (Institutional Shares) 28.2244% 10.2920% 9.1598%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237)
First American National Bank........ 56.0041% (Institutional Shares) 49.8436% 18.9894% 16.9006%
Reinvest Reinvest
300 Union St. NA 052
Nashville, TN 37211
NFSC FEBO FAP-097144
First American National Bank........ 10.0957% (Class B Shares) 10.0957% 2.7479% 2.7479%
237 Haveford Ave.
Nashville, TN 37205
NFSC FEBO FAP-059986
First American National Bank........ 12.2161% (Class B Shares) 12.2161% 3.3245% 3.3245%
700 Narrow Road
Shelbyville, TN 37160
NFSC FEBO FAP-153281
Janis G. Lopez...................... 12.9248% (Class B Shares) 12.9248% 3.5177% 3.5177%
117 Legacy Lane
Durham, NC 29713
Sanwa Bank of California............ 20.7641% (Class A Shares) 20.7641% 19.0553% 19.0553%
Wilshire Associates, Inc.
444 Market Street, 23rd Floor
San Francisco, CA 94111-5325
JC Bradford Company................. 18.6074% (Class A Shares) 18.6074% 17.0761% 17.0761%
RCIP Limited Partners 1
330 Commerce Street
Nashville, TN 37201-1899
NFSC FEBO FAN-153311
Ann Brothers Bourlarkas............. 7.3206% (Class B Shares) 7.3206% 1.9923% 1.9923%
2130 Golf Club Lane
Nashville, TN 37215
NFSC FEBO FAE-009130
First American National Bank, 8.5359% (Class B Shares)
Cust................................ 8.5359% 2.3227% 2.3227%
238 Crawford St.
Dayton, TN 37321
</TABLE>
47
<PAGE> 56
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
JFSC FEBO FAP-112992
First American National Bank, 6.6643% (Class B Shares)
Cust................................ 6.6643% 1.8133% 1.8133%
6003 Clark Rd.
Harrison, TN 37341
ISG INCOME FUND:
First American National Bank........ 27.7283% (Class A Shares) 27.4510% 8.3710% 8.2872%
Cash Reinvest 18.7203% (Institutional Shares) 18.5331% 3.5849% 3.5490%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 55.7364% (Class A Shares) 55.1790% 16.8264% 16.6581%
Reinvest Reinvest 34.5125% (Institutional Shares) 34.1674% 6.6090% 6.5429%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 46.3616% (Institutional Shares) 45.8980% 8.8781% 8.7893%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
NFSC FEBO FAN-107280
Mary M. McGavock.................... 5.5987% (Class B Shares) 5.5987% 1.9149% 1.9149%
115 Woodmont Blvd., Apt. 220
Nashville, TN 37205
NFSC FEBO FAN-109630
Mildred V. Morgan................... 5.5672% (Class B Shares) 5.5672% 1.9042% 1.9040%
1449 Fosterville Loop
Bell Buckle, TN 37020
NFSC FEBO FAN-110140
John J. Garrett..................... 5.3236% (Class B Shares) 5.3236% 1.8208% 1.8208%
PO Box 4182
Murfreesboro, TN 37133
ISG LIMITED TERM U.S. GOVERNMENT
FUND:
First American National Bank........ 25.6328% (Class A Shares) 25.1201% 25.6328% 25.1201%
Cash Reinvest 5.8094% (Institutional Shares) 5.6932% 5.8094% 5.6932%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 18.1703% (Class A Shares) 17.8069% 18.1703% 17.8069%
Reinvest Reinvest 34.2313% (Institutional Shares) 33.5467% 34.2313% 33.5467%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 58.0058% (Institutional Shares) 56.8457% 58.0058% 56.8457%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
National Financial Services Corp.... 7.6256% (Class A Shares) 7.6256% 7.6256% 7.6256%
Raspberry Comm. Properties, L.P.
800 Spring Street S
Bethany, LA 71007-9532
NFSC FEBO FAN-107280
Mary M. McGavock.................... 15.9844% (Class B Shares) 15.9844% 15.9844% 15.9844%
115 Woodmont Blvd. Apt. 220
Nashville, TN 37205
</TABLE>
48
<PAGE> 57
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAN-166804
Helen E. Frankenbach................ 10.7595% (Class B Shares) 10.7595% 10.7595% 10.7595%
173 Boxwood Dr.
Franklin, TN 37069
NFSC FEBO FAN-092312
Lois B. Hoge........................ 6.5745% (Class B Shares) 6.5745% 6.5745% 6.5745%
20 Ridge Road
Westminster, MD 21157
NFSC FEBO FAN-180432
Lee Ensign Johnson.................. 10.1287% (Class B Shares) 10.1287% 10.1287% 10.1287%
4612 Skymont Dr.
Nashville, TN 37215
NFSC FEBO FAN-088340
Francis T. Harris................... 10.9138% (Class B Shares) 10.9138% 10.9138% 10.9138%
6045 Sunrise Circle
Franklin, TN 37067
NFSC FEBO FAP-058025
First American National Bank, 10.2288% (Class B Shares)
Custodian........................... 10.2288% 10.2288% 10.2288%
306 Dye Road
Bell Buckle, TN 37020
NFSC FEBO FAN-155306
Woodrow W. Billips.................. 9.3488% (Class B Shares) 9.3488% 9.3488% 9.3488%
3701 Woodlawn Drive
Nashville, TN 37215
First American National Bank, 6.3144% (Class B Shares)
Cust................................ 6.1881% 6.3144% 6.1881%
302 Colonial St.
Woodberry, TN 37190
ISG LIMITED TERM TENNESSEE
TAX-EXEMPT FUND:
First American National Bank........ 71.8483% (Class A Shares) 65.3819% 71.8483% 65.3819%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 22.3631% (Class A Shares) 20.3504% 22.3631% 20.3504%
Cash Reinvest
300 Union St. NA 052
Nashville, TN 37237
NFSC FEBO FAN-000078
Rose S. Kennon...................... 9.2810% (Class B Shares) 9.2810% 9.2810% 9.2810%
1603 Tyne Blvd.
Nashville, TN 37215
NFSC FEBO FAN-101621
Julie K. Tuerff..................... 7.9430% (Class B Shares) 7.9430% 7.9430% 7.9430%
1304 Beddington Park
Nashville, TN 37215
NFSC FEBO FAD-027499
Thomas I. Sutton.................... 6.9857% (Class B Shares) 6.9857% 6.9857% 6.9857%
4616 Tara Drive
Nashville, TN 37215
</TABLE>
49
<PAGE> 58
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAN-059560
Floyd W. Rhew....................... 7.0571% (Class B Shares) 7.0571% 7.0571% 7.0571%
5009 D. Camelot Drive
Columbia, TN 38401
NFSC FEBO FAN-024198
Margaret Y. Millam.................. 12.3897% (Class B Shares) 12.3897% 12.3897% 12.3897%
1109 Crater Hill Dr.
Nashville, TN 37215
NFSC FEBO FAN-169757
James E. Fugate..................... 5.6468% (Class B Shares) 5.6468% 5.6468% 5.6468%
635 Fugate Road
Evensville, TN 37332
NFSC FEBO FAN-142115
Yvonne P. Benson.................... 13.7158% (Class B Shares) 13.7158% 13.7158% 13.7158%
4409 Belmont Terrace #246
Nashville, TN 37215
NFSC FEBO FAN-059579
Beatrice A. Rhew.................... 7.9625% (Class B Shares) 7.9625% 7.9625% 7.9625%
5009 D Camelot Dr.
Columbia, TN 38401
ISG TENNESSEE TAX-EXEMPT FUND:
BISYS Brokerage Services............ 7.6204% (Class A Shares) 7.6204% 7.6204% 7.6204%
P.O. Box 4054
Concord, CA 94520
First American National Bank........ 36.1869 (Class A Shares) 35.1013% 36.1869% 35.1013%
Cash Reinvest 56.0036% (Institutional Shares) 54.3235% 56.0036% 54.3235%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 9.5697% (Class A Shares) 9.2826% 9.5697% 9.2826%
Reinvest Reinvest
300 Union St. NA 052
Nashville, TN 37237
NFSC FEBO FAN-060623
James E. Richards, III.............. 6.6678% (Class A Shares) 6.6678% 6.6678% 6.6678%
10 Castlewood Court
Nashville, TN 37215
NFSC FEBO FAN-071587
Janet Myers Trent................... 7.5098% (Class A Shares) 7.5098% 7.5098% 7.5098%
1400 Kenesaw Avenue, Apt. 12R
Knoxville, TN 37919
NFSC FEBO FAN-080438
Alan F. Cooper...................... 5.9158% (Class A Shares) 5.9158% 5.9158% 5.9158%
3305 Honeywood Drive
Johnson City, TN 37604
NFSC FEBO FAN-048933
Vivian M. Jones..................... 7.4314% (Class B Shares) 7.4314% 7.4314% 7.4314%
5400 Park Avenue Unit -- 306
Memphis, TN 34119
</TABLE>
50
<PAGE> 59
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAN-128732
Emil Fay Penley..................... 5.4608% (Class B Shares) 5.4608% 5.4608% 5.4608%
1920 Bowgter Drive, Apt C-8
Kingport, TN 37660
NFSC FEBO FAN-111287
Martha H. Sircy..................... 5.1499% (Class B Shares) 5.1499% 5.1499% 5.1499%
1155 Park Dr.
Cookeville, TN 38501
NFSC FEBO FAN-267880
Bobby L. Jones...................... 11.1664% (Class B Shares) 11.1664% 11.1664% 11.1664%
9 Abbeywood Court
Nashville, TN 37215
NFSC FEBO FAN-174319
Leonard Bobby Crisafulli............ 6.2514% (Class B Shares) 6.2514% 6.2514% 6.2514%
910 Ironworkers Rd.
Clarkesville, TN 37043
NFSC FEBO FAN-152552
Brenda K. Brasher................... 7.4964% (Class B Shares) 7.4964% 7.4964% 7.4964%
8244 Spring Ridge Drive
Nashville, TN 37221
First American National Bank........ 9.3111% (Class B Shares) 9.0318% 9.3111% 9.0318%
Cash Cash 40.8792 (Institutional Shares) 39.6528% 40.8792% 39.6528%
300 Union St. NA 052
Nashville, TN 37237
ISG LIMITED TERM INCOME FUND:
BISYS Brokerage Services............ 21.1782% (Class A Shares) 21.1782% 14.836% 14.836%
P.O. Box 4054
Concord, CA 94520
FTC & Company....................... 29.4197% (Class A Shares) 29.4197% 20.6094% 20.6094%
P.O. Box 173736
Denver, CO 80217-3736
First American National Bank........ 13.5599% (Class A Shares) 11.3903% 9.4991% 7.9792%
Cash Reinvest 23.3049% (Institutional Shares) 19.5761% 11.1348% 9.3532%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 31.4846% (Class A Shares) 26.4471% 22.0559% 18.5270%
Reinvest Reinvest................... 32.3642% (Institutional Shares) 27.1859% 15.4682% 12.9891%
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 31.7865% (Institutional Shares) 26.7007% 15.1872% 12.7572%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
NFSC FEBO FAN-107280
Mary M McGavook..................... 10.3334% (Class B Shares) 10.3334% 2.4693% 2.4693%
115 Woodmont Blvd. Apt. 220
Nashville, TN 37205
NFSC FEBO FAN-109630
Mildred V. Morgan................... 11.5548% (Class B Shares) 11.5548% 2.7612% 2.7612%
1448 Footerville Loop
Bell Buckle, TN 37020
</TABLE>
51
<PAGE> 60
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAD-023680
Mildred E. Brown.................... 9.9091% (Class B Shares) 9.9091% 2.3680% 2.3680%
3207 Bristol Hwy. Apt. 205
Johnson City, TN 37601
NFSC FEBO FAN-129216
Margaret H. Leeper.................. 7.3811% (Class B Shares) 7.3811% 1.7638% 1.7638%
337 Piney Flats Road
Piney Flats, TN 37686
NFSC FEBO FAP-062073
First American National Bank, 8.2646% (Class B Shares)
Custodian........................... 8.2646% 1.9752% 1.9752%
202 Windsor Terr. Road
Nashville, TN 37221
NFSC FEBO FAP-074845
First American National Bank, 8.6400% (Class B Shares)
Custodian........................... 8.6400% 2.0649% 2.0649%
347 Dafoe Circle
Maryville, TN 37804
NFSC FEBO FAP-058025
First American National Bank, 6.5801% (Class B Shares)
Custodian........................... 6.5801% 1.5724% 1.5724%
306 Dye Road
Bell Buckle, TN 37020
ISG PRIME MONEY MARKET FUND:
First American National Bank........ 9.3609% (Class A Shares) 1.7786% 7.1604% 1.3605%
800 First American Center
Nashville, TN 37237-0801
National Financial Services Corp.... 90.5428% (Class A Shares) 90.5428% 69.2580% 69.2580%
Exclusively for the Benefit of our
Customers
200 Liberty Street
New York, New York 10281
NFSC FEBO FAN-051799
Brent S. Thatcher................... 5.3711% (Class B Shares) 5.3711% 3.3019% 3.3019%
2727 Middlebrook Pike
Knoxville, TN 37921
NFSC FEBO FAN-BH2-90371
NFSC FMTC IRA....................... 6.1147% (Class B Shares) 6.1147% 3.7590% 3.7590%
6924 Querbes Dr.
Shreveport, LA 71106
NFSC FEBO BH2-904678
NFSC FMTC IRA....................... 12.9420% (Class B Shares) 12.9420% 7.9560% 7.9560%
6924 Querbes Dr.
Shreveport, LA 71106
NFSC FEBO 010-554855
NFSC FMTC IRA....................... 6.2206% (Class B Shares) 6.2206% 3.8240% 3.8240%
16621 County Road 73
Summerdale, AL 36580
NFSC FEBO 010-687553
Stephen D. Borsage AND.............. 10.7497% (Class B Shares) 10.7497% 6.6083% 6.6083%
11400 Arglyle Road
Irvington, AL 36544
</TABLE>
52
<PAGE> 61
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO 010-683272
AmSouth Bank-Cust................... 7.5165% (Class B Shares) 7.5165% 4.6207% 4.6207%
P.O. Box 520
St. Elmo, AL 36568
NFSC FEBO FAD-010-787469
Michael E. Futrell AND.............. 7.6854% (Class B Shares) 7.6854% 4.7245% 4.7245%
P.O. Box 39
Harvest, AL 35749
NFSC FEBO FAN-177741
Suzanne Baker MD.................... 5.7929% (Class B Shares) 5.7929% 3.5611% 3.5611%
539 E. Parkway
Memphis, TN 38104
First American National Bank........ 57.3518% (Institutional Shares) 10.8968% 18.4286% 3.5014%
800 First American Center
Nashville, TN 37237
First American National Bank........ 6.4254% (Institutional Shares) 1.2208% 2.0646% 0.3923%
Cash Cash
800 First American Center
Nashville, TN 37237
ISG TREASURY MONEY MARKET FUND:
First American National Bank........ 24.1931% (Class A Shares) 16.2094% 24.1931% 16.2094%
800 First American Center 38.1109% (Institutional Shares) 25.5343% 38.1109% 25.5343%
Nashville, TN 37237-0801
Hare & Co.
c/o The Bank of New York............ 57.3498% (Class A Shares) 57.3498% 57.3498% 57.3498%
Attn: Stif/Master Note
One Wall Street 2nd Flr.
New York, NY 10286
National Financial Services Corp.... 17.4361% (Class A Shares) 17.4361% 17.4361% 17.4361%
Exclusively for the Benefit of our
Customers
200 Liberty Street
New York, NY 10281
First American National Bank........ 59.3000% (Institutional Shares) 39.7310% 59.3000% 39.7310%
Cash Cash
800 First American Center
Nashville, TN 37237
ISG GOVERNMENT INCOME FUND:
City Bank & Trust................... 13.5874% (Class A Shares) 13.5874% 4.9617%% 4.9617%
Eldoark Company C
101 W Main St.
El Dorado, AR 71730
NFSC FEBO OIC 600962
Hodding Carter Memorial YMCA........ 5.2854% (Class A Shares) 5.2854% 1.9301% 1.9301%
1688 Fairground Road
Greenville, MS 38703-7805
</TABLE>
53
<PAGE> 62
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
First American National Bank........ 42.9126% (Institutional Shares) 36.4757% 42.4938% 36.1197%
Cash Cash
300 Union St. NA 052
Nashville, TN 37237
NFSC FEBO BH2-013854
NFSC FMTC IRA Rollover.............. 15.9261% (Class B Shares) 15.9261% 15.9236% 15.9236%
217 Willliamsburg
Monroe, LA 71203
NFSC FEBO FAN-169200
Thelma Lorraine H. Barrett.......... 10.8295% (Class B Shares) 10.8295% 10.8287% 10.8287%
Apt. S-154
Nashville, TN 37215
NFSC FEBO FAD-045543
James R. Wesson..................... 8.4877% (Class B Shares) 8.4877% 8.4863% 8.4863%
612 Spring House Court
Brentwood, TN 37027
NFSC FEBO FAN 023680
Mildred E. Brown.................... 5.1520% (Class B Shares) 5.1520% 5.1510% 5.1510%
3207 Bristol Hwy
Apt. 205
Johnson City, TN 37601
First American National Bank........ 28.8926% (Class A Shares) 24.5587% 10.5508% 8.9682%
Cash Reinvest
300 Union St. NA 052
Nashville, TN 37237
First American National Bank........ 17.4364% (Class A Shares) 14.8209% 6.3673% 5.4122%
Reinvest Reinvest 38.9846% (Institutional Shares) 33.1369% 38.6041% 32.8135%
300 Union St. NA 052
Nashville, TN 37237
ISG Growth & Income Portfolio....... 9.2557% (Institutional Shares) 9.2557% 9.1654% 9.1654%
3435 Stelzer Rd.
Columbus, OH 43219
NFSC FEBO FAN-088340
Frances T. Harris................... 16.8801% (Class B Shares) 16.8801% 16.8785% 16.8785%
6045 Sunrise Circle
Franklin, TN 37067
NFSC FEBO FAN-180114
Stephanie L. Wilson................. 13.2718% (Class B Shares) 13.2718% 13.2691% 13.2691%
19205 Wynd Chase Circle
Franklin, TN 37067
NFSC FEBO FAN-180432
Lee Ensign Johnson.................. 7.9232% (Class B Shares) 7.9232% 7.9215% 7.9215%
4612 Skymont Dr.
Nashville, TN 37215
ISG MUNICIPAL INCOME FUND:
First American National Bank........ 37.6713% (Class A Shares) 37.2946% 16.8642% 16.6956%
Reinvest Reinvest
300 Union St.
Nashville, TN 37237
</TABLE>
54
<PAGE> 63
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO OIC 375128................ 8.0714% (Class A Shares) 8.0714% 3.6133% 3.6133%
Blanche R. Young
334 Williamsburg Road
Columbia, MS 36701-1948
First American National Bank........ 98.8212% (Institutional Shares) 97.8330% 17.9317% 17.7524%
Cash Cash
300 Union St.
Nashville, TN 37237
NFSC FEBO OIC 218146................ 7.8932% (Class A Shares) 7.8932% 3.5335% 3.5335%
Richard A. Kent
P.O. Box 180
Fluker, LA 70436
NFSC FEBO FAD 047066................ 9.7849% (Class B Shares) 9.7849% 6.2062% 6.2062%
Jesse P. Smithson
3133 Long Blvd.
Nashville, TN 37203
NFSC FEBO OIC 170470................ 39.0760% (Class B Shares) 39.0760% 24.7935% 24.7935%
CL Womack
1302 Delaware Ave.
McComb, MS 39648
NFSC FEBO BH2-016349................ 11.8332% (Class B Shares) 11.8332% 7.5058% 7.5058%
Jean S. McKinney
2653-3 Village Lane
Bossier City, LA 71112
NFSC FEBO FAN 089877................ 38.0296% (Class B Shares) 38.0296% 24.1293% 24.1293%
Mildred Evelyn Piper Cons
102 Morton Mill Cir.
Nashville, TN 37221
ISG INTERNATIONAL EQUITY FUND:
First American National Bank........ 44.0257% (Class A Shares) 23.3336% 44.0257% 23.3336%
Cash Reinvest
300 Union St., NA 0052
Nashville, TN 37237-0001
First American National Bank........ 10.1764% (Class A Shares) 5.3935% 10.1764% 5.3935%
Reinvest Reinvest
300 Union St., NA 0052
Nashville, TN 37237-0001
NFSC FEBO O1C-528269................ 10.3328% (Class A Shares) 10.3328% 10.3328% 10.3328%
Halbert E. Dockins, Jr.
840 East River Place, Ste. 500
Jackson, MS 39202
NFSC FEBO O1C-235806................ 9.6006% (Class B Shares) 9.6006% 9.6006% 9.6006%
Jamel Macadory
1919 Bienville Dr.
Jackson, MS 39212
NFSC FEBO O1C-398810................ 19.6079% (Class B Shares) 19.6079% 19.6079% 19.6079%
Malcolm M. Perry
188 Lewis Road
Forrest, MS 39074
</TABLE>
55
<PAGE> 64
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO O1C-243221................ 11.1202% (Class B Shares) 11.1202% 11.1202% 11.1202%
Lametric Mackey GDN
212 Linda Dr.
Vicksburg, MS 39180
NFSC FEBO 010-363731................ 7.5396% (Class A Shares) 7.5396% 7.5396% 7.5396%
Timothy Mize Parker Jr.
PO Box 20980
Tuscaloosa, AL 35402
NFSC FEBO FAN-060968................ 23.4829% (Class B Shares) 23.4829% 23.4829% 23.4829%
Paul T. Naylor MD
12233 Ansley Ct.
Knoxville, TN 37922
First American National Bank........ 30.1771% (Institutional Shares) 30.1771% 30.1771% 30.1771%
Cash Cash
300 Union St., NA 0052
Nashville, TN 37237-0001
ISG AGGRESSIVE GROWTH PORTFOLIO:
NFSC FEBO 01C-307351
Teresa Kremser Rushin............... 7.2773% (Class A Shares) 7.2773% 7.2773% 7.2773%
PO Box 4525
Greenville, MS 38701
NFSC FEBO FAE-011967
First American National Bank, 7.6692% (Class A Shares)
Customer............................ 7.6692% 7.6692% 7.6692%
102 Carr St.
Hartsville, TN 37074
NFSC FEBO FAD-052256
Samual Hersk........................ 6.0036% (Class A Shares) 6.0036% 6.0036% 6.0036%
2014 Linden Avenue Apt. 5
Nashville, TN 37212
NFSC FEBO 01C-185850
Eric C. Biedenharn Jr............... 8.9792% (Class A Shares) 8.9792% 8.9792% 8.9792%
2205 Wilson St.
Vicksburg, MS 39180
NFSC FEBO 01C-186350
Debra G. Biedenharn................. 9.0496% (Class A Shares) 9.0496% 9.0496% 9.0496%
2205 Wilson St.
Vicksburg, MS 39180
NFSC FEBO FAD-059480
Wassim Hossari...................... 5.9559% (Class A Shares) 5.9559% 5.9559% 5.9559%
6991 Daneman Drive
Memphis, TN 38133
NIFSC FEBO FAD-060364
Solomon Aladmah..................... 7.0009% (Class A Shares) 7.0009% 7.0009% 7.0009%
Riyadah 112
Saudi Arabia, 999
NFSC FEBO FAP-113727
First American National Bank, 20.0962% (Class A Shares)
Customer............................ 20.0962% 20.0962% 20.0962%
1710 First American Center
Nashville, TN 37237
</TABLE>
56
<PAGE> 65
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAD-064912
Vanessa Epps........................ 8.6754% (Class A Shares) 8.6754% 8.6754% 8.6754%
1032 Lake St.
Kingsport, TN 37660
NFSC FEBO FAE-008931
First American National Bank, 8.2951% (Class B Shares)
Customer............................ 8.2951% 8.2951% 8.2951%
1105 Newcastle Drive
Old Hickory, TN 37138
NFSC FEBO FAE-012475
First American National Bank, 11.1172% (Class B Shares)
Customer............................ 11.1172% 11.1172% 11.1172%
RR3 Box 635
Max Meadows, VA 24360
NFSC FEBO FAD-057991
Kenad SG Medical Inc................ 5.7975% (Class B Shares) 5.7975% 5.7975% 5.7975%
2692 Huntley Drive
Memphis, TN 36132
NFSC FEBO 09G-400463
Russell M. Lamb..................... 28.7629% (Class B Shares) 28.7629% 28.7629% 28.7629%
202 E 4th Avenue Apt. 1
Rome, GA 30161
First American National Bank........ 53.2729% (Institutional Shares) 28.7674% 53.2729% 28.7674%
Reinvest Reinvest
300 Union St. NA 052
Nashville, TN 37237
BISYS Brokerage Service
PO Box 4054......................... 46.1800% (Institutional Shares) 46.1800% 46.1800% 46.1800%
Concord, CA 94520
ISG GROWTH PORTFOLIO:
NFSC FEBO FAE-011800
First American National Bank, 31.1673% (Class A Shares)
Customer............................ 31.1673% 31.1673% 31.1673%
2095 Puryears Bend Road
Hartsville, TN 37074
NFSC FEBO FAE-011967
First American National Bank, 16.6228% (Class A Shares)
Customer............................ 16.6228% 16.6228% 16.6228%
102 Carr St.
Hartsville, TN 37074
NFSC FEBO FAE-012289
First American National Bank, 12.6391% (Class A Shares)
Customer............................ 12.6391% 12.6391% 12.6391%
65 Albert Holder Loop
Hartville, TN 37074
NFSC FEBO 01C-221821
John R. Fraiser..................... 22.3948% (Class A Shares) 22.3948% 22.3948% 22.3948%
3009 Tidewater Circle
Madison, MS 39110
NFSC FEBO 01C-209945
NFSC FMTC IRA....................... 6.3196% (Class A Shares) 6.3196% 6.3196% 6.3196%
130 Hood Drive
Clinton, MS 39056
</TABLE>
57
<PAGE> 66
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAD-051845
Frank L. Jayakody................... 7.0722% (Class B Shares) 7.0722% 7.0722% 7.0722%
440 Naron Road
Shelbyville, TN 37160
NFSC FEBO 01C-562793
Velma S. Hamilton................... 23.4835% (Class B Shares) 23.4835% 23.4835% 23.4835%
1329 Robert Drive
Jackson, MS 39211
NFSC FEBO 010-698102
NFSC FMTC IRA....................... 16.7808% (Class B Shares) 16.7808% 16.7808% 16.7808%
155 Sunset Lane
Trion, GA 30753
First American National Bank........ 55.6530% (Institutional Shares) 33.3918% 55.6530% 33.3918%
Reinvest Reinvest
300 Union St. NA 052
Nashville, TN 37237
BISYS Brokerage Service............. 38.5562% (Institutional Shares) 38.5562% 38.5562% 38.5562%
PO Box 4054
Concord, CA 94520
ISG GROWTH & INCOME PORTFOLIO:
First American National Bank........ 5.6480% (Class A Shares) 4.6878% 5.6480% 4.6878%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
NFSC FEBO 01C-178713
NFSC FMTC IRA....................... 19.5403% (Class A Shares) 19.5403% 19.5403% 19.5403%
719 Spring Lake Circle
Terry, MS 39170
NFSC FEBO FAD-059110
Kathy B. Boyd GDN................... 18.8363% (Class A Shares) 18.8363% 18.8363% 18.8363%
2195 Leevillepike
Lebanon, TN 37090
NFSC FEBO 01C-311316
NFSC FMTC IRA....................... 41.9819% (Class A Shares) 41.9819% 41.9819% 41.9819%
14 Briarwood Circle
Long Beach, MS 39560
NFSC FEBO FAE-010197
First American National Bank, 6.7569% (Class B Shares)
Customer............................ 6.7569% 6.7569% 6.7569%
542 Lovedale Drive
Kingsport, TN 37660
NFSC FEBO FAE-012726
First American National Bank, 5.9821% (Class B Shares)
Customer............................ 5.9821% 5.9821% 5.9821%
1324 General George Patton
Nashville, TN 37221
NFSC FEBO FAN-230626
Emmett R Ray Sr., Mary F. Ray TT.... 8.4843% (Class B Shares) 8.4843% 8.4843% 8.4843%
602 Davis Dr.
Brentwood, TN 37027
</TABLE>
58
<PAGE> 67
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO 010-695980
NFSC FMTC IRA Rollover.............. 6.4309% (Class B Shares) 6.4309% 6.4309% 6.4309%
20 Pine Grove Circle
Adairsville, GA 30103
First American National Bank........ 78.2204% (Institutional Shares) 64.9229% 78.2204% 64.9229%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
BISYS Brokerage Service............. 16.4849% (Institutional Shares) 16.4849% 16.4849% 16.4849%
PO Box 4054
Concord, CA 94520
ISG MODERATE GROWTH & INCOME
PORTFOLIO:
NFSC FEBO 01C-630268
AGAPE Storge Christian Center....... 69.3405% (Class A Shares) 69.3405% 69.3405% 69.3405%
130 N Theobald
Greenville, MS 38701
National Financial Services Corp.... 6.9237% (Class A Shares) 6.9237% 6.9237% 6.9237%
Ottamiese W. Mercer
1131 Mountain Brook Circle
Shreveport, LA 71118-4829
NFSC FEBO 01C-178896
Tulane Baptist Church............... 7.5020% (Class A Shares) 7.5020% 7.5020% 7.5020%
PO Box 41
Yazoo City, MS 39194
NFSC FEBO FAE-011371
First American Bank, Customer....... 10.0065% (Class B Shares) 10.0065% 10.0065% 10.0065%
112 Hillcrest
Clinton, TN 37716
NFSC FEBO FAD-050202
John A. Haynes...................... 5.2027% (Class B Shares) 5.2027% 5.2027% 5.2027%
1945 N.W. Broadstreet
Murfreesboro, TN 37129
NFSC FEBO 01C-173878
Noelie L. Cook...................... 7.8091% (Class B Shares) 7.8091% 7.8091% 7.8091%
2300 Seven Springs Rd. Apt B312
Raymond, MS 39154
NFSC FEBO 01C-372153
NFSC FMTC IRA....................... 8.1090% (Class B Shares) 8.1090% 8.1090% 8.1090%
2736 Newport St.
Jackson, MS 39213
NFSC FEBO FAD-052140
Marshall E. Rasnake................. 10.0837% (Class B Shares) 10.0837% 10.0837% 10.0837%
College Hill
La Follette, TN 37766
NFSC FEBO 01C-176710
NFSC FMTC IRA Rollover.............. 5.0587% (Class B Shares) 5.0587% 5.0587% 5.0587%
1520 4th Avenue N
Columbus, MS 39701
</TABLE>
59
<PAGE> 68
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO FAE-042412
First American National Bank, 5.2957% (Class B Shares)
Customer............................ 5.2957% 5.2957% 5.2957%
2306 Dundee Lane
Nashville, TN 37214
NFSC FEBO 010-556203
NFSC FMTC IRA....................... 6.3725% (Class B Shares) 6.3725% 6.3725% 6.3725%
1920 Gun Barrel Road 1712
Chattanooga, TN 37421
First American National Bank........ 76.9411% (Institutional Shares) 61.5529% 76.9411% 61.5529%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
BISYS Brokerage Service............. 19.1652% (Institutional Shares) 19.1652% 19.1652% 19.1652%
PO Box 4054
Concord, CA 94520
ISG CURRENT INCOME PORTFOLIO:
NFSC FEBO FAP-109789
First American Nat'l. Bank Cust..... 99.6923% (Class A Shares) 99.6923% 99.6923% 99.6923%
4204 Edwards Ave.
Nashville, TN 37216
NFSC FEBO FAE-012009
First American Nat'l. Bank Cust..... 99.9663% (Class B Shares) 99.9663% 99.9663% 99.9663%
504 Upsall Drive
Antioch, TN 37013
First American Nat'l. Bank.......... 38.4749% (Institutional Shares) 14.6205% 38.4749% 14.6205%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
BISYS Brokerage Service............. 61.5235% (Institutional Shares) 61.5235% 61.5235% 61.5235%
PO Box 4054
Concord, CA 94520
ISG MID-CAP FUND:
First American Nat'l. Bank.......... 21.3784% (Class A Shares) 15.8200% 21.3784% 15.8200%
Cash Reinvest
300 Union Street NA 052
Nashville, TN 37237
First American Nat'l. Bank.......... 5.4587% (Class A Shares) 4.0394% 5.4587% 4.0394%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
NFSC FEBO 01C-830268
Agape Storge Christian Center....... 13.9565% (Class A Shares) 13.9565% 13.9565% 13.9565%
130 N. Theobald
Greenville, MS 38701
NFSC FEBO 01C-528269
Halbert E. Dockins Jr............... 6.9956% (Class A Shares) 6.9956% 6.9956% 6.9956%
640 East River Place Ste. 500
Jackson, MS 39202
</TABLE>
60
<PAGE> 69
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO 01C-374458
Kimberly Sweet...................... 9.3401% (Class A Shares) 9.3401% 9.3401% 9.3401%
378 Fannin Landing Circle
Brandon, MS 39042
NFSC FEBO FAN-072915
Thomas K. Hightower................. 5.5477% (Class B Shares) 5.5477% 5.5477% 5.5477%
P.O. Box 51853
Bowling Green, KY 42102
NFSC FEBO 01C-412228
NFSC FMTC IRA SEPP.................. 13.0229% (Class B Shares) 13.0229% 13.0229% 13.0229%
P.O. Box 2057
Ridgeland, MS 39158
NFSC FEBO 09G-452491
Timothy E. Ramski AND............... 6.8796% (Class B Shares) 6.8796% 6.8796% 6.8796%
13572 Sunset Lakes Circle
Winter Garden, FL 34787
First American Nat'l. Bank.......... 22.2942% (Institutional Shares) 16.4977% 22.2942% 16.4977%
Cash Cash
300 Union Street NA 052
Nashville, TN 37237
First American National Bank........ 5.2186% (Institutional Shares) 3.8618% 5.2186% 3.8618%
Cash Reinvest
300 Union Street NA 052
Nashville, TN 37237
First American Nat'l. Bank.......... 46.5911% (Institutional Shares) 34.4774% 46.5911% 34.4774%
Reinvest Reinvest
300 Union Street NA 052
Nashville, TN 37237
ISG Aggressive Growth Portfolio..... 6.5448% (Institutional Shares) 6.5448% 6.5448% 6.5548%
3435 Stelzer Rd.
Columbus, OH 43219
ISG Growth & Income Portfolio....... 5.3351% (Institutional Shares) 5.3351% 5.3351% 5.3351%
3435 Stelzer Rd.
Columbus, OH 43219
Capital Management Group............ 8.0855% (Institutional Shares) 8.0855% 8.0855% 8.9855%
Provident Bank
P.O. Box 691198
Cincinnati, OH 45269-1198
ISG TAX-EXEMPT MONEY MARKET FUND:
First American National Bank........ 42.5184% (Class A Shares) 38.2666% 11.7658% 10.5892%
800 First American Ctr.
Nashville, TN 37237-0801
National Financial Services Corp.... 57.4815% (Class A Shares) 57.4815% 15.9064% 15.9064%
Exclusive Benefit of Our Customers
200 Liberty St.
New York, NY 10281
First American National Bank........ 21.4054% (Institutional Shares) 19.2649% 11.9310% 10.7379%
800 First American Ctr.
Nashville, TN 37237-0801
</TABLE>
61
<PAGE> 70
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
First American National Bank........ 75.3525% (Institutional Shares) 67.8173% 42.0001% 37.8001%
Cash Cash
300 Union Street NA 052
Nashville, TN 37237-0801
</TABLE>
The votes of the shareholders of AmSouth are not being solicited, since
their approval or consent is not necessary for approval of the Agreement. As of
December 3, 1999, the officers and Trustees of AmSouth as a group beneficially
owned less than 1% of the outstanding Class A, Class B and Trust Class shares of
any of the AmSouth Funds. The information in the following table shows, to the
best of the knowledge of ISG Funds, the shareholders who owned of record or
beneficially 5% or more of the indicated Fund and Class. The table also shows,
as far as practicable, the percentage of record and beneficial ownership of
these same shareholders upon consummation of the Transaction calculated on the
basis of holdings as of the December 3, 1999 record date. Those shareholders who
beneficially own 25% or more of the outstanding shares of a Fund may be deemed
to be controlling persons of that Fund under the 1940 Act.
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
AMSOUTH PRIME MONEY MARKET FUND:
Kenneburt & Company................. 51.8829% (Trust Shares) 37.3567% 35.2152% 25.3549%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 40.3094% (Trust Shares) 29.0236% 27.3598% 19.6990%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
National Financial Services 99.1730% (Class A Shares)
Corporation......................... 99.1730% 23.3206% 23.3206%
The Benefit of Our Customers
P.O. Box 3752
New York, New York 10008-3752
NFSC FEBO 010-743801
Gary M. Bailey...................... 5.3144% (Class B Shares) 5.3144% 2.0475% 2.0475%
2608 Snow Rogers Road
Gardendale, AL 35071
NFSC FEBO 010-439150
NFSC FMTC IRA....................... 6.7229% (Class B Shares) 6.7229% 2.5903% 2.5903%
317 Shenandoah Drive N.E.
Calhoun, GA 30701
NFSC FEBO 010-882399
NFSC FMTC IRA Rollover.............. 8.6708% (Class B Shares) 8.6708% 3.3408% 3.3408%
1827 Poplar Drive
Gardendale, AL 35071
NFSC FEBO 010-491101
NFSC FMTC IRA Rollover.............. 13.8864% (Class B Shares) 13.8864% 5.3503% 5.3503%
3943 14 Ave. North
St. Petersburg, FL 33713
NFSC FEBO 010-907073
Mae Lynn Hardy AND.................. 7.9118% (Class B Shares) 7.9118% 3.0483% 3.0483%
1410 14th St. S.W.
Alabaster, AL 35007
</TABLE>
62
<PAGE> 71
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO 010-727512
Charles L. Banther AND.............. 7.6592% (Class B Shares) 7.6592% 2.9510% 2.9510%
82 Pick Drive
Scottsboro, AL 35769
NFSC FEBO 010-031020
NFSC FMTC IRA Rollover.............. 13.2514% (Class B Shares) 13.2514% 5.1056% 5.1056%
9551 Manley Vines Road
Hueytown, AL 35023
AMSOUTH TAX-EXEMPT MONEY MARKET
FUND:
Kenneburt & Company................. 28.4278% (Trust Shares) 21.6080% 12.6059% 9.5806%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 71.5660% (Trust Shares) 54.3973% 31.7350% 24.1186%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
National Financial Services 96.1956% (Class A Shares)
Corporation......................... 96.1956% 69.6075% 69.6075%
The Benefit of Our Customers
P.O. Box 3752
New York, New York 10008-3752
AMSOUTH BOND FUND:
Kenneburt & Company................. 46.6925% (Trust Shares) 34.5236% 34.5922% 25.5982%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 34.5653% (Trust Shares) 25.5515% 25.6077% 18.9497%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 17.1960% (Trust Shares) 12.7116% 12.7396% 9.4273%
P.O. Box 11426 Cstdy. Unit
Birmingham, AL 35202-1426
NFSC FEBO 010-445851
First Ala. Bank as Successor-TTEE... 11.2746% (Class A Shares) 11.2746% 7.2297% 7.2297%
P.O. Box 2527
Mobile, AL 36822
NFSC FEBO 010-445878
First Ala. Bank as Successor-TTEE... 8.9962% (Class A Shares) 8.9962% 5.7687% 5.7687%
P.O. Box 2527
Mobile, AL 36822
Baldwin & Co........................ 6.1819% (Class A Shares) 6.1819% 3.9641% 3.9641%
P.O. Box 511
Montgomery, AL 36101-0511
NFSC FEBO 09G-359173
Lillian F. Kinzel TTEE.............. 7.5650% (Class B Shares) 7.5650% 4.9761% 4.9761%
2655 Nebraska Avenue Apt. 337
Palm Harbor, FL 34684
NFSC FEBO 09G-440477
Edward Sidlasky..................... 7.6867% (Class B Shares) 7.6867% 5.0556% 5.0556%
4315 Harbor Watch Lane
Lutz, FL 33549
</TABLE>
63
<PAGE> 72
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
AMSOUTH LIMITED TERM BOND FUND:
Kenneburt & Company................. 33.9909% (Trust Shares) 23.7913% 17.7559% 12.4291%
P.O. Box 11426 CSTDY Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 57.1436% (Trust Shares) 39.9965% 29.8501% 20.8951%
P.O. Box 11426 CSTDY Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 7.7747% (Trust Shares) 5.4417% 4.0613% 2.8429%
Feed Reinvestment
P.O. Box 11426 CSTDY Unit
Birmingham, AL 35202-1426
Morgan Keegan C F Inc. C F.......... 5.1197% (Class A Shares) 5.1197% 1.5403% 1.5403%
Robert P. Hall DMD SEP IRA
19493 Scenic Hwy. 98
Fairhope, AL 36532
NFSC FEBO 010-909386
James Brand Jr. B B Brand TTEE...... 5.0637% (Class A Shares) 5.0637% 1.5235% 1.5235%
1800 Mountain Circle
Birmingham, AL 35217
NFSC FEBO 010-876836
CW Auto Parts....................... 10.8081% (Class B Shares) 10.8081% 8.1457% 8.1457%
3912 Cottage Hill Rd.
Mobile, AL 36609
AMSOUTH GOVERNMENT INCOME FUND:
Kenneburt & Company................. 42.7430% (Trust Shares) 30.3474% 0.4298% 0.3052%
P.O. Box 11426 CSTD Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 15.9518% (Trust Shares) 11.3256% 0.1604% 0.1139%
P.O. Box 11426 CSTD Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 41.3049% (Trust Shares) 29.3264% 0.4153% 0.2949%
P.O. Box 11426 CSTD Unit
Birmingham, AL 35202-1426
NFSC FEBO 09G-098418
Gulf Coast Health Cooperative....... 8.2302% (Class A Shares) 8.2302% 5.2380% 5.2380%
P.O. Box 17500
Pensacola, FL 32522
AMSOUTH MUNICIPAL BOND FUND:
Kenneburt & Company................. 46.8401% (Trust Shares) 35.1884% 38.2634% 28.7932%
P.O. Box 11426 CSTD Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 51.7045% (Trust Shares) 38.8428% 42.2371% 31.7835%
P.O. Box 11426 CSTD Unit
Birmingham, AL 35202-1426
NFSC FEBO 010-861715
Robert S. Sanford................... 14.4356% (Class A Shares) 14.4356% 7.9726% 7.9726%
203 Briarhill Road
Enterprise, AL 38330
</TABLE>
64
<PAGE> 73
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sterne Agee Leach Inc............... 5.2408% (Class A Shares) 5.2408% 2.8945% 2.8945%
A C 8102-3199
813 Sades Creek Parkway
Birmingham, AL 35209
Sterne Agee Leach Inc............... 6.6800% (Class A Shares) 6.6800% 3.6892% 3.6892%
A C 8102-6340
813 Sades Creek Parkway STE 1008
Birmingham, AL 35209
Sterne Agee Leach Inc............... 7.9602% (Class A Shares) 7.9602% 4.3962% 4.3962%
A C 8102-8820
813 Sades Creek Parkway STE 1008
Birmingham, AL 35209
NFSC FEBO 010-710326
Charlotte Martin.................... 8.1300% (Class A Shares) 8.1300% 4.4900% 4.4900%
501 Walnut Grove Dr.
Madison, WI 53717
NFSC FEBO 01A-385700
W. Milam Cain....................... 6.8578% (Class A Shares) 6.8578% 3.7875% 3.7875%
2439 Magnolia Park Cir
Tuscaloosa, AL 35405
NFSC FEBO 010-639125
Pauline M. Penick................... 6.8031% (Class B Shares) 6.8031% 2.4859% 2.4859%
921 Royal Tower Drive
Birmingham, AL 35209
NFSC FEBO 09G-396931
Evelyn K. Malmquist AND............. 35.6851% (Class B Shares) 35.6851% 13.0410% 13.0410%
917 Signal Road
Signal Mtn, TN 37377
NFSC FEBO 09G-349321
Joseph J. Cervenka LLC.............. 53.0598% (Class B Shares) 53.0598% 19.3922% 19.3922%
5400 Paliway
St. Petersburg, FL 33706
AMSOUTH EQUITY INCOME FUND:
Kenneburt & Company................. 65.3402% (Trust Shares) 48.2132% 10.1638% 7.4196%
P.O. Box 11426 Cstdy Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 34.6597% (Trust Shares) 25.5747% 5.3914% 3.9357%
P.O. Box 11426 Cstdy Unit
Birmingham, AL 35202-1426
AMSOUTH SMALL CAP FUND:
Kenneburt & Company................. 79.4916% (Trust Shares) 57.8267% 20.7165% 15.0713%
P.O. Box 11426 Cstdy Unit
Birmingham, AL 35202-1426
Kenneburt & Company................. 20.5084% (Trust Shares) 14.9189% 5.3447% 3.8883%
Small Cap Premier Fund Reinvestment
P.O. Box 11426 Cstdy Unit
Birmingham, AL 35202-1426
</TABLE>
65
<PAGE> 74
<TABLE>
<CAPTION>
PERCENT APPROXIMATE APPROXIMATE
OF PERCENT OF PERCENT OF
BENEFICIAL RECORD BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP
PERCENT OF RECORD OWNERSHIP AS OF UPON UPON
NAME AND ADDRESS AS OF 12/3/99 12/3/99 CONSUMMATION CONSUMMATION
---------------- --------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
NFSC FEBO 09G-349097
Donald B. Quarles AND............... 33.4699% (Class A Shares) 33.4699% 2.7251% 2.7251%
702 Waterview Lane
Tarpon Springs, FL 34689
NFSC FEBO 010-279471
Amsouth Bank C F Rollver IRA........ 16.3572% (Class A Shares) 16.3572% 1.3318% 1.3318%
3004 Myrtlewood Lane
Dothan, AL 36303
NFSC FEBO 010-620122
C Dowd Ritter....................... 8.3184% (Class A Shares) 8.3184% 0.6773% 0.6773%
2949 Southwood Road
Birmingham, AL 35223
NFSC FEBO 010-363731
Timothy Mize Parker Jr.............. 6.7790% (Class A Shares) 6.7790% 0.5519% 0.5519%
P. O. Box 20908
Tuscaloosa, AL 35402
NFSC FEBO 09G-312568
Dock W. Smith....................... 5.2737% (Class B Shares) 5.2737% 3.8387% 3.8387%
384 Evergreen Road
Dayton, TN 37321
NFSC FEBO 010-604240
Richard E. McBee.................... 6.4403% (Class B Shares) 6.4403% 4.6879% 4.6879%
516 Park Mill Circle
Vestavia Mills, AL 35242
NFSC FEBO 09G-411582
Charles Thomas Deel................. 5.2322% (Class B Shares) 5.2322% 3.8083% 3.8083%
P. O. Box 530814
St. Petersburg, FL 33747
</TABLE>
THE BOARD OF DIRECTORS OF ISG, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN AND THE ADVISORY AND SUB-ADVISORY
AGREEMENTS.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Combined Prospectus/Proxy Statement and the related statement of
additional information do not contain all of the information set forth in the
registration statements and the exhibits relating thereto which AmSouth and ISG,
respectively, have filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the 1940 Act to which reference is hereby made. The
SEC file numbers for the ISG Prospectuses and the related statement of
additional information which are incorporated by reference herein are
Registration No. 33-34080 and 811-06076. The SEC file numbers for the AmSouth
Prospectuses and related statement of additional information which are
incorporated by reference herein are Registration No. 33-21660 and 811-5551.
AmSouth and ISG are subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith file reports and
other information with the SEC. Reports, proxy and information statements,
registration statements and other information filed by AmSouth and ISG can be
inspected and copied at the public reference facilities of the SEC at 450 Fifth
Street, N.W. Washington, D.C. 20549. Copies of such filings may also be
available at the following SEC regional offices: 90 Devonshire Street, Suite
700, Boston, MA 02109; 500 West Madison Street, Suite 1400, Chicago, IL
60611-2511; and 601 Walnut Street, Suite 1005E, Philadelphia, PA 19106. Copies
of such materials can also be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549
at prescribed rates.
66
<PAGE> 75
APPENDIX A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
November 23, 1999, by and between AmSouth Funds ("AmSouth"), a Massachusetts
business trust, and The Infinity Mutual Funds, Inc. ("Infinity"), a Maryland
corporation, on behalf of the ISG Funds. The capitalized terms used herein shall
have the meaning ascribed to them in this Agreement.
PLAN OF REORGANIZATION
(a) Infinity will sell, assign, convey, transfer and deliver to AmSouth,
and AmSouth will acquire, on the Exchange Date, all of the properties and assets
existing at the Valuation Time in the following funds:
ISG Current Income Portfolio ("ISG Current Income")
ISG Treasury Money Market Fund ("ISG Treasury Money Market")
ISG Moderate Growth & Income Portfolio ("ISG Moderate Growth & Income")
ISG Growth & Income Portfolio ("ISG Growth & Income")
ISG Growth Portfolio ("ISG Growth")
ISG Aggressive Growth Portfolio ("ISG Aggressive Growth")
ISG Mid-Cap Fund ("ISG Mid-Cap")
ISG Large-Cap Equity Fund ("ISG Large-Cap Equity")
ISG International Equity Fund ("ISG International Equity")
ISG Capital Growth Fund ("ISG Capital Growth")
ISG Tennessee Tax-Exempt Fund ("ISG Tennessee Tax-Exempt")
ISG Limited Term Tennessee Tax-Exempt Fund ("ISG Limited Term Tennessee
Tax-Exempt")
ISG Limited Term U.S. Government Fund ("ISG Limited Term U.S. Government")
ISG Limited Term Income Fund ("ISG Limited Term Income")
ISG Equity Income Fund ("ISG Equity Income")
ISG Municipal Income Fund ("ISG Municipal Income")
ISG Small-Cap Opportunity Fund ("ISG Small-Cap Opportunity")
ISG Tax-Exempt Money Market Fund ("ISG Tax-Exempt Money Market")
ISG Prime Money Market Fund ("ISG Prime Money Market")
ISG Government Income Fund ("ISG Government Income")
ISG Income Fund ("ISG Income")
(such funds each are an "ISG Fund" and are collectively the "ISG Funds").
Such acquisition is to be made by the following funds:
AmSouth Strategic Portfolios: Current Income Portfolio ("AmSouth
Current Income")
AmSouth Treasury Reserve Money Market Fund ("AmSouth Treasury Reserve
Money Market")
AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio
("AmSouth Moderate Growth and Income")
AmSouth Strategic Portfolios: Growth and Income Portfolio ("AmSouth
Growth and Income")
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AmSouth Strategic Portfolios: Growth Portfolio ("AmSouth Growth")
AmSouth Strategic Portfolios: Aggressive Growth Portfolio ("AmSouth
Aggressive Growth")
AmSouth Mid Cap Fund ("AmSouth Mid Cap")
AmSouth Large Cap Fund ("AmSouth Large Cap")
AmSouth International Equity Fund ("AmSouth International Equity")
AmSouth Capital Growth Fund ("AmSouth Capital Growth")
AmSouth Tennessee Tax-Exempt Fund ("AmSouth Tennessee Tax-Exempt")
AmSouth Limited Term Tennessee Tax-Exempt Fund ("AmSouth Limited Term
Tennessee Tax-Exempt")
AmSouth Limited Term U.S. Government Fund ("AmSouth Limited Term U.S.
Government")
AmSouth Government Income Fund ("AmSouth Government Income")
AmSouth Limited Term Bond Fund ("AmSouth Limited Term Bond")
AmSouth Equity Income Fund ("AmSouth Equity Income")
AmSouth Municipal Bond Fund ("AmSouth Municipal Bond")
AmSouth Small Cap Fund ("AmSouth Small Cap")
AmSouth Tax-Exempt Money Market Fund ("AmSouth Tax-Exempt Money
Market")
AmSouth Prime Money Market Fund ("AmSouth Prime Money Market")
AmSouth Bond Fund ("AmSouth Bond")
(such funds each are an "AmSouth Fund" and are collectively the
"AmSouth Funds").
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For purposes of this Agreement the respective ISG Funds correspond to the
AmSouth Funds as follows:
<TABLE>
<S> <C>
ISG Current Income AmSouth Current Income
ISG Treasury Money Market AmSouth Treasury Reserve Money Market
ISG Moderate Growth & Income AmSouth Moderate Growth and Income
ISG Growth & Income AmSouth Growth and Income
ISG Growth AmSouth Growth
ISG Aggressive Growth AmSouth Aggressive Growth
ISG Mid-Cap AmSouth Mid Cap
ISG Large-Cap Equity AmSouth Large Cap
ISG International Equity AmSouth International Equity
ISG Capital Growth AmSouth Capital Growth
ISG Tennessee Tax-Exempt AmSouth Tennessee Tax-Exempt
ISG Limited Term Tennessee Tax-Exempt AmSouth Limited Term Tennessee Tax-Exempt
ISG Limited Term U.S. Government AmSouth Limited Term U.S. Government
ISG Government Income AmSouth Government Income
ISG Limited Term Income AmSouth Limited Term Bond
ISG Equity Income AmSouth Equity Income
ISG Municipal Income AmSouth Municipal Bond
ISG Small-Cap Opportunity AmSouth Small Cap
ISG Tax-Exempt Money Market AmSouth Tax-Exempt Money Market
ISG Prime Money Market AmSouth Prime Money Market
ISG Income AmSouth Bond
</TABLE>
In consideration therefor, each AmSouth Fund shall, on the Exchange Date,
assume all of the liabilities of the corresponding ISG Fund and transfer to the
corresponding ISG Fund a number of full and fractional AmSouth Class A, Class B,
or Trust shares of the corresponding AmSouth Fund (collectively, "Shares")
having an aggregate net asset value equal to the value of all of the assets of
each ISG Fund transferred to the corresponding AmSouth Fund on such date less
the value of all of the liabilities of each ISG Fund assumed by the
corresponding AmSouth Fund on that date. It is intended that each reorganization
described in this Agreement shall be a tax-free reorganization under the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transactions described in paragraph (a) of
this Agreement, each ISG Fund in complete liquidation shall distribute to its
respective shareholders of record as of the Exchange Date the Shares received by
it, each shareholder being entitled to receive that number of Shares equal to
the proportion which the number of shares of common stock of the ISG Fund held
by such shareholder bears to the number of such shares of the ISG Fund
outstanding on such date. ISG Fund shareholders of record holding Institutional
Class shares will receive AmSouth Trust shares; ISG Fund shareholders of record
holding Class B shares will receive AmSouth Class B shares; and ISG Fund
shareholders of record holding Class A shares will receive AmSouth Class A
shares.
AGREEMENT
AmSouth and Infinity represent, warrant and agree as follows:
1. Representations and Warranties of Infinity. Each of Infinity and each
ISG Fund represent and warrant to and agree with AmSouth and each AmSouth Fund
that:
(a) Infinity is a corporation duly organized and validly existing
under the laws of the State of Maryland and has power to own all of its
properties and assets and to carry out its obligations under this
Agreement. Infinity and each ISG Fund is not required to qualify as a
foreign association in any jurisdiction where the
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failure to so qualify would have a material adverse effect on Infinity or
the ISG Funds. Infinity and each ISG Fund has all necessary federal, state
and local authorizations to carry on its business as now being conducted
and to fulfill the terms of this Agreement, except for shareholder approval
and as otherwise described in Section 1(l).
(b) Infinity is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company,
and such registration has not been revoked or rescinded and is in full
force and effect. Each ISG Fund has elected to qualify and has qualified as
a regulated investment company under Part I of Subchapter M of the Code, as
of and since its first taxable year, and qualifies and intends to continue
to qualify (if not an ISG Fund that will combine with an AmSouth Fund in a
manner qualifying for treatment under Section 368(a)(1)(F) of the Code) as
a regulated investment company for its taxable year ending upon its
liquidation. Each ISG Fund has been a regulated investment company under
such sections of the Code at all times since its inception.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of portfolio
investments (indicating their market values) for each ISG Fund at and for
the year ended December 31, 1998, such statements and schedules having been
audited by KPMG LLP, independent accountants to Infinity, have been
furnished to AmSouth. Such statements of assets and liabilities and
schedule fairly present the financial position of each ISG Fund as of their
respective dates and said statements of operations and changes in net
assets fairly reflect the results of operations and changes in net assets
for the periods covered thereby in conformity with generally accepted
accounting principles. The statements of assets and liabilities, statements
of operations, statements of changes in net assets and schedules of
investments (indicating their market values) for each ISG Fund for the
six-month period ended June 30, 1999, which are unaudited, have also been
furnished to AmSouth. Such statements of assets and liabilities and
schedules fairly present the financial position of the ISG Funds as of
their respective dates, and said statements of operations and changes in
net assets fairly reflect the results of its operations and changes in
financial position for the periods covered thereby in conformity with
generally accepted accounting principles.
(d) The prospectuses of the ISG Funds dated May 1, 1999 (the "ISG
Prospectuses") and the Statement of Additional Information for the ISG
Funds dated May 1, 1999 and on file with the Securities and Exchange
Commission, which have been previously furnished to AmSouth, did not as of
their dates and do not as of the date hereof contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Infinity or any ISG Fund, overtly
threatened against Infinity or any ISG Fund which assert liability on the
part of Infinity or any ISG Fund.
(f) There are no material contracts outstanding to which Infinity,
with respect to the ISG Funds, or any ISG Fund is a party, other than as
disclosed in the ISG Prospectuses and the corresponding Statement of
Additional Information or in the Registration Statement and the Proxy
Statement.
(g) Neither Infinity, with respect to the ISG Funds, nor any ISG Fund
has any known liabilities of a material nature, contingent or otherwise,
other than those shown as belonging to it on its statement of assets and
liabilities as of June 30, 1999, and those incurred in the ordinary course
of Infinity's business as an investment company since that date. Prior to
the Exchange Date, Infinity will advise AmSouth of all known material
liabilities, contingent or otherwise, incurred by it, with respect to the
ISG Funds, and each ISG Fund subsequent to June 30, 1999, whether or not
incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall mean each
ISG Fund's investments shown on the schedule of its portfolio investments
as of June 30, 1999, referred to in Section 1(c) hereof, as supplemented
with such changes as Infinity or each ISG Fund shall make after June 30,
1999, which changes shall be disclosed to AmSouth, and changes resulting
from stock dividends, stock split-ups, mergers and similar corporate
actions.
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(i) Each ISG Fund has filed or will file all federal and state tax
returns which, to the knowledge of Infinity's officers, are required to be
filed by each ISG Fund and has paid or will pay all federal and state taxes
shown to be due on said returns or on any assessments received by each ISG
Fund. To the best of such officers' knowledge, all tax liabilities of each
ISG Fund have been adequately provided for on its books, and no tax
deficiency or liability of any ISG Fund has been asserted, and no question
with respect thereto has been raised, by the Internal Revenue Service or by
any state or local tax authority for taxes in excess of those already paid.
(j) As of both the Valuation Time and the Exchange Date and except for
shareholder approval and otherwise as described in Section 1(l), Infinity
on behalf of each ISG Fund will have full right, power and authority to
sell, assign, transfer and deliver the Investments and any other assets and
liabilities of each ISG Fund to be transferred to the corresponding AmSouth
Fund pursuant to this Agreement. At the Exchange Date, subject only to the
delivery of the Investments and any such other assets and liabilities as
contemplated by this Agreement, AmSouth will, on behalf of each AmSouth
Fund, acquire the Investments and any such other assets subject to no
encumbrances, liens or security interests in favor of any third party
creditor of Infinity or an ISG Fund and, except as described in Section
1(k), without any restrictions upon the transfer thereof.
(k) Except as to Investments otherwise disclosed as unregistered
securities pursuant to Section 1(h) hereof, no registration under the
Securities Act of 1933, as amended (the "1933 Act"), of any of the
Investments would be required if they were, as of the time of such
transfer, the subject of a public distribution by either of Infinity or
AmSouth.
(l) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Infinity on
behalf of the ISG Funds or any ISG Fund of the transactions contemplated by
this Agreement, except such as may be required under the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act,
Maryland General Corporate Law state securities or blue sky laws (which
term as used herein shall include the laws of the District of Columbia and
of Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "H-S-R Act").
(m) The registration statement (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") by AmSouth
on Form N-14 relating to the Shares issuable hereunder, and the proxy
statement of Infinity included therein (the "Proxy Statement"), on the
effective date of the Registration Statement and insofar as they relate to
Infinity and the ISG Funds, (i) will comply in all material respects with
the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules
and regulations thereunder and (ii) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading; and at
the time of the shareholders' meeting referred to in Section 8(a) below and
on the Exchange Date, the prospectus contained in the Registration
Statement of which the Proxy Statement is a part (the "Prospectus"), as
amended or supplemented by any amendments or supplements filed with the
Commission by AmSouth, insofar as it relates to Infinity and the ISG Funds,
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; provided, however, that none of the
representations and warranties in this subsection shall apply to statements
in or omissions from the Registration Statement, the Prospectus or the
Proxy Statement, made in reliance upon or in conformity with information
furnished by AmSouth, or any AmSouth Fund, for use in the Registration
Statement, Prospectus, or Proxy Statement.
(n) All of the issued and outstanding shares of common stock of each
ISG Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
2. Representations and Warranties of AmSouth Each of AmSouth and each
AmSouth Fund jointly and severally represent and warrant to and agree with
Infinity and each ISG Fund that:
(a) AmSouth is a business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts and has power to carry
on its business as it is now being conducted and to
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<PAGE> 80
carry out this Agreement. AmSouth and each AmSouth Fund is not required to
qualify as a foreign association in any jurisdiction. AmSouth and each
AmSouth Fund has all necessary federal, state and local authorizations to
own all of its properties and assets and to carry on its business as now
being conducted and to fulfill the terms of this Agreement, except as set
forth in Section 2(i).
(b) AmSouth is registered under the 1940 Act as an open-end management
investment company, and such registration has not been revoked or rescinded
and is in full force and effect. Each AmSouth Fund that has had active
operations prior to the Exchange Date, has elected to qualify and has
qualified as a regulated investment company under Part I of Subchapter M of
the Code, as of and since its first taxable year, and qualifies and intends
to continue to qualify as a regulated investment company for its current
tax year. Each AmSouth Fund that has had actual operations prior to the
Exchange Date has been a regulated investment company under such sections
of the Code at all times since its inception. AmSouth Current Income,
AmSouth Treasury Reserve Money Market, AmSouth Moderate Growth and Income,
AmSouth Growth and Income, AmSouth Growth, AmSouth Aggressive Growth,
AmSouth International Equity, AmSouth Mid Cap, AmSouth Large Cap, AmSouth
Capital Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term
Tennessee Tax-Exempt, and AmSouth Limited Term U.S. Government, which have
not had active operations prior to the Exchange Date, intend to qualify as
regulated investment companies under Part I of Subchapter M of the Code.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of
investments (indicating their market values) for each AmSouth Fund for the
year ended JULY 31, 1999, such statements and schedules having been audited
by PricewaterhouseCoopers LLP, independent accountants to AmSouth, have
been furnished to Infinity.
(d) The prospectuses of each AmSouth Fund dated December 1, 1999 and
December 14, 1999, (collectively, the "AmSouth Prospectuses"), and the
Statements of Additional Information for the AmSouth Funds, dated December
1, 1999 and December 14, 1999 and on file with the Securities and Exchange
Commission, which have been previously furnished to Infinity, did not as of
their dates and do not as of the date hereof contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of AmSouth or any AmSouth Fund, overtly
threatened against AmSouth or any AmSouth Fund which assert liability on
the part of AmSouth or any AmSouth Fund.
(f) There are no material contracts outstanding to which AmSouth or
any AmSouth Fund is a party, other than as disclosed in the AmSouth
Prospectuses and the corresponding Statement of Additional Information or
in the Registration Statement.
(g) Neither AmSouth nor any AmSouth Fund has any known liabilities of
a material nature, contingent or otherwise, other than those shown on its
statement of assets and liabilities as of July 31, 1999, referred to above
and those incurred in the ordinary course of the business of AmSouth as an
investment company or any AmSouth Fund since such date. Prior to the
Exchange Date, AmSouth will advise Infinity of all known material
liabilities, contingent or otherwise, incurred by it and each AmSouth Fund
subsequent to July 31, 1999, whether or not incurred in the ordinary course
of business.
(h) Each AmSouth Fund has filed or will file all federal and state tax
returns which, to the knowledge of AmSouth's officers, are required to be
filed by each AmSouth Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by
each AmSouth Fund. To the best of such officers' knowledge, all tax
liabilities of each AmSouth Fund have been adequately provided for on its
books, and no tax deficiency or liability of any AmSouth Fund has been
asserted, and no question with respect thereto has been raised, by the
Internal Revenue Service or by any state or local tax authority for taxes
in excess of those already paid.
(i) No consent, approval, authorization or order of any governmental
authority is required for the consummation by AmSouth or any AmSouth Fund
of the transactions contemplated by this Agreement,
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<PAGE> 81
except such as may be required under the 1933 Act, the 1934 Act, the 1940
Act, state securities or Blue Sky laws or the H-S-R Act.
(j) As of both the Valuation Time and the Exchange Date and otherwise
as described in Section 2(i), AmSouth on behalf of each AmSouth Fund will
have full right, power and authority to purchase the Investments and any
other assets and assume the liabilities of each ISG Fund to be transferred
to the corresponding AmSouth Fund pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy
Statement, on the effective date of the Registration Statement and insofar
as they relate to AmSouth and the AmSouth Funds: (i) will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and (ii) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; and
at the time of the shareholders' meeting referred to in Section 8(a) and at
the Exchange Date, the Prospectus, as amended or supplemented by any
amendments or supplements filed with the Commission by AmSouth or any
AmSouth Fund, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading; provided, however, that none of the
representations and warranties in this subsection shall apply to statements
in or omissions from the Registration Statement, the Prospectus or the
Proxy Statement made in reliance upon and in conformity with information
furnished by Infinity or any ISG Fund for use in the Registration
Statement, the Prospectus or the Proxy Statement.
(l) Shares to be issued to each ISG Fund have been duly authorized
and, when issued and delivered pursuant to this Agreement and the
Prospectus, will be legally and validly issued and will be fully paid and
nonassessable by AmSouth and no shareholder of AmSouth will have any
preemptive right of subscription or purchase in respect thereof.
(m) The issuance of Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
(n) Each of AmSouth Government Income Fund, AmSouth Limited Term Bond
Fund, AmSouth Equity Income Fund, AmSouth Municipal Bond Fund, AmSouth
Small Cap Fund, AmSouth Tax-Exempt Money Market Fund, AmSouth Prime Money
Market Fund, AmSouth Bond Fund, is qualified and will at all times through
the Exchange Date qualify for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code. AmSouth Current Income, AmSouth
Treasury Reserve Money Market, AmSouth Moderate Growth and Income, AmSouth
Growth and Income, AmSouth Growth, AmSouth Aggressive Growth, AmSouth
International Equity, AmSouth Mid Cap, AmSouth Large Cap, AmSouth Capital
Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee
Tax-Exempt, and AmSouth Limited Term U.S. Government, upon filing of their
first income tax returns at the completion of their first taxable year will
elect to be regulated investment companies and until such time will take
all steps necessary to ensure qualification as regulated investment
companies under Sections 851 and 852 of the Code.
(o) AmSouth through its administrator, transfer agent, custodian or
otherwise, will cooperate fully and in a timely manner with Infinity and
each ISG Fund in completing each of the actions required of it and its
agents and necessary for consummation of the transactions described in
Sections 3 (a) and (b) of this Agreement.
3. Reorganization. (a) Subject to the requisite approval of the
shareholders of each ISG Fund and to the other terms and conditions contained
herein (including each ISG Fund's obligation to distribute to its respective
shareholders all of its investment company taxable income and net capital gain
as described in Section 9(k) hereof), Infinity and each ISG Fund agree to sell,
assign, convey, transfer and deliver to the corresponding AmSouth Fund, and each
AmSouth Fund agrees to acquire from the corresponding ISG Fund, on the Exchange
Date all of the Investments and all of the cash and other assets of each ISG
Fund in exchange for that number of Shares of the corresponding AmSouth Fund
provided for in Section 4 and the assumption by the corresponding
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AmSouth Fund of all of the liabilities of the ISG Fund. Pursuant to this
Agreement, such ISG Fund will, as soon as practicable after the Exchange Date,
distribute in liquidation all of the Shares received by it to its shareholders
in exchange for their shares of common stock of such ISG Fund.
(b) Infinity, on behalf of each ISG Fund, will pay or cause to be paid
to the corresponding AmSouth Fund any interest and cash dividends received
by it on or after the Exchange Date with respect to the Investments
transferred to the AmSouth Funds hereunder. Infinity, on behalf of each ISG
Fund, will transfer to the corresponding AmSouth Fund any rights, stock
dividends or other securities received by Infinity or any ISG Fund after
the Exchange Date as stock dividends or other distributions on or with
respect to the Investments transferred, which rights, stock dividends and
other securities shall be deemed included in the assets transferred to each
AmSouth Fund at the Exchange Date and shall not be separately valued, in
which case any such distribution that remains unpaid as of the Exchange
Date shall be included in the determination of the value of the assets of
the ISG Fund acquired by the corresponding AmSouth Fund.
4. Exchange Date; Valuation Time. On the Exchange Date, AmSouth will
deliver to Infinity a number of Shares having an aggregate net asset value equal
to the value of the assets attributable to each class of shares of the
corresponding ISG Fund acquired by each AmSouth Fund, less the value of the
liabilities of such ISG Fund assumed, determined as hereafter provided in this
Section 4.
(a) Subject to Section 4(d) hereof, the value of each ISG Fund's net
assets will be computed as of the Valuation Time using the valuation
procedures for the corresponding AmSouth Fund set forth in the AmSouth
Prospectus and Statement of Additional Information. In no event shall the
same security held by both Infinity and AmSouth be valued at different
prices.
(b) Subject to Section 4(d) hereof, the net asset value of a share of
each AmSouth Fund will be determined to the nearest full cent as of the
Valuation Time, using the valuation procedures set forth in the AmSouth
Prospectus for the particular AmSouth Fund.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m.
Eastern Standard time on MARCH 10, 2000 for all of the ISG Funds, or such
earlier or later days as may be mutually agreed upon in writing by the
parties hereto (the "Valuation Time").
(d) No formula will be used to adjust the net asset value of any ISG
Fund or AmSouth Fund to take into account differences in realized and
unrealized gains and losses.
(e) Each AmSouth Fund shall issue its Shares to the corresponding ISG
Fund on one share deposit receipt registered in the name of the
corresponding ISG Fund. Each ISG Fund shall distribute in liquidation the
Shares received by it hereunder pro rata to its shareholders by
redelivering such share deposit receipt to AmSouth's transfer agent which
will as soon as practicable set up open accounts for each ISG Fund
shareholder in accordance with written instructions furnished by Infinity.
(f) Each AmSouth Fund shall assume all liabilities of the
corresponding ISG Fund, whether accrued or contingent, in connection with
the acquisition of assets and subsequent liquidation of the corresponding
ISG Fund or otherwise, except that recourse for assumed liabilities
relating to a particular ISG Fund will be limited to the corresponding
AmSouth Fund.
5. Expenses, Fees, Etc. (a) Subject to subsections 5(b) through 5(e), all
fees and expenses, including accounting expenses, portfolio transfer taxes (if
any) or other similar expenses incurred directly in connection with the
consummation by AmSouth and Infinity of the transactions contemplated by this
Agreement will be borne by AMSOUTH BANK, including the costs of proxy materials,
proxy solicitation, and legal expenses; provided, however, that such expenses
will in any event be paid by the party directly incurring such expenses if and
to the extent that the payment by the other party of such expenses would result
in the disqualification of any AmSouth Fund or any ISG Fund, as the case may be,
as a "regulated investment company" within the meaning of Section 851 of the
Code. Fees and expenses not incurred directly in connection with the
consummation of the Transaction will be borne by the party incurring such fees
and expenses.
(b) In the event the transactions contemplated by this Agreement are
not consummated by reason of Infinity being either unwilling or unable to
go forward (other than by reason of the nonfulfillment or failure
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of any condition to Infinity's obligations referred to in Section 8(a) or
Section 10), Infinity shall pay directly all reasonable fees and expenses
incurred by AmSouth in connection with such transactions, including,
without limitation, legal, accounting and filing fees.
(c) In the event the transactions contemplated by this Agreement are
not consummated by reason of AmSouth being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any
condition to AmSouth's obligations referred to in Section 8(a) or Section
9), AmSouth shall pay directly all reasonable fees and expenses incurred by
Infinity in connection with such transactions, including without limitation
legal, accounting and filing fees.
(d) In the event the transactions contemplated by this Agreement are
not consummated for any reason other than (i) AmSouth or Infinity being
either unwilling or unable to go forward or (ii) the nonfulfillment or
failure of any condition to Infinity or AmSouth's obligations referred to
in Section 8(a), Section 9 or Section 10 of this Agreement, then each of
Infinity and AmSouth shall bear the expenses it has actually incurred in
connection with such transactions.
(e) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated,
no party shall be liable to the other party for any damages resulting
therefrom, including without limitation consequential damages, except as
specifically set forth above.
6. Permitted Assets. AmSouth and Infinity agree to review the assets of the
ISG Funds to ensure that at any time prior to the Exchange Date the assets of
any ISG Fund do not include any assets that the corresponding AmSouth Fund is
not permitted, or reasonably believes to be unsuitable for it, to acquire,
including without limitation any security that, prior to its acquisition by any
ISG Fund, is unsuitable for the corresponding AmSouth Fund to acquire.
7. Exchange Date. Delivery of the assets of the ISG Funds to be
transferred, assumption of the liabilities of the ISG Funds to be assumed, and
the delivery of Shares to be issued shall be made on March 13, 2000 at 10:00
a.m. or at such other times and dates agreed to by Infinity and AmSouth, the
date and time upon which such delivery is to take place being referred to herein
as the "Exchange Date."
8. Special Meeting of Shareholders; Dissolution. (a) Infinity agrees to
call a special meeting of the shareholders of each ISG Fund as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of each ISG Fund to and the
assumption of all of the liabilities of each ISG Fund by the corresponding
AmSouth Fund as herein provided, approving this Agreement, and authorizing the
liquidation of each ISG Fund, and the subsequent dissolution of Infinity, and,
except as set forth in Section 13, it shall be a condition to the obligations of
each of the parties hereto that the holders of the shares of common stock of
each ISG Fund shall have approved this Agreement and the transactions
contemplated herein in the manner required by law and Infinity's Articles of
Incorporation and Bylaws at such a meeting on or before the Valuation Time.
(b) Infinity and each ISG Fund agree that the liquidation of each ISG
Fund will be effected in the manner provided in Infinity's Articles of
Incorporation and Bylaws in accordance with applicable law, that it will
not make any distributions of any Shares to the shareholders of a ISG Fund
without first paying or adequately providing for the payment of all of such
ISG Fund's known debts, obligations and liabilities.
(c) Each of AmSouth and Infinity will cooperate with the other, and
each will furnish to the other the information relating to itself required
by the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder to be set forth in the Registration Statement,
including the Prospectus and the Proxy Statement.
9. Conditions to AmSouth's Obligations. The obligations of AmSouth and each
AmSouth Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been approved and the transactions
contemplated hereby, including the liquidation of the ISG Funds, shall have
been approved by the shareholders of each ISG Fund in the manner required
by law.
A-9
<PAGE> 84
(b) Infinity shall have furnished to AmSouth a statement of each ISG
Fund's assets and liabilities, with values determined as provided in
Section 4 of this Agreement, together with a list of Investments with their
respective tax costs, all as of the Valuation Time, certified on Infinity's
behalf by its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, to the effect
that as of the Valuation Time and as of the Exchange Date there has been no
material adverse change in the financial position of any ISG Fund since
June 30, 1999, other than changes in the Investments since that date or
changes in the market value of the Investments, or changes due to net
redemptions of shares of the ISG Funds, dividends paid or losses from
operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of Infinity and each ISG Fund made in this
Agreement are true and correct in all material respects as if made at and
as of such dates, Infinity and each ISG Fund has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to each of such dates, and Infinity shall have
furnished to AmSouth a statement, dated the Exchange Date, signed by
Infinity's President (or any Vice President) and Treasurer certifying those
facts as of such dates.
(d) Infinity shall have delivered to AmSouth a letter from KPMG LLP
dated the Exchange Date stating that such firm reviewed the federal and
state income tax returns of each ISG Fund for the year ended December 31,
1999 and that, in the course of such review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal and state income taxes of
each ISG Fund for the periods covered thereby, or that each ISG Fund would
not qualify as a regulated investment company for federal income tax
purposes.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) AmSouth shall have received an opinion of Stroock & Stroock &
Lavan LLP, in form reasonably satisfactory to AmSouth and dated the
Exchange Date, to the effect that (i) Infinity is a corporation duly
organized and validly existing under the laws of the State of Maryland,
(ii) this Agreement has been duly authorized, executed, and delivered by
Infinity on behalf of the ISG Funds and, assuming that the Registration
Statement, the Prospectus and the Proxy Statement comply with the 1933 Act,
the 1934 Act and the 1940 Act and assuming due authorization, execution and
delivery of this Agreement by AmSouth, is a valid and binding obligation of
Infinity with respect to the ISG Funds, subject as to enforcement to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto, and such counsel shall not be required to
express an opinion with respect to the application of equitable principles
in any proceeding, whether at law or in equity, or with respect to the
provisions of this Agreement intended to limit liability for particular
matters to an ISG Fund and its assets, (iii) Infinity has corporate power
to sell, assign, convey, transfer and deliver the Investments and other
assets contemplated hereby and, upon consummation of the transactions
contemplated hereby in accordance with the terms of this Agreement and the
filing of Articles of Transfer in accordance with Maryland law, Infinity
and each ISG Fund will have duly sold, assigned, conveyed, transferred and
delivered such Investments and other assets to AmSouth, (iv) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Infinity's Articles of
Incorporation and Bylaws or any provision of an agreement known to such
counsel (without any independent inquiry or investigation) to which
Infinity, with respect to the ISG Funds, or any ISG Fund is a party or by
which it is bound, it being understood that with respect to investment
restrictions as contained in Infinity's Articles of Incorporation and
Bylaws, such counsel may rely upon a certificate of an officer of Infinity
whose responsibility it is to advise Infinity with respect to such matters,
and (v) to such counsel's knowledge, no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by Infinity on behalf of the ISG Funds or any ISG Fund of the
transactions contemplated hereby, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws and the H-S-R Act and the
acceptance for record of Articles of Transfer by the Maryland State
Department of Assessments and Taxation, and it being understood that such
opinion shall not be deemed to apply to AmSouth's compliance obligations
under the 1933 Act, 1934 Act, 1940 Act, state securities or blue sky laws
A-10
<PAGE> 85
and H-S-R Act. Such opinion may rely on the opinion of other counsel to the
extent set forth in such opinion, provided such other counsel is reasonably
acceptable to AmSouth.
(g) AmSouth shall have received an opinion of Ropes & Gray, counsel to
AmSouth addressed to AmSouth and each AmSouth Fund, and to Infinity and ISG
Funds in form reasonably satisfactory to AmSouth and dated the Exchange
Date (which opinion would be based upon certain factual representations and
subject to certain qualifications), to the effect that, on the basis of the
existing provisions of the Code, current administrative rules and court
decisions, for Federal income tax purposes: (i) no gain or loss will be
recognized by any ISG Fund or its Shareholders upon the transfer of the
assets to the corresponding AmSouth Fund in exchange for Shares and the
assumption by such AmSouth Fund of the liabilities of the ISG Fund or upon
the distribution of Shares by the ISG Fund to its shareholders in
liquidation pursuant to this Agreement; (ii) the basis of the Shares an
Infinity Shareholder receives in connection with the transaction will be
the same as the basis of his or her ISG Fund shares exchanged therefor;
(iii) an Infinity shareholder's holding period with respect to his or her
Shares will be determined by including the period for which he or she held
the ISG Fund shares exchanged therefor, provided that he or she held such
ISG Fund shares as capital assets; (iv) no gain or loss will be recognized
by any AmSouth Fund upon the receipt of the assets of the corresponding ISG
Fund in exchange for Shares and the assumption by the AmSouth Fund of the
liabilities of the corresponding ISG Fund; (v) the basis in the hands of
the AmSouth Fund of the assets of the corresponding ISG Fund transferred to
the AmSouth Fund will be the same as the basis of the assets in the hands
of the corresponding ISG Fund immediately prior to the transfer; and (vi)
each AmSouth Fund's holding periods with respect to the assets of the
corresponding ISG Fund will include the periods for which such assets were
held by the corresponding ISG Fund.
(h) Subject to the parties' compliance with Section 6 hereof, the
assets of each ISG Fund to be acquired by the corresponding AmSouth Fund
will include no assets which the corresponding AmSouth Fund, by reason of
limitations contained in its Declaration of Trust or of investment
restrictions disclosed in the AmSouth Prospectuses in effect on the
Exchange Date, may not properly acquire. AmSouth shall not change the
AmSouth Declaration of Trust and the AmSouth Prospectuses so as to restrict
permitted investments for each AmSouth Fund except as required by the
Commission or any state regulatory authority.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable Blue Sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of
AmSouth, contemplated by the Commission and or any state regulatory
authority.
(j) All proceedings taken by Infinity in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to AmSouth.
(k) Prior to the Exchange Date, each ISG Fund (other than an ISG Fund
that will combine with a AmSouth Fund in a manner qualifying for treatment
under Section 368(a)(1)(F) of the Code) shall have declared a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income for its taxable year ended December 31, 1999 and the short
taxable year beginning January 1, 2000 and ending on the Exchange Date
(computed without regard to any deduction for dividends paid), and all of
the ISG Fund's net capital gain realized in its taxable year ended December
31, 1999 and the short taxable year beginning on January 1, 2000 and ending
on the Exchange Date (after reduction for any capital loss carryover).
(l) Infinity shall have furnished to AmSouth a certificate, signed by
the President (or any Vice President) and the Treasurer of Infinity, as to
the tax cost to Infinity of the securities delivered to AmSouth pursuant to
this Agreement, together with any such other evidence as to such tax cost
as AmSouth may reasonably request.
(m) ISG Funds' custodian shall have delivered to AmSouth a certificate
identifying all of the assets of each ISG Fund held by such custodian as of
the Valuation Time.
(n) ISG Funds' transfer agent shall have provided to AmSouth's
transfer agent (i) the originals or true copies of all of the records of
each ISG Fund in the possession of such ISG transfer agent as of the
Exchange
A-11
<PAGE> 86
Date, (ii) a record specifying the number of shares of each ISG Fund
outstanding as of the Valuation Time and (iii) a record specifying the name
and address of each holder of record of any such shares of each ISG Fund
and the number of shares held of record by each such shareholder as of the
Valuation Time. ISG's transfer agent shall also have provided AmSouth with
a certificate confirming that the acts specified in the preceding sentence
have been taken and that the information so supplied is complete and
accurate to the best knowledge of the transfer agent.
(o) All of the issued and outstanding shares of common stock of each
ISG Fund shall have been offered for sale and sold in conformity with all
applicable federal or state securities or blue sky laws and, to the extent
that any audit of the records of Infinity or any ISG Fund or its transfer
agent by AmSouth or its agents shall have revealed otherwise, either (i)
Infinity and each ISG Fund shall have taken all actions that in the
reasonable opinion of AmSouth are necessary to remedy any prior failure on
the part of Infinity to have offered for sale and sold such shares in
conformity with such laws or (ii) Infinity shall have furnished (or caused
to be furnished) surety, or deposited (or caused to be deposited) assets in
escrow, for the benefit of AmSouth in amounts sufficient and upon terms
satisfactory, in the opinion of AmSouth or its counsel, to indemnify
AmSouth against any expense, loss, claim, damage or liability whatsoever
that may be asserted or threatened by reason of such failure on the part of
Infinity to have offered and sold such shares in conformity with such laws.
(p) AmSouth shall have received from Ernst & Young LLP a letter
addressed to AmSouth dated as of the Exchange Date reasonably satisfactory
in form and substance to AmSouth and Infinity to the effect that, on the
basis of limited procedures agreed upon by AmSouth and Infinity and
described in such letter (but not an examination in accordance with
generally accepted auditing standards), as of the Valuation Time the value
of the assets of each ISG Fund to be exchanged for the Shares have been
determined in accordance with the valuation procedures for the
corresponding AmSouth Fund as set forth in the AmSouth Prospectus and
Statement of Additional Information.
(q) Infinity shall have duly executed and delivered to AmSouth bills
of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as AmSouth may deem necessary or desirable to
transfer all of Infinity's and each ISG Fund's entire right, title and
interest in and to the Investments and all other assets of each ISG Fund.
10. Conditions to Infinity's Obligations. The obligations of Infinity and
each ISG Fund hereunder shall be subject to the following conditions:
(a) This Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation of the ISG Funds, shall have
been approved by the shareholders of each ISG Fund in the manner required
by law.
(b) AmSouth shall have furnished to Infinity a statement of each
AmSouth Fund's net assets, together with a list of portfolio holdings with
values determined as provided in Section 4, all as of the Valuation Time,
certified on AmSouth's behalf by its President (or any Vice President) and
Treasurer (or any Assistant Treasurer), and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation
Time and as of the Exchange Date there has been no material adverse change
in the financial position of any AmSouth Fund since July 31, 1999, other
than changes in its portfolio securities since that date, changes in the
market value of its portfolio securities, changes due to net redemptions,
dividends paid or losses from operations.
(c) AmSouth shall have executed and delivered to Infinity an
Assumption of Liabilities dated as of the Exchange Date pursuant to which
each AmSouth Fund will assume all of the liabilities of the corresponding
ISG Fund existing at the Valuation Time in connection with the transactions
contemplated by this Agreement.
(d) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of AmSouth and each AmSouth Fund made in
this Agreement are true and correct in all material respects as if made at
and as of such dates, AmSouth and each AmSouth Fund has complied with all
of the agreements and satisfied all of the conditions on its part to be
performed or satisfied at or prior to each of such dates, and
A-12
<PAGE> 87
AmSouth shall have furnished to Infinity a statement, dated the Exchange
Date, signed by AmSouth's President (or any Vice President) and Treasurer
certifying those facts as of such dates.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) Infinity shall have received an opinion of Ropes & Gray, in form
reasonably satisfactory to Infinity and dated the Exchange Date, to the
effect that (i) AmSouth is a business trust and validly existing in
conformity with the laws of The Commonwealth of Massachusetts, and, to the
knowledge of such counsel, neither AmSouth nor any AmSouth Fund is required
to qualify to do business as a foreign association in any jurisdiction,
(ii) the Shares to be delivered to Infinity as provided for by this
Agreement are duly authorized and upon such delivery will be validly issued
and will be fully paid and nonassessable by AmSouth and no shareholder of
AmSouth has any preemptive right to subscription or purchase in respect
thereof, (iii) this Agreement has been duly authorized, executed and
delivered by AmSouth and, assuming that the Prospectus, the Registration
Statement and the Proxy Statement comply with the 1933 Act, the 1934 Act
and the 1940 Act and assuming due authorization, execution and delivery of
this Agreement by Infinity, is a valid and binding obligation of AmSouth,
(iv) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate
AmSouth's Declaration of Trust, as amended, or Code of Regulations, or any
provision of any agreement known to such counsel to which AmSouth or any
AmSouth Fund is a party or by which it is bound, it being understood that
with respect to investment restrictions as contained in AmSouth's
Declaration of Trust, as amended, Code of Regulations or then-current
prospectus or statement of additional information of each AmSouth Fund,
such counsel may rely upon a certificate of an officer of AmSouth whose
responsibility it is to advise AmSouth with respect to such matters, (v) no
consent, approval, authorization or order of any court or governmental
authority is required for the consummation by AmSouth or any AmSouth Fund
of the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act and such as may be
required under state securities or blue sky laws and the H-S-R Act and it
being understood that such opinion shall not be deemed to apply to
Infinity's compliance obligations under the 1933 Act, 1934 Act, 1940 Act,
state securities or blue sky laws and the H-S-R Act; and (vi) the
Registration Statement has become effective under the 1933 Act, and to the
best of the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act.
(g) Infinity shall have received an opinion of Ropes & Gray addressed
to Infinity and each ISG Fund in a form reasonably satisfactory to Infinity
and dated the Exchange Date (which opinion would be based upon certain
factual representations and subject to certain qualifications), with
respect to the matters specified in Section 9(g) of this Agreement.
(h) All proceedings taken by AmSouth in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to Infinity.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable Blue Sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of
AmSouth, contemplated by the Commission or any state regulatory authority.
(j) At the Exchange Date, each of the ISG Funds will have sold such of
its assets, if any, if informed by AmSouth in writing that such sale is
necessary to assure that, after giving effect to the acquisition of the
assets pursuant to this Agreement, each of the AmSouth Funds designated as
a "diversified company" will remain a "diversified company" within the
meaning of Section 5(b)(1) of the 1940 Act and in compliance with such
other mandatory investment restrictions as are set forth in the AmSouth
Prospectuses previously furnished to Infinity.
11. Indemnification. (a) Infinity will indemnify and hold harmless AmSouth,
its trustees and its officers (for purposes of this subsection, the "Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the
Indemnified Parties in
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<PAGE> 88
connection with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties may be involved
or with which any one or more of the Indemnified Parties may be threatened by
reason of any untrue statement or alleged untrue statement of a material fact
relating to Infinity or any ISG Fund contained in the Registration Statement,
the Prospectus or the Proxy Statement or any amendment or supplement to any of
the foregoing, or arising out of or based upon the omission or alleged omission
to state in any of the foregoing a material fact relating to Infinity or any ISG
Fund required to be stated therein or necessary to make the statements relating
to Infinity or any ISG Fund therein not misleading, including, without
limitation, any amounts paid by any one or more of the Indemnified Parties in a
reasonable compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding made with the prior
consent of Infinity. The Indemnified Parties will notify Infinity in writing
within ten days after the receipt by any one or more of the Indemnified Parties
of any notice of legal process or any suit brought against or claim made against
such Indemnified Party as to any matters covered by this Section 11(a). Infinity
shall be entitled to participate at its own expense in the defense of any claim,
action, suit or proceeding covered by this Section 11(a), or, if it so elects,
to assume at its expense by counsel satisfactory to the Indemnified Parties the
defense of any such claim, action, suit or proceeding, and if Infinity elects to
assume such defense, the Indemnified Parties shall be entitled to participate in
the defense of any such claim, action, suit or proceeding at their expense.
Infinity's and the ISG Funds' obligation under this Section 11(a) to indemnify
and hold harmless the Indemnified Parties shall constitute a guarantee of
payment so that the ISG Funds will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be paid by them under this
Section 11(a) without the necessity of the Indemnified Parties' first paying the
same.
(b) AmSouth will indemnify and hold harmless Infinity, its directors
and its officers (for purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by any one or
more of the Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which any one or
more of the Indemnified Parties may be involved or with which any one or
more of the Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact relating to
AmSouth or any AmSouth Fund contained in the Registration Statement, the
Prospectus or the Proxy Statement, or any amendment or supplement to any of
the foregoing, or arising out of or based upon the omission or alleged
omission to state in any of the foregoing a material fact relating to
AmSouth or any AmSouth Fund required to be stated therein or necessary to
make the statements relating to AmSouth or any AmSouth Fund therein not
misleading, including, without limitation, any amounts paid by any one or
more of the Indemnified Parties in a reasonable compromise or settlement of
any such claim, action, suit or proceeding, or threatened claim, action,
suit or proceeding made with the prior consent of AmSouth. The Indemnified
Parties will notify AmSouth in writing within ten days after the receipt by
any one or more of the Indemnified Parties of any notice of legal process
or any suit brought against or claim made against such Indemnified Party as
to any matters covered by this Section 11(b). AmSouth shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(b), or, if it so elects, to assume at
its expense by counsel satisfactory to the Indemnified Parties the defense
of any such claim, action, suit or proceeding, and, if AmSouth elects to
assume such defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or proceeding at
their own expense. The AmSouth Funds' obligation under this Section 11(b)
to indemnify and hold harmless the Indemnified Parties shall constitute a
guarantee of payment so that the AmSouth Funds will pay in the first
instance any expenses, losses, claims, damages and liabilities required to
be paid by them under this Section 11(b) without the necessity of the
Indemnified Parties' first paying the same.
12. No Broker, Etc. Each of AmSouth and Infinity represents that there is
no person who has dealt with it who by reason of such dealings is entitled to
any broker's or finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
13. Termination. AmSouth and Infinity may, by mutual consent of their
respective trustees, terminate this Agreement, and AmSouth or Infinity, after
consultation with counsel and by consent of their respective trustees and
directors or an officer authorized by such trustees or directors, may waive any
condition to their respective obligations hereunder. If the transactions
contemplated by this Agreement have not been substantially completed
A-14
<PAGE> 89
by June 30, 2000, this Agreement shall automatically terminate on that date
unless a later date is agreed to by AmSouth and Infinity.
Notwithstanding any other provision in this Agreement, in the event
shareholder approval of this Agreement and the transactions contemplated by this
Agreement is obtained with respect to only one or more ISG Funds but not all of
the ISG Funds, AmSouth and Infinity agree to consummate those transactions with
respect to those ISG Funds that have approved this Agreement and those
transactions.
14. Covenants, Etc. Deemed Material. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
15. Sole Agreement; Amendments. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
16. Agreement and Declaration of Trust. Amsouth Funds is a business trust
organized under Massachusetts law and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of The Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of "AmSouth Funds" entered into in the name or on behalf thereof by
any of the Trustees, officers, employees or agents are made not individually,
but in such capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of AmSouth personally, but bind only the
assets of AmSouth and all persons dealing with any series or funds of AmSouth,
such as the AmSouth Funds, must look solely to the assets of AmSouth belonging
to such series or funds for the enforcement of any claims against AmSouth.
This Agreement may be executed in any number of counter-parts, each of
which, when executed and delivered, shall be deemed to be an original.
THE INFINITY MUTUAL FUNDS, INC.
On Behalf of its ISG Funds
By:
------------
AMSOUTH FUNDS
By:
------------
A-15
<PAGE> 90
APPENDIX B
COMPARATIVE FEE TABLES
COMPARATIVE FEE TABLE FOR EACH PORTFOLIO
<TABLE>
<CAPTION>
ISG AMSOUTH
CURRENT INCOME CURRENT INCOME COMBINED
PORTFOLIO PORTFOLIO FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None 0%(5) 0%(5) 0%(5) 0%(5) 0%(5) 0%(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ .20% .20% .20% .20% .20% .20% .20% .20% .20%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .79% .79% .64%(6) .79% .79% .64%(6)
Total Fund Operating Expenses(7),
(8)................................ .99% 1.59% .74% .99% 1.74% .84% .99% 1.74% ..84%
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.15%) (.15%) (.05%) (.15%) (.15%) (.05%)
Net Expense(9)....................... n/a n/a n/a .84% 1.59% .79% .84% 1.59% .79%
</TABLE>
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(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, which is charged if Class B Shares are sold within six years of
purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year. Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount reflects a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements in effect. For the period from inception
through October 31, 1999, significant fee waivers occurred with respect to
the ISG Current Income Portfolio. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) If you buy and hold Shares of a Strategic Portfolio, you will indirectly
bear your pro rata share of fees and expenses incurred by the Underlying
Funds in which the fund invests, so that the investment returns of the Fund
will be net of the expenses of the Fund with those of the Underlying Funds.
After combining the total estimated operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratios
for the ISG Funds are: Class A, 2.09%; Class B, 2.69%, Class I, 1.84%; and
for the AmSouth Funds and fund pro formas are: Class A, 1.91%; Class B,
2.66%; Trust, 1.91%.
(9) The above amounts reflect a reduction in shareholder servicing fees required
by National Association of Securities Dealers (NASD) rules. As reduced, the
shareholder servicing fees are .10% for each class. Absent such reduction,
the shareholder servicing fees would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
B-1
<PAGE> 91
ISG CURRENT INCOME PORTFOLIO
AMSOUTH CURRENT INCOME PORTFOLIO
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Current Income Portfolio
Class A Shares............................................ $506 $ 935
Class B Shares............................................ $672 $1,135
Class I Shares............................................ $187 $ 579
AmSouth Current Income Portfolio
Class A Shares............................................ $586 $ 976
Class B Shares............................................ $769 $1,126
Trust Shares.............................................. $189 $ 585
Combined Fund Pro Forma
Class A Shares............................................ $586 $ 976
Class B Shares............................................ $769 $1,126
Trust Shares.............................................. $189 $ 585
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Current Income Portfolio
Class B Shares............................................ $272 $835
AmSouth Current Income Portfolio
Class B Shares............................................ $269 $826
Combined Fund Pro Forma
Class B Shares............................................ $269 $826
</TABLE>
B-2
<PAGE> 92
<TABLE>
<CAPTION>
ISG AMSOUTH
TREASURY MONEY TREASURY RESERVE
MARKET MONEY COMBINED
FUND MARKET FUND FUND PRO FORMA
------------------ ---------------- ----------------
CLASS A CLASS I CLASS A TRUST CLASS A TRUST
------- ------- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)..... None None None None None None
Sales Charge on Reinvested Dividends...... None None None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable)............................. None None None None None None
Redemption Fees........................... None None None(1) None None(1) None
Exchange Fees............................. None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net
assets)
Advisory Fees............................... .25% .25% .40% .40% .40% .40%
12b-1 Fees.................................. None None None None None None
Other Expenses.............................. .53% .43% .57% .47%(2) .57% .47%(2)
Total Fund Operating Expenses............... .78%(3) .68%(3) .97%(4) .87%(4) .97%(4) .87%(4)
Fee Waiver and/or Expense Reimbursement..... n/a n/a n/a n/a (.23%) (.23%)
Net Expenses................................ n/a n/a n/a n/a .72%(5) .62%(5)
</TABLE>
- ---------------
(1) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(2) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(3) Other expenses have been restated for Class I to reflect current fees. The
expenses noted above do not reflect any fee waivers or expense reimbursement
arrangements that are or were in effect. Total expenses after fee waivers
and expense reimbursements for each Class were: Class A, .60%, Class I,
.60%. Any fee waiver or expense reimbursement arrangement is voluntary and
may be discontinued at any time.
(4) Other expenses are based on estimated amounts for the current fiscal year.
The expenses do not reflect any fee waivers or expense reimbursement
arrangements.
(5) Total expenses after fee waivers and expense reimbursements through April
30, 2000 are as follows: Class A, .60%; and Trust Class, .60%. AmSouth Bank
has contractually agreed to waive fees and/or reimburse expenses to limit
the total annual fund operating expenses to: Class A, .72%; and Trust Class,
.62% until October 1, 2001.
B-3
<PAGE> 93
ISG TREASURY MONEY MARKET FUND
AMSOUTH TREASURY RESERVE MONEY MARKET FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Treasury Money Market Fund
Class A Shares......................................... $80 $249 $433 $ 966
Class I Shares......................................... $69 $218 $379 $ 847
AmSouth Treasury Reserve Money Market Fund
Class A Shares......................................... $99 $309 $536 $1,190
Trust Shares........................................... $89 $278 $482 $1,073
Combined Fund Pro Forma
Class A Shares......................................... $99 $309 $536 $1,190
Trust Shares........................................... $89 $278 $482 $1,073
</TABLE>
B-4
<PAGE> 94
<TABLE>
<CAPTION>
ISG AMSOUTH
MODERATE GROWTH & MODERATE GROWTH AND COMBINED
INCOME PORTFOLIO INCOME PORTFOLIO FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .20% .20% .20% .20% .20% .20% .20% .20% .20%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .79% .79% .64%(6) .79% .79% .64%(6)
Total Fund Operating
Expenses(7)(8)..................... .99% 1.59% .74% .99% 1.74% .84% .99% 1.74% .84%
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.15%) (.15%) (.05%) (.15%) (.15%) (.05%)
Net Expense(9)....................... n/a n/a n/a .84% 1.59% .79% .84% 1.59% .79%
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, which is charged if Class B Shares are sold within six years of
purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year. Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Fund with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements that are or were in effect. For the
period from inception through October 31, 1999, significant fee waivers
occurred with respect to the ISG Moderate Growth & Income Portfolio. Any fee
waiver or expense reimbursement arrangement is voluntary and may be
discontinued at any time.
(8) If you buy and hold Shares of a Strategic Portfolio, you will indirectly
bear your pro rata share of fees and expenses incurred by the Underlying
Funds in which the fund invests, so that the investment returns of the Fund
will be net of the expenses of the Fund with those of the Underlying Funds.
After combining the total estimated operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratios
for the ISG Funds are: Class A, 1.91%; Class B, 2.51%, Class I, 1.66%; and
for the AmSouth Funds and fund pro formas are: Class A, 2.05%; Class B,
2.80%; Trust, 2.05%.
(9) The above amounts reflect a reduction in shareholder servicing fees required
by NASD rules. As reduced, the shareholder servicing fees are .10% for each
class. Absent such reduction, the shareholder servicing fees would be: Class
A, .25%; Class B, .25%; Trust Class, .15%.
B-5
<PAGE> 95
ISG MODERATE GROWTH & INCOME PORTFOLIO
AMSOUTH MODERATE GROWTH AND INCOME PORTFOLIO
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Moderate Growth & Income Portfolio
Class A Shares............................................ $660 $1,047
Class B Shares............................................ $654 $1,082
Class I Shares............................................ $169 $ 523
AmSouth Moderate Growth and Income Portfolio
Class A Shares............................................ $649 $1,064
Class B Shares............................................ $783 $1,168
Trust Shares.............................................. $203 $ 627
Combined Fund Pro Forma
Class A Shares............................................ $649 $1,064
Class B Shares............................................ $783 $1,168
Trust Shares.............................................. $203 $ 627
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Moderate Growth & Income Portfolio
Class B Shares............................................ $254 $782
AmSouth Moderate Growth and Income Portfolio
Class B Shares............................................ $283 $868
Combined Fund Pro Forma
Class B Shares............................................ $283 $868
</TABLE>
B-6
<PAGE> 96
<TABLE>
<CAPTION>
ISG AMSOUTH
GROWTH & INCOME GROWTH AND INCOME COMBINED
PORTFOLIO PORTFOLIO FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None(2)
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .20% .20% .20% .20% .20% .20% .20% .20% .20%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .79% .79% .64%(6) .79% .79% .64%(6)
Total Fund Operating Expenses(7),
(8)................................ .99% 1.59% .74% .99% 1.74% .84% .99% 1.74% .84%
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.15%) (.15%) (.05%) (.15%) (.15%) (.05%)
Net Expense(9)....................... n/a n/a n/a .84% 1.59% .79% .84% 1.59% .79%
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, which is charged if Class B Shares are sold within six years of
purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year. Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements that were or are in effect. For the
period from inception through October 31, 1999, significant fee waivers
occurred with respect to the ISG Growth & Income Portfolio. Any fee waiver
or expense reimbursement arrangement is voluntary and may be discontinued at
any time.
(8) If you buy and hold Shares of a Strategic Portfolio, you will indirectly
bear your pro rata share of fees and expenses incurred by the Underlying
Funds in which the fund invests, so that the investment returns of the Fund
will be net of the expenses of the Fund with those of the Underlying Funds.
After combining the total estimated operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratios
for the ISG Funds are: Class A, 1.93%; Class B, 2.53%, Class I, 1.68%; and
for the AmSouth Funds and fund pro formas are: Class A, 2.19%; Class B,
2.94%; Trust, 2.19%.
(9) The above amounts reflect a reduction in shareholder servicing fees required
by NASD rules. As reduced, the shareholder servicing fees are .10% for each
class. Absent such reduction, the shareholder servicing fees would be: Class
A, .25%; Class B, .25%; Trust Class, .15%.
B-7
<PAGE> 97
ISG GROWTH & INCOME PORTFOLIO
AMSOUTH GROWTH AND INCOME PORTFOLIO
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Growth & Income Portfolio
Class A Shares............................................ $662 $1,052
Class B Shares............................................ $656 $1,088
Class I Shares............................................ $171 $ 530
AmSouth Growth and Income Portfolio
Class A Shares............................................ $662 $1,104
Class B Shares............................................ $797 $1,210
Trust Shares.............................................. $217 $ 670
Combined Fund Pro Forma
Class A Shares............................................ $662 $1,104
Class B Shares............................................ $797 $1,210
Trust Shares.............................................. $217 $ 670
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Growth & Income Portfolio
Class B Shares............................................ $256 $788
AmSouth Growth and Income Portfolio
Class B Shares............................................ $297 $910
Combined Fund Pro Forma
Class B Shares............................................ $297 $910
</TABLE>
B-8
<PAGE> 98
<TABLE>
<CAPTION>
ISG AMSOUTH
GROWTH GROWTH COMBINED
PORTFOLIO PORTFOLIO FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .20% .20% .20% .20% .20% .20% .20% .20% .20%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .79% .79% .64%(6) .79% .79% .64%(6)
Total Fund Operating Expenses(7),
(8)................................ .99% 1.59% .74% .99% 1.74% .84% .99% 1.74% .84%
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.15%) (.15%) (.05%) (.15%) (.15%) (.05%)
Net Expense(9)....................... n/a n/a n/a .84% 1.59% .79% .84% 1.59% .79%
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, which is charged if Class B Shares are sold within six years of
purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year. Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer. For the period from inception
through October 31, 1999, significant fee waivers occurred with respect to
the ISG Current Income Portfolio.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements in effect. For the period from inception
through October 31, 1999, significant fee waivers occurred with respect to
the ISG Growth Portfolio. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) If you buy and hold Shares of a Strategic Portfolio, you will indirectly
bear your pro rata share of fees and expenses incurred by the Underlying
Funds in which the fund invests, so that the investment returns of the Fund
will be net of the expenses of the Fund with those of the Underlying Funds.
After combining the total estimated operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratios
for the ISG Funds are: Class A, 2.24%; Class B, 2.84%, Class I, 1.99%; and
for the AmSouth Funds and fund pro formas are: Class A, 2.23%; Class B,
2.94%; Trust, 2.23%.
(9) The above amounts reflect a reduction in shareholder servicing fees required
by NASD rules. As reduced, the shareholder servicing fees are .10% for each
class. Absent such reduction, the shareholder servicing fees would be: Class
A, .25%; Class B, .25%; Trust Class, .15%.
B-9
<PAGE> 99
ISG GROWTH PORTFOLIO
AMSOUTH GROWTH PORTFOLIO
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Growth Portfolio
Class A Shares............................................ $691 $1,142
Class B Shares............................................ $687 $1,180
Class I Shares............................................ $202 $ 624
AmSouth Growth Portfolio
Class A Shares............................................ $666 $1,116
Class B Shares............................................ $797 $1,210
Trust Shares.............................................. $221 $ 670
Combined Fund Pro Forma
Class A Shares............................................ $666 $1,116
Class B Shares............................................ $797 $1,210
Trust Shares.............................................. $221 $ 670
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Growth Portfolio
Class B Shares............................................ $287 $880
AmSouth Growth Portfolio
Class B Shares............................................ $297 $910
Combined Fund Pro Forma
Class B Shares............................................ $297 $910
</TABLE>
B-10
<PAGE> 100
<TABLE>
<CAPTION>
ISG AMSOUTH
AGGRESSIVE GROWTH AGGRESSIVE GROWTH COMBINED
PORTFOLIO PORTFOLIO FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .20% .20% .20% .20% .20% .20% .20% .20% .20%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .79% .79% .64%(6) .79% .79% .64%(6)
Total Fund Operating Expenses(7),
(8)................................ .99% 1.59% .74% .99%(9) 1.74% .84% .99% 1.74% .84%
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.15%) (.15%) (.05%) (.15%) (.15%) (.15%)
Net Expenses(9)...................... n/a n/a n/a .84% 1.59% .79% .84% 1.59% .79%
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, which is charged if Class B Shares are sold within six years of
purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year. Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements in effect. For the period from inception
through October 31, 1999, significant fee waivers occurred with respect to
the ISG Aggressive Growth Portfolio. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly
bear your pro rata share of fees and expenses incurred by the Underlying
Funds in which the fund invests, so that the investment returns of the Fund
will be net of the expenses of the Fund with those of the Underlying Funds.
After combining the total estimated operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratios
for the ISG Funds are: Class A, 2.38%; Class B, 2.98%, Class I, 2.13%; and
for the AmSouth Funds and fund pro formas are: Class A, 2.36%; Class B,
3.11%; Trust, 2.36%.
(8) The above amounts reflect a reduction in shareholder servicing fees required
by NASD rules. As reduced, the shareholder servicing fees are .10% for each
class. Absent such reduction, the shareholder servicing fees would be: Class
A, .25%; Class B, .25%; Trust Class, .15%.
(9) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
B-11
<PAGE> 101
ISG AGGRESSIVE GROWTH PORTFOLIO
AMSOUTH AGGRESSIVE GROWTH PORTFOLIO
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Aggressive Growth Portfolio
Class A Shares............................................ $705 $1,182
Class B Shares............................................ $701 $1,221
Class I Shares............................................ $216 $ 667
AmSouth Aggressive Growth Portfolio
Class A Shares............................................ $678 $1,153
Class B Shares............................................ $814 $1,260
Trust Shares.............................................. $234 $ 721
Combined Fund Pro Forma
Class A Shares............................................ $678 $1,153
Class B Shares............................................ $814 $1,260
Trust Shares.............................................. $234 $ 721
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Aggressive Growth Portfolio
Class B Shares............................................ $301 $921
AmSouth Aggressive Growth Portfolio
Class B Shares............................................ $314 $960
Combined Fund Pro Forma
Class B Shares............................................ $314 $960
</TABLE>
B-12
<PAGE> 102
<TABLE>
<CAPTION>
ISG AMSOUTH
MID-CAP MID CAP COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ----------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price).............. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends.................... None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as
applicable).................. None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees................ None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees.................. None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees.................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees........................ .25% .75% None None .75% None None .75% None
Other Expenses................... 1.75% 1.85% 1.75% 1.34% 1.34% 1.24%(6) 1.34% 1.34% 1.24%(6)
Total Fund Operating
Expenses.............. 3.00%(7) 3.60%(7) 2.75%(7) 2.34%(8) 3.09%(8) 2.24%(8) 2.34%(8)(9) 3.09%(8)(9) 2.24%(8)(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements in effect. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements in effect.
(9) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, 3.00%;
Class B, 3.60%; Trust, 2.75% until October 1, 2001.
B-13
<PAGE> 103
ISG MID-CAP FUND
AMSOUTH MID CAP FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Mid-Cap Fund
Class A Shares............................................ $764 $1,358
Class B Shares............................................ $763 $1,403
Class I Shares............................................ $278 $ 853
AmSouth Mid Cap Fund
Class A Shares............................................ $676 $1,148
Class B Shares............................................ $812 $1,254
Trust Shares.............................................. $227 $ 700
Combined Fund Pro Forma
Class A Shares............................................ $676 $1,148
Class B Shares............................................ $812 $1,254
Trust Shares.............................................. $227 $ 700
</TABLE>
- ---------------
Assuming no redemption of Class B shares at the end of the period, the dollar
amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Mid-Cap Fund
Class B Shares............................................ $363 $1,103
AmSouth Mid Cap Fund
Class B Shares............................................ $312 $ 954
Combined Fund Pro Forma
Class B Shares............................................ $312 $ 954
</TABLE>
B-14
<PAGE> 104
<TABLE>
<CAPTION>
ISG AMSOUTH
LARGE-CAP EQUITY LARGE CAP COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .75% .75% .75% .80% .80% .80% .80% .80% .80%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .35% .45% .35% .57% .57% . 47%(6) .57% .57% .47%(6)
Total Fund Operating
Expenses..................... 1.35%(7) 1.95%(7) 1.10%(7) 1.37%(8) 2.12%(8) 1.27%(8) 1.37%(8) 2.12%(8) 1.27%(8)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a n/a n/a n/a n/a (.10%) (.10%)
Net Expenses......................... n/a n/a n/a n/a n/a n/a n/a 2.02%(9) 1.17%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(9) Total expenses after fee waivers and expense reimbursements for each Class
through April 30, 2000 will not exceed the following: Class A, 1.04%; and
Trust Class, 1.04%. AmSouth Bank has contractually agreed to waive and/or
reimburse expenses to limit total annual operating fund expenses to: Class
B, 2.02%; and Trust Class, 1.17% until October 1, 2001.
B-15
<PAGE> 105
ISG LARGE-CAP EQUITY FUND
AMSOUTH LARGE CAP FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Large-Cap Equity Fund
Class A Shares........................................ $606 $882 $1,179 $2,022
Class B Shares........................................ $598 $912 $1,292 $2,044
Class I Shares........................................ $112 $350 $ 606 $1,340
AmSouth Large Cap Fund
Class A Shares........................................ $583 $864 $1,166 $2,022
Class B Shares........................................ $715 $964 $1,339 $2,171
Trust Shares.......................................... $129 $403 $ 697 $1,534
Combined Fund Pro Forma
Class A Shares........................................ $583 $864 $1,166 $2,022
Class B Shares........................................ $715 $964 $1,339 $2,171
Trust Shares.......................................... $129 $403 $ 697 $1,534
</TABLE>
- ---------------
** Class B shares of the ISG Large-Cap Equity Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Large Cap Fund
and the Combined Fund automatically convert to Class A Shares approximately
after eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Large-Cap Equity Fund
Class B Shares........................................ $198 $612 $1,052 $2,044
AmSouth Large Cap Fund
Class B Shares........................................ $215 $664 $1,139 $2,171
Combined Fund Pro Forma
Class B Shares........................................ $215 $664 $1,139 $2,171
</TABLE>
- ---------------
** Class B shares of the ISG Large-Cap Equity Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Large Cap Equity
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-16
<PAGE> 106
<TABLE>
<CAPTION>
ISG AMSOUTH
INTERNATIONAL EQUITY INTERNATIONAL EQUITY COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ 1.00% 1.00% 1.00% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .88% .98% .88% 1.21% 1.21% 1.11%(6) 1.21% 1.21% 1.11%(6)
Total Fund Operating
Expenses..................... 2.13%(7) 2.73%(7) 1.88%(7) 2.46%(8) 3.21%(8) 2.36%(8) 2.46%(8) 3.21%(8) 2.36%(8)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a n/a n/a n/a (.15%) (.30%) (.30%)
Net Expenses......................... n/a n/a n/a n/a n/a n/a 2.31%(9) 2.91%(9) 2.06%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(9) Total expenses after fee waivers and expense reimbursements for each Class
through April 30, 2000 will be as follows: Class A, 1.77%; Trust Class,
1.77%. AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund expenses to: Class A, 2.31%; Class B,
2.91%; Trust, 2.06% until October 1, 2001.
B-17
<PAGE> 107
ISG INTERNATIONAL EQUITY FUND
AMSOUTH INTERNATIONAL EQUITY FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG International Equity Fund
Class A Shares........................................ $681 $1,110 $1,565 $2,820
Class B Shares........................................ $676 $1,147 $1,645 $2,846
Class I Shares........................................ $191 $ 591 $1,016 $2,201
AmSouth International Equity Fund
Class A Shares........................................ $688 $1,182 $1,702 $3,120
Class B Shares........................................ $824 $1,289 $1,878 $3,260
Trust Shares.......................................... $239 $ 736 $1,260 $2,696
Combined Fund Pro Forma
Class A Shares........................................ $688 $1,182 $1,702 $3,120
Class B Shares........................................ $824 $1,289 $1,878 $3,260
Trust Shares.......................................... $239 $ 736 $1,260 $2,696
</TABLE>
- ---------------
** Class B shares of the ISG International Equity Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth International
Equity Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG International Equity Fund
Class B Shares........................................ $276 $847 $1,445 $2,846
AmSouth International Equity Fund
Class B Shares........................................ $324 $989 $1,678 $3,260
Combined Fund Pro Forma
Class B Shares........................................ $324 $989 $1,678 $3,260
</TABLE>
- ---------------
** Class B shares of the ISG International Equity Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth International
Equity Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-18
<PAGE> 108
<TABLE>
<CAPTION>
ISG AMSOUTH
CAPITAL GROWTH CAPITAL GROWTH COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .65% .65% .65% .80% .80% .80% .80% .80% .80%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .54% .64% .54% .61% .61% .51%(6) .61% .61% .51%(6)
Total Fund Operating
Expenses..................... 1.44%(7) 2.04%(7) 1.19%(7) 1.41%(8) 2.16%(8) 1.31%(8) 1.41%(8) 2.16%(8) 1.31%(8)
Fee Waiver and/or Expense
Reimbursement n/a n/a n/a n/a n/a n/a (.07%) (.20%) (.20%)
Net Expenses......................... n/a n/a n/a n/a n/a n/a 1.36%(9) 1.96%(9) 1.11%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements
(9) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, 1.36%;
Class B, 1.96%; Trust Class, 1.11% until October 1, 2001.
B-19
<PAGE> 109
ISG CAPITAL GROWTH FUND
AMSOUTH CAPITAL GROWTH FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Capital Growth Fund
Class A Shares........................................ $615 $909 $1,225 $2,117
Class B Shares........................................ $607 $940 $1,298 $2,140
Class I Shares........................................ $121 $378 $ 654 $1,443
AmSouth Capital Growth Fund
Class A Shares........................................ $587 $876 $1,186 $2,065
Class B Shares........................................ $719 $976 $1,359 $2,213
Trust Shares.......................................... $133 $415 $ 718 $1,579
Combined Fund Pro Forma
Class A Shares........................................ $587 $876 $1,186 $2,065
Class B Shares........................................ $719 $976 $1,359 $2,213
Trust Shares.......................................... $133 $415 $ 718 $1,579
</TABLE>
- ---------------
** Class B shares of the ISG Capital Growth Fund automatically convert to Class
A Shares approximately after seven (7) years. AmSouth Capital Growth Fund and
the Combined Fund automatically convert to Class A Shares approximately after
eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Capital Growth Fund
Class B Shares........................................ $207 $640 $1,098 $2,140
AmSouth Capital Growth Fund
Class B Shares........................................ $219 $676 $1,159 $2,213
Combined Fund Pro Forma
Class B Shares........................................ $219 $676 $1,159 $2,213
</TABLE>
- ---------------
** Class B shares of the ISG Capital Growth Fund automatically convert to Class
A Shares approximately after seven (7) years. AmSouth Growth Opportunities
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-20
<PAGE> 110
<TABLE>
<CAPTION>
ISG AMSOUTH
TENNESSEE TAX-EXEMPT TENNESSEE TAX-EXEMPT COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price).................... 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends................. None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds, as
applicable)............... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees............. None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees............... None None None None None None None None None
ANNUAL OPERATING EXPENSES(as a
percentage of average daily
net assets)
Advisory Fees................. .50% .50% .50% .65% .65% .65% .65% .65% .65%
12b-1 Fees.................... .25% .75% None None .75% None None .75% None
Other Expenses .60% .70% .60% .67% .67% .57%(6) .67% .67% .57%(6)
Total Fund Operating
Expenses.............. 1.35%(7) 1.95%(7) 1.10%(7) 1.32%(8) 2.07%(8) 1.22%(8) 1.32%(8) 2.07%(8) 1.22%(8)
Fee Waiver and/or Expense
Reimbursement............... n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%)
Net Expenses.................. n/a n/a n/a n/a n/a n/a 1.27%(9) 1.87%(9) 1.02%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(9) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual operating expenses to: Class A, 1.27%; Class
B, 1.87%; Trust Class, 1.02% until October 1, 2001.
B-21
<PAGE> 111
ISG TENNESSEE TAX-EXEMPT FUND
AMSOUTH TENNESSEE TAX-EXEMPT FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Tennessee Tax-Exempt Fund
Class A Shares........................................ $433 $715 $1,017 $1,875
Class B Shares........................................ $598 $912 $1,252 $2,044
Class I Shares........................................ $112 $350 $ 606 $1,340
AmSouth Tennessee Tax-Exempt Fund
Class A Shares........................................ $529 $802 $1,095 $1,927
Class B Shares........................................ $710 $949 $1,314 $2,118
Trust Shares.......................................... $124 $387 $ 670 $1,477
Combined Fund Pro Forma
Class A Shares........................................ $529 $802 $1,095 $1,927
Class B Shares........................................ $710 $949 $1,314 $2,118
Trust Shares.......................................... $124 $387 $ 670 $1,477
</TABLE>
- ---------------
** Class B shares of the ISG Tennessee Tax-Exempt Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Tennessee
Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Tennessee Tax-Exempt Fund
Class B Shares........................................ $198 $612 $1,052 $2,044
AmSouth Tennessee Tax-Exempt Fund
Class B Shares........................................ $210 $649 $1,114 $2,118
Combined Fund Pro Forma
Class B Shares........................................ $210 $649 $1,114 $2,118
</TABLE>
- ---------------
** Class B shares of the ISG Tennessee Tax-Exempt Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Tennessee
Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-22
<PAGE> 112
<TABLE>
<CAPTION>
ISG AMSOUTH
LIMITED TERM TENNESSEE LIMITED TERM TENNESSEE COMBINED
TAX-EXEMPT FUND TAX-EXEMPT FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ .50% .50% .50% .65% .65% .65% .65% .65% .65%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .92% 1.02 .92% 1.00% 1.00% .90%(6) 1.00% 1.00% .90%(6)
Total Fund Operating
Expenses..................... 1.67%(7) 2.27%(7) 1.42%(7) 1.65%(8) 2.40%(8) 1.55%(8) 1.65%(8) 2.40%(8) 1.55%(8)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%)
Net Expenses......................... n/a n/a n/a n/a n/a n/a 1.60%(9) 2.20%(9) 1.35%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other holders of B Shares, the CDSC
declines over a six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in
the seventh and eighth year. Approximately eight years after purchase (seven
years in the case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(9) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, 1.60%;
Class B, 2.20%; Trust Class, 1.35% until October 1, 2001.
B-23
<PAGE> 113
ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND
AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term Tennessee Tax-Exempt Fund
Class A Shares........................................ $465 $ 811 $1,180 $2,217
Class B Shares........................................ $630 $1,009 $1,415 $2,381
Class I Shares........................................ $145 $ 449 $ 776 $1,702
AmSouth Limited Term Tennessee Tax-Exempt Fund
Class A Shares........................................ $561 $ 900 $1,261 $2,276
Class B Shares........................................ $743 $1,048 $1,480 $2,463
Trust Shares.......................................... $158 $ 490 $ 845 $1,845
Combined Fund Pro Forma
Class A Shares........................................ $561 $ 900 $1,261 $2,276
Class B Shares........................................ $743 $1,048 $1,480 $2,463
Trust Shares.......................................... $158 $ 900 $1,261 $2,276
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term Tennessee Tax-Exempt Fund
automatically convert to Class A Shares approximately after seven (7) years.
AmSouth Limited Term Tennessee Tax-Exempt Fund and the Combined Fund
automatically convert to Class A Shares approximately after eight (8) years.
Therefore, the "10 Years" example above reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term Tennessee Tax-Exempt Fund
Class B Shares........................................ $203 $709 $1,215 $2,381
AmSouth Limited Term Tennessee Tax-Exempt Fund
Class B Shares........................................ $243 $748 $1,280 $2,463
Combined Fund Pro Forma
Class B Shares........................................ $243 $748 $1,280 $2,463
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term Tennessee Tax-Exempt Fund
automatically convert to Class A Shares approximately after seven (7) years.
AmSouth Limited Term Tennessee Tax-Exempt Fund and the Combined Fund
automatically convert to Class A Shares approximately after eight (8) years.
Therefore, the "10 Years" example above reflects these conversions.
B-24
<PAGE> 114
<TABLE>
<CAPTION>
ISG AMSOUTH
LIMITED TERM U.S. LIMITED TERM U.S. COMBINED
GOVERNMENT FUND GOVERNMENT FUND FUND PRO FORMA
----------------------------- ------------------ ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ .50% .50% .50% .65% .65% .65% .65% .65% .65%
12b-1 Fees........................... .25% .75% None None .75% None None .75% None
Other Expenses....................... .79% .75% .65% .76% .76% .66%(6) .76% .76% .66%(6)
Total Fund Operating
Expenses..................... 1.54%(7) 2.00%(7) 1.15%(7) 1.41%(8) 2.16%(8) 1.39%(8) 1.41%(8) 2.16%(8) 1.31%(8)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%)
Net Expenses......................... n/a n/a n/a n/a n/a n/a 1.36%(9) 1.96%(9) 1.11%(9)
</TABLE>
- ---------------
(1) Sales charges may be reduced depending upon the amount invested, or in
certain circumstances, waived.
(2) Class A Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if Class B Shares are sold within
six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1%
to 0% in the seventh year. For all other B Shares, the CDSC declines over a
six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and
eighth year. Approximately eight years after purchase (seven years in the
case of Shares acquired in the ISG combination), Class B Shares
automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(8) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, 1.36%;
Class B, 1.96%; Trust Class, 1.11% until October 1, 2001.
B-25
<PAGE> 115
ISG LIMITED TERM U.S. GOVERNMENT FUND
AMSOUTH LIMITED TERM U.S. GOVERNMENT FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term U.S. Government Fund
Class A Shares........................................ $452 $ 772 $1,114 $2,079
Class B Shares........................................ $603 $ 927 $1,278 $2,152
Class I Shares........................................ $117 $ 365 $ 633 $1,398
AmSouth Limited Term U.S. Government Fund
Class A Shares........................................ $546 $ 852 $1,181 $2,108
Class B Shares........................................ $727 $1,000 $1,400 $2,297
Trust Shares.......................................... $142 $ 440 $ 761 $1,669
Combined Fund Pro Forma
Class A Shares........................................ $546 $ 852 $1,181 $2,108
Class B Shares........................................ $727 $1,000 $1,400 $2,297
Trust Shares.......................................... $142 $ 440 $ 761 $1,669
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term U.S. Government Fund automatically
convert to Class A Shares approximately after seven (7) years. AmSouth
Limited Term U.S. Government Fund and the Combined Fund automatically convert
to Class A Shares approximately after eight (8) years. Therefore, the "10
Years" example above reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term U.S. Government Fund
Class B Shares........................................ $203 $627 $1,078 $2,152
AmSouth Limited Term U.S. Government Fund
Class B Shares........................................ $227 $700 $1,200 $2,297
Combined Fund Pro Forma
Class B Shares........................................ $227 $700 $1,200 $2,297
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term U.S. Government Fund automatically
convert to Class A Shares approximately after seven (7) years. AmSouth
Limited Term U.S. Government Fund and the Combined Fund automatically convert
to Class A Shares approximately after eight (8) years. Therefore, the "10
Years" example above reflects these conversions.
B-26
<PAGE> 116
<TABLE>
<CAPTION>
ISG AMSOUTH
GOVERNMENT INCOME GOVERNMENT INCOME COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees........................ None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) Advisory Fees........ .60% .60% .60% .65% .65% .65% .65% .65% .65%
12b-1 Fees........................... .25% .75% None None 1.00% None None .75% None
Other Expenses....................... .38% .48% .38% 1.27% 1.02% 1.02% .69% .69% .59%(6)
Total Fund Operating
Expenses..................... 1.23%(7) 1.83%(7) .98%(7) 1.92%(8) 2.67%(8) 1.67%(8) 1.34%(9) 2.09%(9) 1.24%(9)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (1.20%) (.80%) (1.05%) (.06%) (.21%) (.21%)
Net Expenses......................... n/a n/a n/a .72% 1.87% .62 1.28%(9) 1.88%(9) 1.03%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For
all other B shares, the CDSC declines over a six year period as follows: 5%,
4%, 3%, 3%, 2%, 1% 0% in the seventh and eighth year. Approximately eight
years after purchase (seven years in the case of Shares acquired in the ISG
combination), Class B Shares automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for Class B shares and Class I shares are based on estimated
amounts for the current fiscal year, and have been restated for Class A to
reflect current fees. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement is
voluntary and my be discontinued at any time.
(8) Other expenses for each Class are restated to reflect current fees. The
expenses do not reflect any fee waivers or expense reimbursement
arrangements. Total expenses after fee waivers and expense reimbursements
for each class are: Class A, 0.72%; Class B, 1.87%; Trust, 0.62%. Any fee
waiver and/or expense reimbursement arrangement is voluntary and may be
discontinued at any time.
(9) Other expenses are based on estimated amounts for the current fiscal year.
AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, .91%;
Trust, .91% through April 30, 2000, and thereafter will be: Class A, 1.28%;
Class B, 1.88%; Trust Class, 1.03% until October 1, 2001.
B-27
<PAGE> 117
ISG GOVERNMENT INCOME FUND
AMSOUTH GOVERNMENT INCOME FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Government Income Fund
Class A Shares........................................ $422 $ 679 $ 955 $1,744
Class B Shares........................................ $586 $ 876 $1,190 $1,915
Class I Shares........................................ $100 $ 312 $ 542 $1,201
AmSouth Government Income Fund
Class A Shares........................................ $587 $ 979 $1,395 $2,553
Class B Shares........................................ $795 $1,204 $1,738 $3,006
Trust Shares.......................................... $170 $ 926 $1,907 $1,976
Combined Fund Pro Forma
Class A Shares........................................ $531 $ 808 $1,105 $1,948
Class B Shares........................................ $710 $ 949 $1,314 $2,126
Trust Shares.......................................... $126 $ 393 $ 681 $1,500
</TABLE>
- ---------------
** Class B shares of the ISG Government Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Government Income
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Government Income Fund
Class B Shares........................................ $186 $576 $ 990 $1,915
AmSouth Government Income Fund
Class B Shares........................................ $295 $904 $1,538 $3,006
Combined Fund Pro Forma
Class B Shares........................................ $210 $649 $1,114 $2,126
</TABLE>
- ---------------
** Class B shares of the ISG Government Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Government Income
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-28
<PAGE> 118
<TABLE>
<CAPTION>
ISG AMSOUTH
LIMITED TERM INCOME LIMITED TERM BOND COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................. 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ .50% .50% .50% .65% .65% .65% .65% .65% .65%
12b-1 Fees........................... .25% .75% None None 1.00% None None .75% None
Other Expenses....................... .60% .70% .60% .60% .33% .35% .54% .54% .44%(6)
Total Fund Operating
Expenses..................... 1.35%(7) 1.95%(7) 1.10%(7) 1.25%(8) 1.98%(8) 1.00%(8) 1.19%(9) 1.94%(9) 1.09%(9)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.42%) (.27%) (.27%) n/a (.11%) (.11%)
Net Expenses......................... n/a n/a n/a .83% 1.71% .73% n/a 1.83%(9) .98%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For
all other B shares, the CDSC declines over a six year period as follows: 5%,
4%, 3%, 3%, 2%, 1% to 0% in the seventh and eighth year. Approximately eight
years after purchase (seven years in the case of Shares acquired in the ISG
combination), Class B Shares automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses have been restated for Class A and Class I to reflect current
fees. The expenses do not reflect any fee waivers or expense reimbursement
arrangements. Any fee waiver or expense reimbursement arrangement is
voluntary and may discontinued at any time.
(8) Other expenses for each Class have been restated to reflect current fees.
The expenses do not reflect any fee waivers or expense reimbursement
arrangements. Total expenses after fee waivers and expense reimbursements
for each class are: Class A, 0.83%; Class B, 1.71%; Trust, 0.73%. Any fee
waiver or expense reimbursement is voluntary and may be discontinued at any
time.
(9) Other expenses are based on estimated amounts for the current fiscal year.
AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class B, 1.83%;
Trust Class, .98% until October 1, 2001.
B-29
<PAGE> 119
ISG LIMITED TERM INCOME FUND
AMSOUTH LIMITED TERM BOND FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term Income Fund
Class A Shares........................................ $433 $715 $1,017 $1,875
Class B Shares........................................ $598 $912 $1,252 $2,044
Class I Shares........................................ $112 $350 $ 606 $1,340
AmSouth Limited Term Bond Fund
Class A Shares........................................ $522 $781 $1,059 $1,851
Class B Shares........................................ $701 $921 $1,268 $2,118
Trust Shares.......................................... $102 $318 $ 552 $1,225
Combined Fund Pro Forma
Class A Shares........................................ $516 $763 $1,028 $1,785
Class B Shares........................................ $697 $909 $1,247 $1,979
Trust Shares.......................................... $111 $347 $ 601 $1,329
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Limited Term Bond
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Limited Term Income Fund
Class B Shares........................................ $198 $612 $1,052 $2,044
AmSouth Limited Term Bond Fund
Class B Shares........................................ $201 $621 $1,068 $2,118
Combined Fund Pro Forma
Class B Shares........................................ $197 $609 $1,047 $1,979
</TABLE>
- ---------------
** Class B shares of the ISG Limited Term Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Limited Term Bond
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-30
<PAGE> 120
<TABLE>
<CAPTION>
ISG AMSOUTH
EQUITY INCOME EQUITY INCOME COMBINED
FUND FUND FUND PRO FORMA
----------------------------- ----------------------------- -----------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price).................... 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends................. None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds, as
applicable)............... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees............. None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees............... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees................. .65% .65% .65% .80% .80% .80% .80% .80% .80%
12b-1 Fees.................... .25% .75% None None 1.00% None None .75% None
Other Expenses................ .70% .80% .70% .80% .55% .55% .58% .58% .48%(6)
Total Fund Operating
Expenses.............. 1.60%(7) 2.20%(7) 1.35%(7) 1.60%(8) 2.35%(8) 1.35%(8) 1.38%(9) 2.13%(9) 1.28%(9)
Fee Waiver and/or Expense
Reimbursement............... n/a n/a n/a (.17%) (.22%) (.17%) n/a (.07%) (.07%)
Net Expenses.................. n/a n/a n/a 1.43% 2.13% 1.18% n/a 2.06%(9) 1.21%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For B shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For
all other B shares, the CDSC declines over a six year period as follows: 5%,
4%, 3%, 3%, 2%, 1% to 0% in the seventh and eighth year. Approximately eight
years after purchase (seven years in the case of Shares acquired in the ISG
combination), Class B Shares automatically convert to Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses have been restated for Class A and Class I to reflect current
fees. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at
any time.
(8) Other expenses for each Class have been restated to reflect current fees.
The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Total expenses after
fee waivers and expense reimbursements for each class are: Class A, 1.43%;
Class B, 2.13%; Trust, 1.18%. Any fee waiver or expense reimbursement is
voluntary and may be discontinued at any time.
(9) Other expenses for each class are based on estimated amounts for the current
fiscal year. AmSouth Bank has contractually agreed to waive fees and/or
reimburse expenses to limit total annual fund operating expenses to: Class
B, 2.06%; Trust Class, 1.21% until October 1, 2001.
B-31
<PAGE> 121
ISG EQUITY INCOME FUND
AMSOUTH EQUITY INCOME FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Equity Income Fund
Class A Shares........................................ $630 $ 956 $1,304 $2,285
Class B Shares........................................ $623 $ 988 $1,380 $2,309
Class I Shares........................................ $137 $ 428 $ 739 $1,624
AmSouth Equity Income Fund
Class A Shares........................................ $605 $ 932 $1,282 $2,265
Class B Shares........................................ $738 $ 1,033 $1,455 $2,499
Trust Shares.......................................... $137 $ 428 $ 739 $1,624
Combined Fund Pro Forma
Class A Shares........................................ $584 $ 867 $1,171 $2,033
Class B Shares........................................ $716 $ 967 $1,344 $2,182
Trust Shares.......................................... $130 $ 406 $ 702 $1,545
</TABLE>
- ---------------
** Class B shares of the ISG Equity Income Fund automatically convert to Class A
Shares approximately after seven (7) years. AmSouth Equity Income Fund and
the Combined Fund automatically convert to Class A Shares approximately after
eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Equity Income Fund
Class B Shares........................................ $223 $ 688 $1,180 $2,309
AmSouth Equity Income Fund
Class B Shares........................................ $238 $ 733 $1,255 $2,499
Combined Fund Pro Forma
Class B Shares........................................ $216 $ 667 $1,114 $2,182
</TABLE>
- ---------------
** Class B shares of the ISG Equity Income Fund automatically convert to Class A
Shares approximately after seven (7) years. AmSouth Equity Income Fund and
the Combined Fund automatically convert to Class A Shares approximately after
eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
B-32
<PAGE> 122
<TABLE>
<CAPTION>
ISG AMSOUTH
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price).................... 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends................. None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds, as
applicable)............... None(2) 4.00%(3) None None 5.00%(4) None(2) None(4) 5.00%(4) None
Redemption Fees............. None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees............... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees................. .60% .60% .60% .65% .65% .65% .65% .65% .65%
12b-1 Fees.................... .25% .75% None None 1.00% None None .75% None
Other Expenses................ .56% .66% .56% .60% .24% .32% .53% .53% .43%(6)
Total Fund Operating
Expenses.............. 1.41%(7) 2.01%(7) 1.16%(7) 1.22%(8) 1.89%(8) .97%(8) 1.18%(9) 1.93%(9) 1.08%(9)
Fee Waiver and/or Expense
Reimbursement............... n/a n/a n/a (.49%) (.27%) (.34%) n/a n/a n/a
Net Expenses.................. n/a n/a n/a .73% 1.62% .63% n/a n/a n/a
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For former B shares acquired ISG Funds, waivers are in place on the CDSC as
follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC
declines over a six year period as follows: 5%, 4%, 3%, 3%, 2%, 1% to 0%.
Approximately eight years after purchase (seven years in the case of Shares
acquired in the ISG combination), Class B Shares automatically convert to
Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses have been for Class B and Class I are based on estimated
amounts for the current fiscal year, and have been restated for Class A to
reflect current fees. The expenses do not reflect any fee waivers or expense
reimbursement arrangements. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class have been restated to reflect current fees.
The expenses do not reflect any fee waivers or expense reimbursement
arrangements. AmSouth Bank has contractually agreed to waive fees and/or
reimburse expenses to limit total annual fund operating expenses to: Class
A, .90%; Trust, .90%, through April 30, 2000, and thereafter will be: Class
A, 0.73%; Class B, 1.62%; Trust, 0.63% until October 1, 2001. Any fee waiver
or expense reimbursement arrangement is voluntary and may be discontinued at
any time.
(9) Other expenses are based on estimated amounts for the current fiscal year.
B-33
<PAGE> 123
ISG MUNICIPAL INCOME FUND
AMSOUTH MUNICIPAL BOND FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Municipal Income Fund
Class A Shares........................................ $439 $ 733 $1,048 $1,940
Class B Shares........................................ $604 $ 930 $1,283 $2,108
Class I Shares........................................ $118 $ 368 $ 638 $1,409
AmSouth Municipal Bond Fund
Class A Shares........................................ $519 $ 772 $1,044 $1,818
Class B Shares........................................ $692 $ 894 $1,221 $2,037
Trust Shares.......................................... $ 99 $ 309 $ 536 $1,190
Combined Fund Pro Forma
Class A Shares........................................ $515 $ 760 $1,023 $1,775
Class B Shares........................................ $696 $ 906 $1,242 $1,968
Trust Shares.......................................... $110 $ 343 $ 595 $1,317
</TABLE>
- ---------------
** Class B shares of the ISG Municipal Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Municipal Bond
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Municipal Income Fund
Class B Shares........................................ $204 $ 630 $1,083 $2,108
AmSouth Municipal Bond Fund
Class B Shares........................................ $192 $ 594 $1,021 $2,037
Combined Fund Pro Forma
Class B Shares........................................ $196 $ 606 $1,042 $1,968
</TABLE>
- ---------------
** Class B shares of the ISG Municipal Income Fund automatically convert to
Class A Shares approximately after seven (7) years. AmSouth Municipal Bond
Fund and the Combined Fund automatically convert to Class A Shares
approximately after eight (8) years. Therefore, the "10 Years" example above
reflects these conversions.
B-34
<PAGE> 124
<TABLE>
<CAPTION>
ISG AMSOUTH
SMALL-CAP OPPORTUNITY SMALL CAP COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price).................... 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None
Sales Charge on Reinvested
Dividends................. None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds, as
applicable)............... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees............. None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees............... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees................. .95% .95% .95% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
12b-1 Fees.................... .25% .75% None None 1.00% None None .75% None
Other Expenses................ .55% .65% .55% 1.50% 1.24% 1.20% .55% .55% .45%(6)
Total Fund Operating
Expenses.............. 1.75%(7) 2.35%(7) 1.50%(7) 2.70%(8) 3.24%(8) 2.40%(8) 1.75%(9) 2.50%(9) 1.65%
Fee Waiver and/or Expense
Reimbursement............... n/a n/a n/a (1.02%) (.81%) (.99%) n/a (.15%) (.15%)
Net Expenses.................. n/a n/a n/a 1.68% 2.43% 1.41% n/a 2.35%(9) 1.50%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For former B shares acquired in the combination of AmSouth Funds with ISG
Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%,
0%. For all other B shares, the CDSC declines over a six-year period as
follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and eighth year.
Approximately eight years after purchase (seven years in the case of Shares
acquired in the ISG combination), Class B Shares automatically convert to
Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses for Class B and Class I are based on estimated amounts for
the current fiscal year, and have been restated for Class A to reflect
current fees. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements that are or were in effect. Any fee
waiver or expense reimbursement arrangement is voluntary and may be
discontinued at any time.
(8) Other expenses have been restated to reflect current fees. Total expenses
after fee waivers and expense reimbursements for each class are: Class A,
1.68%; Class B, 2.43%; Trust, 1.41%. Any fee waiver or expense reimbursement
is voluntary and may be discontinued at any time.
(9) Other expenses for each Class are based on estimated amounts for the current
fiscal year. AmSouth Bank has contractually agreed to waive fees and/or
reimburse expenses to limit the total annual fund operating expenses to:
Class B, 2.35 %; Trust Class, 1.50% until October 1, 2001.
B-35
<PAGE> 125
ISG SMALL-CAP OPPORTUNITY FUND
AMSOUTH SMALL CAP FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Small-Cap Opportunity Fund
Class A Shares........................................ $636 $ 974 $1,334 $2,347
Class B Shares........................................ $629 $ 1,006 $1,410 $2,371
Class I Shares........................................ $144 $ 446 $ 771 $1,691
AmSouth Small Cap Fund
Class A Shares........................................ $711 $ 1,251 $1,815 $3,345
Class B Shares........................................ $847 $ 1,356 $1,988 $3,555
Trust Shares.......................................... $243 $ 748 $1,280 $2,736
Combined Fund Pro Forma
Class A Shares........................................ $620 $ 976 $1,356 $2,420
Class B Shares........................................ $753 $ 1,079 $1,531 $2,565
Trust Shares.......................................... $168 $ 520 $ 897 $1,955
</TABLE>
- ---------------
** Class B shares of the ISG Small-Cap Opportunity Fund automatically convert to
Class A Shares after seven (7) years. AmSouth Small Cap Fund and the Combined
Fund automatically convert to Class A Shares approximately after eight (8)
years. Therefore, the "10 Years" example above reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Small-Cap Opportunity Fund
Class B Shares........................................ $229 $ 706 $1,210 $2,371
AmSouth Small Cap Fund
Class B Shares........................................ $347 $ 1,056 $1,788 $3,555
Combined Fund Pro Forma
Class B Shares........................................ $253 $ 779 $1,331 $2,565
</TABLE>
- ---------------
** Class B shares of the ISG Small-Cap Opportunity Fund automatically convert to
Class A Shares after seven (7) years. AmSouth Small Cap Fund and the Combined
Fund automatically convert to Class A Shares approximately after eight (8)
years. Therefore, the "10 Years" example above reflects these conversions.
B-36
<PAGE> 126
<TABLE>
<CAPTION>
ISG AMSOUTH
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY COMBINED
MARKET FUND MARKET FUND FUND PRO FORMA
------------------ ---------------- ----------------
CLASS A CLASS I CLASS A TRUST CLASS A TRUST
------- ------- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................... None(1) None None None None(1) None
Sales Charge on Reinvested Dividends............... None None None None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable).............. None(2) None None None None(2) None
Redemption Fees.................................... None None None(3) None(3) None(3) None(3)
Exchange Fees...................................... None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)
Advisory Fees........................................ .35% .35% .40% .40% .40% .40%
12b-1 Fees........................................... None None None None None None
Other Expenses....................................... .57% .47% .60% .35% .53% .43%(4)
Total Fund Operating Expenses.................. .92% .82% 1.00%(5) .75%(5) .93%(6) .83%(6)
Fee Waiver and/or Expense Reimbursement.............. n/a n/a (.39%) (.24%) (.03%) (.03%)
Net Expenses......................................... n/a n/a .61% .51% .90%(7) .80%(7)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(4) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(5) Other expenses for each class have been restated to reflect current fees.
The expenses do not reflect any fee waivers or expense reimbursement
arrangements. Total expenses after fee waivers and expense reimbursements
for each class are: Class A, 0.61%; Trust, 0.51%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
(6) Other expenses for each Class are based on estimated amounts for the current
fiscal year. The expenses do not reflect any fee waivers or expense
reimbursement arrangements.
(7) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A, .90%;
Trust Class, .80% until October 1, 2001.
B-37
<PAGE> 127
ISG TAX-EXEMPT MONEY MARKET FUND
AMSOUTH TAX-EXEMPT MONEY MARKET FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
ISG Tax-Exempt Money Market Fund
Class A Shares............................................ $ 94 $293
Class I Shares............................................ $ 84 $262
AmSouth Tax-Exempt Money Market Fund
Class A Shares............................................ $102 $318
Trust Shares.............................................. $ 77 $240
Combined Fund Pro Forma
Class A Shares............................................ $ 95 $296
Trust Shares.............................................. $ 85 $265
</TABLE>
B-38
<PAGE> 128
<TABLE>
<CAPTION>
ISG AMSOUTH
PRIME MONEY MARKET PRIME MONEY MARKET COMBINED
FUND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge imposed on
Purchases (as a percentage of
offering price).................. None(1) None None None None None None(1) None None
Sales Charge on Reinvested
Dividends........................ None None None None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable)...................... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees.................... None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees...................... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Advisory Fees........................ .25% .25% .25% .40% .40% .40% .40% .40% .40%
12b-1 Fees........................... None .75% None None 1.00% None None .75% None
Other Expenses....................... .57% .58% .48% .56% .32% .31% .53% .53% .43%(6)
Total Fund Operating
Expenses..................... .82%(1) 1.58%(1) .73%(1) .96%(8) 1.72%(8) .71%(8) .93%(9) 1.68%(9) .83%(9)
Fee Waiver and/or Expense
Reimbursement...................... n/a n/a n/a (.16%) (.01%) (.01%) (.16%) (.16%) (.16%)
Net Expenses......................... n/a n/a n/a .80% 1.71% .70% .77%(9) 1.52%(9) .67%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For former B shares acquired in the combination of AmSouth Funds with ISG
Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%,
0%. For all other B shares, the CDSC declines over a six-year period as
follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and eighth year.
Approximately eight years after purchase (seven years in the case of Shares
acquired in the ISG combination), Class B Shares automatically convert to
Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other fees have been restated for Class I to reflect current fees. The
expenses noted above do not reflect any fee waivers or expense reimbursement
arrangements that are or were in effect. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class have been restated to reflect current fees.
The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Total expenses after
fee waivers and expense reimbursements are: Class A, 0.80%; Class B, 1.71%,
Trust, .70%. Any fee waiver or expense reimbursement is voluntary and may be
waived at any time.
(9) Other expenses are based on estimated amounts for the current fiscal year.
AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class A .66%;
Trust .66% through April 30, 2000, and thereafter will be: Class A, .77%;
Class B, 1.52%; Trust Class, .67% until October 1, 2001.
B-39
<PAGE> 129
ISG PRIME MONEY MARKET FUND
AMSOUTH PRIME MONEY MARKET FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Prime Money Market Fund
Class A Shares........................................ $ 84 $262 $ 455 $1,014
Class B Shares........................................ $561 $799 $1,060 $1,576
Class I Shares........................................ $ 75 $233 $ 406 $ 906
AmSouth Prime Money Market Fund
Class A Shares........................................ $ 98 $306 $ 531 $1,178
Class B Shares........................................ $675 $842 $1,133 $1,829
Trust Shares.......................................... $ 73 $227 $ 395 $ 883
Combined Fund Pro Forma
Class A Shares........................................ $ 95 $296 $ 515 $1,143
Class B Shares........................................ $671 $830 $1,113 $1,694
Trust Shares.......................................... $ 85 $265 $ 460 $1,025
</TABLE>
- ---------------
** Class B shares of the ISG Prime Money Market Fund automatically convert to
Class A Shares after seven (7) years. AmSouth Prime Money Market Fund and the
Combined Fund automatically convert to Class A Shares approximately after
eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Prime Money Market Fund
Class B Shares......................................... $161 $499 $860 $1,576
AmSouth Prime Money Market Fund
Class B Shares......................................... $175 $542 $933 $1,829
Combined Fund Pro Forma
Class B Shares......................................... $171 $530 $913 $1,694
</TABLE>
- ---------------
** Class B shares of the ISG Prime Money Market Fund automatically convert to
Class A Shares after seven (7) years. AmSouth Prime Money Market Fund and the
Combined Fund automatically convert to Class A Shares approximately after
eight (8) years. Therefore, the "10 Years" example above reflects these
conversions.
B-40
<PAGE> 130
<TABLE>
<CAPTION>
ISG AMSOUTH COMBINED
INCOME FUND BOND FUND FUND PRO FORMA
----------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS I CLASS A CLASS B TRUST CLASS A CLASS B TRUST
------- ------- ------- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering
price).................... 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None
Sales Charge on Reinvested
Dividends................. None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds, as
applicable)............... None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None
Redemption Fees............. None None None None(5) None(5) None(5) None(5) None(5) None(5)
Exchange Fees............... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
daily net assets)
Advisory Fees................. .50% .50% .50% .65% .65% .65% .65% .65% .65%
12b-1 Fees.................... .25% .75% None None 1.00% None None 1.00% None
Other Expenses................ .63% .73% .63% .57% .32% .32% .53% .53% .43%(6)
Total Fund Operating
Expenses.............. 1.38%(7) 1.98%(7) 1.13%(7) 1.22%(8) 1.93%(8) .97%(8) 1.18%(9) 1.93%(9) 1.08%(9)
Fee Waiver and/or Expense
Reimbursement............... n/a n/a n/a (.39%) (.20%) (.24%) n/a (.07%) (.07%)
Net Expenses.................. n/a n/a n/a .83% 1.73% .73% n/a 1.86%(9) 1.01%(9)
</TABLE>
- ---------------
(1) Sales changes may be reduced or, in certain circumstances, waived.
(2) Class A shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of 1.00% if
sold within one year of purchase.
(3) The CDSC, charged if Class B Shares are sold within six years of purchase,
declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year.
Approximately seven years after purchase, Class B Shares automatically
convert to Class A Shares.
(4) For former B shares acquired in the combination of AmSouth Funds with ISG
Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%,
0%. For all other B shares, the CDSC declines over a six-year period as
follows: 5%, 4%, 3%, 3%, 2%, 1% to 0% in the seventh and eighth year.
Approximately eight years after purchase (seven years in the case of Shares
acquired in the ISG combination), Class B Shares automatically convert to
Class A Shares.
(5) A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
(6) The above amount includes a shareholder servicing fee that will become
effective on March 13, 2000.
(7) Other expenses have been restated for class A and Class I to reflect current
fees. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. There was no fee
waiver or expense reimbursement for Class B. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
(8) Other expenses for each Class have been restated to reflect current fees.
The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Total expenses after
fee waivers and expense reimbursements are: Class A, 0.83%; Class B, 1.73%;
Trust, .73%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
(9) AmSouth Bank has contractually agreed to waive fees and/or reimburse
expenses to limit total annual fund operating expenses to: Class B, 1.86%;
Trust Class, 1.01% until October 1, 2001.
B-41
<PAGE> 131
ISG INCOME FUND
AMSOUTH BOND FUND
EXAMPLE: An investor would pay the following expenses on $10,000
investment, assuming (1) 5% annual return, (2) no changes in the Fund's
operating expenses, and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Income Fund
Class A Shares........................................ $436 $724 $1,033 $1,908
Class B Shares........................................ $601 $921 $1,268 $2,076
Class I Shares........................................ $115 $359 $ 622 $1,375
AmSouth Bond Fund
Class A Shares........................................ $519 $772 $1,044 $1,818
Class B Shares........................................ $700 $918 $1,262 $2,102
Trust Shares.......................................... $ 99 $309 $ 536 $1,190
Combined Fund Pro Forma
Class A Shares........................................ $515 $760 $1,023 $1,775
Class B Shares........................................ $696 $906 $1,242 $1,968
Trust Shares.......................................... $110 $343 $ 595 $1,317
</TABLE>
- ---------------
** Class B shares of the ISG Income Fund automatically convert after seven (7)
years. AmSouth Bond Fund and the Combined Fund automatically convert to Class
A Shares approximately after eight (8) years. Therefore, the "10 Years"
example above reflects these conversions.
Assuming no redemption of Class B shares at the end of the period, the
dollar amounts in the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
ISG Income Fund
Class B Shares........................................ $201 $621 $1,068 $2,076
AmSouth Bond Fund
Class B Shares........................................ $200 $618 $1,062 $2,102
Combined Fund Pro Forma
Class B Shares........................................ $196 $606 $1,042 $1,968
</TABLE>
- ---------------
** Class B shares of the ISG Income Fund automatically convert after seven (7)
years. AmSouth Bond Fund and the Combined Fund automatically convert to Class
A Shares approximately after eight (8) years. Therefore, the "10 Years"
example above reflects these conversions.
B-42
<PAGE> 132
APPENDIX C
AMSOUTH FUNDS ANNUAL REPORT
THE AMSOUTH EQUITY INCOME FUND
The AmSouth Equity Income Fund is subadvised by Rockhaven Asset Management,
LLC and is managed by Christopher Wiles, CFA. President and chief investment
officer of Rockhaven, Mr. Wiles has more than 15 years of investment management
experience. He holds an MBA and a bachelor's degree in finance.
LOW RISK, HIGH INCOME
For the 12 months ended July 31, 1999, the AmSouth Equity Income Fund
produced a total return of 14.17% (Classic Shares at NAV). In comparison, the
S&P 500 Stock Index rose 20.20%, and the Lipper Equity Income Fund Index(1)
gained 11.26%.
We provided our shareholders with solid market participation with
below-average risk and above-average income. As of July 31, 1999, the Fund's
yield was 2.82%, more than twice the S&P 500's yield of just 1.26%.
WE MADE GOOD MONEY WITH CONVERTIBLES
In many ways, this was one of the most phenomenal 12-month periods in stock
market history. Last summer, we thought we might be in the throes of a
potentially disastrous, deflationary environment throughout the world. There was
serious trouble in Asia and Russia, with Latin America also looking vulnerable.
Consequently, even though the U.S. economy was strong, the Federal Reserve acted
quickly -- lowering short-term interest rates three times in the latter part of
1998 -- to stave off a global financial collapse.
In a deflationary environment, it is prudent to hold securities with the
longest duration you can get your hands on. Those long-duration securities were
large-cap growth stocks and, to some degree, Internet stocks. Then all of a
sudden in 1999, the world looked much more stable, and deflationary fears
subsided. Therefore, interest rates began to rise sharply. This turnaround
favored short-duration securities. With regard to stocks, this favored
deep-value stocks.
The Fund participated in the climb from the October 1998 lows to the March
1999 highs. With the abrupt change away from large-cap growth, we gave up some
ground -- though not that much.
One significant change in the portfolio during the last 12 months was an
increase in our allocation to convertible securities. Due to an active
merger-and-acquisition environment, we found some very attractive convertible
opportunities. For instance, when Centocor, a biotech company, was acquired by
Johnson & Johnson (0.91% of the Fund's net assets), we found ourselves holding
JNJ convertible (1.42%), which yielded 3.7%. Another example was Level One
Communications, which was taken over by Intel (0.75%). By buying Level One
convertible, which became Intel convertible (0.91%), we were getting
significantly more income than was available through Intel common stock.*
As of July 31, 1999, the Fund's top five holdings were BCE, Inc. (3.04%),
Lincoln National Corp. (2.94%), Nextel STRYPES (2.92%), Skytel/Worldcom
Communications, Inc. (2.85%) and General Electric Co. (2.81%).*
A BLASE MARKET FOR THE NEXT FEW MONTHS
Going forward, we believe there will be many things happening in the next
six months. The main event remains the Year 2000 (Y2K) situation. One factor
that helped the U.S. economy grow robustly in the first seven months of 1999 was
a significant amount of Y2K-related buying of goods before the end of the year.
Many made their purchases early in 1999. Therefore, we expect the economy to
show some signs of slowing in the fourth quarter of 1999, and interest rates
could fall from their relatively high levels. We do not see the stock market
making much of a move either way for the next six months, but we think
conditions could be ripe for an increase in stock prices in the early part of
next year.
- ---------------
(1) The Lipper Equity Income Fund Index is comprised of funds that seek
relatively high current income and growth of income through investing 60% or
more of their portfolios in equities.
* The Fund's portfolio composition is subject to change.
C-1
<PAGE> 133
THE AMSOUTH EQUITY INCOME FUND
[THE AMSOUTH EQUITY INCOME FUND APPEARS HERE]
<TABLE>
<CAPTION>
AMSOUTH EQUITY
AMSOUTH EQUITY INCOME FUND AMSOUTH EQUITY S&P 500 LIPPER EQUITY
INCOME FUND (PREMIER INCOME FUND STOCK INCOME FUND
DATE (CLASSIC SHARES)* SHARES) (B SHARES)** INDEX INDEX
---- ----------------- -------------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C>
3/20/97..................... 9,550 10,000 10,000 10,000 10,000
7/97........................ 11,409 11,948 11,421 12,633 11,786
7/98........................ 12,073 12,669 12,142 15,136 12,918
7/99........................ 13,784 14,497 13,915 18,193 14,373
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SINCE
1 INCEPTION
AS OF JULY 31, 1999 YEAR (3/20/97)
------------------- ----- ---------
<S> <C> <C>
Classic*................................................... 9.03% 14.54%
Premier.................................................... 14.43% 17.01%
B Shares**................................................. 8.34% 15.00%
</TABLE>
- ---------------
* Reflects 4.50% sales charge
** Reflects applicable contingent deferred sales charge.
Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier Shares. The
performance figures for Premier Shares for periods prior to such date represent
the performance of Classic Shares of the Fund.
Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Classic Shares (without
sales charge) prior to that date. The performance of Classic Shares does not
reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC).
Had the CDSC and higher 12b-1 fees been incorporated, total return and
hypothetical growth figures would have been lower.
The performance of the AmSouth Equity Income Fund is measured against the
S&P 500 Stock Index and the Lipper Equity Income Fund Index. The S&P 500 Stock
Index is an unmanaged index generally representative of the U.S. stock market as
a whole. The index does not reflect the deduction of fees associated with a
mutual fund, such as investment management and fund accounting fees. The Lipper
Equity Income Fund Index, an index that consists of managed funds, and the
Fund's performance do reflect the deduction of fees for these value-added
services. During the period shown, the Fund waived fees for various expenses.
Had these waivers not been in effect, performance quoted would have been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
C-2
<PAGE> 134
THE AMSOUTH SMALL CAP FUND+
The AmSouth Small Cap Fund is subadvised by Sawgrass Asset Management, LLC
and is managed by Dean McQuiddy, CFA. A principal of Sawgrass, Mr. McQuiddy has
more than 16 years of investment management experience. He received his
bachelor's degree in finance from the University of Florida.
TOUGH TIMES IN SMALL CAPS
For the 12 months ended July 31, 1999, the Fund produced a total return
of-8.10% (Classic Shares at NAV). In comparison, the Russell 2000 Growth Index
rose 14.51%.
Looking at the entire period from beginning to end, the equity markets dove
up and down like a roller coaster. The period began with stocks going into a
tailspin, hitting bottom in early October 1998. Then, buoyed by three successive
interest-rate cuts by the Federal Reserve Board, many sectors surged
higher -- though the small-cap arena in which we operate did not fully
participate in the recovery. The rally continued into the beginning of April
1999, when small caps experienced what we call a "capitulation bottom." We
believe many small-cap funds -- not including this one, fortunately -- were
forced to sell a portion of their holdings to raise cash for redemptions, a
situation that drove small-cap stock prices even lower.
Then, quite abruptly, investor bias shifted away from large-cap growth
stocks and toward cyclical sectors. As sentiment broadened, the Fund experienced
a solid rebound throughout April, May, June and July.
However for the period as a whole, the Fund underperformed its benchmark,
the Russell 2000 Growth Index. The primary reason was the huge impact
Internet-related stocks had on the index -- many issues in the sector rose an
astonishing 400% to 500%, and the virtual absence of these stocks in our
portfolio had an impact on Fund performance. One of the disciplines we follow is
the requirement that all stocks we buy have current earnings. That is part of
our risk-control approach. However, the vast majority of Internet stocks do not
have current earnings.
Not only do these stocks not have earnings, but they lack many of the
characteristics we find attractive, including above-market sales, earnings
growth rates that are rising, and estimates of future earnings, or valuation
multiples that we consider to be reasonable.
WE SCORED WITH FIBER OPTIC CABLE AND HANDBAGS
We have talked in the past about our stocks being very "cheap" relative to
the overall market -- at the end of the period, the average holding in our
portfolio was selling for just 18 times this year's earnings, while the market
as a whole was selling for close to 30 times earnings -- and our strategy
produced a number of spectacular winners. Dycom (2.19% of the Fund's net
assets), a company that lays the fiber optic cable that brings the Internet into
people's homes, more than doubled in price. Among retailers, we profited from
our investment in Fossil (2.80%) -- a manufacturer of fashionable watches, belts
and handbags -- which grew in sales and earnings very strongly, and was up 130%
for the period. And going forward, we are optimistic about one of our newer
holdings, Forest Oil (1.66%). The energy sector has done very well this year,
and we feel Forest has a marvelous position in the oil-and-gas exploration
segment of the industry.*
ATTRACTIVE CIRCUMSTANCES FOR SMALL CAPS
Going forward, we believe we are set up for a very nice rally in smaller
stocks. They are selling at tremendous discounts to the overall market, really
at historical lows. Normally, these high-growth stocks are priced at a premium
to the market, not at a discount. The other essential element is that the market
has begun
- ---------------
* The Fund's portfolio composition is subject to change.
+ Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk
of failure. Historically, smaller companies' stocks have experienced a greater
degree of market volatility than
average.
C-3
<PAGE> 135
THE AMSOUTH SMALL CAP FUND+
broadening out, and investors are finally paying attention to this sector. We
have endured a very long bear market for small-company shares, but it appears
that liquidity has returned.
As of July 31, 1999, the Fund's top five holdings were Commscope, Inc.
(3.47%), Antec Corp. (3.03%), Priority Healthcare (3.02%), American Freightways
(2.93%) and Copart, Inc. (2.92%).*
[THE AMSOUTH SMALL CAP FUND APPEARS HERE]
<TABLE>
<CAPTION>
AMSOUTH SMALL AMSOUTH SMALL AMSOUTH SMALL RUSSELL 2000
CAP FUND CAP FUND CAP FUND GROWTH
DATE (CLASSIC SHARES)* (PREMIER SHARES) (B SHARES)** INDEX
---- ----------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
3/2/98................................ 9,550 10,000 10,000 10,000
7/98.................................. 8,756 9,152 8,655 8,639
7/99.................................. 8,047 8,441 7,978 9,893
----- ------ ------ ------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SINCE
1 INCEPTION
AS OF JULY 31, 1999 YEAR (3/2/98)
------------------- ------ ---------
<S> <C> <C>
Classic Shares*........................................... -12.23% -14.27%
------ ------
Premier Shares............................................ -7.76% -11.30%
------ ------
B Shares**................................................ -13.34% -14.77%
------ ------
</TABLE>
- ---------------
* Reflects 4.50% sales charge.
** Reflects applicable contingent deferred sales charge.
Classic Shares commenced operations on March 3, 1998. The performance
figures for Classic Shares prior to such date represent the performance of
Premier Shares of the Fund.
The performance of the AmSouth Small Cap Fund is measured against the
Russell 2000 Growth Index, an unmanaged index generally representative of
domestically traded common stocks of small to mid-sized companies. The index
does not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The Fund's performance does
reflect the deduction of fees for these value-added services. During the period
shown, the Fund waived fees for various expenses. Had these waivers not been in
effect, performance quoted would have been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
- ---------------
* The Fund's portfolio composition is subject to change.
+ Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk
of failure. Historically, smaller companies' stocks have experienced a greater
degree of market volatility than
average.
C-4
<PAGE> 136
THE AMSOUTH LIMITED TERM BOND FUND
The AmSouth Limited Term Bond Fund is managed by John Boston, CFA. Mr.
Boston, Senior Vice President of AmSouth Bank, has more than 10 years of
experience as a fixed-income manager. He holds a bachelor's degree in economics.
OUR SHORT ORIENTATION LED TO OUTPERFORMANCE
For the 12 months ended July 31, 1999, the AmSouth Limited Term Bond Fund
produced a total return of 4.01% (Classic Shares at NAV). In comparison, the
Merrill Lynch 1-5-Year Government/Corporate Bond Index rose 2.33%, and the
Lipper Short-Term Investment Grade Debt Index(1) gained 3.84%.
With volatility and credit concerns rampant in the bond market during much
of the period, our shorter maturity and emphasis on quality were the keys to our
relatively high returns and our significant outperformance relative to the
Lipper benchmark. Further, continued low inflation resulted in
inflation-adjusted returns that were generous by historical standards.
The defensive characteristics of our portfolio enabled the Fund to hold up
better than many longer-maturity funds during the last six months of the period,
when skyrocketing interest rates ate away at the value of many portfolios
(higher rates lead to lower bond prices).
UPSIDE GAINS, DOWNSIDE PROTECTION
As interest rates fell during the first six months of the period, the Fund
showed a profit. Concurrently, we allowed the portfolio's average maturity to
shorten. When rates turned around abruptly and began climbing higher, the Fund's
shorter-than-average maturity preserved shareholder value. At that point, we
felt it was prudent to begin allowing the portfolio's maturity to lengthen
again, in order to be prepared to take advantage of any future decline in rates.
As of July 31, 1999, approximately 80% of the portfolio's net assets was
invested in high-quality corporates, with the remainder invested in Treasuries
and agencies. Our allocation to corporate paper has fallen slightly over the
last six months, as we have been buying longer-term Treasuries in order to
extend the portfolio's maturity structure.*
As of July 31, 1999, the Fund's average maturity was 2.7 years, up from 2.5
years six months earlier (but still lower than 2.9 years a year ago). The Fund's
credit quality was AA.
WE ARE POSITIONED FOR NEUTRAL-TO-LOWER RATES
We believe that interest rates have reached the upper end of their
near-term band and should remain level or begin to fall again. With that in
mind, we have extended the Fund's average maturity. At current levels, the Fund
is providing shareholders with productive yields. If rates do fall--and we think
this is probably six to 12 months down the road--we should realize capital gain
profits that will be passed along to our investors.
- ---------------
1 The Lipper Short-Term Investment Grade Debt Index is comprised of funds that
invest at least 65% of their assets in investment-grade debt issues (rated in
the top four grades) with dollar-weighted average maturities of one to five
years.
* The Fund's portfolio composition is subject to change.
C-5
<PAGE> 137
THE AMSOUTH LIMITED TERM BOND FUND
[THE AMSOUTH LIMITED TERM BOND FUND APPEARS HERE]
<TABLE>
<CAPTION>
MERRILL LYNCH
AMSOUTH AMSOUTH 1-5 YEAR
LIMITED LIMITED AMSOUTH LIMITED GOVERNMENT/ LIPPER SHORT
TERM BOND FUND TERM BOND FUND TERM BOND FUND CORPORATE INVESTMENT GRADE
DATE (CLASSIC SHARES)* (PREMIER SHARES) (B SHARES) BOND INDEX DEBT INDEX
---- ----------------- ---------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
7/31/89................ 9,800 10,000 10,000 10,000 10,000
7/90................... 10,252 10,879 10,679 10,765 10,618
7/91................... 11,178 11,644 11,644 11,857 11,590
7/92................... 12,459 12,978 12,978 13,330 13,165
7/93................... 13,296 13,850 13,850 14,279 14,258
7/94................... 13,398 13,957 13,957 14,533 14,306
7/95................... 14,422 15,024 15,024 15,697 15,351
7/96................... 15,102 15,732 15,732 16,548 16,130
7/97................... 16,197 16,872 16,872 17,877 17,377
7/98................... 17,159 17,892 17,785 19,029 18,401
7/99................... 17,847 18,631 18,501 19,906 19,030
</TABLE>
For performance purposes the above graph has not been adjusted for CDSC
charges.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
1 5 10
AS OF JULY 31, 1999 YEAR YEAR YEAR
------------------- ----- ---- ----
<S> <C> <C> <C>
Classic*.............................................. -0.11% 5.03% 5.97%
Premier............................................... 4.14% 5.95% 6.42%
B Shares**............................................ -1.42% 5.48% 6.35%
</TABLE>
- ---------------
* Reflects 4.00% sales charge.
** Reflects applicable contingent deferred sales charge.
Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier Shares. The
performance figures for Premier Shares for periods prior to such date represent
the performance of Classic Shares of the Fund.
Performance for the Class B Shares, which commenced operations on January
21, 1999, is based on the historical performance of the Classic Shares (without
sales charge) prior to that date. The performance of Classic Shares does not
reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC).
Had the CDSC and higher 12b-1 fees been incorporated, total return and
hypothetical growth figures would have been lower.
The performance of the AmSouth Limited Term Bond Fund is measured against
the Merrill Lynch 1-5-Year Government/Corporate Bond Index and the Lipper
Short-Term Investment Grade Debt Index. The Merrill Lynch 1-5-Year
Government/Corporate Bond Index is unmanaged and generally representative of the
total return of short-term government and corporate bonds. The index does not
reflect the deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The Lipper Short-Term Investment Grade Debt
Index, an index of managed funds, and the Fund's performance do reflect the
deduction of fees for these value-added services. During the period shown, the
Fund waived fees for various expenses. Had these waivers not been in effect,
performance quoted would have been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
C-6
<PAGE> 138
THE AMSOUTH GOVERNMENT INCOME FUND
John Boston, CFA, manages the AmSouth Government Income Fund. Mr. Boston,
Senior Vice President of AmSouth Bank, has over 10 years of experience as a
fixed-income manager. He holds a bachelor's degree in economics.
WE FAVORED GNMA SECURITIES
For the 12 months ended July 31, 1999, the AmSouth Government Income Fund
produced a total return of 2.62% (Classic Shares at NAV). In comparison, the
Lehman Brothers Mortgage Index rose 2.78%, while the Lipper U.S. Mortgage Fund
Index(1) gained 1.49%.
The Fund invests solely in debt instruments issued by the U.S. Treasury or
backed by an agency of the federal government. This allocation allows the Fund
to hold securities of superior quality, which can serve our shareholders well
both in times of economic turmoil and relative stability.
We generally favor mortgage-backed securities, principally Ginnie Maes
(GNMAs) because they offer significantly higher yields than Treasuries. Ginnie
Maes are the highest-quality bonds among mortgage-backed securities and are the
only type of mortgage security backed by the full faith and credit of the U.S.
Government.
MORTGAGE-BACKED SECURITIES SUPPORTED THE PORTFOLIO
Interest rates, the primary driver of bond prices (prices generally rise
when rates fall, and vice versa) made two large, contrary moves during the
period. First, rates declined sharply last autumn -- pushed lower by concerns
about the global economy, a flight to quality in U.S. government issues, and the
Fed's decision to cut short-term rates three times. Then, during the last six
months of our reporting period, rates rapidly climbed higher, retracing most if
not all of their earlier levels.
During this difficult latter period, the mortgage-backed sector was the
best-performing area in the bond market. Our overweighting in this sector
benefited our shareholders.
Throughout this volatility, we saw little reason to make dramatic changes
to our portfolio. For example, on a year-to-year basis, our allocation to GNMAs
changed just one percentage point. The Fund's average maturity did rise a bit
during the period, but such an increase is to be expected in a portfolio that
holds a preponderance of mortgage securities -- which normally extend in
maturity as interest rates rise.
As of July 31, 1999, the Fund's average maturity was 7.7 years, and its
average credit quality was AAA (government-quality portfolio). Approximately 67%
of the Fund was invested in GNMAs; 18% in noncallable, government agency
debentures; 11% in U.S. Treasury securities and 4% in cash. This mix reflected
only minor shifts from the portfolio's allocation six months earlier.*
WE DO NOT EXPECT RATES TO RISE
We were a little surprised at the speed at which interest rates rose during
the last six months; we had expected a less-volatile environment. The increase
in market-set rates (as opposed to rate increases mandated by the Fed) will
reinforce the prospects for the economic slowdown that we have been expecting.
We think long-term rates in the 6.15% to 6.25% levels are attractive, meaning we
do not believe they will go much higher and, in our opinion, they should be
lower a year from now.
- ---------------
1 The Lipper U.S. Mortgage Fund Index is comprised of funds that invest at least
65% of their assets in mortgages/securities issued or guaranteed as to
principal and interest by the U.S. Government and certain federal agencies.
* The Fund's portfolio composition is subject to change.
C-7
<PAGE> 139
THE AMSOUTH GOVERNMENT INCOME FUND
[THE AMSOUTH GOVERNMENT INCOME FUND APPEARS HERE]
<TABLE>
<CAPTION>
AMSOUTH GOVERNMENT AMSOUTH GOVERNMENT LEHMAN BROTHERS LIPPER U.S.
INCOME FUND INCOME FUND MORTGAGE MORTGAGE
(CLASSIC SHARES)* (PREMIER SHARES) INDEX FUND INDEX
------------------ ------------------ --------------- -----------
<S> <C> <C> <C> <C>
10/93..................... 9,600 10,000 10,000 10,000
7/94...................... 9,572 9,974 9,924 9,833
7/95...................... 10,378 10,814 10,798 10,432
7/96...................... 10,888 11,345 11,688 10,945
7/97...................... 12,000 12,504 12,933 12,057
1/98...................... 12,581 13,115 13,506 12,573
7/98...................... 12,900 13,443 13,897 12,797
7/99...................... 13,248 13,807 14,284 12,988
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SINCE
1 5 INCEPTION
AS OF JULY 31, 1999 YEAR YEAR (10/1/93)
------------------- ----- ---- ---------
<S> <C> <C> <C>
Classic*........................................... -1.47% 5.86% 4.94%
Premier............................................ 2.72% 6.72% 5.69%
</TABLE>
- ---------------
* Reflects 4.00% sales charge.
Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier Shares. The
performance figures for Premier Shares for periods prior to such date represent
the performance of Classic Shares of the Fund.
The performance of the AmSouth Government Income Fund is measured against
the Lehman Brothers Mortgage Index and the Lipper U.S. Mortgage Fund Index. The
Lehman Brothers Mortgage Index is an unmanaged index generally representative of
the mortgage bond market as whole. The index does not reflect the deduction of
fees associated with a mutual fund, such as investment management and fund
accounting fees. The Lipper U.S. Mortgage Fund Index, an index of managed funds,
and the Fund's performance do reflect the deduction of fees for these
value-added services. During the period shown, the Fund waived fees for various
expenses. Had these waivers not been in effect, performance quoted would have
been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
C-8
<PAGE> 140
THE AMSOUTH BOND FUND
Brian Sullivan, CFA, manages the AmSouth Bond Fund. Mr. Sullivan, Senior
Vice President of AmSouth Bank, serves as Chairman of the Trust Investment
Policy and Strategy Group and is AmSouth Bank's Senior Investment Officer. He
has 14 years of fixed-income investment management experience and holds an MBA
in finance and a bachelor's degree in economics.
ABOVE-AVERAGE RETURNS, DESPITE EXTREME VOLATILITY
For the 12 months ended July 31, 1999, the AmSouth Bond Fund produced a
total return of 2.58% (Classic Shares at NAV). In comparison, the Lehman
Brothers Government/Corporate Bond Index rose 2.33%, and the Lipper Corporate
A-Rated Debt Fund Index(1) gained 0.73%.
We were proud of the Fund's performance, which produced a positive return
in the face of extraordinary interest-rate volatility. As with most fixed-income
portfolios, we profited when rates declined sharply last fall, and we struggled
when rates rose just as abruptly in the last six months of the period.
Apart from total return, the Fund's inflation-adjusted yield was enhanced
by the fact that inflation remained remarkably tame throughout the period.
MAKING THE RIGHT CALLS
In January, it seemed to us that the optimism then prevalent in the bond
market was overdone. Rates had fallen so far, so quickly -- many rates were near
20-year lows -- that a further, significant drop appeared unlikely.
Consequently, we shortened the portfolio's average maturity and duration
considerably.
At the same time, and just prior, spreads on corporate bonds had widened.
(A "spread" is the additional yield offered by an agency or corporate bond over
a U.S. Treasury bond of like maturity.) We decided to swap the interest-rate
risk inherent in long-term Treasuries for the credit risk of short-term
corporate bonds -- without diminishing our yield to maturity. At the same yield,
we were, effectively, trading a greater risk for a smaller risk. Therefore, when
rates reversed direction and headed back up (driving bond prices lower), our
shareholders' capital was protected to some degree.
Since February, we have increased our average maturity and duration. What
we have seen in the last six months is that agency paper and mortgage-backed
securities have outperformed Treasuries. Spreads have narrowed. Our buying
emphasis in recent months has been on improving the quality of the portfolio and
pushing our maturity and duration out longer.*
As of July 31, 1999, approximately 46.8% of the portfolio was invested in
corporate issues, 35.3% in securities issued by the U.S. Treasury, 12.8% in U.S.
government agency paper and the remainder in cash and cash equivalents. The
securities within the Fund maintained an average credit quality of AAA, with an
average maturity of 7.84 years.*
A SLOWER ECONOMY SHOULD HELP THE FUND
We believe the domestic economy will slow in the coming months. Quite
honestly, we have been surprised that the economy hasn't slowed much to this
point--which makes us even more convinced that the market could lose a little
steam from here on out. At this time, there is one dominant engine in the
economy: the American consumer. There is a chance that foreign economies will
improve and help to maintain our growth rate, but that scenario has not yet
materialized and is, therefore, just a hope. A less robust economy should be
positive for the fixed-income securities we hold.
- ---------------
1 The Lipper Corporate A-Rated Debt Fund Index is comprised of funds that invest
at least 65% of their assets in corporate debt issues rated "A" or better, or
in government issues.
* The Fund's portfolio composition is subject to change.
C-9
<PAGE> 141
THE AMSOUTH BOND FUND
[THE AMSOUTH BOND FUND APPEARS HERE]
<TABLE>
<CAPTION>
AMSOUTH AMSOUTH AMSOUTH LEHMAN BROTHERS LIPPER CORPORATION
BOND FUND BOND FUND BOND FUND GOVT./CORP. A-RATED DEBT
DATE (B SHARES) (CLASSIC SHARES)* (PREMIER SHARES) BOND INDEX FUND INDEX
---- ---------- ----------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
7/89................. 10,000 9,600 10,000 10,000 10,000
7/90................. 10,553 10,131 10,553 10,623 10,515
7/91................. 11,393 10,938 11,393 11,712 11,556
7/92................. 13,258 12,728 13,258 13,543 13,468
7/93................. 14,559 13,979 14,559 15,037 15,004
7/94................. 14,591 14,011 14,591 15,019 14,815
7/95................. 16,000 15,363 16,000 16,539 16,302
7/96................. 16,699 16,035 16,699 17,417 17,138
7/97................. 18,447 17,714 18,448 19,296 19,106
7/98................. 19,682 19,034 19,840 20,853 20,501
7/99................. 19,995 19,524 20,374 21,338 20,652
</TABLE>
For performance purposes the above graph has not been adjusted for CDSC
charges.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
1 5 10
AS OF JULY 31, 1999 YEAR YEAR YEAR
------------------- ----- ---- ----
<S> <C> <C> <C>
Classic*.............................................. -1.52% 6.00% 6.92%
Premier............................................... 2.68% 6.90% 7.38%
B Shares**............................................ -3.22% 6.19% 7.17%
</TABLE>
- ---------------
* Reflects 4.00% sales charge.
** Reflects applicable contingent deferred sales charge.
Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier Shares. The
performance figures for Premier Shares for periods prior to such date represent
the performance of Classic Shares of the Fund.
Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Classic Shares (without
sales charge) prior to that date. The performance of Classic Shares does not
reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC).
Had the CDSC and higher 12b-1 fees been incorporated, total return and
hypothetical growth figures would have been lower.
The performance of the AmSouth Bond Fund is measured against the Lehman
Brothers Government/ Corporate Bond Index, an unmanaged broad-based index
representative of the total return of long-term government and corporate bond,
and the Lipper Corporate A-Rated Debt Fund Index. The Lehman Brothers
Government/Corporate Bond Index does not reflect the deduction of fees
associated with a mutual fund, such as investment management and fund accounting
fees. The Lipper Corporate A-Rated Debt Fund Index, an index of managed funds,
and the Fund's performance do reflect the deduction of fees for these
value-added services. During the period shown, the Fund waived fees for various
expenses. Had these waivers not been in effect, performance quoted would have
been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
C-10
<PAGE> 142
THE AMSOUTH MUNICIPAL BOND FUND(+)
Dorothy Thomas, who has 16 years of experience as an investment portfolio
manager for municipal bond accounts, personal trusts and endowments, manages the
AmSouth Municipal Bond Fund. Ms. Thomas, Senior Vice President of AmSouth Bank,
holds an MBA and a bachelor's degree in economics.
SUITABLE PERFORMANCE IN A CHALLENGING ENVIRONMENT
For the 12 months ended July 31, 1999, the Fund produced a total return of
2.31% (Classic Shares at NAV). In comparison, the Merrill Lynch 3-7-Year
Municipal Bond Index rose 3.83%, while the Lipper Intermediate Municipal Debt
Index(1) gained 2.44%.
Roughly speaking, the first half of the period was very positive for
fixed-income securities, including municipal bond funds, while the second half
was unusually difficult. The Fund's performance followed suit in both instances.
PRESERVING TOTAL RETURNS
Last summer, investors began to become very concerned about economic
conditions in Asia and elsewhere. As a result, money flooded into the U.S.
Treasury market. This flight to quality caused U.S. interest rates to plummet
and bond prices to rise sharply (rates and prices move in opposite directions).
At nearly the same time, the Fed cut short-term rates three times, in part to
ensure that there would be plenty of liquidity in the financial markets.
Together, these actions kept interest rates very low through the end of 1998.
However, as the new year began, these trends started to reverse completely,
and interest rates climbed sharply -- pushing bond prices markedly lower.
Fortunately for our shareholders, municipal bonds held their value more than
comparable Treasury or corporate debt. In the last six months of the period,
10-year Treasury bond yields climbed 125 basis points (1.25%), while 10-year
corporate bond yields surged 140 basis points (1.40%)--both substantial moves.
But 10-year AA municipal bond yields rose just 60 basis points (0.60%), thereby
preserving a greater measure of total return.*
WE CONTINUED TO FOCUS ON ALABAMA ISSUES
Because so many of our investors are Alabama residents, we kept 55% to 60%
of the portfolio invested in municipal debt issued in this state (56.5% as of
July 31, 1999). This strategy helped boost the tax-equivalent yield for Alabama
shareholders.*
The Alabama muni market did not produce an abundance of supply during the
period. In fact, issuance in the national municipal market is lower this year
than last year, especially in the last six months, with rising interest rates
making it more expensive for government entities to borrow money. Based on the
amount of quality debt available in Alabama, we have kept our allocation to
Alabama paper as high as we can. If additional, high-quality debt is put on the
market at a reasonable price, we will buy it.
As of July 31, 1999, the securities within the Fund maintained an average
credit quality of AA, with an average maturity of 5.96 years.
- ---------------
+ The Fund's income may be subject to the federal alternative minimum tax and to
certain state and local taxes.
1 The Lipper Intermediate Municipal Debt Fund Index is comprised of funds that
invest in municipal debt issues with dollar-weighted average maturities of
five to ten years.
* The Fund's portfolio composition is subject to change.
C-11
<PAGE> 143
THE AMSOUTH MUNICIPAL BOND FUND(+)
ECONOMIC GROWTH COULD SLOW, ONE WAY OR ANOTHER
We are starting to see some signs of a possible economic slowdown in the
United States. If that comes about, it would be good for the bond market. And if
the economy does not slow down by itself, the Fed is likely to step in and raise
rates in order to make it decelerate. Rates have gone up in recent months, as we
noted, and in response, we have lengthened the portfolio's average maturity
modestly.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
AMSOUTH MERRILL LYNCH LIPPER AMSOUTH
MUNICIPAL AMSOUTH 3-7-YEAR INTERMEDIATE MUNICIPAL
BOND FUND MUNICIPAL MUNICIPAL MUNICIPAL BOND FUND
DATE (CLASSIC SHARES)* (B SHARES)** BOND INDEX DEBT INDEX (PREMIER SHARES)
---- ----------------- ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
7/1/97................. 9,500 10,000 10,000 10,000 10,000
7/98................... 10,199 10,624 10,480 10,460 10,643
7/99................... 10,434 10,525 10,881 10,715 10,889
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SINCE
1 INCEPTION
AS OF JULY 31, 1999 YEAR (7/1/97)
------------------- ----- ---------
<S> <C> <C>
Classic*.................................................... -1.77% 2.04%
Premier..................................................... 2.30% 4.17%
B Shares**.................................................. -3.02% 2.48%
</TABLE>
- ---------------
* Reflects 4.00% sales charge.
** Reflects applicable contingent deferred sales charge
Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either Classic or Premier Shares. The
performance figures for Premier Shares for periods prior to such date represent
the performance of Classic Shares of the Fund.
Performance for the Class B Shares, which commenced operations on February
3, 1999, is based on the historical performance of the Classic Shares (without
sales charge) prior to that date. The performance of Classic Shares does not
reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC).
Had the CDSC and higher 12b-1 fees been incorporated, total return and
hypothetical growth figures would have been lower.
The performance of the AmSouth Municipal Bond Fund is measured against the
Merrill Lynch 3-7-Year Municipal Bond Index, an unmanaged index that is
generally representative of municipal bonds with intermediate maturities. The
Fund's performance is also measured against the Lipper Intermediate Municipal
Debt Fund Index. The Merrill Lynch 3-7-Year Municipal Bond Index does not
reflect the deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The Lipper Intermediate Municipal Debt Fund
Index, an index of managed funds, and the Fund's performance do reflect the
deduction of fees for these value-added services. During the period shown, the
Fund waived fees for various expenses. Had these waivers not been in effect,
performance quoted would have been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
- ---------------
+ The Fund's income may be subject to the federal alternative minimum tax and to
certain state and local taxes.
C-12
<PAGE> 144
THE AMSOUTH MONEY MARKET FUNDS
The AmSouth Money Market Funds are managed by John Boston, CFA, Senior Vice
President of AmSouth Bank. Mr. Boston has more than 10 years of experience as a
fixed-income manager. He holds a bachelor's degree in economics.
INTEREST RATES FALL, THEN RISE SHARPLY
During the first six months of the period, the Fed lowered the fed funds
rate -- the benchmark rate banks charge one another for overnight loans -- three
times. Remarkably, rates then reversed direction and began a steady climb over
the last six months of the period. This was due to many factors, including the
perception that the Fed would begin raising rates again -- in effect, "taking
back" the earlier rate cuts. By the time the Fed did take action, raising
short-term rates by 25 basis points (0.25%) on June 30, the market had already
pushed rates significantly higher on its own.
The yields we generate in the money market funds depend, largely, on Fed
policy. Consequently, our yields fell and rose in response to the Fed's actions.
Throughout the period, inflation remained at very low levels, providing
shareholders with "real returns" (total returns minus inflation) that were
attractive on a historical basis.
- As of July 31, 1999, the Prime Obligations Fund's average maturity was 66
days, compared to 54 days on January 31, 1999, and 63 days on July 31,
1998.*
- As of July 31, 1999, the U.S. Treasury Fund's average maturity was 47
days, compared to 50 days on January 31, 1999, and 48 days on July 31,
1998.*
- As of July 31, 1999, the Tax-Exempt Fund's(+) average maturity was 53
days, compared to 54 days on January 31, 1999, and 81 days on July 31,
1998.*
- As of July 31, 1999, the Institutional Prime Obligations Fund's average
maturity was 48 days, compared to 23 days on January 31, 1999.*
Investments in the Prime Money Market, the Treasury Reserve Money Market,
and the Tax-Exempt Funds are neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any government agency. Although the Funds seek
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Funds.
Although money market funds may produce higher returns than insured deposit
products, the net asset value may be sensitive to interest rate movement.
The total return set forth may reflect the waiver of a portion of a Fund's
advisory or administrative fees for certain periods since the inception date. In
such instances, and without waiver of fees, total return would have been lower.
Past performance is no guarantee of future results. Investment return and
net asset value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
- ---------------
* The composition of the Fund's holdings is subject to change.
+ The Fund's income may be subject to the federal alternative minimum tax and to
certain state and local taxes.
C-13
<PAGE> 145
APPENDIX D
FORM OF INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement made as of October 1, 1999, between THE
INFINITY MUTUAL FUNDS, INC., a Maryland corporation having its principal office
and place of business at 3435 Stelzer Road, Columbus, Ohio 43219-3035 (herein
called the "Fund"), and FIRST AMERICAN NATIONAL BANK, a national banking
association having its principal office and place of business at First American
Center, 315 Deaderick Street, Nashville, Tennessee 37238-0035 (herein called the
"Adviser").
Whereas, the Fund is an open-end, management investment company, registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
Whereas, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the
"Administrator") to act as the Fund's administrator; and
Whereas, the Fund desires to retain the Adviser to provide investment
advisory services and other services to the Fund's portfolios set forth on
Schedule 1 attached hereto, as such may be revised from time to time (each, a
"Series"; the provisions herein shall apply severally to each Series), and the
Adviser is willing to furnish such services upon the terms and conditions herein
set forth;
Now, Therefore, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) The Fund hereby appoints the Adviser to act as investment adviser
to each Series for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
(b) In the event that the Fund establishes one or more portfolios,
other than those set forth on Schedule 1 hereto, and with respect to which
the Fund desires the Adviser to act as investment adviser hereunder, the
Fund shall notify the Adviser in writing. If the Adviser is willing to
render such services under this Agreement it shall notify the Fund in
writing whereupon such portfolio shall become a Series hereunder and shall
be subject to the provisions of this Agreement to the same extent as the
Series currently named in Schedule 1, except to the extent that said
provisions (including those relating to the compensation payable to the
Adviser) are modified with respect to such Series in writing by the Fund
and the Adviser.
2. DELIVERY OF DOCUMENTS.
The Fund has furnished the Adviser with copies properly certified or
authenticated of each of the following:
(a) The Fund's Articles of Incorporation and any amendments and
supplements thereto (as presently in effect and as from time to time
amended or supplemented, herein called the "Charter");
(b) The Fund's By-laws and any amendments thereto;
(c) Resolutions of the Fund's Board of Directors authorizing the
appointment of the Adviser and approving this Agreement;
(d) The Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act
most recently filed with the Securities and Exchange Commission (the
"Commission");
(e) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Commission; and
(f) The Fund's current Prospectuses and Statements of Additional
Information of the Series (as presently in effect and as from time to time
amended and supplemented, herein called individually the "Prospectus" and
collectively the "Prospectuses").
D-1
<PAGE> 146
The Fund promptly will furnish the Adviser with copies of all amendments of
or supplements to the foregoing, if any.
3. SERVICES OF ADVISER.
Subject to the supervision of the Fund's Board of Directors, the Adviser
will provide a continuous investment program for each Series, including
investment research and day-to-day management with respect to such Series'
assets. The Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Series. The Adviser will
provide the services rendered by it under this Agreement in accordance with the
investment criteria and policies established from time to time for a Series by
the Fund, such Series' investment objective, policies and restrictions as stated
in its Prospectus and resolutions of the Fund's Board of Directors. The Fund
wishes to be informed of important developments materially affecting a Series'
portfolio and the Adviser agrees to furnish to the Fund from time to time such
information as the Adviser may believe appropriate for this purpose. The Adviser
shall be permitted to employ one or more sub-investment advisers (each a
"Sub-Adviser") to provide the day-to-day management of the investments of the
Series.
4. OTHER COVENANTS.
The Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the Securities
and Exchange Commission in performing its duties as investment adviser for
the Series and, in addition, will conduct its activities under this
Agreement in accordance with other applicable federal and state law;
(b) review and analyze on a periodic basis each Series' portfolio
holdings and transactions;
(c) provide, or cause to be provided, to the Board of Directors of the
Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Adviser's services hereunder;
(d) 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;
(e) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the
Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for
any transaction, the Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction, the Adviser also may consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Series and other accounts
over which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser is authorized, subject to the prior approval of the
Fund's Board of Directors, to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for any of the Series which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer as viewed in terms of
that particular transaction or in terms of the overall responsibilities of
the Adviser to the Series. In addition, the Adviser is authorized to take
into account the sale of the Fund's Shares in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including brokers
and dealers that are affiliated with the Adviser or the Fund's principal
underwriter), provided the Adviser believes that the quality of the
execution and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities
be purchased from or sold to the Adviser, the Fund's principal underwriter
or any affiliated person of either the Fund, the Adviser, or the principal
underwriter, acting as principal in the transaction, except to
D-2
<PAGE> 147
the extent permitted by the Securities and Exchange Commission and other
applicable federal and state laws and regulations;
(f) maintain historical tax lots for each portfolio security held by
the Series;
(g) transmit trades to the Fund's custodian for proper settlement; and
(h) prepare a quarterly broker security transaction summary and
monthly security transaction listing for each Series.
5. SERVICES NOT EXCLUSIVE.
The services furnished by the Adviser hereunder are deemed not to be
exclusive, and the Adviser shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby. To the
extent that the purchase or sale of securities or other investments of the same
issuer may be deemed by the Adviser to be suitable for two or more Series,
investment companies or accounts managed by the Adviser, the available
securities or investments will be allocated in a manner believed by the Adviser
to be equitable to each of them. It is recognized and acknowledged by the Fund
that in some cases this procedure may adversely affect the price paid or
received by a Series or the size of the position obtained for or disposed of by
a Series.
6. BOOKS AND RECORDS.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Adviser hereby agrees that all records which it maintains for the Series are the
property of the Fund and further agrees to surrender promptly to the Fund any of
such records upon the Fund's request. The Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act.
7. EXPENSES.
Except as otherwise stated in this section 7, the Adviser shall pay all
expenses incurred by it in performing its services and duties as investment
adviser and shall pay all fees of each Sub-Adviser in connection with such
Sub-Adviser's duties in respect of the Fund. All other expenses incurred in the
operation of the Fund will be borne by the Fund, except to the extent
specifically assumed by others. The expenses to be borne by the Fund include,
without limitation, the following: organizational costs, taxes, interest,
brokerage fees and commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Adviser, any Sub-Adviser or the Administrator, or any of their
affiliates, Commission fees, state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, auditing
and legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
calculating the net asset value of the Series' shares, costs of shareholders'
reports and corporate meetings, costs of preparing and printing certain
prospectuses and statements of additional information, and any extraordinary
expenses.
8. COMPENSATION.
In consideration of services rendered pursuant to this Agreement, the Fund
will pay the Adviser on the first business day of each month, subject to the
terms and conditions set forth on Exhibit A attached hereto, the fee at the
annual rate set forth opposite the Series' name on Schedule 1 attached hereto,
based upon the value of the Series' average daily net assets for the previous
month. Such fee as is attributable to a Series shall be a separate charge to
such Series and shall be the several (and not joint or joint and several)
obligation of the Series. Fees hereunder shall be payable with respect to a
Series commencing on the date of the initial public sale of such Series' shares.
The Adviser agrees to accept such fee from the Fund as full compensation for the
services provided and expenses assumed by it pursuant to this Agreement, and
acknowledges that it shall not be entitled to any further compensation from the
Fund in respect of the same.
D-3
<PAGE> 148
Net asset value shall be computed on such days and at such time or times as
described in the Prospectus. Upon the commencement or any termination of this
Agreement after the first day or before the end of any month, as the case may
be, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and, in the case
of any termination, shall be payable upon the date of termination of this
Agreement.
For the purpose of determining fees payable to the Adviser, the value of
each Series' net assets shall be computed in the manner specified in the Charter
for the computation of the value of the Series' net assets.
Notwithstanding anything to the contrary herein, if in any fiscal year the
aggregate expenses of a Series, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including investment advisory and
administration fees, exceed the expense limitation of any such state having
jurisdiction over such Series, the Fund may deduct from the fees to be paid
hereunder, or the Adviser will bear, to the extent required by state law, that
portion of such excess which bears the same relation to the total of such excess
as the Adviser's fee hereunder bears to the total fee otherwise payable for the
fiscal year by the Series pursuant to this Agreement and the Fund's
Administration Agreement. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
9. LIMITATION OF LIABILITY.
The Adviser shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except that the Adviser shall be liable to the Fund for
any loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of the Adviser's duties or from its reckless
disregard of its obligations and duties under this Agreement. Any person, even
though also an officer, director, partner, employee or agent of the Adviser, who
may be or become an officer, Director, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or to a Series, or acting on any
business of the Fund or of a Series (other than services or business in
connection with the Adviser's duties as investment adviser hereunder) to be
rendering such services to or acting solely for the Fund or such Series and not
as an officer, director, partner, employee or agent or one under the control or
direction of the Adviser even though paid by the Adviser.
10. TERM.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is
specifically approved as to a Series at least annually by (a) the Fund's Board
of Directors or (b) vote of a majority (as defined in the 1940 Act) of such
Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Directors who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement may be terminated without
penalty, on 60 days' written notice to the Adviser (which notice may be waived
in writing by the Adviser), by the Fund's Board of Directors or by vote of the
holders of a majority of such Series' shares or may be terminated without
penalty, upon not less than 90 days' written notice to the Fund (which notice
may be waived in writing by the Fund), by the Adviser. This Agreement also will
terminate automatically, as to the relevant Series, in the event of its
assignment (as defined in the 1940 Act).
11. USE OF NAME.
The parties hereto agree that (i) in the event of the termination of this
Agreement, the Adviser shall have the right to require the Fund, within 30 days
of such termination, to delete from the Series and its name the word "ISG" and
(ii) the Adviser or any affiliate of the Adviser shall have the right to grant
to other investment companies that it may sponsor or advise the use of the word
"ISG" in the name of such investment company.
D-4
<PAGE> 149
12. MISCELLANEOUS.
(a) Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the
party against whom an enforcement of the change, waiver, discharge or
termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 affected thereby. Subject to the provisions of Section 10 hereof,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or any rule or regulation of the
Commission thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective upon
actual receipt by the Fund, or on the fourth day after the postmark if such
notice or other instrument is mailed via first class postage prepaid, at
its office at the address first above written, or at such other place as
the Fund may from time to time designate in writing. Any notice or other
instrument in writing, authorized or required by this Agreement to be given
to the Adviser shall be effective upon actual receipt by the Adviser, or on
the fourth day after the postmark if such notice or other instrument is
mailed via first class postage prepaid, at its office at the address first
above written, or at such other place as the Adviser may from time to time
designate in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE INFINITY MUTUAL FUNDS, INC.
By:
------------------------------------
Attest:
- ------------------------------------
FIRST AMERICAN NATIONAL BANK
By:
------------------------------------
Attest:
- ------------------------------------
D-5
<PAGE> 150
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS
A PERCENTAGE OF
AVERAGE DAILY REAPPROVAL REAPPROVAL
NAME OF SERIES NET ASSETS DATE DAY
-------------- --------------- ----------------- -----------
<S> <C> <C> <C>
ISG Aggressive Growth Portfolio............. .20 of 1% December 31, 1999 December 31
ISG Capital Growth Fund..................... .65 of 1% December 31, 1999 December 31
ISG Income Fund............................. .50 of 1% December 31, 1999 December 31
ISG Current Income Portfolio................ .20 of 1% December 31, 1999 December 31
ISG Equity Income Fund...................... .65 of 1% December 31, 1999 December 31
ISG Equity Value Fund....................... .75 of 1% December 31, 1999 December 31
ISG Government Income Fund.................. .60 of 1% December 31, 1999 December 31
ISG Government Money Market Fund............ .25 of 1% December 31, 1999 December 31
ISG Growth Portfolio........................ .20 of 1% December 31, 1999 December 31
ISG Growth & Income Portfolio............... .20 of 1% December 31, 1999 December 31
ISG International Equity Fund*.............. 1.00% December 31, 1999 December 31
ISG Large-Cap Equity Fund................... .75 of 1% December 31, 1999 December 31
ISG Limited Term Income Fund................ .50 of 1% December 31, 1999 December 31
ISG Limited Term Tennessee Tax-Exempt .50 of 1% December 31, 1999 December 31
Fund......................................
ISG Limited Term U.S. Government Fund....... .50 of 1% December 31, 1999 December 31
ISG Mid-Cap Fund**.......................... 1.00% December 31, 1999 December 31
ISG Moderate Growth & Income Portfolio...... .20 of 1% December 31, 1999 December 31
ISG Municipal Income Fund................... .60 of 1% December 31, 1999 December 31
ISG Prime Money Market Fund................. .25 of 1% December 31, 1999 December 31
ISG Small-Cap Opportunity Fund***........... .95 of 1% December 31, 1999 December 31
ISG Tax-Exempt Money Market Fund............ .35 of 1% December 31, 1999 December 31
ISG Tennessee Tax-Exempt Fund............... .50 of 1% December 31, 1999 December 31
ISG Treasury Money Market Fund.............. .25 of 1% December 31, 1999 December 31
</TABLE>
- ---------------
* The Adviser has retained Lazard Asset Management as the Series' sub-investment
adviser.
** The Adviser has retained Bennett Lawrence Management, LLC as the Series'
sub-investment adviser.
*** The Adviser has retained Womack Asset Management, Inc. as the Series'
sub-investment adviser.
D-6
<PAGE> 151
EXHIBIT A
As to each Series, during the period from and including October 1, 1999
(the "Escrow Beginning Date") until the date of approval by shareholders of the
Series in conformity with the provisions of the 1940 Act, including but not
limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all
sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall
be paid in accordance with this Exhibit A. From and including the Escrow
Beginning Date to, but not including, the Escrow Termination Date, any and all
Sub-Advisory Fees payable under this Agreement shall be paid into an interest
bearing escrow account (the "Escrow Account") maintained by an unaffiliated
financial institution (the "Escrow Agent"). Pursuant to a letter agreement with
the Escrow Agent, the Sub-Advisory Fees (including interest earned on such
Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser
only if shareholders of the Series approve the Agreement. Further pursuant to
the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid
hereunder will be released by the Escrow Agent from the Escrow Account to the
Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from
officers of the Fund stating that this Agreement, with respect to the Series,
has received the requisite shareholder vote. As to each Series, in the event
that the requisite shareholder vote is not obtained and the Escrow Termination
Date does not therefore occur, the officers of the Fund shall execute and
deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating
that the requisite shareholder vote with respect to the Series has not been
obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account
should be paid over to the Series. As to each Series, the provisions of this
Exhibit A shall terminate and be of no further force and effect, and may be
removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March
31, 2000.
D-7
<PAGE> 152
APPENDIX E
FORM OF NEW SUB-ADVISORY AGREEMENT (ISG MID-CAP FUND)
Sub-Investment Advisory Agreement made as of the 1st day of October, l999,
between FIRST AMERICAN NATIONAL BANK, a national banking association having its
principal office and place of business at First American Center, 315 Deaderick
Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and
BENNETT LAWRENCE MANAGEMENT, LLC, having its principal office and place of
business at 757 Third Avenue, New York, New York 10017(herein called the
"Sub-Adviser").
WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an
open-end, management investment company, registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund employs the Adviser to provide advisory services pursuant
to an Investment Advisory Agreement dated October 1, 1999 between the Fund and
the Adviser (the "Investment Advisory Agreement") with respect to the Fund's
portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be
revised from time to time (the "Series"; if there are more than one Series to
which this Agreement applies, the provisions herein shall apply severally to
each such Series); and
WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the
"Administrator") to act as the Fund's administrator; and
WHEREAS, THE ADVISER, in its capacity as investment adviser to the Series,
desires to retain the Sub-Adviser to provide the day-to-day management of the
Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser
to provide such services, and the Sub-Adviser is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser
to the Series for the period and on the terms set forth in this Agreement. The
Sub-Adviser accepts such appointment and agrees to furnish the services herein
set forth for the compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Adviser, the Sub-Adviser
will provide a continuous investment program for the Series, including
investment research and day-to-day management with respect to such Series'
assets. The Sub-Adviser will provide the services rendered by it under this
Agreement in accordance with the investment criteria and policies established
from time to time for the Series by the Adviser, the Series' investment
objective, policies and restrictions as stated in the Fund's Prospectus and
Statement of Additional Information for the Series, as from time to time in
effect, and resolutions of the Fund's Board of Directors. The Fund and the
Adviser wish to be informed of important developments materially affecting the
Series' portfolio and the Sub-Adviser agrees to furnish to the Fund and the
Adviser from time to time such information as may be appropriate for this
purpose.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the Securities
and Exchange Commission in performance of its duties as sub-investment
adviser for the Series and, in addition, will conduct its activities under
this Agreement in accordance with other applicable federal and state law;
E-1
<PAGE> 153
(b) provide, or cause to be provided, to the Board of Directors of the
Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Sub-Adviser's services
hereunder;
(c) 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;
(d) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the Sub-
Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction, the Sub-Adviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Series and other accounts
over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized, subject to the prior
approval of the Adviser and the Fund's Board of Directors, to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for any of the Series
which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer as viewed in terms of that particular transaction or
in terms of the overall responsibilities of the Sub-Adviser to the Series.
In addition, the Sub-Adviser is authorized to take into account the sale of
the Fund's shares in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Adviser, Sub-Adviser or the Fund's principal
underwriter), provided that the Sub-Adviser believes that the quality of
the execution and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities
be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal
underwriter or any affiliated person of any of the Fund, the Adviser, Sub-
Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission and other applicable federal and state laws and regulations;
(e) maintain historical tax lots for each portfolio security held by
the Series;
(f) transmit trades to the Fund's custodian for proper settlement; and
(g) prepare a quarterly broker security transaction summary and
monthly security transaction listing for each Series.
4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby. To
the extent that the purchase or sale of securities or other investments of the
same issuer may be deemed by the Sub-Adviser to be suitable for two or more
Series, investment companies or accounts managed by the Sub-Adviser, the
available securities or investments will be allocated in a manner believed by
the Sub-Adviser to be equitable to each of them. It is recognized and
acknowledged by the Adviser that in some cases this procedure may adversely
affect the price paid or received by the Series or the size of the position
obtained for or disposed of by Series.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 3la-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Series are
the property of the Fund and further agrees to surrender promptly to the Fund
any of such records upon the request of the Fund of the Adviser. The Sub-Adviser
further agrees to
E-2
<PAGE> 154
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
6. EXPENSES.
Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all
expenses incurred by it in performing its services and duties as sub-investment
adviser. The Adviser hereby agrees that all other expenses to be incurred in the
operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the
Fund have agreed that such other expenses will be borne by the Fund, except to
the extent specifically assumed by others. The expenses to be borne by the Fund
include, without limitation, the following: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of Directors who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Adviser, Sub-Adviser or the Administrator, or any of
their affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of the Series' shares, costs
of shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses.
7. COMPENSATION.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay the Sub-Adviser on the first business day of each month,
subject to the terms and conditions set forth on Exhibit A attached hereto, the
fee at the annual rate set forth opposite the Series' name on Schedule l
attached hereto, based on the value of such Series' average daily net assets for
the previous month. The Sub-Adviser agrees to accept such fee from the Adviser
as full compensation for the services provided and expenses assumed by it
pursuant to this Agreement, and acknowledges that it shall not be entitled to
any further compensation from any other person in respect of the same.
Net asset value shall be computed on such days and at such time or times as
described in the Fund's current Prospectus for the Series. The fee for the
period from the date of the commencement of the initial public sale of the
Series' shares to the end of the month during which such sale shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Sub-Adviser, the value
of the Series' net assets shall be computed in the manner specified in the
Fund's Charter for the computation of the value of the Series' net assets.
8. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or the Adviser in connection with the
matters to which this Agreement relates, except that the Sub-Adviser shall be
liable to the Fund for any loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of the Sub-Adviser's duties or
from its reckless disregard of its obligations and duties under this Agreement.
Any person, even though also an officer, director, partner, employee or agent of
the Sub-Adviser, who may be or become an officer, Director, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or to the Series,
or acting on any business of the Fund or of the Series (other than services or
business in connection with the Sub-Adviser's duties as sub-investment adviser
hereunder) to be rendering such services to or acting solely for the Fund or the
Series and not as an officer, director, partner, employee or agent or one under
the control or direction of the Sub-Adviser even though paid by the Sub-Adviser.
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<PAGE> 155
9. TERM.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is
specifically approved as to a Series at least annually by (a) the Fund's Board
of Directors or (b) vote of a majority (as defined in the 1940 Act) of such
Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Directors who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement may be terminated without
penalty (i) by the Fund's Board of Directors or by vote of the holders of a
majority of such Series' shares, upon written notice to the Sub-Adviser, (ii) by
the Adviser (but only upon the approval of the Fund's Board of Directors) upon
60 days' written notice to the Sub-Adviser (which notice may be waived in
writing by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90
days' written notice to the Fund and the Adviser (which notice may be waived in
writing by the Fund and the Adviser). This Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in the 1940 Act). In addition, notwithstanding anything herein to the
contrary, if the Investment Advisory Agreement is terminated for any reason
(whether by the Fund, by the Adviser or by operation of law), this Agreement
shall terminate with respect to the Series upon the effective date of such
termination of the Investment Advisory Agreement.
10. MISCELLANEOUS.
(a) Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the
party or parties against whom an enforcement of the change, waiver,
discharge or termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 affected thereby. Subject to the provisions of Section 10 hereof,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or any rule or regulation of the
Securities and Exchange Commission thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective upon
actual receipt by the Fund, or on the fourth day after the postmark if such
notice or other instrument is mailed via first class postage prepaid, at
its office at 3435 Stelzer Road, Columbus, Ohio 43219-3035, Attention:
Compliance Officer, or at such other place as the Fund may from time to
time designate in writing. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Adviser or
Sub-Adviser, as the case may be, shall be effective upon actual receipt by
the Adviser or Sub-Adviser, as the case may be, or on the fourth day after
the postmark if such notice or other instrument is mailed via first class
postage prepaid, at its office at the address first above written, or at
such other place as the Adviser or Sub-Adviser, as the case may be, may
from time to time designate in writing.
E-4
<PAGE> 156
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
FIRST AMERICAN NATIONAL BANK
By:
Attest:
BENNETT LAWRENCE MANAGEMENT, LLC
By:
Attest:
E-5
<PAGE> 157
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS
A PERCENTAGE OF
AVERAGE DAILY
NAME OF SERIES NET ASSETS REAPPROVAL DATE REAPPROVAL DAY
-------------- --------------- ----------------- --------------
<S> <C> <C> <C>
ISG Mid-Cap Fund........................... * December 31, 1999 December 31
</TABLE>
- ---------------
* .75% on the first $25 million of average aggregate daily net assets; .625% on
the next $50 million of such assets; and .50% on assets in excess of $75
million.
E-6
<PAGE> 158
EXHIBIT A
As to each Series, during the period from and including October 1, 1999
(the "Escrow Beginning Date") until the date of approval by shareholders of the
Series in conformity with the provisions of the 1940 Act, including but not
limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all
sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall
be paid in accordance with this Exhibit A. From and including the Escrow
Beginning Date to, but not including, the Escrow Termination Date, any and all
Sub-Advisory Fees payable under this Agreement shall be paid into an interest
bearing escrow account (the "Escrow Account") maintained by an unaffiliated
financial institution (the "Escrow Agent"). Pursuant to a letter agreement with
the Escrow Agent, the Sub-Advisory Fees (including interest earned on such
Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser
only if shareholders of the Series approve the Agreement. Further pursuant to
the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid
hereunder will be released by the Escrow Agent from the Escrow Account to the
Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from
officers of the Fund stating that this Agreement, with respect to the Series,
has received the requisite shareholder vote. As to each Series, in the event
that the requisite shareholder vote is not obtained and the Escrow Termination
Date does not therefore occur, the officers of the Fund shall execute and
deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating
that the requisite shareholder vote with respect to the Series has not been
obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account
should be paid over to the Series. As to each Series, the provisions of this
Exhibit A shall terminate and be of no further force and effect, and may be
removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March
31, 2000.
E-7
<PAGE> 159
APPENDIX F
FORM OF NEW SUB-ADVISORY AGREEMENT (ISG INTERNATIONAL EQUITY FUND)
Sub-Investment Advisory Agreement made as of the 1st day of October, l999,
between FIRST AMERICAN NATIONAL BANK, a national banking association having its
principal office and place of business at First American Center, 315 Deaderick
Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and
LAZARD ASSET MANAGEMENT, having its principal office and place of business at 30
Rockefeller Plaza, New York, New York 10020 (herein called the "Sub-Adviser").
WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an
open-end, management investment company, registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund employs the Adviser to provide advisory services pursuant
to an Investment Advisory Agreement dated October 1, 1999 between the Fund and
the Adviser (the "Investment Advisory Agreement") with respect to the Fund's
portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be
revised from time to time (the "Series"; if there are more than one Series to
which this Agreement applies, the provisions herein shall apply severally to
each such Series); and
WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the
"Administrator") to act as the Fund's administrator; and
WHEREAS, the Adviser, in its capacity as investment adviser to the Series,
desires to retain the Sub-Adviser to provide the day-to-day management of the
Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser
to provide such services, and the Sub-Adviser is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser
to the Series for the period and on the terms set forth in this Agreement. The
Sub-Adviser accepts such appointment and agrees to furnish the services herein
set forth for the compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Adviser, the Sub-Adviser
will provide a continuous investment program for the Series, including
investment research and day-to-day management with respect to such Series'
assets. The Sub-Adviser will provide the services rendered by it under this
Agreement in accordance with the investment criteria and policies established
from time to time for the Series by the Adviser, the Series' investment
objective, policies and restrictions as stated in the Fund's Prospectus and
Statement of Additional Information for the Series, as from time to time in
effect, and resolutions of the Fund's Board of Directors. The Fund and the
Adviser wish to be informed of important developments materially affecting the
Series' portfolio and the Sub-Adviser agrees to furnish to the Fund and the
Adviser from time to time such information as may be appropriate for this
purpose.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the Securities
and Exchange Commission in performance of its duties as sub-investment
adviser for the Series and, in addition, will conduct its activities under
this Agreement in accordance with other applicable federal and state law;
(b) provide, or cause to be provided, to the Board of Directors of the
Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Sub-Adviser's services
hereunder;
F-1
<PAGE> 160
(c) 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;
(d) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the Sub-
Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction, the Sub-Adviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Series and other accounts
over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized, subject to the prior
approval of the Adviser and the Fund's Board of Directors, to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for any of the Series
which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer as viewed in terms of that particular transaction or
in terms of the overall responsibilities of the Sub-Adviser to the Series.
In addition, the Sub-Adviser is authorized to take into account the sale of
the Fund's shares in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Adviser, Sub-Adviser or the Fund's principal
underwriter), provided that the Sub-Adviser believes that the quality of
the execution and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities
be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal
underwriter or any affiliated person of any of the Fund, the Adviser, Sub-
Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission and other applicable federal and state laws and regulations;
(e) maintain historical tax lots for each portfolio security held by
the Series;
(f) transmit trades to the Fund's custodian for proper settlement; and
(g) prepare a quarterly broker security transaction summary and
monthly security transaction listing for each Series.
4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby. To
the extent that the purchase or sale of securities or other investments of the
same issuer may be deemed by the Sub-Adviser to be suitable for two or more
Series, investment companies or accounts managed by the Sub-Adviser, the
available securities or investments will be allocated in a manner believed by
the Sub-Adviser to be equitable to each of them. It is recognized and
acknowledged by the Adviser that in some cases this procedure may adversely
affect the price paid or received by the Series or the size of the position
obtained for or disposed of by Series.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 3la-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Series are
the property of the Fund and further agrees to surrender promptly to the Fund
any of such records upon the request of the Fund or the Adviser. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
F-2
<PAGE> 161
6. EXPENSES.
Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all
expenses incurred by it in performing its services and duties as sub-investment
adviser. The Adviser hereby agrees that all other expenses to be incurred in the
operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the
Fund have agreed that such other expenses will be borne by the Fund, except to
the extent specifically assumed by others. The expenses to be borne by the Fund
include, without limitation, the following: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of Directors who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Adviser, Sub-Adviser or the Administrator, or any of
their affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of the Series' shares, costs
of shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses.
7. COMPENSATION.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay the Sub-Adviser on the first business day of each month,
subject to the terms and conditions set forth on Exhibit A attached hereto, the
fee at the annual rate set forth opposite the Series' name on Schedule l
attached hereto, based on the value of such Series' average daily net assets for
the previous month. The Sub-Adviser agrees to accept such fee from the Adviser
as full compensation for the services provided and expenses assumed by it
pursuant to this Agreement, and acknowledges that it shall not be entitled to
any further compensation from any other person in respect of the same.
Net asset value shall be computed on such days and at such time or times as
described in the Fund's current Prospectus for the Series. The fee for the
period from the date of the commencement of the initial public sale of the
Series' shares to the end of the month during which such sale shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Sub-Adviser, the value
of the Series' net assets shall be computed in the manner specified in the
Fund's Charter for the computation of the value of the Series' net assets.
8. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or the Adviser in connection with the
matters to which this Agreement relates, except that the Sub-Adviser shall be
liable to the Fund for any loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of the Sub-Adviser's duties or
from its reckless disregard of its obligations and duties under this Agreement.
Any person, even though also an officer, director, partner, employee or agent of
the Sub-Adviser, who may be or become an officer, Director, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or to the Series,
or acting on any business of the Fund or of the Series (other than services or
business in connection with the Sub-Adviser's duties as sub-investment adviser
hereunder) to be rendering such services to or acting solely for the Fund or the
Series and not as an officer, director, partner, employee or agent or one under
the control or direction of the Sub-Adviser even though paid by the Sub-Adviser.
9. TERM.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 attached hereto
F-3
<PAGE> 162
(the "Reapproval Day"), provided such continuance is specifically approved as to
a Series at least annually by (a) the Fund's Board of Directors or (b) vote of a
majority (as defined in the 1940 Act) of such Series' outstanding voting
securities, provided that in either event its continuance also is approved by a
majority of the Fund's Directors who are not "interested persons" (as defined in
the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. As to each Series,
this Agreement may be terminated without penalty (i) by the Fund's Board of
Directors or by vote of the holders of a majority of such Series' shares, upon
written notice to the Sub-Adviser, (ii) by the Adviser (but only upon the
approval of the Fund's Board of Directors) upon 60 days' written notice to the
Sub-Adviser (which notice may be waived in writing by the Sub-Adviser), or (iii)
by the Sub-Adviser upon not less than 90 days' written notice to the Fund and
the Adviser (which notice may be waived in writing by the Fund and the Adviser).
This Agreement also will terminate automatically, as to the relevant Series, in
the event of its assignment (as defined in the 1940 Act). In addition,
notwithstanding anything herein to the contrary, if the Investment Advisory
Agreement is terminated for any reason (whether by the Fund, by the Adviser or
by operation of law), this Agreement shall terminate with respect to the Series
upon the effective date of such termination of the Investment Advisory
Agreement.
10. MISCELLANEOUS.
(a) Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated, except by an instrument in writing signed by
the party or parties against whom an enforcement of the change, waiver,
discharge or termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 affected thereby. Subject to the provisions of Section 10
hereof, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall
be governed by New York law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the 1940 Act or any
rule or regulation of the Securities and Exchange Commission thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective
upon actual receipt by the Fund, or on the fourth day after the postmark
if such notice or other instrument is mailed via first class postage
prepaid, at its office at 3435 Stelzer Road, Columbus, Ohio 43219-3035,
Attention: Compliance Officer, or at such other place as the Fund may
from time to time designate in writing. Any notice or other instrument
in writing, authorized or required by this Agreement to be given to the
Adviser or Sub-Adviser, as the case may be, shall be effective upon
actual receipt by the Adviser or Sub-Adviser, as the case may be, or on
the fourth day after the postmark if such notice or other instrument is
mailed via first class postage prepaid, at its office at the address
first above written, or at such other place as the Adviser or
Sub-Adviser, as the case may be, may from time to time designate in
writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
Attest:
----------------------
FIRST AMERICAN NATIONAL BANK
By:
--------------------------
Attest:
----------------------
LAZARD ASSET MANAGEMENT
By:
--------------------------
F-4
<PAGE> 163
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS A
PERCENTAGE OF AVERAGE
NAME OF SERIES DAILY NET ASSETS REAPPROVAL DATE REAPPROVAL DAY
-------------- --------------------- ----------------- --------------
<S> <C> <C> <C>
ISG International Equity Fund.......... .50 of 1% December 31, 1999 December 31
</TABLE>
F-5
<PAGE> 164
EXHIBIT A
As to each Series, during the period from and including October 1, 1999
(the "Escrow Beginning Date") until the date of approval by shareholders of the
Series in conformity with the provisions of the 1940 Act, including but not
limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all
sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall
be paid in accordance with this Exhibit A. From and including the Escrow
Beginning Date to, but not including, the Escrow Termination Date, any and all
Sub-Advisory Fees payable under this Agreement shall be paid into an interest
bearing escrow account (the "Escrow Account") maintained by an unaffiliated
financial institution (the "Escrow Agent"). Pursuant to a letter agreement with
the Escrow Agent, the Sub-Advisory Fees (including interest earned on such
Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser
only if shareholders of the Series approve the Agreement. Further pursuant to
the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid
hereunder will be released by the Escrow Agent from the Escrow Account to the
Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from
officers of the Fund stating that this Agreement, with respect to the Series,
has received the requisite shareholder vote. As to each Series, in the event
that the requisite shareholder vote is not obtained and the Escrow Termination
Date does not therefore occur, the officers of the Fund shall execute and
deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating
that the requisite shareholder vote with respect to the Series has not been
obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account
should be paid over to the Series. As to each Series, the provisions of this
Exhibit A shall terminate and be of no further force and effect, and may be
removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March
31, 2000.
F-6
<PAGE> 165
APPENDIX G
FORM OF NEW SUB-ADVISORY AGREEMENT (ISG SMALL-CAP OPPORTUNITY FUND)
Sub-Investment Advisory Agreement made as of the 1st day of October, l999,
between FIRST AMERICAN NATIONAL BANK, a national banking association having its
principal office and place of business at First American Center, 315 Deaderick
Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and
WOMACK ASSET MANAGEMENT, INC., having its principal office and place of business
at 1667 Lelia Drive, Suite 101, Jackson, Mississippi 39216 (herein called the
"Sub-Adviser").
WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an
open-end, management investment company, registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund employs the Adviser to provide advisory services pursuant
to an Investment Advisory Agreement dated October 1, 1999 between the Fund and
the Adviser (the "Investment Advisory Agreement") with respect to the Fund's
portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be
revised from time to time (the "Series"; if there are more than one Series to
which this Agreement applies, the provisions herein shall apply severally to
each such Series); and
WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the
"Administrator") to act as the Fund's administrator; and
WHEREAS, the Adviser, in its capacity as investment adviser to the Series,
desires to retain the Sub-Adviser to provide the day-to-day management of the
Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser
to provide such services, and the Sub-Adviser is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser
to the Series for the period and on the terms set forth in this Agreement. The
Sub-Adviser accepts such appointment and agrees to furnish the services herein
set forth for the compensation herein provided.
2. SERVICES OF SUB-ADVISER.
Subject to the oversight and supervision of the Adviser, the Sub-Adviser
will provide a continuous investment program for the Series, including
investment research and day-to-day management with respect to such Series'
assets, other than cash and cash equivalents. The Sub-Adviser will provide the
services rendered by it under this Agreement in accordance with the investment
criteria and policies established from time to time for the Series by the
Adviser, the Series' investment objective, policies and restrictions as stated
in the Fund's Prospectus and Statement of Additional Information for the Series,
as from time to time in effect, and resolutions of the Fund's Board of
Directors. The Fund and the Adviser wish to be informed of important
developments materially affecting the Series' portfolio and the Sub-Adviser
agrees to furnish to the Fund and the Adviser from time to time such information
as may be appropriate for this purpose.
3. OTHER COVENANTS.
The Sub-Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the Securities
and Exchange Commission in performance of its duties as sub-investment
adviser for the Series and, in addition, will conduct its activities under
this Agreement in accordance with other applicable federal and state law;
G-1
<PAGE> 166
(b) provide, or cause to be provided, to the Board of Directors of the
Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Sub-Adviser's services
hereunder;
(c) 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;
(d) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the Sub-
Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker-dealer to execute
a particular transaction, the Sub-Adviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Series and other accounts
over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized, subject to the prior
approval of the Adviser and the Fund's Board of Directors, to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for any of the Series
which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer as viewed in terms of that particular transaction or
in terms of the overall responsibilities of the Sub-Adviser to the Series.
In addition, the Sub-Adviser is authorized to take into account the sale of
the Fund's shares in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Adviser, Sub-Adviser or the Fund's principal
underwriter), provided that the Sub-Adviser believes that the quality of
the execution and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities
be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal
underwriter or any affiliated person of any of the Fund, the Adviser, Sub-
Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission and other applicable federal and state laws and regulations;
(e) maintain historical tax lots for each portfolio security held by
the Series;
(f) transmit trades to the Fund's custodian for proper settlement; and
(g) prepare a quarterly broker security transaction summary and
monthly security transaction listing for each Series.
4. SERVICES NOT EXCLUSIVE.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby. To
the extent that the purchase or sale of securities or other investments of the
same issuer may be deemed by the Sub-Adviser to be suitable for two or more
Series, investment companies or accounts managed by the Sub-Adviser, the
available securities or investments will be allocated in a manner believed by
the Sub-Adviser to be equitable to each of them. It is recognized and
acknowledged by the Adviser that in some cases this procedure may adversely
affect the price paid or received by the Series or the size of the position
obtained for or disposed of by Series.
5. BOOKS AND RECORDS.
In compliance with the requirements of Rule 3la-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Series are
the property of the Fund and further agrees to surrender promptly to the Fund
any of such records upon the request of the Fund of the Adviser. The Sub-Adviser
further agrees to
G-2
<PAGE> 167
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
6. EXPENSES.
Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all
expenses incurred by it in performing its services and duties as sub-investment
adviser. The Adviser hereby agrees that all other expenses to be incurred in the
operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the
Fund have agreed that such other expenses will be borne by the Fund, except to
the extent specifically assumed by others. The expenses to be borne by the Fund
include, without limitation, the following: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of Directors who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Adviser, Sub-Adviser or the Administrator, or any of
their affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of the Series' shares, costs
of shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses.
7. COMPENSATION.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay the Sub-Adviser on the first business day of each month,
subject to the terms and conditions set forth on Exhibit A attached hereto, the
fee at the annual rate set forth opposite the Series' name on Schedule l
attached hereto, based on the value of such Series' average daily net assets for
the previous month. The Sub-Adviser agrees to accept such fee from the Adviser
as full compensation for the services provided and expenses assumed by it
pursuant to this Agreement, and acknowledges that it shall not be entitled to
any further compensation from any other person in respect of the same.
Net asset value shall be computed on such days and at such time or times as
described in the Fund's current Prospectus for the Series. The fee for the
period from the date of the commencement of the initial public sale of the
Series' shares to the end of the month during which such sale shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Sub-Adviser, the value
of the Series' net assets shall be computed in the manner specified in the
Fund's Charter for the computation of the value of the Series' net assets.
8. LIMITATION OF LIABILITY.
The Sub-Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or the Adviser in connection with the
matters to which this Agreement relates, except that the Sub-Adviser shall be
liable to the Fund for any loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of the Sub-Adviser's duties or
from its reckless disregard of its obligations and duties under this Agreement.
Any person, even though also an officer, director, partner, employee or agent of
the Sub-Adviser, who may be or become an officer, Director, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or to the Series,
or acting on any business of the Fund or of the Series (other than services or
business in connection with the Sub-Adviser's duties as sub-investment adviser
hereunder) to be rendering such services to or acting solely for the Fund or the
Series and not as an officer, director, partner, employee or agent or one under
the control or direction of the Sub-Adviser even though paid by the Sub-Adviser.
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<PAGE> 168
9. TERM.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is
specifically approved as to a Series at least annually by (a) the Fund's Board
of Directors or (b) vote of a majority (as defined in the 1940 Act) of such
Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Directors who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement may be terminated without
penalty (i) by the Fund's Board of Directors or by vote of the holders of a
majority of such Series' shares, upon written notice to the Sub-Adviser, (ii) by
the Adviser (but only upon the approval of the Fund's Board of Directors) upon
60 days' written notice to the Sub-Adviser (which notice may be waived in
writing by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90
days' written notice to the Fund and the Adviser (which notice may be waived in
writing by the Fund and the Adviser). This Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in the 1940 Act). In addition, notwithstanding anything herein to the
contrary, if the Investment Advisory Agreement is terminated for any reason
(whether by the Fund, by the Adviser or by operation of law), this Agreement
shall terminate with respect to the Series upon the effective date of such
termination of the Investment Advisory Agreement.
10. MISCELLANEOUS.
(a) Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the
party or parties against whom an enforcement of the change, waiver,
discharge or termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 affected thereby. Subject to the provisions of Section 10 hereof,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or any rule or regulation of the
Securities and Exchange Commission thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective upon
actual receipt by the Fund, or on the fourth day after the postmark if such
notice or other instrument is mailed via first class postage prepaid, at
its office at 3435 Stelzer Road, Columbus, Ohio 43219-3035, Attention:
Compliance Officer, or at such other place as the Fund may from time to
time designate in writing. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Adviser or
Sub-Adviser, as the case may be, shall be effective upon actual receipt by
the Adviser or Sub-Adviser, as the case may be, or on the fourth day after
the postmark if such notice or other instrument is mailed via first class
postage prepaid, at its office at the address first above written, or at
such other place as the Adviser or Sub-Adviser, as the case may be, may
from time to time designate in writing.
G-4
<PAGE> 169
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
Attest:
-----------------------
FIRST AMERICAN NATIONAL BANK
By:
---------------------------
Attest:
-----------------------
WOMACK ASSET MANAGEMENT, INC.
By:
---------------------------
G-5
<PAGE> 170
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS A
PERCENTAGE OF AVERAGE
NAME OF SERIES DAILY NET ASSETS REAPPROVAL DATE REAPPROVAL DAY
-------------- --------------------- --------------- --------------
<S> <C> <C> <C>
ISG Small-Cap Opportunity Fund......... .35 of 1% December 31, 1999 December 31
</TABLE>
G-6
<PAGE> 171
EXHIBIT A
As to each Series, during the period from and including October 1, 1999
(the "Escrow Beginning Date") until the date of approval by shareholders of the
Series in conformity with the provisions of the 1940 Act, including but not
limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all
sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall
be paid in accordance with this Exhibit A. From and including the Escrow
Beginning Date to, but not including, the Escrow Termination Date, any and all
Sub-Advisory Fees payable under this Agreement shall be paid into an interest
bearing escrow account (the "Escrow Account") maintained by an unaffiliated
financial institution (the "Escrow Agent"). Pursuant to a letter agreement with
the Escrow Agent, the Sub-Advisory Fees (including interest earned on such
Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser
only if shareholders of the Series approve the Agreement. Further pursuant to
the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid
hereunder will be released by the Escrow Agent from the Escrow Account to the
Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from
officers of the Fund stating that this Agreement, with respect to the Series,
has received the requisite shareholder vote. As to each Series, in the event
that the requisite shareholder vote is not obtained and the Escrow Termination
Date does not therefore occur, the officers of the Fund shall execute and
deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating
that the requisite shareholder vote with respect to the Series has not been
obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account
should be paid over to the Series. As to each Series, the provisions of this
Exhibit A shall terminate and be of no further force and effect, and may be
removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March
31, 2000.
G-7
<PAGE> 172
APPENDIX H
EXECUTIVE OFFICERS AND DIRECTORS OF AMSOUTH BANK
The principal executive officer and directors of AmSouth Bank are listed in
the table below. Certain executive officers and directors of AmSouth Bank also
hold or have held various positions with bank and non-bank affiliates of AmSouth
Bank, including AmSouth Bancorporation.
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION,
AMSOUTH BANK AMSOUTH BANK VOCATION, OR EMPLOYMENT
---------------------- ------------------------------------
<S> <C>
J. Harold Chandler
Director.......................... Chairman, President & CEO Provident Companies, Inc.
One Fountain Square
Chattanooga, Tennessee 37402
James E. Dalton, Jr.
Director........................ President and CEO
Quorum Health Group, Inc.
103 Continental Place
Brentwood, Tennessee 37027
Rodney C. Gilbert
Director........................ Chairman of the Board & CEO Enfinity Corporation
3700 Old Leeds Road
Birmingham, Alabama 35213
Elmer B. Harris
Director........................ President and CEO
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Victoria Jackson Gregorious
Director........................ President and CEO
DSS/ProDiesel, Inc.
922 Main Street
Nashville, Tennessee 37206
Ronald L. Kuehn, Jr.
Director........................ Chairman of the Board,
President and CEO
Sonat Inc.
1900 Fifth Avenue
North Birmingham, Alabama 35203
James R. Malone
Director........................ Chairman and CEO
HMI Industries, Inc./Intok Capital, Inc.
8889 Pelican Bay Boulevard
Naples, Florida 34108
Claude B. Nielson
Director........................ President and CEO
Coca-Cola Bottling Company United, Inc.
4600 East Lake Boulevard
Birmingham, Alabama 35217
Dr. Benjamin F. Payton
Director........................ President
Tuskegee University
399 Montgomery Road
Tuskegee, Alabama 36083
</TABLE>
H-1
<PAGE> 173
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION,
AMSOUTH BANK AMSOUTH BANK VOCATION, OR EMPLOYMENT
---------------------- ------------------------------------
<S> <C>
C. Dowd Ritter
Chairman, President and CEO....... AmSouth Bancorporation
AmSouth Bank
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
Herbert A. Sklenar
Director........................ Chairman Emeritus
Vulcan Materials Company
Two Metroplex Drive
Birmingham, Alabama 35209
Michael C. Baker
Senior Executive Vice
President....................... None
O.B. Grayson Hall, Jr.
Executive Vice President........ None
David B. Edmonds
Executive Vice President........ None
Sloan D. Gibson, IV
Senior Executive Vice President
and Chief Financial Officer..... None
W. Charles Mayer, III
Senior Executive Vice
President....................... None
Candice W. Rogers
Senior Executive Vice
President....................... Senior Executive Vice President
E.W. Stephenson, Jr.
Senior Executive Vice
President....................... None
Alfred W. Swan, Jr.
Senior Executive Vice
President....................... None
Stephen A. Yoder
Executive Vice President and
General Counsel................. None
</TABLE>
H-2
<PAGE> 174
AMSOUTH FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains information which may
be of interest to investors but which is not included in the Combined
Prospectus/Proxy Statement (the "Prospectus") of AmSouth Funds dated December
19, 1999 relating to the transfer of assets from the ISG Funds to the
corresponding AmSouth Funds as follows:
<TABLE>
<CAPTION>
<S> <C>
ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio
ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund
ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio
ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio
ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio
ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio
ISG Mid-Cap Fund AmSouth Mid Cap Fund*
ISG Large-Cap Equity Fund AmSouth Large Cap Fund*
ISG International Equity Fund AmSouth International Equity Fund*
ISG Capital Growth Fund AmSouth Capital Growth Fund*
ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund
ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund
ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund
ISG Government Income Fund AmSouth Government Income Fund
ISG Limited Term Income Fund AmSouth Limited Term Bond Fund
ISG Equity Income Fund AmSouth Equity Income Fund
ISG Municipal Income Fund AmSouth Municipal Bond Fund
ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund*
</TABLE>
* This Fund is also referred to as a Capital Appreciation Fund.
B-1
<PAGE> 175
<TABLE>
<CAPTION>
<S> <C>
ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund
ISG Prime Money Market Fund AmSouth Prime Money Market Fund
ISG Income Fund AmSouth Bond Fund
</TABLE>
The Statement of Additional Information for the ISG Funds dated May 1,
1999, and the Statements of Additional Information for the AmSouth Funds dated
December 1, 1999 and December 14, 1999 have been filed with the Securities and
Exchange Commission and are incorporated herein by reference. This Statement of
Additional Information is not a prospectus and is authorized for distribution
only when it accompanies or follows delivery of the Prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus. A
copy of the Prospectus may be obtained, without charge, by writing ASO Services
Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling 1-800-852-0045.
The date of this Statement of Additional Information is December 19,
1999.
B-2
<PAGE> 176
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Other Investment Policies and Techniques ........................... B-4
Other Risks ........................................................ B-49
Financial Statements of the
combined Funds on a pro-forma
basis for the year ended
July 31, 1999 ...................................................... B-55
</TABLE>
B-3
<PAGE> 177
OTHER INVESTMENT POLICIES AND TECHNIQUES
Regarding ISG Funds and AmSouth International Equity Fund, AmSouth Mid Cap Fund,
AmSouth Capital Growth Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S.
Government Fund, AmSouth Tennessee Tax-Exempt Fund, AmSouth Limited Term
Tennessee Tax-Exempt Fund, and AmSouth Treasury Reserve Money Market Fund.
Lending Portfolio Securities. (All ISG Funds and AmSouth Funds) From time to
time, each Fund may lend securities from its investment portfolio to brokers,
dealers and other financial institutions needing to borrow securities to
complete certain transactions. Such loans may not exceed 33-1/3% of the value of
the relevant Fund's total assets. In connection with such loans, each Fund will
receive collateral consisting of cash or U.S. Government securities which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Each Fund can increase its income through
the investment of such collateral. Each Fund continues to be entitled to
payments in amounts equal to the dividends, interest and other distributions
payable on the loaned security and receives interest on the amount of the loan.
Such loans will be terminable at any time upon specified notice. A Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with such Fund. From time to
time, a Fund may return to the borrower or a third party which is unaffiliated
with the Fund, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions payable
on the loaned securities, and any increase in market value; (5) the Fund may pay
only reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Trust's Board of
Directors must terminate the loan and regain the right to vote the securities if
a material event adversely affecting the investment occurs.
Options Transactions. (ISG Large-Cap Equity, ISG Capital Growth, ISG
Small Cap Opportunity, ISG Mid-Cap, ISG Equity Income, ISG Government Income and
ISG International Equity and AmSouth Large Cap, AmSouth Capital Growth, AmSouth
Mid Cap and AmSouth International Equity Funds) Each of these Funds may purchase
call and put options in respect of specific securities in which the Fund may
invest and write covered call and put option contracts. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security at the exercise price at any time during the option period.
Conversely, a put option gives the purchaser of the option the right to sell,
and obligates the writer to buy, the underlying
B-4
<PAGE> 178
security at the exercise price at any time during the option period. A covered
call option sold by the Fund, which is a call option with respect to which the
Fund owns the underlying security, exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or to possible continued holding of a security
which might otherwise have been sold to protect against depreciation in the
market price of the security. A covered put option sold by the Fund exposes the
Fund during the term of the option to a decline in price of the underlying
security. A put option sold by the Fund is covered when, among other things,
permissible liquid assets are placed in a segregated account to fulfill the
obligation undertaken.
The principal reason for the Fund writing covered call options is to
realize, through the receipt of premiums, a greater return than would be
realized on its portfolio securities alone. In return for a premium, the writer
of a covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing covered put options is to realize
income in the form of premiums. The writer of a covered put option accepts the
risk of a decline in the price of the underlying security. The size of the
premiums that the Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase their
option-writing activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
time the options are written. In the case of call options, these exercise prices
are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Fund may write (a) in-the-money call options when the Adviser
expects that the price of the underlying security will remain stable or decline
moderately during the option period, (b) at-the-money call options when the
Adviser expects that the price of the underlying security will remain stable or
advance moderately during the option period and (c) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this lower price, the
amount of any realized loss will be offset wholly or in part by the premium
received. Out-of-the-money, at-the-money and in-the-money put options (the
reverse of call options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call options are used
in equivalent transactions.
So long as the Fund's obligation as the writer of an option continues,
it may be assigned an exercise notice by the broker-dealer through which the
option was sold, requiring it to deliver, in the case of a call, or take
delivery of, in the case of a put, the underlying security against payment of
the exercise price. This obligation terminates when the option
B-5
<PAGE> 179
expires or the Fund effects a closing purchase transaction. The Fund can no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice.
While it may choose to do otherwise, the Fund generally will purchase
or write only those options for which the Adviser believes there is an active
secondary market so as to facilitate closing transactions. There is no assurance
that sufficient trading interest to create a liquid secondary market on a
securities exchange will exist for any particular option or at any particular
time, and for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety of reasons. In
the past, for example, higher than anticipated trading activity or order flow,
or other unforeseen events, at times have rendered certain clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that otherwise may interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid securities.
Stock Index Options. (ISG Large-Cap Equity, ISG Capital Growth, ISG
Small Cap Opportunity, ISG Mid-Cap, ISG Equity Income and ISG International
Equity, AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid Cap and AmSouth
International Equity Funds) Each of these Funds may purchase and write put and
call options on stock indexes listed on national securities exchanges or traded
in the over-the-counter market to the extent of 15% of the value of its net
assets. A stock index fluctuates with changes in the market values of the stocks
included in the index. Options on stock indexes are similar to options on stock
except that (a) the expiration cycles of stock index options are monthly, while
those of stock options are currently quarterly, and (b) the delivery
requirements are different. Instead of giving the right to take or make delivery
of a stock at a specified price, an option on a stock index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the amount, if
any, by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the option. The amount
of cash received will be equal to such difference between the closing price of
the index and the exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
B-6
<PAGE> 180
premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
The effectiveness of the Fund's purchasing or writing stock index
options will depend upon the extent to which price movements in its portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than movements in the price of
a particular stock. Accordingly, successful use by the Fund of options on stock
indexes will be subject to the Adviser's ability to predict correctly movements
in the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
When the Fund writes an option on a stock index, it will place in a
segregated account permissible liquid assets in an amount at least equal to the
market value of the underlying stock index and will maintain the account while
the option is open or will otherwise cover the transaction.
Futures Contracts and Options on Futures Contracts. (ISG Large-Cap
Equity, ISG Capital Growth, ISG Small-Cap Opportunity, ISG Mid-Cap, ISG Equity
Income, ISG International Equity, ISG Tennessee Tax-Exempt and ISG Limited Term
Tennessee Tax-Exempt and AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid
Cap, AmSouth International Equity, AmSouth Tennessee Tax-Exempt and AmSouth
Limited Term Tennessee Tax-Exempt Funds) None of these Funds will be a commodity
pool. However, as a substitute for a comparable market position in the
underlying securities or for hedging purposes, each of these Funds may engage in
futures and options on futures transactions, as described below.
The commodities transactions of each of these Funds must constitute
bona fide hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission. In addition, none of
these Funds may engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, each of these Funds may be required to segregate permissible liquid
assets in connection with its commodities transactions in an amount at least
equal to the value of the underlying commodity.
B-7
<PAGE> 181
Initially, when purchasing or selling futures contracts, a Fund will be
required to deposit with the Trust's custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate its
existing position in the contract.
Although each of these Funds intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the relevant Fund to substantial losses. If it is not possible, or
the Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures contract.
To the extent a Fund is engaging in a futures transaction as a hedging
device, because of the risk of an imperfect correlation between securities in a
portfolio that are the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not be fully
effective if, for example, losses on the portfolio securities exceed gains on
the futures contract or losses on the futures contract exceed gains on the
portfolio securities. For futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of a Fund's investments
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, the Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the futures contract
has been less or greater than that of the securities. Such "over hedging" or
"under hedging" may adversely affect the
B-8
<PAGE> 182
Fund's net investment results if market movements are not as anticipated when
the hedge is established.
Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market or
interest rates. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, such Fund will lose part or all of the
benefit of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
Call options sold by a Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which are
expected to move relatively consistently with, the instruments underlying the
futures contract. Put options sold by a Fund with respect to futures contracts
will be covered in the same manner as put options on specific securities as
described above.
Upon exercise of an option, the writer of the option delivers to the
holder of the option the futures position and the accumulated balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in
the net asset value of the Fund.
Stock Index Futures and Options on Stock Index Futures. (ISG Large-Cap
Equity, ISG Capital Growth, ISG Small-Cap Opportunity, ISG Mid-Cap, ISG Equity
Income and ISG
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International Equity Funds and AmSouth Large Cap, AmSouth Capital Growth,
AmSouth Mid Cap and AmSouth International Equity Funds) Each of these Funds may
purchase and sell stock index futures contracts and options on stock index
futures contracts to the extent of 15% of the value of its net assets.
A stock index future obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indexes that are permitted investments, each of these Funds intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.
Each of these Funds may use index futures as a substitute for a
comparable market position in the underlying securities.
Interest Rate Futures Contracts and Options on Interest Rate Futures
Contracts. (ISG and AmSouth Tennessee Tax-Exempt and AmSouth Limited Term
Tennessee Tax-Exempt Funds) Each of these Funds may invest in interest rate
futures contracts and options on interest rate futures contracts as a substitute
for a comparable market position and to hedge against adverse movements in
interest rates to the extent of 15% of the value of its net assets.
To the extent the Fund has invested in interest rate futures contracts
or options on interest rate futures contracts as a substitute for a comparable
market position, the Fund will be subject to the same investment risks had it
purchased the securities underlying the contract.
Each of these Funds may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase put
options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates. The Fund may sell call options on
interest rate futures contracts to partially hedge against declining prices of
portfolio securities. The Fund may sell put options on interest rate futures
contracts to hedge against increasing prices of the securities which are
deliverable upon exercise of the futures contracts.
Each of these Funds also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or the degree of correlation between price movements in the options on
interest rate futures and price movements in the Fund's investment securities
which are the subject of the hedge.
Future Developments. Each Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivative investments which are not presently contemplated for use by
such Fund or which are not
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currently available but which may be developed, to the extent such opportunities
are both consistent with its investment objective and legally permissible for
the Fund. Before entering into such transactions or making any such investment,
the Fund will provide appropriate disclosure in its Prospectus or this Statement
of Additional Information.
Foreign Currency Transactions. (ISG and AmSouth International Equity
Fund) Foreign currency transactions may be entered into for a variety of
purposes, including: to fix in U.S. dollars, between trade and settlement date,
the value of a security the Fund has agreed to buy or sell; to hedge the U.S.
dollar value of securities the Fund already owns, particularly if it expects a
decrease in the value of the currency in which the foreign security is
denominated; or to gain exposure to the foreign currency in an attempt to
realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange. The
Fund's success in these transactions will depend principally on the ability of
the Fund's Sub-Adviser to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
Short-Selling. (ISG International Equity Fund and, to a limited extent,
ISG Capital Growth, ISG Equity Income, ISG Income, ISG Limited Term Income, ISG
Limited Term U.S. Government, ISG Tennessee Tax-Exempt and ISG Limited Term
Tennessee Tax-Exempt Funds and AmSouth International Equity Fund and, to a
limited extent, AmSouth Capital Growth, AmSouth Limited Term U.S. Government,
AmSouth Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt
Funds) In these transactions the Fund sells a security it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, the Fund must borrow the security to make delivery to the buyer.
The Fund is obligated to replace the security borrowed by purchasing it
subsequently at the market price at the time of replacement. The price at such
time may be more or less than the price at which the security was sold by the
Fund, which would result in a loss or gain, respectively. Securities will not be
sold short if, after effect is given to any such short sale, the total market
value of all securities sold short would exceed 25% of the value of the Fund's
net assets. Each of these Funds, other than the International Equity Fund, will
limit its short sales to those that are "against the box," a transaction in
which the Fund enters into a short sale of a security which it owns. The
proceeds of the short sale will be held by a broker until the settlement date at
which time the Fund delivers the security to close the short position. The Fund
receives the net proceeds from the short sale. At no time will any of these
Funds have more than 15% of the value of its net assets in deposits on short
sales against the box.
Borrowing Money. (All ISG Funds and AmSouth Capital Appreciation Funds,
AmSouth Income Funds and AmSouth Money Market Funds) As a fundamental policy,
each
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Fund is permitted to borrow money in an amount up to 33-1/3% of the value of its
total assets. However, each Fund currently intends to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 33-1/3% of
the value of its total assets (including the amount borrowed) valued at the
lesser of cost or market, less liabilities (not including the amount borrowed)
at the time the borrowing is made. While borrowings exceed 5% of a Fund's total
assets, such Fund will not make any investments. In addition, each Money Market
Fund may borrow for investment purposes on a secured basis through entering into
reverse repurchase agreements as described below.
Reverse Repurchase Agreements. (ISG Prime Money Market, ISG Treasury
Money Market Funds and AmSouth Treasury Reserve Money Market Fund) These Funds
may enter into reverse repurchase agreements with banks, brokers or dealers.
Reverse repurchase agreements involve the transfer by the Fund of an underlying
debt instrument in return for cash proceeds based on a percentage of the value
of the security. The Fund retains the right to receive interest and principal
payments on the security. The Fund will use the proceeds of reverse repurchase
agreements only to make investments which generally either mature or have a
demand feature to resell to the issuer at a date simultaneous with or prior to
the expiration of the reverse repurchase agreement. At an agreed upon future
date, the Fund repurchases the security at principal plus accrued interest. In
certain types of agreements, there is no agreed upon repurchase date and
interest payments are calculated daily, often based on the prevailing overnight
repurchase rate. As a result of these transactions, the Fund may be exposed to
greater potential fluctuations in the value of its assets and its net asset
value per share. Interest costs on the money borrowed may exceed the return
received on the securities purchased. The Trust's Directors have considered the
risks to each of these Funds and their shareholders which may result from the
entry into reverse repurchase agreements and have determined that the entry into
such agreements is consistent with such Fund's investment objective and
management policies. The Fund will maintain in a segregated account permissible
liquid assets equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission.
AmSouth Equity Income Fund, AmSouth Small Cap Fund, AmSouth Bond Fund, AmSouth
Government Income Fund, AmSouth Limited Term Bond Fund, AmSouth Municipal Bond
Fund, AmSouth Prime Money Market Fund, and AmSouth Tax Exempt Money Market 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 adviser to the Trust ("Adviser") to present minimal credit risks
under guidelines adopted by the Trust's Trustees.
With regard to the AmSouth Prime Money Market 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 nationally recognized statistical
ratings organizations ("NRSROs"); or (ii) do not
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possess a rating, (i.e., are unrated) but are determined by the Adviser 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 AmSouth Tax Exempt
Money Market 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 Adviser 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 Adviser 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 AmSouth Prime Money Market Fund and the
AmSouth Tax Exempt Money Market 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 Adviser 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 Adviser. 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 Money Market Fund will not invest more than 5% of its total
assets in the securities of any one issuer, except that the Fund may invest up
to 25% of its total assets in the securities of a single issuer for a period of
up to three business days. If a percentage limitation is satisfied at the time
of purchase, a later increase in such percentage resulting from a change in the
Fund's net asset value or a subsequent change in a security's qualification as
an Eligible Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, and instrumentalities and repurchase agreements fully collateralized
by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a- 7 under the Investment Company Act of 1940 (the "1940 Act"), the
Adviser may be required promptly to dispose of an obligation held in a Fund's
portfolio in the event of certain developments that indicate a diminishment of
the instrument's credit quality, such as where an NRSRO downgrades an obligation
below the second highest rating category, or in the event of a default relating
to the financial condition of the issuer.
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The Appendix to this Statement of Additional Information identifies
each NRSRO that may be utilized by the Adviser 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 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. The Prime Money Market 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.
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 may invest in commercial paper. Commercial
paper consists of unsecured promissory notes issued by corporations. Issues of
commercial paper normally have maturities of less than nine months and fixed
rates of return.
Each Fund except the Tax Exempt Fund and the Municipal Bond 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.
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
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securities are regarded as predominantly speculative. The market value of high
yield securities may fluctuate more than the market value of higher rated
securities, since high yield securities tend to reflect short-term corporate and
market developments to a greater extent than higher rated securities, which
fluctuate primarily in response to the general level of interest rates, assuming
that there has been no change in the fundamental interest rates, assuming that
there has been no change in the fundamental quality of such securities. The
market prices of fixed income securities generally fall when interest rates
rise. Conversely, the market prices of fixed-income securities generally rise
when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the AmSouth Equity Income Fund more difficult,
at least in the absence of price concessions. Reduced liquidity also could
adversely affect the AmSouth 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.
Insurance Company Funding Agreements. The AmSouth Bond Fund, the
AmSouth Limited Term Bond Fund and the AmSouth Prime Money Market Fund may
invest in funding agreements ("Funding Agreements"), also known as guaranteed
investment contracts, issued by insurance companies. Pursuant to such
agreements, the AmSouth Bond Fund, AmSouth Limited Term Bond Fund and the
AmSouth Prime Money Market Fund invest 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 AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth
Prime Money Market Fund will only purchase a Funding Agreement (i) when the
Adviser 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 1940 Act, of the issuer, on any insurer, guarantor, 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 AmSouth Bond Fund, the AmSouth Limited Term Bond
Fund and the AmSouth Prime Money Market 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 in the case of the AmSouth Bond
Fund and
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AmSouth Limited Term Bond Fund, and 10% of such Funds net assets in the case of
the AmSouth Prime Money Market 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.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the AmSouth Prime Money Market Fund, the AmSouth Equity Income
Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund and the AmSouth Limited
Term Bond 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 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 Adviser or
Sub-Adviser 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.
Variable and Floating Rate Notes. The AmSouth Tax Exempt Money Market
Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth
Municipal Bond Fund 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 Adviser 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 Adviser will
consider the earning power, cash flow and other liquidity ratios of the issuers
of such notes (such issuers include financial,
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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 AmSouth Tax Exempt Money Market Fund, the AmSouth
Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Municipal Bond
Fund, the maturities of the variable and floating rate notes will be determined
in accordance with Rule 2a-7 under the 1940 Act.
Zero Coupon Obligations. The AmSouth Bond Fund, AmSouth Limited Term
Bond Fund and AmSouth Tax Exempt Money Market Fund may acquire 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
AmSouth 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 AmSouth Limited Term Bond Fund will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 25% of the value of the AmSouth Limited Term Bond 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 Adviser 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 Adviser will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
Foreign Investment. All of the Funds, except the AmSouth Municipal Bond
Fund, 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
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U.S. bank or a foreign bank, Canadian Time Deposits ("CTD's") which are U.S.
dollar denominated certificates of deposit issued by Canadian offices of major
Canadian Banks, and American Depository Receipts ("ADRs") which are foreign
shares of a company held by a U.S. bank which issues a receipt evidencing
ownership. Investments in securities issued by foreign branches of U.S. banks,
foreign banks, or other foreign issuers, including ADRs and securities purchased
on foreign securities exchanges, may subject the Funds to investment risks that
differ in some respects from those related to investment in obligations of U.S.
domestic issuers or in U.S. securities markets. Such risks include future
adverse political and economic developments, possible seizure, currency
blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, and the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore many securities traded in these markets may be less liquid and
their prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations are
often subject to accounting treatment and engage in business practices different
from those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks. A Fund will acquire such securities only when the Adviser or Sub-
Adviser 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 Adviser or Sub-Adviser
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 Adviser or Sub-Adviser
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
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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 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 AmSouth Prime Money Market Fund,
the AmSouth Tax Exempt Money Market Fund, the AmSouth Bond Fund, the AmSouth
Government Income Fund, the AmSouth Limited Term Bond Fund or other liquid,
high-grade debt securities, in the case of the AmSouth Equity Income Fund and
the AmSouth Small Cap Fund. 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. Each of the Funds may invest 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 Funds also may invest in
other obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities. Such other obligations may include those such as GNMA and the
Export-Import Bank of the United States, which are supported by the full faith
and credit of the U.S. government; others, such as those of FNMA, 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, such as those of the Federal Farm
Credit Banks or FHLMC, 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 Adviser or
Sub-Adviser believes that the credit risk with respect thereto is minimal.
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.
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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.
When-Issued Securities. As discussed in the Prospectuses, each Fund
except the AmSouth Prime Money Market 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. 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 AmSouth Equity Income Fund and the
AmSouth Small Cap Fund expect 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 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 Adviser or
Sub-Adviser 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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Asset-Backed Securities. The Bond Fund, the Limited Term Bond Fund and
the Prime Money Market Fund may invest in securities backed by automobile
receivables and credit-card receivables and other securities backed by other
types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, typically 18 months. The CARD'S principal balance
remains constant during this period, while any cardholder repayments or new
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
CARDS have monthly payment schedules, weighted-average lives of 18-24 months and
stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization. The Bond Fund and the Limited Term Bond 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
Adviser under guidelines established by the Trust's Board of Trustees to be of
comparable quality.
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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 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
AmSouth 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 AmSouth 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 Adviser 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
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any other assets which in the Adviser'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 AmSouth 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 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
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(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. See "Investment Company
Securities" in this Statement of Additional Information.
The AmSouth 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 Adviser will, consistent with the Government Income Fund's
investment objective, policies and quality standards, consider making
investments in such new types of securities.
Convertible Securities. The AmSouth Equity Income Fund and the AmSouth
Small Cap Fund 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. The Funds 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. 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
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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 AmSouth Equity Income Fund's investment objective may be more
dependent on the Sub-Adviser'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 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-Adviser 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 AmSouth Equity Income Fund and the AmSouth Small Cap Fund 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 Adviser
or Sub-Adviser, the investment characteristics of the underlying common shares
will assist a Fund in achieving its investment objectives. Otherwise, a Fund
will hold or trade the convertible securities. In selecting convertible
securities for a Fund, the Adviser or Sub-Adviser evaluates the investment
characteristics of the convertible security as a fixed-income instrument, and
the investment potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a particular
convertible security, the Adviser or Sub-Adviser considers numerous factors,
including the economic and political outlook, the value of the
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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.
Calls. The AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the
AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth 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 Adviser's or Sub-Adviser'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
AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth 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 AmSouth Equity Income Fund,
the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond
Fund and the AmSouth 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 AmSouth Equity Income Fund, the AmSouth
Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and
the AmSouth 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
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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 AmSouth Equity
Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth
Limited Term Bond Fund and the AmSouth Government Income Fund will consider a
security covered by a call to be "pledged" as that term is used in its policy
which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Adviser or Sub-Adviser, 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 AmSouth Equity Income Fund, the AmSouth
Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and
the AmSouth 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
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security for delivery in accordance with an exercise notice of a call option
assigned to it, rather than delivering such security from its portfolio. In such
cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
Puts. The AmSouth Tax-Exempt Money Market Fund and the AmSouth
Municipal Bond Fund may acquire "puts" with respect to Municipal Securities held
in their portfolios, and the Bond Fund and the AmSouth Limited Term Bond Fund
may acquire "puts" with respect to debt securities held in their portfolios. A
put is a right to sell a specified security (or securities) within a specified
period of time at a specified exercise price. The AmSouth Tax Exempt Money
Market Fund, the AmSouth Municipal Bond Fund, the AmSouth Bond Fund, the AmSouth
Limited Term 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 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.
The AmSouth Limited Term Bond Fund will acquire puts solely to shorten
the maturity of the underlying debt security.
The AmSouth Tax-Exempt Money Market Fund, the AmSouth Municipal Bond
Fund, and the AmSouth Limited Term Bond Fund will generally acquire puts only
where the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, a Fund may pay for puts
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the puts (thus reducing the yield to maturity
otherwise available for the same securities).
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The AmSouth Tax Exempt Money Market Fund, the AmSouth Municipal Bond
Fund, the AmSouth Limited Term Bond intend to enter into puts only with dealers,
banks, and broker-dealers which, in the Adviser's opinion, present minimal
credit risks.
Futures Contracts and Related Options. The AmSouth Small Cap Fund may
invest in futures contracts and options thereon (interest rate futures contracts
or index futures contracts, as applicable) 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.
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.
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.
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
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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 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 Company Securities. The AmSouth Equity Income Fund, the
AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Government Income
Fund, the AmSouth Limited Term Bond Fund and the AmSouth Municipal Bond Fund may
invest up to 5% of the value of its total assets in the securities of any one
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money market mutual fund including Shares of the AmSouth Prime Money Market
Fund, the AmSouth Treasury Reserve Fund (the "AmSouth Money Market Funds"), the
AmSouth Money Market and AmSouth Tax Exempt Money Market Fund may invest in the
securities of other money market funds that have similar policies and objectives
provided that no more than 10% of a 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 Funds in the
AmSouth Money Market Funds, the Adviser and the Administrator will reduce that
portion of their usual service fees from each Fund by an amount equal to their
service fees from the AmSouth Money Market Funds that are attributable to those
Fund investments. The Adviser 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.
Securities Lending. In order to generate additional income, each 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 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 Fund will receive 100% collateral in the form of cash or other
liquid securities. This collateral will be valued daily by the Adviser or
Sub-Adviser and should the market value of the loaned securities increase, the
borrower will furnish additional collateral to the Fund. During the time
portfolio securities 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, the Funds intend 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 Adviser or Sub-Adviser has determined are creditworthy
under guidelines established by the Trust's Board of Trustees.
Short-Term Trading. The AmSouth Equity Income Fund, the AmSouth Small
Cap Fund and the AmSouth 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 Fund in order to take advantage of what the Adviser or Sub-Adviser
believes are changes in market, industry or individual company conditions or
outlook. Any such trading would increase the turnover rate of a Fund and its
transaction costs.
Municipal Securities. Under normal market conditions, the AmSouth Tax
Exempt Fund and the AmSouth Municipal Bond Fund will be primarily invested in
bonds (and in the case of the AmSouth Tax-Exempt Money Market
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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 AmSouth Tax-Exempt Money
Market Fund will invest at least 80% of its total assets, the Municipal Bond
Fund will invest at least 80% of its net assets 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. 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 if they do not have this effect
regarding individuals.
Municipal Securities may also include General Obligation Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, Tax Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the Prospectuses of the Tax Exempt Money Market Fund,
the Municipal Bond Fund 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. 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. There are, of
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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.
Municipal Securities purchased by the AmSouth Tax-Exempt Money Market
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 AmSouth Tax Exempt
Money Market 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 AmSouth Tax Exempt Fund will approximate their
par value.
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.
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
Municipal Bond Fund nor the Adviser will review the proceedings relating to the
issuance of Eligible Municipal Securities or the basis for such opinions.
Although the AmSouth Tax-Exempt Fund and AmSouth Municipal Bond 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. Such investments would be made only
if deemed necessary or appropriate by the Adviser. 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 AmSouth Municipal Bond Fund may acquire "puts" with respect to
Eligible Municipal Securities held in their portfolios. Under a put, the Funds
would have the right to sell a specified Eligible Municipal Security within a
specified period of time at a specified price to a third party. A put would be
sold, transferred, or assigned only with the underlying Eligible Municipal
Security. The Funds will acquire puts solely to facilitate portfolio liquidity,
shorten the maturity of the underlying Eligible Municipal Securities, or permit
the investment of the Funds' at a more favorable rate of return. The Funds
expect that they will generally acquire puts only where the puts are available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Funds may pay for a put separately in cash. The
aggregate price of a security subject to a 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.
Tax-Free Funds. The AmSouth Municipal Bond Fund 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 Adviser 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 AmSouth Municipal Bond 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 the Funds will be determined by the Adviser 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.
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The AmSouth Municipal Bond Fund 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 Fund will
only purchase zero-coupon obligations if, at the time of purchase, such
investments does not exceed 25% of the Municipal Bond Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Municipal Bond Fund and a decline in interest rates will
generally increase the value of those investments. Depending upon prevailing
market conditions, the Adviser 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 Adviser will
consider many factors besides current yield, including the preservation of
capital, maturity, and yield to maturity.
The AmSouth Municipal Bond Fund -- Concentration in Alabama Issuers.
The AmSouth 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 1998. 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 0.2% in 1998. Alabama's per capita income in 1998 was
$21,442, 81.2% 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
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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.
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.
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Limited Taxing Authority. Political subdivisions of the state
have limited taxing authority. Ad valorem taxes may be levied only as authorized
by the Alabama Constitution. In order to increase the rate at which any ad
valorem tax is levied above the limit otherwise provided in the Constitution,
the proposed increase must be proposed by the governing body of the taxing
authority after a public hearing, approved by an act of the Alabama Legislature
and approved at an election within the taxing authority's jurisdiction. In
addition, the Alabama Constitution limits the total amount of state, county,
municipal and other ad valorem taxes that may be imposed on any class of
property in any one tax year. This limitation is expressed in terms of a
specified percentage of the market value of such property.
Specific authorizing legislation is required for the levy of taxes by
local governments. In addition, the rate at which such taxes are levied may be
limited to the authorizing legislation or judicial precedent. For example, the
Alabama Supreme Court has held that sales and use taxes, which usually comprise
a significant portion of the revenues for local governments, may not be levied
at rates that are confiscatory or unreasonable. The total sales tax (state and
local) in some jurisdictions is 9%. State and local governments in Alabama are
more dependent on general and special sales taxes than are state and local
governments in many states. Because sales taxes are less stable sources of
revenue than are property taxes, state and local governments in Alabama may be
subject to shortfalls in revenue due to economic cycles.
Priority for Essential Governmental Functions. Numerous
decisions of the Alabama Supreme Court hold that a governmental unit may first
use its taxes and other revenues to pay the expenses of providing necessary
governmental services before paying debt service on its bonds, warrants or other
indebtedness.
Challenge to Education Funding. On January 10, 1997, the
Alabama Supreme Court affirmed a lower court ruling which held that an
unconstitutional disparity exists among Alabama's public school districts
because, among other things, of an inequitable distribution of tax funds among
the school districts. In order to comply with the ruling, the Alabama
Legislature continues to restructure the public educational system in Alabama,
subject to review by the state courts. Any reallocation of funds between school
districts arising out of this restructuring could impair the ability of certain
districts to service debt.
INVESTMENT RESTRICTIONS. As noted above, each ISG Fund's investment
objective and policies are similar, although not always identical, to those of
the corresponding AmSouth Fund. In addition, for the most part, the types of
instruments and securities in which they may invest are similar. Likewise, the
fundamental investment restrictions adopted by each ISG Fund and the
corresponding AmSouth Fund, which may be changed only with shareholder approval,
are also similar. However, as summarized below, there are some differences
between these investment restrictions. The following discussion is qualified by
the disclosure on such subjects contained in the AmSouth Prospectuses and the
ISG Prospectuses accompanying and incorporated by reference into this Combined
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Prospectus/Proxy Statement, as well as by the disclosure on such subjects
contained in the Statements of Additional Information of AmSouth and ISG which
are incorporated by reference into this Combined Prospectus/Proxy Statement.
ISG Funds
Each Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted
investment restrictions numbered 1 through 7 as fundamental policies, and only
the Funds so indicated have adopted investment restrictions numbered 8 through
13 as additional fundamental policies. These restrictions cannot be changed, as
to a Fund, without approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting securities. Each Fund, except as
otherwise indicated, has adopted investment restrictions numbered 14 through 19
as non-fundamental policies which may be changed by vote of a majority of ISG's
Directors at any time. No fund may:
1. Invest in commodities, except that each Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
2. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but each Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate.
3. Borrow money , except that each fund may borrow up to 33-1/3% of the
value of its total assets. For purposes of this investment restriction, a Fund's
entry into options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes shall not
constitute borrowing.
4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, each Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and ISG's Board
of Directors.
5. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the 1933 Act by virtue of
disposing of portfolio securities, and except that the Municipal Income Fund,
Tennessee Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt, Tax-Exempt Money
Market Fund, Limited Term Income Fund and Income Fund each may bid separately or
as part of a group for the purchase of Municipal Obligations directly from an
issuer for its own portfolio to take advantage of the lower purchase price
available.
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6. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act). A Fund's permitted borrowings and transactions in futures and
options, to the extent permitted under the 1940 Act, are not considered senior
securities for purposes of this investment restriction.
7. Purchase securities on margin, but each Fund may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indexes, and options on futures contracts
or indexes.
The following investment restrictions numbered 8 and 9 are fundamental
policies which apply only the Prime Money Market Fund. The Prime Money Market
Fund may not:
8. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Prime Money Market Fund's
total assets may be invested without regard to any such limitation, provided
that not more than 10% of its assets may be invested in securities issued or
guaranteed by any single guarantor of obligations held by the Prime Money Market
Fund.
9. Invest less than 25% of its total assets in securities issued by
banks or invest more than 25% of its assets in the securities of issuers in any
other industry, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Notwithstanding the foregoing, for temporary defensive
purposes the Prime Money Market Fund may invest less than 25% of its assets in
bank obligations.
The following investment restriction number 10 is a fundamental policy
which applies to each Fund, except the Strategic Portfolios and Prime Money
Market Fund. None of these Funds may:
10. Invest more than 25% of its assets in the securities of issuers in
any single industry, provided that, in the case of the Municipal Income Fund,
Tennessee Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt Fund and Tax-Exempt
Money Market Fund, there shall be no such limitation on the purchase of
tax-exempt municipal obligations and, in the case of each Fund, there shall be
no limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
The following investment restrictions numbered 11 and 12 are
fundamental policies which apply only to the Large-Cap Equity Fund, Small-Cap
Opportunity Fund, Mid-Cap Fund, Municipal Income Fund and Government Income
Fund. None of these Funds may:
11. With respect to 75% of its total assets, invest more than 5% of its
assets in the obligations of any single issuer. This investment restriction does
not apply to the purchase of U.S. Government securities.
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12. Hold more than 10% of the outstanding voting securities of any
single issuer. This investment restriction applies only with respect to 75% of
the Fund's total assets.
The following investment restriction number 13 is a fundamental policy
which applies only to the Strategic Portfolios. None of the Strategic Portfolios
may:
13. Invest less than 25% of the value of its total assets in securities
issued by investment companies or invest more than 25% of the value of its total
assets in the securities of issuers in any other industry, provided that there
shall be no limitation on the purchase of obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
As non-fundamental policies, no fund may:
14. Invest in the securities of a company for the purpose of exercising
management or control, but each Fund will vote (as provided in ISG's charter)
the securities it owns as a shareholder in accordance with its views.
15. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
16. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% (10% in the case of the Capital Growth, Equity
Income, Income, Limited Term Income, Limited Term U.S. Government, Tennessee
Tax-Exempt, Limited Term Tennessee Tax-Exempt and Money market Funds) of the
value of the Fund's net assets would be so invested.
17. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
The following investment restrictions numbered 18 and 19 are
noon-fundamental policies which apply to each Fund, except the Strategic
Portfolios, Large-Cap Equity Fund, Small-Cap Opportunity Fund, Mid-Cap Fund,
International Equity Fund, Municipal Income Fund, Government Income Fund, Prime
Money Market fund, Government Money market fund, Treasury Money market Fund and
Tax-Exempt Money Market Fund. None of these Funds may:
18. Purchase, sell or write puts, calls or combinations thereof, except
as may be described in the Funds' Prospectus and Statement of Additional
Information.
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19. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) is such
purchase would cause the value of the Fund's investments in all such companies
to exceed 5% of the value of its total assets.
For purposes of Investment Restriction No. 10, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry."
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
AmSouth Funds
AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth
Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth
Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund,
AmSouth Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio,
AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate
Growth and Income Portfolio, and AmSouth Current Income Portfolio.
Each Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted
investment restrictions numbered 1 through 5 as fundamental policies, and only
the Funds so indicated have adopted investment restrictions numbered 6 through 9
as additional fundamental policies. These restrictions cannot be changed, as to
a Fund, without approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting securities. Each Fund, except as
otherwise indicated, has adopted investment restrictions numbered 10 through 13
as non-fundamental policies which may be changed by vote of a majority of the
Trust's Trustees at any time.
AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth
Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth
Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund,
AmSouth Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio,
AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate
Growth and Income Portfolio, and AmSouth Current Income Portfolio.
No Fund may:
1. Purchase or sell commodities, commodity contracts (including futures
contracts with respect to each Fund other than the International Equity, Mid
Cap, Capital Growth, Large Cap, Limited Term U.S. Government, Tennessee
Tax-Exempt, and
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Limited Term Tennessee Tax-Exempt 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 Treasury Reserve Money
Market 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
Mid Cap, Capital Growth, and Large Cap Funds).
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 33 1/3% 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 33 1/3% 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.
4. 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.
5. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act). A Fund's permitted borrowings and transactions in futures and
options, to the extent permitted under the 1940 Act, are not considered senior
securities for purposes of this investment restriction.
The following investment restriction numbered 6 is a fundamental policy
which applies only to the Treasury Reserve Money Market Fund. The Treasury
Reserve Money Market Fund may not:
6. Invest in securities other than those issued or guaranteed by the
U.S. Government or its agencies or instrumentalities or repurchase agreements
related thereto.
The following investment restriction numbered 7 is a fundamental policy
which applies to each of the Tennessee Tax-Exempt and Tennessee Limited Term
Tax-Exempt Funds. Neither of these Funds may:
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7. Purchase any securities which would cause 25% or more of the 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.
The following investment restriction numbered 8 is fundamental for the
Treasury Reserve Money Market, International Equity Fund, Mid Cap Fund, Capital
Growth Fund, Large Cap Fund, Limited Term U.S. Government Fund, Aggressive
Growth Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth
and Income Portfolio, and Current Income Portfolio. None of these Funds may:
8. Purchase any securities which would cause more than 25% of the value
of such 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 Aggressive Growth
Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth and
Income Portfolio, and Current Income Portfolio, there is no limitation with
respect to registered investment companies; (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 following investment restriction numbered 9 is fundamental for the
Mid Cap Fund, Large Cap Fund, Limited Term U.S. Government Fund, Treasury
Reserve Money Market Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth
and Income Portfolio, Moderate Growth and Income Portfolio, and Current Income
Portfolio. No such fund may:
9. 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 or securities of other investment
companies.
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AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth
Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth
Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund,
AmSouth Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio,
AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate
Growth and Income Portfolio, and AmSouth Current Income Portfolio.
None of the Funds may:
10. Invest in the securities of a company for the purpose of exercising
management or control.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Fund's net assets would be so
invested.
12. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
None of the International Equity, Capital Growth, Tennessee Tax-Exempt,
and Limited Term Tennessee Tax-Exempt Funds will:
13. 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 50% of the value of
the 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.
AmSouth Prime Money Market Fund, AmSouth Tax Exempt Fund, AmSouth Municipal Bond
Fund, AmSouth Limited Term Bond Fund, AmSouth Government Income Fund, AmSouth
Bond Fund, AmSouth Small Cap Fund, AmSouth Equity Income Fund:
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 "ADDITIONAL INFORMATION - Miscellaneous" in the
Statement of Additional Information).
The Prime Money Market 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
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purchase, more than 5% of the value of the Prime Money Market Fund's total
assets would be invested in such issuer, except that 25% or less of the value of
the Prime Money Market 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 Money Market 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.
The Tax Exempt Money Market 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 Money Market 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 Money Market 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 Money Market 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 Money Market 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
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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 Term Bond Fund, the Government Income Fund,
the Municipal Bond Fund, the Equity Income Fund and the Small Cap 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 Bond Fund, the Government Income Fund, the Limited Term Bond Fund,
the Municipal Bond Fund, the Equity Income Fund and the Small Cap Fund may not:
1. Purchase any securities which would cause more than 25% of the value
of such Income Fund's, Equity Income Fund's or Small Cap 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 Term Bond 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.
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The Municipal Bond Fund 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 Prime Money Market Fund, the Tax Exempt Fund, the Bond Fund, the
Government Income Fund, the Limited Term Bond Fund, the Municipal Bond Fund, the
Equity Income Fund, and the Small Cap Fund may not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of such Fund's total assets
at the time of its borrowing. A Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
2. Make loans, except that each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, may lend
Fund securities in accordance with its investment objective and policies, and
may enter into repurchase agreements.
None of the AmSouth Prime Money Market Fund, AmSouth Tax Exempt Money
Market Fund, AmSouth Municipal Bond Fund, AmSouth Limited Term Bond Fund,
AmSouth Government Income Fund, AmSouth Bond Fund, AmSouth Small Cap Fund,
AmSouth Equity Income Fund 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 Fund, which may
purchase futures contracts), oil, gas or mineral exploration or development
programs, or real estate (although investments by all of the Funds 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 Small Cap Fund and the Equity
Income 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;
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provided, however, that the Equity Income Fund, the Small Cap Fund and the
Income Funds may purchase securities of a money market fund, including
securities of both the Prime Money Market Fund and the AmSouth Treasury Reserve
Fund (and in the case of the Tax-Free Funds, securities of the Tax Exempt Money
Market Fund) and the Tax Exempt Money Market Fund and the Prime Money Market
Fund may purchase securities of a money market fund which invests primarily in
high quality short-term obligations exempt from federal income tax, if, with
respect to each such Fund, immediately after such purchase, the acquiring Fund,
does not own in the aggregate (i) more than 3% of the acquired company's
outstanding voting securities, (ii) securities issued by the acquired company
having an aggregate value in excess of 5% of the value of the total assets of
the acquiring Fund, or (iii) securities issued by the acquired company and all
other investment companies (other than Treasury stock of the acquiring Fund)
having an aggregate value in excess of 10% of the value of the acquiring Fund's
total assets;
4. Invest in any issuer for purposes of exercising control or
management;
5. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its investment adviser
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities; and
6. Invest more than 10% of total assets in the securities of issuers
which together with any predecessors have a record of less than three years of
continuous operation.
The Prime Money Market Fund may not buy common stocks or voting
securities, or state, municipal, or private activity bonds. The Prime Money
Market Fund, the Tax Exempt Money Market Fund and the Municipal Bond Fund may
not write or purchase call options. None of the Funds may write put options. The
Prime Money Market Fund and the Equity Income Fund may not purchase put options.
The Tax Exempt Money Market Fund and the Municipal Bond Fund 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: The AmSouth Prime
Money Market Fund, AmSouth Tax Exempt Money Market Fund, AmSouth Municipal Bond
Fund, AmSouth Limited Term Bond Fund, AmSouth Government Income Fund, AmSouth
Bond Fund, AmSouth Small Cap Fund,
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AmSouth Equity Income Fund will not 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.
ADDITIONAL INVESTMENT RISKS
Both the ISG and AmSouth money market funds intend to comply with Rule
2a-7 under the 1940 Act. Shares of each Fund are priced pursuant to the
amortized cost method whereby each Fund seeks to maintain its net asset value
per share at $1.00. There can be, however, no assurance that a stable net asset
value of $1.00 per share will be maintained.
Investments by both the ISG Funds and the AmSouth Funds in obligations
of certain agencies and instrumentalities of the U.S. Government may not be
guaranteed by the full faith and credit of the U.S. Treasury, and there can be
no assurance 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.
As in the case of mortgage-related securities, loan participations and
certain asset-backed securities are subject to prepayments and there can be no
assurance that an ISG Fund or an AmSouth Fund will be able to reinvest the
proceeds of any prepayment at the same interest rate or on the same terms as the
original investment.
With regard to loan participations, although an ISG or AmSouth Fund's
ability to receive payments of principal and interest in connection with a
particular loan is primarily dependent on the financial condition of the
underlying borrower, the lending institution or bank may provide assistance in
collecting interest and principal from the borrower and in enforcing its rights
against the borrower in the event of a default. In selecting loan participations
on behalf of an ISG or AmSouth Fund, the Advisor evaluates the creditworthiness
of both the borrower and the loan originator and will treat both as an "issuer"
of the loan participation for purposes of the Fund's investment policies and
restrictions.
Certain risks are inherent in both ISG and AmSouth Tennessee Tax-Exempt
and ISG and AmSouth Limited Term Tennessee Tax-Exempt's concentrated investment
in Tennessee Municipal Securities, which may make an investment in such Funds
riskier than an investment in other types of funds. The Constitution of the
State of Tennessee requires a balanced budget. In 1978, the voters of the State
of Tennessee approved an amendment to the State Constitution requiring that (1)
the total expenditures of the State for any fiscal year may not exceed the
State's revenues and reserves, including the proceeds of debt obligations issued
to finance capital expenditures and (2) in no year may the rate of growth of
appropriations from State tax revenues exceed the estimated rate of growth of
the State's economy. In the past the Governor and the General Assembly have had
to restrict expenditures to comply with the State Constitution.
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Tennessee's fiscal year 1997-98 budget completed a six year plan for
funding of improvements in the Basic Education Program for public schools and of
teacher salary equalization, funded certain crime legislation aimed at juvenile
crime, and expanded TennCare enrollment to all children without access to health
insurance. The reduction in retirement contributions sufficient to fund
contingency appropriations for a compound cost-of-living retirement adjustment,
a 3.6% retirement adjustment, and a 1.5% salary increase for state employees,
teachers and higher education was confirmed effective January 1, 1998. The
General Assembly approved $60.8 million in general obligation bonds (excluding
highway bonds), of which $24.8 million was for higher education projects, to
fund part of the $93.1 million capital projects program.
A budget transfer of $43 million from the Tennessee Housing Development
Agency dedicated tax revenues, reserves and other funds was made as of June 30,
1998, to the State's General Fund. Such transfer did not impact the ratings on
the Agency's outstanding debt.
The Governor's $15.4 billion budget for fiscal year 1998-99 was amended
and approved April 29, 1998. The budget includes a 1,049 reduction in then
existing staff positions and an increase of 406 positions necessary for
recommended improvements. The base budget includes a $57.1 million reduction in
expenditures from General Fund taxes ($66.2 million from all tax sources). The
improvement budget of $370 million from General Fund taxes includes $66.3
million for the Basic Education Program for public schools; $20.3 million for
higher education operating budgets; $67.8 million for TennCare; $21 million for
new prison beds and operating requirements; and a 2% salary increase effective
January 1, 1999. The Governor recommended and the General Assembly passed $265.5
million in general obligation bonds (excluding highway bonds), of which $196.2
million is for higher education projects, to fund part of the $322.7 million
capital projects program.
On February 8, 1999, the Funding Board reported to the Governor and the
Chairmen of the Finance, Ways & Means Committees of the Tennessee General
Assembly its revised consensus revenue estimates for fiscal year 1998-99 and the
first estimates for fiscal year 1999-2000, which became the basis for the fiscal
year 1998-99 revised estimates and the estimates for fiscal year 1999-2000. The
growth estimates for fiscal year 1998-99 for the General Fund taxes range from
2.25% to 2.75% and for all tax collections range from 2.5% to 3.0%. The budget
document for fiscal year 1999-2000 estimates growth of 2.43% in 1998-99 which is
$69.8 million less than the budgeted estimate. The shortfall is offset by fiscal
year 1997-98's surplus and available reserves in the current year.
Revenue collections for the six months of August 1998 through January
1999 increased by 3.36% over the same period last year. General Fund collections
are $2.6 billion which is $20.2 million less than budgeted. The undercollection
was in the franchise and excise taxes.
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The estimated financial effects of the Governor's proposed "Tax Relief
& Fairness Act of 1999", which repeals the sales tax on grocery food and
replaces the franchise and excise taxes with the "fair business tax" -a 2.5% tax
on business compensation and profits (with a $50,000 exemption on each), are
included in the 1999-2000 budget. The budget contemplates a net revenue increase
from the 1999 Tax Bill of $406 million in General Fund revenue consisting of
$40.6 million to the Reserve for Revenue Fluctuations and $365.4 million to fund
the 1999-2000 budget.
The $16.568 billion budget recommended for fiscal year 1999-2000
includes no growth in positions. The base budget includes $42.3 million to fund
supplemental appropriations. The improvement budget of $416 million from general
fund taxes includes $68.9 million for the Basic Education Program for public
schools; $25.6 million for higher education operating budgets; $142.3 million
for TennCare; $13.6 million for new prison beds and local jail beds; $20 million
for state employee compensation issues; and $26 million for a 1.7% salary
increase effective January 1, 2000 for state employees, teachers and higher
education employees. The Governor recommended $166.5 million in general
obligation bonds (excluding highway bonds), of which $75.9 million is for higher
education projects, to fund part of the $246.9 million capital projects program.
Investment in ISG Capital Growth, AmSouth Capital Growth, ISG Equity
Income and AmSouth Equity Income entails certain risks. These Funds are
permitted to invest, to a limited extent, in securities rated as low as Ba by
Moody's or BB by S&P, Fitch or Duff. Such securities, though higher yielding,
are characterized by risk. Although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate the market value
risk of these securities. The Fund will rely on the Adviser's judgment, analysis
and experience in evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities are considered
by S&P, Moody's, Fitch and Duff generally to be predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.
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Because there is no established retail secondary market for many of
these securities, the Funds anticipate that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Funds' ability to dispose of particular issues when necessary to meet its
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing its securities
and calculating its net asset value. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of these securities. In such cases, judgment may play a greater role
in valuation because less reliable, objective data may be available.
These securities may be particularly susceptible to economic downturns.
It is likely that an economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such securities.
In addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
ISG Capital Growth, AmSouth Capital Growth, ISG Equity Income and
AmSouth Equity Income may acquire these securities during an initial offering.
Such securities may involve special risks because they are new issues. The Funds
do not have any arrangement with any persons concerning the acquisition of such
securities, and the Adviser will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities. Such zero coupon securities carry an
additional risk in that, unlike securities which pay interest throughout the
period to maturity, the Funds will realize no cash until the cash payment date
unless a portion of such securities are sold and, if the issuer defaults, the
Funds may obtain no return at all on its investment.
Regarding ISG Capital Growth, AmSouth Capital Growth, ISG Limited Term
U.S. Government, AmSouth Limited Term U.S. Government, ISG Equity Income,
AmSouth Equity Income, ISG Limited Term Income, AmSouth Limited Term Bond, ISG
Income, AmSouth Bond, ISG Government Income and AmSouth Government Income,
mortgage-related securities in which these Funds may invest are complex
derivative instruments, subject to both credit and prepayment risk, and may be
more volatile and less liquid than more traditional debt securities. Some
mortgage-related securities have structures that make their reactions to
interest rate changes and other factors difficult to predict, making their value
highly volatile. No assurance can be given as to the liquidity of the market for
certain mortgage-backed securities, such as collateralized mortgage obligations
and stripped mortgage-backed securities. Determination as to the liquidity of
interest-only and principal-only fixed mortgage-backed securities issued by the
U.S. Government or its
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agencies and instrumentalities will be made in accordance with guidelines
established by the Trust's Board of Directors. In accordance with such
guidelines, the Adviser will monitor investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. The Fund intends to treat other
stripped mortgage-backed securities as illiquid securities.
Mortgage-related securities are subject to credit risks associated with
the performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although commercial
mortgages typically have shorter maturities than residential mortgages and
prepayment protection features. In certain instances, the credit risk associated
with mortgage-related securities can be reduced by third party guarantees or
other forms of credit support. Improved credit risk does not reduce prepayment
risk which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk can lead to fluctuations in value of the mortgage-related
security which may be pronounced. If a mortgage-related security is purchased at
a premium, all or part of the premium may be lost if there is a decline in the
market value of the security, whether resulting from changes in interest rates
or prepayments in the underlying mortgage collateral. Certain mortgage-related
securities that may be purchased by the Funds, such as inverse floating rate
collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in a form of leverage. As with
other interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However, though
the value of a mortgage-related security may decline when interest rates rise,
the converse is not necessarily true, since in periods of declining interest
rates the mortgages underlying the security are more likely to be prepaid. For
this and other reasons, a mortgage-related security's stated maturity may be
shortened by unscheduled prepayments on the underlying mortgages, and,
therefore, it is not possible to predict accurately the security's return to the
Funds. Moreover, with respect to certain stripped mortgage-backed securities, if
the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Funds may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating category. During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity which generally would cause the value of such security to fluctuate
more widely in response to changes in interest rates. Were the prepayments on
the Fund's mortgage-related securities to decrease significantly, the Funds'
effective duration, and thus sensitivity to interest rate fluctuations, would
increase.
Regarding all ISG and AmSouth Funds except the Strategic Portfolios,
investment decisions for each Fund are made independently from those of the
other investment companies, investment advisory accounts, custodial accounts,
individual trust accounts and commingled funds that may be advised by the
Adviser or, if applicable, sub-investment
B-53
<PAGE> 227
adviser. However, if such other investment companies or managed accounts desire
to invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each of
them. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by a Fund or the price paid or received by
a Fund.
B-54
<PAGE> 228
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
1. BASIS OF COMBINATION:
---------------------
The unaudited Pro Forma Combining Statements of Assets and Liabilities,
Statements of Operations, and Schedules of Portfolio Investments reflect the
accounts of eight investment portfolios offered by the AmSouth Funds (the
"AmSouth Funds"): AmSouth Prime Money Market Fund, the AmSouth Tax-Exempt Money
Market Fund, the AmSouth Limited Term Bond Fund, the AmSouth Government Income
Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth Equity
Income Fund and the AmSouth Small Cap Fund (the "AmSouth Funds") and eight
investment portfolios offered by the Infinity Mutual Funds, Inc., ISG Funds: the
ISG Prime Money Market Fund, the ISG Tax-Exempt Money Market Fund, the ISG
Limited Term Income Fund, the ISG Government Income Fund, the ISG Income Fund,
the ISG Municipal Income Fund, the ISG Equity Income Fund, and the ISG Small-Cap
Opportunity Fund (the "ISG Funds"), (collectively, the "Funds" and individually
a "Fund") as if the proposed reorganization occurred as of and for the 12 month
period ended July 31, 1999. These statements have been derived from books and
records utilized in calculating daily net asset value at July 31, 1999.
The Reorganization Agreement provides that on the Closing Date of the
Reorganization, all of the assets and liabilities will be transferred as follows
such that at and after the Reorganization, the assets and liabilities of the
applicable ISG Funds will become the assets and liabilities of the corresponding
AmSouth Fund (see table below):
<TABLE>
<S> <C>
ISG Prime Money Market Fund AmSouth Prime Money Market Fund
ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund
ISG Limited Term Income Fund AmSouth Limited Term Bond Fund
ISG Government Income Fund AmSouth Government Income Fund
ISG Income Fund AmSouth Bond Fund
ISG Municipal Income Fund AmSouth Municipal Bond Fund
ISG Equity Income Fund AmSouth Equity Income Fund
ISG Small-Cap Opportunity AmSouth Small Cap Fund
</TABLE>
In exchange for the transfer of assets and liabilities, the Company
will issue to the ISG Funds full and fractional shares of the corresponding
AmSouth Funds, and the ISG Funds will make a liquidating distribution of such
shares to its shareholders. The number of shares of the AmSouth Funds so issued
will be equal in value to the full and fractional shares of the ISG Funds that
are outstanding immediately prior to the Reorganization. At and after the
Reorganization, all debts, liabilities and obligations of ISG Funds will attach
to the AmSouth Funds and may thereafter be enforced against the AmSouth Funds to
the same extent as if the AmSouth Funds had incurred them. The pro forma
statements give effect to the proposed transfer described above.
Under the purchase method of accounting for business combinations under
generally
(CONTINUED)
B-55
<PAGE> 229
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
accepted accounting principles, the basis on the part of the AmSouth
Funds, of the assets of the ISG Funds will be the fair market value of such
assets on the Closing Date of the Reorganization. The AmSouth Funds will
recognize no gain or loss for federal tax purposes on its issuance of shares in
the Reorganization, and the basis to the AmSouth Funds of the assets of the ISG
Funds received pursuant to the Reorganization will equal the fair market value
of the consideration furnished, and costs incurred, by the AmSouth Funds in the
Reorganization -- i.e., the sum of the liabilities assumed, the fair market
value of the AmSouth Funds shares issued, and such costs. For accounting
purposes, the AmSouth Funds are the surviving portfolios of this Reorganization,
except for the ISG Equity Income Fund and the AmSouth Equity Income Fund, where
the ISG Fund will be the accounting survivor. The pro forma statements reflect
the combined results of operations of the ISG Funds and the AmSouth Funds.
However, should such Reorganization be effected, the statements of operations of
the AmSouth Funds will not be restated for pre-combination period results of the
corresponding ISG Funds.
The Pro Forma Combining Statements of Assets and Liabilities,
Statements of Operations, and Schedules of Portfolio Investments should be read
in conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The AmSouth Funds and the ISG Funds are each separate portfolios of the
AmSouth Mutual Funds and The Infinity Mutual Funds, Inc, respectively, which are
registered as open-end management companies under the Investment Company Act of
1940. The investment objectives of each fund are listed below.
AmSouth Prime Money Market Funds seeks current income with liquidity
and stability of principal.
ISG Prime Money Market Fund seeks to provide investors with as high a
level of current income as is consistent with the preservation of
capital and the maintenance of liquidity.
AmSouth Tax-Exempt Money Market 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.
ISG Tax-Exempt Money Market Fund seeks to provide investors with as
high a level of current income exempt from Federal income tax as is
consistent with the preservation of capital and the maintenance of
liquidity.
AmSouth Limited Term Bond Fund seeks current income, consistent with
the preservation of capital.
ISG Limited Term Income Fund seeks to provide investors with current
income without
(CONTINUED)
B-56
<PAGE> 230
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
assuming undue risk.
AmSouth Government Income Fund seeks current income consistent with the
preservation of capital.
ISG Government Income Fund seeks to provide investors with current
income.
AmSouth Bond Fund seeks current income consistent with the
preservation of capital
ISG Income Fund seeks to provide investor with current income without
assuming undue risk.
AmSouth Municipal Bond Fund seeks to provide as high a level of current
interest income exempt from Federal income taxes as is consistent with
the preservation of capital.
ISG Municipal Income Fund seeks to provide investors with dividend
income exempt from Federal income tax.
AmSouth Equity Income Fund seeks above average income and capital
appreciation.
ISG Equity Income Fund seeks to provide investor with current income
and capital appreciation.
AmSouth Small Cap Fund seeks capital appreciation.
ISG Small-Cap Opportunity Fund seeks to provide investors with capital
appreciation.
EXPENSES
--------
AmSouth Bank serves as the AmSouth Funds' investment advisor and
custodian. Rockhaven Asset Management, LLC, serves as sub-investment advisor to
the AmSouth Equity Income Fund. Sawgrass Assets Management, LLC serves as
sub-investment advisor to the AmSouth Small Cap Fund. ASO Services Company
("ASO") serves as the administrator and mutual fund accountant for the AmSouth
Funds. AmSouth and BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services (BISYS) serve as sub-administrators to the AmSouth Funds. BISYS Fund
Services Ohio ("BISYS Ohio") serves as the transfer and dividend disbursing
agent for the AmSouth Funds. ASO, BISYS and BISYS Ohio are subsidiaries of The
BISYS Group, Inc.
ISG Funds:
- ----------
(CONTINUED)
B-57
<PAGE> 231
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
The ISG Funds issue three classes of shares, Institutional Shares,
Class A Shares and Class B Shares (except for the Tax-Exempt Money Market Fund
which does not offer Class B Shares), which have rights and privileges analogous
to those of the AmSouth Funds' Trust Shares, Class A Shares and Class B Shares,
respectively.
Under the terms of the investment advisory agreement between the ISG
Funds and First American National Bank ("FANB"), FANB is entitled to receive
fees computed at an annual rate based on each Fund's average daily net assets
(see table below). Such fees are accrued daily and paid monthly. For the period
from August 1, 1998 to December 13, 1999, ParkSouth Corporation (ParkSouth) was
the investment advisor to the DG Prime Money Market Fund (now the ISG Money
Market Fund), the DG Municipal Income Fund (now the ISG Municipal Income Fund)
and the DG Opportunity Fund (now the ISG Small-Cap Opportunity Fund). ParkSouth
received a fee for its services at an annual rate of 0.50%, 0.60% and 0.95% of
each respective Fund's daily average net assets. Womack Asset Management, Inc.
serves as the sub-investment advisor to the ISG Small-Cap Opportunity Fund and
receives a fee from FANB paid at the annual rate of 0.35% of the Fund's average
daily net assets. For the year ended July 31, 1999, total investment advisory
fees incurred by the ISG Funds were as follows:
<TABLE>
<CAPTION>
Percentage Fee Total Fees Fees Waived
-------------- ---------- -----------
<S> <C> <C> <C>
Prime Money Market* 0.25%
Tax-Exempt Money Market 0.35%
Limited Term Income 0.50%
Government Income 0.60%
Income 0.50%
Municipal Income* 0.60%
Equity Income 0.65%
Small-Cap Opportunity* 0.95%
</TABLE>
* Amounts include fees incurred by the funds payable to ParkSouth for the period
of August 1, 1998 to December 13, 1998.
AmSouth Funds:
- --------------
The AmSouth Funds offer three classes of shares: Trust Shares, Class A
Shares and B Shares (except for the Tax-Exempt Money Market Fund and Government
Income Fund which do not offer B Shares; effective with the Closing Date of the
Reorganization, the Government Income Fund will offer B Shares. For pro forma
purposes, the Combining Pro Forma Statement of Assets and Liabilities and
Statement of Operations include B Share operations for the period presented for
the Government Income Fund). Each class of shares has identical rights and
privileges except with respect to fees paid under shareholder servicing or
distribution plans, expenses allocable exclusively to each class of shares,
voting rights on matters affecting a single class of shares, and the exchange
(CONTINUED)
B-58
<PAGE> 232
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
privilege of each class of shares. Class A Shares are subject to an initial
sales charge upon purchase. Class B Shares are subject to a contingent deferred
sales change (CDSC) upon redemption.
Under the terms of the investment advisory agreement, AmSouth Bank is
entitled to receive fees computed at the annual rate based on each Fund's
average daily net assets (see table below). Rockhaven Asset Management, LLC,
serves as sub-investment advisor to the AmSouth Equity Income Fund and receives
an annual fee from AmSouth Bank of 0.48% of the average daily net assets of the
Fund. Sawgrass Assets Management, LLC serves as sub-investment advisor to the
AmSouth Small Cap Fund and receives an annual fee from AmSouth Bank of 0.84% of
the average daily net assets of the Fund. Such fees are accrued daily and paid
monthly. For the 12 month period ended July 31, 1999, total investment advisory
fees incurred by the AmSouth Funds were as follows:
<TABLE>
<CAPTION>
Percentage Fee Total Fees Fees Waived
-------------- ---------- -----------
<S> <C> <C> <C>
Prime Money Market 0.40% $2,765 -
Tax-Exempt Money Market 0.40% 383 $192
Limited Term Bond 0.65% 735 170
Government Income 0.65% 62 33
Bond 0.65% 2,319 535
Municipal Bond 0.65% 2,121 816
Equity Income 0.80% 325 -
Small Cap 1.20% 127 -
</TABLE>
Under the terms of the administration agreement, ASO's fees are
computed at the annual rate of 0.20% of each Fund's daily average net assets.
For the the 12 month period ended July 31, 1999, the administration fees
incurred by the AmSouth Funds were as follows:
<TABLE>
<CAPTION>
Total Fees Fees Waived
---------- -----------
<S> <C> <C>
Prime Money Market $1,383 -
Tax-Exempt Money Market 192 -
Limited Term Bond 226 $90
Government Income 19 10
Bond 714 285
Municipal Bond 653 261
Equity Income 81 -
Small Cap 21 21
</TABLE>
(CONTINUED)
B-59
<PAGE> 233
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
PRO FORMA ADJUSTMENTS AND PRO FORMA COMBINED COLUMNS
----------------------------------------------------
The pro forma adjustments and pro forma combined columns of the
Statements of Operations reflect the adjustments necessary to show expenses at
the rates which would have been in effect if the ISG Funds were included in the
AmSouth Funds for the 12 month period ended July 31, 1999. Investment advisory,
administration, 12b-1, shareholder service, accounting and custodian fees in the
pro forma combined column are calculated at the rates in effect for the AmSouth
Funds based upon the combined net assets of the corresponding ISG Funds and the
AmSouth Funds. Certain pro forma adjustments were made to estimate the benefit
of combining operations of separate funds into one survivor fund.
The pro forma Schedules of Portfolio Investments give effect to the
proposed transfer of such assets as if the Reorganization had occurred at July
31, 1999.
2. PORTFOLIO VALUATION, SECURITIES TRANSACTIONS AND RELATED INCOME:
----------------------------------------------------------------
Investments of the Prime Money Market and Tax-Exempt Money Market Funds
are valued at either amortized cost, which approximates market value, or at
original cost which, combined with accrued interest, approximates market value.
Under the amortized cost method, discount or premium is amortized on a constant
basis to the maturity of the security.
Investments in common stocks, corporate bonds, municipal bonds,
commercial paper and U.S. Government securities of the remaining Funds are
valued on the basis of valuations provided by dealers or an independent pricing
service approved by the Board of Trustees. Investments in investment companies
are valued at their net asset values as reported by such companies. The
differences between cost and market values of such investments are reflected as
unrealized appreciation or depreciation.
Security transactions are recorded on trade date. Realized gains and
losses from sales of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, is accrued daily. Dividend income is recorded on the ex-dividend
date.
3. CAPITAL SHARES:
---------------
The pro forma net asset values per share assume the issuance of shares
of the AmSouth Funds, which would have occurred at July 31, 1999 in connection
with the proposed reorganization. The pro forma number of shares outstanding
consists of the following:
(CONTINUED)
B-60
<PAGE> 234
AMSOUTH FUNDS
ISG FUNDS
Note to Pro Forma Financial Statements
(Unaudited)
-------
<TABLE>
<CAPTION>
- ----------------------------------------- -------------------- ------------------------ -----------------------
Shares Additional Shares
Outstanding at Assumed in the Pro Forma Shares
July 31, 1999 Reorganization at July 31, 1999
(000's) (000's) (000's)
- ----------------------------------------- -------------------- ------------------------ -----------------------
<S> <C> <C> <C>
Prime Money Market 673,222
- ----------------------------------------- -------------------- ------------------------ -----------------------
Tax-Exempt Money Market 96,725
- ----------------------------------------- -------------------- ------------------------ -----------------------
Limited Term Bond 11,067
- ----------------------------------------- -------------------- ------------------------ -----------------------
Government Income 893
- ----------------------------------------- -------------------- ------------------------ -----------------------
Bond 36,681
- ----------------------------------------- -------------------- ------------------------ -----------------------
Municipal Bond 32,832
- ----------------------------------------- -------------------- ------------------------ -----------------------
Equity Income 3,082
- ----------------------------------------- -------------------- ------------------------ -----------------------
Small Cap 2,821
- ----------------------------------------- -------------------- ------------------------ -----------------------
</TABLE>
(CONTINUED)
B-61
<PAGE> 235
AMSOUTH SMALL CAP FUND
ISG SMALL-CAP OPPORTUNITY FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 07/31/99
(UNAUDITED)
<TABLE>
<CAPTION>
ISG PRO FORMA
AMSOUTH SMALL-CAP PRO FORMA COMBINED
SMALL CAP OPPORTUNITY ADJUSTMENTS (NOTE 1)
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value
(cost $21,396 and $91,042, respectively) $ 24,019 $ 102,507 $ -- $ 126,526
Interest and dividends receivable 2 12 -- 14
Receivable for capital shares sold 12 -- -- 12
Receivable from investment adviser -- 22 -- 22
Receivable from brokers for investments sold 1,343 421 -- 1,764
Other assets 6 25 -- 31
---------- ---------- ---------- ----------
TOTAL ASSETS 25,382 102,987 -- 128,369
---------- ---------- ---------- ----------
LIABILITIES:
Payable for capital shares redeemed -- 1 -- 1
Payable to brokers for investments purchased 1,584 394 -- 1,978
Accrued expenses:
Advisory fees 12 88 -- 100
Administration fees -- 2 -- 2
Distribution fees 1 14 -- 15
Accounting fees -- 1 -- 1
Transfer agent fees 1 4 -- 5
Custodian fees -- 4 -- 4
Other 5 15 -- 20
---------- ---------- ---------- ----------
TOTAL LIABILITIES 1,603 523 -- 2,126
---------- ---------- ---------- ----------
NET ASSETS
Class A Shares 1,073 9,649 -- 10,722
Class B Shares 929 311 -- 1,240
Institutional Shares 21,777 92,504 -- 114,281
========== ========== ========== ==========
$ 23,779 $ 102,464 $ -- $ 126,243
========== ========== ========== ==========
CAPITAL SHARES OUTSTANDING
Class A Shares 128 723 426 (a) 1,277
Class B Shares 112 23 14 (a) 149
Institutional Shares 2,581 6,932 4,028 (a) 13,541
========== ========== ========== ==========
2,821 7,678 4,468 (a) 14,967
========== ========== ========== ==========
NET ASSET VALUE
Class A Shares - redemption price per share $ 8.40 $ 13.36 $ 8.40
---------- ---------- ==========
Class A Shares - maximum sales charge 4.50% 4.75% 4.50%
---------- ---------- ==========
Class A Shares - POP $ 8.80 $ 14.03 $ 8.80
========== ========== ==========
Class B Shares - offering price per share* $ 8.31 $ 13.28 $ 8.31
========== ========== ==========
Institutional Shares - offering and redemption
price per share $ 8.44 $ 13.35 $ 8.44
========== ========== ==========
COMPOSITION OF NET ASSETS
Capital $ 23,927 $ 96,999 $ -- $ 120,926
Undistributed (distributions in excess of) (1) (1,225) -- (1,226)
net investment income
Undistributed net realized gains/(loss) (2,770) (4,775) -- (7,545)
from investment transactions
Net unrealized appreciation of investments 2,623 11,465 -- 14,088
---------- ---------- ---------- ----------
NET ASSETS, JULY 31, 1999 $ 23,779 $ 102,464 $ -- $ 126,243
========== ========== ========== ==========
</TABLE>
* Redemption price per share varies by length of time shares are held.
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
B-62
<PAGE> 236
AMSOUTH SMALL CAP FUND
ISG SMALL-CAP OPPORTUNITY FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 07/31/99
(UNAUDITED)
<TABLE>
<CAPTION>
ISG PRO FORMA
AMSOUTH SMALL-CAP PRO FORMA COMBINED
SMALL CAP OPPORTUNITY ADJUSTMENTS (NOTE 1)
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 37 $ 584 $ -- $ 621
Dividend Income 24 144 -- 168
Income from securities lending -- 7 (7)(m) --
-------- -------- -------- --------
61 735 (7) 789
-------- -------- -------- --------
EXPENSES:
Advisory fees 127 948 250 (a) 1,325
Administration fees 21 131 69 (b) 221
Shareholder servicing fees (Class A Shares) 3 65 43 (c) 111
Shareholder servicing fees (Class B Shares) -- -- 2 (d) 2
Shareholder servicing fees (Institutional Shares) -- 85 13 (e) 98
12b-1 fees (Class A Shares) -- 19 (19)(f) --
12b-1 fees (Class B Shares) 9 1 (3)(g) 7
Accounting fees 54 34 (65)(h) 23
Transfer agent fees 33 78 (49)(i) 62
Custodian fees 1 10 19 (j) 30
Trustee fees and expenses -- 1 -- 1
Other expenses 17 87 (29)(k) 75
-------- -------- -------- --------
TOTAL EXPENSES: 265 1,459 232 1,956
Less Waivers
Advisory fees -- -- -- --
Administration fees (21) -- 21 (b) --
12b-1 fees (Class A Shares) -- (19) 19 (f) --
Accounting Fees (50) -- 50 (h) --
Transfer agent fees (30) -- 30 (i) --
Reimbursements (4) (79) 83 (l) --
-------- -------- -------- --------
NET EXPENSES: 160 1,361 435 1,956
-------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) (99) (626) (442) (1,167)
-------- -------- -------- --------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
Investments:
Net realized gains (losses) from investment transactions (2,191) (3,660) -- (5,851)
Net change in unrealized appreciation (depreciation)
from investments 2,703 -- -- 2,703
-------- -------- -------- --------
Net realized/unrealized gains (losses) from investments 512 (3,660) -- (3,148)
Change in net assets resulting from
======== ======== ======== ========
Operations: $ 413 $ (4,286) $ (442) $ (4,315)
======== ======== ======== ========
</TABLE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for
Advisory fees (1.20% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.25% of Class B net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.15% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for
12b-1 fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for
12b-1 fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for
Accounting fees ($10,000 a year per additional class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for
Transfer agent fees (0.015% of net assets + $10,000 a year per
class + OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for
Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
(m) Adjustment to reflect no securities lending income since there is
not a securities lending program set up on the AmSouth Funds.
B-63
<PAGE> 237
AMSOUTH SMALL CAP FUND
ISG SMALL-CAP OPPORTUNITY FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG SMALL-CAP PRO FORMA
SMALL CAP OPPORTUNITY COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- ----------------------------- --------------------- -----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (91.4%):
Airlines (0.1%):
22,900 22,900 Airtran Holdings, Inc. (b)
APPAREL (2.2%):
83,000 83,000 Jones Apparel Group, Inc. (b)
AUTOMOTIVE (1.1%):
28,900 28,900 Copart, Inc. (b)
24,150 24,150 Monaco Coach Corp. (b)
BUSINESS SERVICES (2.9%):
93,700 93,700 Comforce Corp. (b)
95,000 95,000 MasTec, Inc. (b)
COMMERCIAL SERVICES (0.6%):
23,100 23,100 Dollar Thrifty Automotive Group (b)
7,500 7,500 Plexus Corp. (b)
COMPUTER HARDWARE (1.0%):
94,000 94,000 Data General Corp. (b)
COMPUTER SOFTWARE (2.9%):
3,500 3,500 Computer Network Tech Co. (b)
12,900 12,900 Credence Systems Corp. (b)
21,900 21,900 Handleman Co. (b)
10,800 10,800 Mercury Interactive Corp. (b)
12,600 12,600 Pinnacle Systems, Inc (b)
69,000 69,000 THQ, Inc. (b)
COMPUTERS & PERIPHERALS (3.6%):
17,400 17,400 Cybex Computer Products Corp. (b)
171,800 171,800 Datastream Systems, Inc.
5,600 5,600 Kronos, Inc. (b)
8,000 8,000 Lam Research Corp. (b)
46,100 46,100 Sybase, Inc. (b)
11,600 11,600 Verity, Inc. (b)
CONSTRUCTION (0.9%):
10,900 10,900 Dycom Industries, Inc. (b)
25,700 25,700 Insituform Technologies, Class A (b)
</TABLE>
<TABLE>
<CAPTION>
ISG
AMSOUTH AMSOUTH SMALL-CAP PRO FORMA
SMALL CAP SMALL CAP OPPORTUNITY COMBINED
PRINCIPAL MARKET MARKET MARKET
AMOUNT/SHARES VALUE VALUE VALUE
--------------------- -------------------- --------------------- -------------------
<S> <C> <C> <C>
COMMON STOCKS (91.4%):
Airlines (0.1%):
22,900 $ 147 $ - $ 147
-------------------- --------------------- -------------------
APPAREL (2.2%):
- 2,729 2,729
-------------------- --------------------- -------------------
AUTOMOTIVE (1.1%):
28,900 694 694
24,150 638 638
-------------------- --------------------- -------------------
1,332 - 1,332
-------------------- --------------------- -------------------
BUSINESS SERVICES (2.9%):
228 228
3,385 3,385
-------------------- --------------------- -------------------
- 3,613 3,613
-------------------- --------------------- -------------------
COMMERCIAL SERVICES (0.6%):
23,100 497 497
7,500 240 240
-------------------- --------------------- -------------------
737 - 737
-------------------- --------------------- -------------------
COMPUTER HARDWARE (1.0%):
- 1,310 1,310
-------------------- --------------------- -------------------
COMPUTER SOFTWARE (2.9%):
3,500 51 51
12,900 535 535
21,900 245 245
10,800 498 498
12,600 367 367
1,936 1,936
-------------------- --------------------- -------------------
1,696 1,936 3,632
-------------------- --------------------- -------------------
COMPUTERS & PERIPHERALS (3.6%):
17,400 463 463
2,308 2,308
5,600 271 271
8,000 443 443
46,100 473 473
11,600 574 574
-------------------- --------------------- -------------------
2,224 2,308 4,532
-------------------- --------------------- -------------------
CONSTRUCTION (0.9%):
10,900 520 520
25,700 559 559
-------------------- --------------------- -------------------
1,079 - 1,079
-------------------- --------------------- -------------------
</TABLE>
B-64
<PAGE> 238
<TABLE>
<S> <C> <C> <C>
CONSTRUCTION-MANUFACTURED HOMES (2.1%):
207,000 207,000 Clayton Homes, Inc.
18,000 18,000 Ryland Group, Inc.
DIVERSIFIED MANUFACTURING (0.6%):
20,550 20,550 Labor Ready, Inc. (b)
27,600 27,600 WMS Industries, Inc. (b)
ELECTRICAL & ELECTRONIC (1.2%):
8,900 8,900 Advanced Digital Info Corp. (b)
18,400 18,400 Aeroflex, Inc. (b)
3,200 3,200 Cree Research, Inc. (b)
12,000 12,000 DII Group, Inc. (b)
9,400 9,400 Mentor Graphics Corp. (b)
1,400 1,400 Optical Coating Laboratory
ENTERTAINMENT (0.3%):
40,000 40,000 Aztar Corp. (b)
FINANCIAL SERVICES (5.4%):
18,100 18,100 Hambrecht & Quist Group (b)
13,400 13,400 Legg Mason, Inc.
137,000 137,000 Morgan Keegan, Inc.
95,200 95,200 T. Rowe Price Associates
FOOD PROCESSING & PACKAGING (2.9%):
18,500 18,500 Foodmaker, Inc. (b)
125,000 125,000 Hain Food Group, Inc. (b)
FOREST & PAPER PRODUCTS (0.2%):
19,000 19,000 Longview Fibre Co.
HEALTH CARE (3.9%):
17,500 17,500 Cytyc Corp. (b)
19,000 19,000 Hooper Holmes, Inc.
8,800 4,000 12,800 Infocure Corp. (b)
114,500 114,500 Neotherapeutics, Inc. (b)
225,000 225,000 PSS World Medical, Inc. (b)
HOUSEHOLD PRODUCTS/WARES (0.5%):
12,700 12,700 Fossil, Inc. (b)
MACHINERY & EQUIPMENT (1.0%):
134,000 134,000 AGCO Corp.
MACHINERY-CONSTRUCTION (3.3%):
6,600 6,600 Astec Industries, Inc. (b)
129,700 129,700 Terex Corp. (b)
MACHINERY-DIVERSIFIED (0.1%):
1,600 1,600 Tecumseh Products, Inc.
MEDIA (0.3%):
11,550 11,550 Valassis Communications, Inc. (b)
</TABLE>
<TABLE>
<S> <C> <C> <C>
CONSTRUCTION-MANUFACTURED HOMES (2.1%):
2,173 2,173
18,000 502 502
------------------- --------------------- -------------------
502 2,173 2,675
------------------- --------------------- -------------------
DIVERSIFIED MANUFACTURING (0.6%):
20,550 353 353
27,600 425 425
------------------- --------------------- -------------------
778 - 778
------------------- --------------------- -------------------
ELECTRICAL & ELECTRONIC (1.2%):
8,900 378 378
18,400 348 348
3,200 198 198
12,000 445 445
9,400 95 95
1,400 100 100
------------------- --------------------- -------------------
1,564 - 1,564
------------------- --------------------- -------------------
ENTERTAINMENT (0.3%):
40,000 373 - 373
------------------- --------------------- -------------------
FINANCIAL SERVICES (5.4%):
18,100 681 681
13,400 469 469
2,380 2,380
3,332 3,332
------------------- --------------------- -------------------
1,150 5,712 6,862
------------------- --------------------- -------------------
FOOD PROCESSING & PACKAGING (2.9%):
18,500 506 506
3,149 3,149
------------------- --------------------- -------------------
506 3,149 3,655
------------------- --------------------- -------------------
FOREST & PAPER PRODUCTS (0.2%):
19,000 310 - 310
------------------- --------------------- -------------------
HEALTH CARE (3.9%):
17,500 431 431
19,000 375 375
8,800 472 214 686
1,159 1,159
2,321 2,321
------------------- --------------------- -------------------
1,278 3,694 4,972
------------------- --------------------- -------------------
HOUSEHOLD PRODUCTS/WARES (0.5%):
12,700 667 - 667
------------------- --------------------- -------------------
MACHINERY & EQUIPMENT (1.0%):
- 1,256 1,256
------------------- --------------------- -------------------
MACHINERY-CONSTRUCTION (3.3%):
6,600 225 225
3,891 3,891
------------------- --------------------- -------------------
225 3,891 4,116
------------------- --------------------- -------------------
MACHINERY-DIVERSIFIED (0.1%):
1,600 103 - 103
------------------- --------------------- -------------------
MEDIA (0.3%):
11,550 430 - 430
------------------- --------------------- -------------------
</TABLE>
B-65
<PAGE> 239
<TABLE>
<S> <C> <C> <C>
MEDICAL EQUIPMENT & SUPPLIES (0.9%):
110,000 110,000 ATS Medical, Inc. (b)
MEDICAL SERVICES (4.3%):
295,000 295,000 MedPartners, Inc. (b)
13,100 13,100 Medquist, Inc. (b)
115,000 115,000 Res-Care, Inc. (b)
OFFICE EQUIPMENT & SERVICES (0.2%):
7,000 7,000 Clarify, Inc. (b)
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (8.1%):
15,100 15,100 Basin Exploration, Inc. (b)
26,500 133,000 159,500 Forest Oil Corp. (b)
148,000 148,000 Gulf Island Fabrication, Inc. (b)
200,000 200,000 Ocean Energy, Inc. (b)
80,000 80,000 Santa Fe Snyder Corp. (b)
40,000 40,000 Stone Energy Corp. (b)
8,700 8,700 Syncor International Corp. (b)
175,000 175,000 TransCoastal Marine Services, Inc. (b)
OILFIELD EQUIPMENT & SERVICES (2.0%):
92,000 92,000 McDermott International, Inc.
PHARMACEUTICALS (1.3%):
11,000 11,000 Chirex, Inc. (b)
19,400 19,400 King Pharmaceuticals, Inc. (b)
14,850 14,850 Priority Healthcare Corp. Class B (b)
RESTAURANTS (9.3%):
120,000 120,000 CEC Entertainment, Inc. (b)
150,000 150,000 CRBL Group, Inc.
70,500 70,500 RARE Hospitality International, Inc. (b)
70,000 70,000 Ruby Tuesday, Inc.
82,000 82,000 Sonic Corp. (b)
RETAIL (15.2%):
49,000 49,000 Action Performance Cos., Inc. (b)
11,300 11,300 American Eagle Outfitters (b)
250,000 250,000 Goody's Family Clothing, Inc. (b)
155,000 155,000 Horizon Pharmacies, Inc. (b)
100,000 100,000 J. Jill Group, Inc. (b)
67,000 67,000 JAKKS Pacific, Inc. (b)
110,000 110,000 Micro Warehouse, Inc.
245,000 245,000 OfficeMax, Inc. (b)
115,000 115,000 Rainbow Rentals, Inc. (b)
360,000 360,000 Stein-Mart, Inc. (b)
145,000 145,000 Trans World Entertainment Corp. (b)
TECHNOLOGY (2.1%):
1,600 1,600 Cohu, Inc.
72,500 72,500 Insight Enterprises, Inc. (b)
10,900 10,900 Integrated Device Tech, Inc. (b)
23,500 23,500 International Rectifier Corp. (b)
</TABLE>
<TABLE>
<S> <C> <C> <C>
MEDICAL EQUIPMENT & SUPPLIES (0.9%):
- 1,079 1,079
-------------------- --------------------- -------------------
MEDICAL SERVICES (4.3%):
2,471 2,471
13,100 568 568
2,415 2,415
-------------------- --------------------- -------------------
568 4,886 5,454
-------------------- --------------------- -------------------
OFFICE EQUIPMENT & SERVICES (0.2%):
7,000 231 - 231
-------------------- --------------------- -------------------
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (8.1%):
15,100 317 317
26,500 394 1,978 2,372
1,776 1,776
2,212 2,212
740 740
1,808 1,808
8,700 258 258
793 793
-------------------- --------------------- -------------------
969 9,307 10,276
-------------------- --------------------- -------------------
OILFIELD EQUIPMENT & SERVICES (2.0%):
- 2,593 2,593
-------------------- --------------------- -------------------
PHARMACEUTICALS (1.3%):
11,000 360 360
19,400 526 526
14,850 717 717
-------------------- --------------------- -------------------
1,603 - 1,603
-------------------- --------------------- -------------------
RESTAURANTS (9.3%):
3,781 3,781
2,269 2,269
1,573 1,573
1,470 1,470
2,634 2,634
-------------------- --------------------- -------------------
- 11,727 11,727
-------------------- --------------------- -------------------
RETAIL (15.2%):
1,697 1,697
11,300 436 436
2,625 2,625
823 823
1,975 1,975
2,048 2,048
1,554 1,554
2,650 2,650
1,208 1,208
2,396 2,396
1,803 1,803
-------------------- --------------------- -------------------
436 18,779 19,215
-------------------- --------------------- -------------------
TECHNOLOGY (2.1%):
1,600 66 66
2,102 2,102
10,900 142 142
23,500 341 341
-------------------- --------------------- -------------------
549 2,102 2,651
-------------------- --------------------- -------------------
</TABLE>
B-66
<PAGE> 240
<TABLE>
<S> <C> <C> <C>
TELECOMMUNICATIONS (5.4%):
55,000 55,000 International Telecommunication Data
Systems, Inc.
31,700 31,700 InterVoice, Inc. (b)
100,000 100,000 ITC DeltaCom, Inc. (b)
200,000 200,000 World Access, Inc. (b)
TELECOMMUNICATIONS-EQUIPMENT (4.7%):
6,700 6,700 American Xtal Technology, Inc. (b)
17,200 17,200 ANTEC Corp. (b)
24,100 24,100 Commscope, Inc. (b)
310,000 310,000 Paging Network, Inc. (b)
68,000 68,000 Scientific-Atlanta, Inc.
TRANSPORTATION LEASING & TRUCKING (0.8%):
29,000 29,000 American Freightways Corp. (b)
5,600 5,600 US Freightways Corp.
U.S. TREASURY BILLS (0.4%):
$ 500 $ 500 9/16/1999
TOTAL U.S. TREASURY BILLS
INVESTMENT COMPANIES (0.7%):
861,416 861,416 AMSOUTH PRIME OBLIGATIONS FUND
64 64 BANK OF NEW YORK CASH RESERVE MONEY MARKET
FUND
TOTAL INVESTMENT COMPANIES
REPURCHASE AGREEMENTS (7.7%):
$ 9,774 $ 9,774 CANTOR FITZGERALD
</TABLE>
<TABLE>
<S> <C> <C> <C>
TELECOMMUNICATIONS (5.4%):
516 516
31,700 479 479
2,638 2,638
3,187 3,187
---------- ---------- ---------
479 6,341 6,820
---------- ---------- ---------
TELECOMMUNICATIONS-EQUIPMENT (4.7%):
6,700 206 206
17,200 721 721
24,100 825 825
1,666 1,666
2,482 2,482
---------- ---------- ---------
1,752 4,148 5,900
---------- ---------- ---------
TRANSPORTATION LEASING & TRUCKING (0.8%):
29,000 696 696
5,600 277 277
---------- ---------- ---------
973 - 973
---------- ---------- ---------
TOTAL COMMON STOCKS $ 22,661 $ 92,733 $ 115,394
---------- ---------- ---------
U.S. TREASURY BILLS (0.4%):
$ 500 497 497
---------- ---------- ---------
TOTAL U.S. TREASURY BILLS $ 497 $ - $ 497
---------- ---------- ---------
INVESTMENT COMPANIES (0.7%):
861,416 861 861
* *
---------- ---------- ---------
$ $ 861 $ - $ 861
---------- ---------- ---------
REPURCHASE AGREEMENTS (7.7%):
9,774 9,774
---------- ---------- ---------
TOTAL REPURCHASE $ - $ 9,774 $ 9,774
AGREEMENTS ---------- ---------- ---------
---------- ---------- ---------
TOTAL (COST
$112,438) (a) $ 24,019 $ 102,507 $ 26,526
---------- ---------- ---------
</TABLE>
____________
Percentages indicated are based on net assets of $126,243.
* Amount is less than one thousand dollars.
(a) Represents cost for financial reporting purposes and differs
from cost basis for federal income tax purposes by the amount
of losses recognized for financial reporting purposes in
excess of federal income tax reporting of $20. Cost for
federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation 20,655
Unrealized depreciation (6,587)
------
Net unrealized appreciation 14,068
======
(b) Represents non-income producing securities.
B-67
<PAGE> 241
AMSOUTH EQUITY INCOME FUND
ISG EQUITY INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
AMSOUTH ISG PRO FORMA COMBINED
EQUITY INCOME EQUITY INCOME ADJUSTMENTS (NOTE 1)
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities at value (Cost $36,192
and $86,653, respectively) $ 40,285 $ 91,498 $ -- $ 131,783
Interest and dividends receivable 75 145 -- 220
Receivable for capital shares issued 10 42 -- 52
Receivable from brokers for investments sold 1,037 1,718 -- 2,755
Other assets 5 29 -- 34
--------- --------- --------- ---------
TOTAL ASSETS 41,412 93,432 -- 134,844
--------- --------- --------- ---------
LIABILITIES:
Dividends payable -- 70 -- 70
Payable for capital shares redeemed 19 18 -- 37
Payable to brokers for investments purchased 1,007 548 -- 1,555
Accrued expenses and other payables:
Advisory fees 15 53 -- 68
Administration fees 1 2 -- 3
Distribution fees 12 15 -- 27
Transfer agent fees 2 -- -- 2
Custodian fees -- 3 -- 3
Other 3 28 -- 31
--------- --------- --------- ---------
TOTAL LIABILITIES 1,059 737 -- 1,796
--------- --------- --------- ---------
NET ASSETS:
Class A Shares 21,526 5,821 -- 27,347
Class B Shares 7,919 7,715 -- 15,634
Institutional Shares 10,908 79,159 -- 90,067
========= ========= ========= =========
$ 40,353 $ 92,695 $ -- $ 133,048
========= ========= ========= =========
CAPITAL SHARES OUTSTANDING
Class A Shares 1,643 559 (115)(a) 2,087
Class B Shares 607 742 (151)(a) 1,198
Institutional Shares 832 7,600 (1,557)(a) 6,875
--------- --------- --------- ---------
3,082 8,901 (1,823)(a) 10,160
========= ========= ========= =========
NET ASSET VALUE
Class A Shares - redemption price per share $ 13.10 $ 10.41 $ 13.10
========= ========= =========
Class A Shares - maximum sales charge 4.50% 4.75% 4.50%
--------- --------- ---------
Class A Shares - POP $ 13.72 $ 10.93 $ 13.72
========= ========= =========
Class B Shares - offering price per share* $ 13.05 $ 10.40 $ 13.05
========= ========= =========
Institutional Shares - offering and redemption
price per share $ 13.10 $ 10.42 $ 13.10
========= ========= =========
COMPOSITION OF NET ASSETS
Capital 33,870 77,165 -- 111,035
Undistributed (distributions in excess of) 6 (6) -- --
net investment income
Undistributed net realized gains (losses) 2,384 10,691 -- 13,075
from investment transactions
Net unrealized appreciation (depreciation) of investments 4,093 4,845 -- 8,938
--------- --------- --------- ---------
NET ASSETS, JULY 31, 1999 $ 40,353 $ 92,695 $ -- $ 133,048
========= ========= ========= =========
</TABLE>
* Redemption price per share varies by length of time shares are held.
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
B-68
<PAGE> 242
AMSOUTH EQUITY INCOME FUND
ISG EQUITY INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ISG PRO FORMA
AMSOUTH SMALL-CAP PRO FORMA COMBINED
EQUITY INCOME EQUITY INCOME ADJUSTMENTS (NOTE 1)
------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest Income $ 274 $ 19 $ -- $ 293
Dividend Income 853 2,009 -- 2,862
Income from securities lending -- 69 (69) --
-------- -------- -------- --------
1,127 2,097 (69) 3,155
-------- -------- -------- --------
EXPENSES:
Advisory fees 325 549 127 (a) 1,001
Administration fees 81 127 42 (b) 250
Shareholder servicing fees (Class A Shares) 59 4 6 (c) 69
Shareholder servicing fees (Class B Shares) -- 12 20 (d) 32
Shareholder servicing fees (Institutional Shares) -- 68 59 (e) 127
12b-1 fees (Class A Shares) -- 10 (10) (f) --
12b-1 fees (Class B Shares) 78 37 (20) (g) 95
Accounting fees 54 45 (74) (h) 25
Transfer agent fees 47 85 (71) (i) 61
Custodian fees 2 34 (2) (j) 34
Trustee fees and expenses 1 4 (1) (k) 4
Other expenses 29 88 (56) (k) 61
-------- -------- -------- --------
TOTAL EXPENSES: 676 1,063 20 1,759
Less Waivers:
Accounting fees (38) -- 38 (l) --
Transfer agent fees (30) -- 30 (l) --
-------- -------- -------- --------
NET EXPENSES: 608 1,063 88 1,759
-------- -------- -------- --------
NET INVESTMENT INCOME 519 1,034 (157) (1,396)
-------- -------- -------- --------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS
Net realized gains (losses) from investment transaction 2,385 10,112 12,497
Net change in unrealized appreciation (depreciation)
from investments 2,356 (1,328) 1,028
-------- -------- -------- --------
Net realized/unrealized gains (losses) from investments 4,741 8,784 -- 13,525
CHANGE IN NET ASSETS RESULTING FROM
-------- -------- -------- --------
OPERATIONS: $ 5,260 $ 9,818 $ (157) $ 14,421
======== ======== ======== ========
</TABLE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for
Advisory fees (0.80% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class B net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for
Accounting fees ($10,000 a year per additional class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for
Transfer agent fees (0.015% of net assets + $10,000 a year per class +
OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for
Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
B-69
<PAGE> 243
AMSOUTH EQUITY INCOME FUND
ISG EQUITY INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
EQUITY INCOME EQUITY INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
SHARES SHARES SHARES DESCRIPTION
------------------------------------------ --------------------- ---------------- -------------------------------------
<S> <C> <C>
COMMON STOCKS & SECURITIES CONVERTIBLE TO COMMON STOCK (91.4%):
BANKING (4.3%):
25,500 25,500 Bank of America Corp.
19,000 19,000 First Tennessee National Corp.
19,000 19,000 KeyCorp
16,000 16,000 Wachovia Corp.
37,100 37,100 Wells Fargo Co.
BASIC MATERIALS (1.7%):
8,600 13,500 22,100 E.I. du Pont de Nemours & Co.
10,600 10,600 Sealed Air Corp., CVT. PFD., 4/1/18
CAPITAL GOODS/DIVERSIFIED (3.7%):
9,700 16,900 26,600 Emerson Electric Co.
10,400 12,500 22,900 General Electric Co.
31,000 31,000 Ingersoll-Rand Co., 6.75%, CVT. PFD.,
12/31/49
CHEMICALS (0.9%):
10,000 10,000 Air Products & Chemicals, Inc.
34,000 34,000 Sherwin-Williams Co.
CONSUMER CYCLICAL (3.1%):
17,000 17,000 Colgate Palmolive Co.
8,450 16,000 24,450 Ford Motor Co.
8,500 8,500 Mattel, Inc.
17,500 17,500 Minnesota Mining & Manufacturing
11,700 11,700 Tribune/The Learning Co., 6.25%, CVT.
PFD., 8/1/01
ENERGY (6.4%):
13,000 13,000 Enron Corp.
16,400 16,400 Exxon Corp.
22,500 22,500 Halliburton Co.
9,300 12,500 21,800 Mobil Corp.
16,000 16,000 Shell Transport & Trading Co. PLC
(ADR)
18,100 18,100 Texaco, Inc.
23,200 23,200 Williams Cos., Inc.
FINANCE (7.4%):
6,700 6,700 American Express Co.
19,350 25,750 45,100 Citigroup Inc.
8,700 27,900 36,600 Fannie Mae
6,775 6,775 J.P. Morgan & Co., Inc.
8,750 8,750 Jefferson Pilot/Bank America (ACES)
44,400 44,400 Lincoln National Corp., 7.75%, CVT.
PFD., 8/16/01
10,000 10,000 Merrill Lynch & Co., Inc.
28,000 28,000 National Australia Bank, 7.88%, CVT.
PFD., 12/31/49
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH AMSOUTH ISG PRO FORMA
EQUITY INCOME EQUITY INCOME EQUITY INCOME COMBINED
PRINCIPAL MARKET MARKET MARKET
SHARES VALUE VALUE VALUE
------------------------------------------ ------------------- ----------------------- -------------------
<S> <C> <C> <C>
COMMON STOCKS & SECURITIES CONVERTIBLE TO COMMON STOCK (91.4%):
BANKING (4.3%):
$ 1,692 $ 1,692
696 696
599 599
1,249 1,249
1,447 1,447
------------------- ----------------------- -------------------
- 5,683 5,683
------------------- ----------------------- -------------------
BASIC MATERIALS (1.7%):
8,600 $ 620 972 1,592
10,600 652 652
------------------- ----------------------- -------------------
1,272 972 2,244
------------------- ----------------------- -------------------
CAPITAL GOODS/DIVERSIFIED (3.7%):
9,700 579 1,009 1,588
10,400 1,134 1,362 2,496
31,000 930 930
------------------- ----------------------- -------------------
2,643 2,371 5,014
------------------- ----------------------- -------------------
CHEMICALS (0.9%):
334 334
918 918
------------------- ----------------------- -------------------
- 1,252 1,252
------------------- ----------------------- -------------------
CONSUMER CYCLICAL (3.1%):
839 839
8,450 411 778 1,189
8,500 200 200
1,539 1,539
11,700 304 304
------------------- ----------------------- -------------------
915 3,156 4,071
------------------- ----------------------- -------------------
ENERGY (6.4%):
1,107 1,107
1,302 1,302
1,038 1,038
9,300 951 1,278 2,229
16,000 773 773
1,128 1,128
23,200 976 976
------------------- ----------------------- -------------------
2,700 5,853 8,553
------------------- ----------------------- -------------------
FINANCE (7.4%):
883 883
19,350 862 1,148 2,010
8,700 600 1,925 2,525
6,775 866 866
8,750 980 980
44,400 1,188 1,188
10,000 681 681
28,000 791 791
------------------- ----------------------- -------------------
5,968 3,956 9,924
------------------- ----------------------- -------------------
</TABLE>
B-70
<PAGE> 244
<TABLE>
<S> <C> <C> <C> <C>
HEALTHCARE (8.6%):
34,000 34,000 Abbott Laboratories
12,900 12,900 American Home Products Corp.
770,000 770,000 Athena Neurosciences Inc., 4.75%, CVT. BD., 11/15/04
11,800 16,800 28,600 Bristol-Myers Squibb Co.
450,000 450,000 Centocor Inc.\ JNJ
12,500 12,500 Hillenbrand Industries, Inc.
4,000 4,000 Johnson & Johnson
23,500 23,500 Merck & Co., Inc.
16,700 16,700 Monsanto (ACES) 6.50%, CVT. PFD., 11/30/01
11,500 11,500 Pharmacia & Upjohn Inc.
22,000 22,000 Schering Plough Corp.
17,500 17,500 Warner Lambert Co.
INSURANCE (2.5%):
22,500 22,500 Allstate Corp.
35,000 35,000 Conseco, Inc.
32,000 32,000 Torchmark Corp.
16,000 16,000 Washington Mutual Inc.
REAL ESTATE (2.4%):
21,000 21,000 Equity Residential Property
28,000 28,000 Post Properties
31,000 31,000 Spieker Properties
RETAILING (4.9%):
1,340,000 1,340,000 Costco Companies
29,000 29,000 CVS Corp.
9,500 9,500 Dayton Hudson Corp.
13,800 13,800 Dollar General
11,000 31,500 42,500 Dollar General STRYPES Trust
390,000 390,000 Rite Aid Corp.
18,000 18,000 Wal Mart Stores, Inc.
SERVICES (5.2%):
13,000 13,000 Gannett Co., Inc.
19,900 33,500 53,400 McDonald's Corp.
26,500 26,500 McGraw Hill Cos., Inc.
390,000 390,000 Omnicom Group
26,000 26,000 SYSCO Corp.
20,300 20,300 The Walt Disney Co.
STAPLES (8.8%):
19,500 19,500 Bestfoods
5,000 5,000 Campbell Soup Co.
8,000 8,000 Coca Cola Co.
6,200 6,200 Estee Lauder
36,000 36,000 H.J. Heinz Co.
8,800 8,800 Hershey Foods Corp.
17,400 17,400 McCormick & Co., Inc.
52,000 52,000 Pepsi Bottling Group, Inc.
10,000 10,000 PepsiCo, Inc.
48,200 48,200 Philip Morris Cos., Inc.
13,000 13,000 Procter & Gamble Co.
13,500 13,500 Quaker Oats Co.
18,000 18,000 Unilever
TECHNOLOGY (14.2%):
32,700 32,700 Amdocs LTD., 6.75%, CVT.PFD., 9/11/02
57,200 57,200 Automatic Data Processing, Inc.
13,400 13,400 Corning Glass Works
12,000 12,000 Electronic Data Systems Corp.
180,000 50,000 230,000 EMC Corp., 3.25%, CVT. BD., 3/15/02
9,500 9,500 Hewlett-Packard Co.
6,400 8,000 14,400 IBM. Corp.
</TABLE>
<TABLE>
<S> <C> <C> <C>
HEALTHCARE (8.6%):
1,460 1,460
658 658
823 823
785 1,116 1,901
576 576
562 562
369 369
1,590 1,590
685 685
619 619
1,078 1,078
1,155 1,155
------------------- ----------------------- -------------------
4,515 6,961 11,476
------------------- ----------------------- -------------------
INSURANCE (2.5%):
799 799
1,008 1,008
1,052 1,052
549 549
------------------- ----------------------- -------------------
- 3,408 3,408
------------------- ----------------------- -------------------
REAL ESTATE (2.4%):
868 868
1,120 1,120
1,185 1,185
------------------- ----------------------- -------------------
- 3,173 3,173
------------------- ----------------------- -------------------
RETAILING (4.9%):
1,185 1,185
1,442 1,442
615 615
365 365
456 1,304 1,760
379 379
761 761
------------------- ----------------------- -------------------
2,385 4,122 6,507
------------------- ----------------------- -------------------
SERVICES (5.2%):
939 939
830 1,396 2,226
1,348 1,348
888 888
850 850
561 561
------------------- ----------------------- -------------------
2,279 4,533 6,812
------------------- ----------------------- -------------------
STAPLES (8.8%):
951 951
220 220
483 483
570 570
1,697 1,697
510 510
575 575
1,229 1,229
391 391
1,794 1,794
1,177 1,177
919 919
1,258 1,258
------------------- ----------------------- -------------------
3,057 8,717 11,774
------------------- ----------------------- -------------------
TECHNOLOGY (14.2%):
834 834
2,291 2,291
938 938
724 724
976 271 1,247
995 995
804 1,006 1,810
</TABLE>
B-71
<PAGE> 245
<TABLE>
<S> <C> <C> <C> <C>
4,400 4,400 Intel Corp.
290,000 290,000 Level One Communications\ Intel
9,300 9,300 Motorola, Inc.
26,000 26,000 Nextel STRYPES Trust
12,600 27,500 40,100 Pitney Bowes, Inc.
13,000 13,000 Raytheon Co., Class B
7,300 7,300 Texas Instruments, Inc.
10,800 18,100 28,900 United Technologies Corp.
11,900 11,900 Xerox Corp.
TRANSPORTATION (1.5%):
32,500 32,500 CSX Corp.
7,400 7,400 Union Pacific Corp. (b)
UTILITIES (15.8%):
43,750 43,750 A T & T Corp.
12,200 12,200 Ameritech Corp.
24,700 24,700 BCE, Inc.
35,500 35,500 Duke Energy Corp.
27,000 27,000 GTE Corp.
6,000 6,000 Honeywell, Inc.
20,300 20,300 Nisource Inc., 7.75%, CVT. PFD., 2/19/03
32,500 32,500 Nisource, Inc.
18,300 18,300 Royal Dutch Petroleum Co. ADR
33,000 33,000 SBC Communications, Inc.
53,280 53,280 Sierra Pacific Resources
32,100 32,100 Skytel Communications Inc./WorldCom (b)
25,500 25,500 Sonat, Inc.
12,400 12,400 Sprint Corp.
6,500 6,500 Telefonos De Mexico, Sponsored ADR
25,500 25,500 Texas Utilities Co., 9.25%, PRIDES
45,000 45,000 Washington Gas & Light Co.
INVESTMENT COMPANIES (8.2%):
4,439,481 4,439,481 AIM Liquid Assets
2,741,037 2,741,037 AIM Stic Prime
208,614 208,614 AmSouth Prime Obligations Fund
1,077,202 1,077,202 Bank of New York Deposit Account
12,000 12,000 S & P 500 Depositary Receipt
</TABLE>
<TABLE>
<S> <C> <C> <C>
304 304
674 674
849 849
1,179 1,179
802 1,748 2,550
914 914
1,050 1,050
720 1,207 1,927
580 580
------------------- ----------------------- -------------------
9,710 9,156 18,866
------------------- ----------------------- -------------------
TRANSPORTATION (1.5%):
1,574 1,574
381 381
------------------- ----------------------- -------------------
381 1,574 1,955
------------------- ----------------------- -------------------
UTILITIES (15.8%):
2,278 2,278
894 894
1,227 1,227
1,879 1,879
1,991 1,991
719 719
974 974
843 843
1,116 1,116
1,887 1,887
1,385 1,385
1,156 1,156
897 897
641 641
491 491
1,379 1,379
1,254 1,254
------------------- ----------------------- -------------------
4,251 16,760 21,011
------------------- ----------------------- -------------------
------------------- ----------------------- -------------------
TOTAL COMMON STOCKS & SECURITIES $ 40,076 $ 81,647 $ 127,723
CONVERTIBLE TO COMMON STOCK ------------------- ----------------------- -------------------
INVESTMENT COMPANIES (8.2%):
4,439 4,439
2,741 2,741
209 209
1,077 1,077
1,594 1,594
------------------- ----------------------- -------------------
TOTAL INVESTMENT COMPANIES $ 209 $ 9,851 $ 10,060
------------------- ----------------------- -------------------
------------------- ----------------------- -------------------
TOTAL (COST $122,845) (a) $ 40,285 $ 91,498 $ 131,783
------------------- ----------------------- -------------------
</TABLE>
------------------------------------------
Percentages indicated are based on net assets of $133,048.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax purposes by the
amount of losses recognized for financial reporting in excess
of federal income tax reporting of $137. Cost for federal
income tax purposes differs from value by net unrealized
appreciation of securities as follows:
Unrealized appreciation 12,470
Unrealized depreciation (3,669)
-------
Net unrealized appreciation 8,801
=======
(b) Represents a restricted security, purchased under Rule
144A, which is exempt from registration un the Security Act of
1933, as amended. These securities have been deemed liquid
under guidelines established by the Board of Trustees.
ACES - Automatic Common Exchange Securities
ADR - American Depository Receipt
CVT. PFD. - Convertible Preferred
CVT. BD. - Convertible Bond
PLC - Public Limited Co.
STRYPES - Structured Yield Product Exchangeable for Stock
Breakdown of Sectors
--------------------
Common Stocks - 58.3%
Convertible Preferred Stocks - 27.5%
Convertible Bonds - 13.7%
Investment Companies - 0.5%
B-72
<PAGE> 246
AMSOUTH BOND FUND
ISG INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
AMSOUTH ISG PRO FORMA COMBINED
BOND INCOME ADJUSTMENTS (NOTE 1)
------------ --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value
(cost $385,361 and $100,292, respectively) $ 383,287 $ 97,519 $ -- $ 480,806
Interest and dividends receivable 6,731 1,431 -- 8,162
Other assets 15 22 -- 37
--------- --------- --------- ---------
TOTAL ASSETS 390,033 98,972 -- 489,005
--------- --------- --------- ---------
LIABILITIES:
Cash overdraft -- 2 -- 2
Distributions Payable -- 439 -- 439
Payable for capital shares redeemed 83 -- -- 83
Accrued expenses and other payables:
Advisory fees 86 41 -- 127
Administration fees 5 2 -- 7
Distribution fees 3 14 -- 17
Accounting fees 2 2 -- 4
Transfer agent fees 9 3 -- 12
Custodian fees 4 7 -- 11
Other 24 21 -- 45
--------- --------- --------- ---------
TOTAL LIABILITIES 216 531 -- 747
--------- --------- --------- ---------
NET ASSETS:
Class A Shares 7,070 3,593 -- 10,663
Class B Shares 2,521 1,348 -- 3,869
Institutional Shares 380,226 93,500 -- 473,726
--------- --------- --------- ---------
$ 389,817 $ 98,441 $ -- $ 488,258
========= ========= ========= =========
CAPITAL SHARES OUTSTANDING
Class A Shares 665 368 (30)(a) 1,003
Class B Shares 238 138 (11)(a) 365
Institutional Shares 35,778 9,583 (787)(a) 44,574
--------- --------- --------- ---------
36,681 10,089 (828)(a) 45,942
========= ========= ========= =========
NET ASSET VALUE
Class A Shares - redemption price per share $ 10.63 $ 9.76 $ 10.63
========= ========= =========
Class A Shares - maximum sales charge 4.00% 3.00% 4.00%
--------- --------- ---------
Class A Shares - POP $ 11.07 $ 10.06 $ 11.07
========= ========= =========
Class B Shares - offering price per share* $ 10.60 $ 9.75 $ 10.60
========= ========= =========
Institutional Shares - offering and redemption
price per share $ 10.63 $ 9.76 $ 10.63
========= ========= =========
COMPOSITION OF NET ASSETS
Capital $ 389,653 $ 101,315 $ -- $ 490,968
Undistributed (distributions in excess of)
net investment income 1,421 (33) -- 1,388
Undistributed net realized gains (losses)
from investment transactions 817 (68) -- 749
Net unrealized appreciation (depreciation) of
investments (2,074) (2,773) -- (4,847)
--------- --------- --------- ---------
NET ASSETS, JULY 31, 1999 $ 389,817 $ 98,441 $ -- $ 488,258
========= ========= ========= =========
</TABLE>
* Redemption price per share varies by length of time shares are held.
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
B-73
<PAGE> 247
AMSOUTH BOND FUND
ISG INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
AMSOUTH ISG PRO FORMA COMBINED
BOND INCOME ADJUSTMENTS (NOTE 1)
---------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 22,088 $ 5,234 $ -- $ 27,322
Dividend Income 292 191 -- 483
Income from securities lending -- 2 (2)(l) --
-------- -------- -------- --------
22,380 5,427 (2) 27,805
-------- -------- -------- --------
EXPENSES:
Advisory fees 2,319 427 129 (a) 2,875
Administration fees 714 128 43 (b) 885
Shareholder servicing fees (Class A Shares) 18 3 5 (c) 26
Shareholder servicing fees (Class B Shares) -- 3 4 (d) 7
Shareholder servicing fees (Institutional Shares) -- 73 571 (e) 644
12b-1 fees (Class A Shares) -- 7 (7)(f) --
12b-1 fees (Class B Shares) 17 10 (5)(g) 22
Accounting fees 140 49 (159)(h) 30
Transfer agent fees 99 60 (58)(i) 101
Custodian fees 21 26 75 (j) 122
Trustee fees and expenses 8 4 (4)(k) 8
Other expenses 89 82 (77)(k) 94
-------- -------- -------- --------
TOTAL EXPENSES: 3,425 872 517 4,814
Less Waivers
Advisory fees (535) -- 535 (a) --
Administration fees (285) -- 285 (b) --
Shareholder servicing fees (Class A Shares) (11) -- 11 (c) --
Accounting fees (20) -- 20 (h) --
Transfer agent fees (30) -- 30 (i) --
-------- -------- -------- --------
NET EXPENSES: 2,544 872 1,398 4,814
-------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) 19,836 4,555 (1,400) 22,991
-------- -------- -------- --------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS
Net realized gains (losses) from investment transaction 3,588 12 -- 3,600
Net change in unrealized appreciation (depreciation)
from investments (15,033) (3,881) -- (18,914)
-------- -------- -------- --------
Net realized/unrealized gains (losses) from investments (11,445) (3,869) -- (15,314)
CHANGE IN NET ASSETS RESULTING FROM
-------- -------- -------- --------
OPERATIONS: $ 8,391 $ 686 $ (1,400) $ 7,677
======== ======== ======== ========
</TABLE>
Notes to Pro Forma Financial Statements
(a) Adjustment to reflect the AmSouth contractual fee structure for
Advisory fees (0.80% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class B net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for
Accounting fees ($10,000 a year per additional class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for
Transfer agent fees (0.015% of net assets + $10,000 a year per class +
OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for
Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect no securities lending income since there is not
a securities lending program set up on the AmSouth Funds.
B-74
<PAGE> 248
AMSOUTH BOND FUND
ISG INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 7/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
----------------------- --------------------- ------------------- -----------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (52.6%):
AEROSPACE/DEFENSE (0.6%):
$ 3,000 $ 3,000 Boeing Corp., 6.88%, 11/1/06
Appliances (0.1%):
500 500 Whirlpool Corp., 9.50%, 6/15/00
Automotive (0.2%):
908 908 General Motors Corp., 9.63%, 12/1/00
Automotive-Finance (2.0%):
3,485 3,485 Ford Motor Credit Co., 6.25%, 12/8/05
$ 1,500 1,500 General Motors Acceptance Corp., 5.80%, 4/9/01
2,000 2,000 General Motors Acceptance Corp., 6.15%, 4/7/07
3,000 3,000 Toyota Motor Credit Corp., 5.50%, 9/17/01
BANKING (6.3%):
1,750 1,750 ABN AMRO Bank, 6.63%, 10/31/01
2,000 2,000 AmSouth Bancorp., 6.13%, 3/1/09
1,150 1,150 Bank of America Corp., 9.50%, 4/1/01
3,157 3,157 Bank One Corp., 7.00%, 7/15/05
1,000 1,000 Bank One, Texas, 6.25%, 2/15/08
4,000 4,000 Fifth Third Bank, 6.75%, 7/15/05
1,700 1,700 First Union Corp., 6.18%, 2/15/36
3,856 3,856 J.P. Morgan & Co., 7.63%, 9/15/04
1,500 1,500 National City Corp., 6.88%, 5/15/19
4,306 4,306 NationsBank Corp., 5.38%, 4/15/00
1,100 1,100 NationsBank Corp., 7.75%, 8/15/15
3,159 3,159 SunTrust Banks, Inc., 7.38%, 7/1/06
2,100 2,100 Wachovia Corp., 6.61%, 10/1/25
BEVERAGES (1.2%):
2,250 2,250 Anheuser-Busch, 7.13%, 7/1/17
3,500 3,500 Coca-Cola Enterprises, Inc., 6.38%, 8/1/01
BROKERAGE SERVICES (1.7%):
2,910 2,910 Bear Stearns & Co., Inc., 6.63%, 10/1/04
3,500 3,500 Dean Witter Discover & Co., 6.50%, 11/1/05
750 750 Merrill Lynch & Co., Inc., 8.25%, 11/15/99
1,450 1,450 Merrill Lynch & Co., Inc., 6.00%, 2/12/03
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH AMSOUTH ISG PRO FORMA
BOND BOND INCOME COMBINED
PRINCIPAL MARKET MARKET MARKET
AMOUNT/SHARES VALUE VALUE VALUE
----------------------- ------------------------- --------------------------------- ----------------------
<S> <C> <C> <C>
CORPORATE BONDS (52.6%):
AEROSPACE/DEFENSE (0.6%):
$ 3,000 $ 3,000 $ - $ 3,000
------------------------- --------------------------------- ----------------------
APPLIANCES (0.1%):
500 514 - 514
------------------------- --------------------------------- ----------------------
AUTOMOTIVE (0.2%):
908 945 - 945
------------------------- --------------------------------- ----------------------
AUTOMOTIVE-FINANCE (2.0%):
3,485 3,341 3,341
1,485 1,485
2,000 1,898 1,898
3,000 2,951 2,951
------------------------- --------------------------------- ----------------------
8,190 1,485 9,675
------------------------- --------------------------------- ----------------------
BANKING (6.3%):
1,757 1,757
1,843 1,843
1,150 1,206 1,206
3,157 3,157 3,157
943 943
4,000 3,965 3,965
1,628 1,628
3,856 3,952 3,952
1,391 1,391
4,306 4,296 4,296
1,132 1,132
3,159 3,222 3,222
2,062 2,062
------------------------- --------------------------------- ----------------------
19,798 10,756 30,554
------------------------- --------------------------------- ----------------------
BEVERAGES (1.2%):
2,205 2,205
3,500 3,509 3,509
------------------------- --------------------------------- ----------------------
3,509 2,205 5,714
------------------------- --------------------------------- ----------------------
BROKERAGE SERVICES (1.7%):
2,910 2,826 2,826
3,500 3,387 3,387
750 756 756
1,450 1,419 1,419
------------------------- --------------------------------- ----------------------
8,388 - 8,388
------------------------- --------------------------------- ----------------------
</TABLE>
B-75
<PAGE> 249
<TABLE>
<S> <C> <C> <C>
BUILDING PRODUCTS (0.4%):
2,000 2,000 Vulcan Materials, 6.00%, 4/1/09
CHEMICALS (0.3%):
1,500 1,500 Eastman Chemical, 6.38%, 1/15/04
ELECTRONIC COMPONENTS/ INSTRUMENTS (0.9%):
2,000 2,000 Honeywell, Inc., 7.00%, 3/15/07
2,500 2,500 Motorola, Inc., 6.50%, 11/15/28
ENTERTAINMENT (0.6%):
3,000 3,000 Walt Disney Company, 5.13%, 12/15/03
FINANCIAL SERVICES (6.0%):
2,000 2,000 American Express Credit Corp., 6.50%, 8/1/00
3,500 3,500 Ameritech Capital, 5.65%, 1/15/01
800 800 Associates Corp., 7.32%, 1/13/03
2,000 2,000 Associates Corp., 5.75%, 10/15/03
3,000 3,000 Associates Corp., 5.75%, 11/01/03
3,091 3,091 Avco Financial Service Corp., 5.50%, 4/1/00
3,000 3,000 Commercial Credit Co., 7.38%, 3/15/02
3,000 3,000 Commercial Credit Co., 6.50%, 8/1/04
2,400 2,400 Countrywide Home Loan, 6.84%, 10/22/04
2,000 2,000 Ford Motor Credit, 7.35%, 11/7/11
1,500 1,500 General Electric, 7.50%, 8/21/35
1,000 1,000 Margaretten Financial Corp., 6.75%, 6/15/00
2,000 2,000 Norwest Financial, Inc., 6.63%, 7/15/04
FOOD PRODUCTS & SERVICES (1.3%):
2,500 2,500 Best Foods, 6.63%, 4/15/28
2,750 2,750 Campbell Soup Co., 6.15%, 12/1/02
1,250 1,250 Sara Lee Corp., 6.15%, 6/19/08
FOREST & PAPER PRODUCTS (0.8%):
1,000 1,000 International Paper Co., 6.88%, 7/10/00
3,000 3,000 Mead Corp., 6.60%, 3/1/02
INDUSTRIAL GOODS & SERVICES (4.8%):
3,000 3,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02
2,500 2,500 Albertson's, Inc., 6.52%, 4/10/28, MTN
2,655 2,655 Browning-Ferris Industries, Inc., 6.10%, 1/15/03
2,000 2,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02
2,570 2,570 E. I. Dupont de Nemours & Co., 6.75%, 10/15/02
2,000 2,000 First Data Corp., 6.75%, 7/15/05
2,000 2,000 H.J. Heinz Co., 6.38%, 7/15/28
1,500 1,500 Illinois Tool Works, Inc., 5.88%, 3/1/00
1,000 1,000 Lockheed Martin Corp., 7.875%, 3/15/23
1,500 1,500 Reliance Electric Co., 6.80%, 4/15/03
3,456 3,456 Rockwell International Corp., 6.63%, 6/1/05
INSURANCE (2.1%):
1,000 1,000 AON Corp., 6.88%, 10/1/99
1,600 1,600 Capital Holding Corp., 9.20%, 4/17/01
330 330 Chubb Corp., 8.75%, 11/15/99
1,000 1,000 Chubb Corp., 6.15%, 8/15/05
3,100 3,100 Hartford Life, Inc., 6.90%, 6/15/04
2,000 2,000 Travelers Property Casualty, 6.75%, 4/15/01
1,250 1,250 USLife Corp., 6.38%, 6/15/00
</TABLE>
<TABLE>
<S> <C> <C> <C>
BUILDING PRODUCTS (0.4%):
2,000 1,858 - 1,858
---------------------- ------------------------- ----------------------
CHEMICALS (0.3%):
- 1,466 1,466
---------------------- ------------------------- ----------------------
ELECTRONIC COMPONENTS/ INSTRUMENTS (0.9%):
2,000 1,998 1,998
2,206 2,206
---------------------- ------------------------- ----------------------
1,998 2,206 4,204
---------------------- ------------------------- ----------------------
ENTERTAINMENT (0.6%):
3,000 2,831 - 2,831
---------------------- ------------------------- ----------------------
FINANCIAL SERVICES (6.0%):
2,000 2,012 2,012
3,500 3,477 3,477
813 813
2,000 1,913 1,913
3,000 2,869 2,869
3,091 3,086 3,086
3,000 3,060 3,060
3,000 2,951 2,951
2,382 2,382
1,990 1,990
1,560
1,000 1,006 2,566
2,000 1,970 1,970
---------------------- ------------------------- ----------------------
22,344 6,745 29,089
---------------------- ------------------------- ----------------------
FOOD PRODUCTS & SERVICES (1.3%):
2,266 2,266
2,750 2,740 2,740
1,194 1,194
---------------------- ------------------------- ----------------------
2,740 3,460 6,200
---------------------- ------------------------- ----------------------
FOREST & PAPER PRODUCTS (0.8%):
1,004 1,004
3,000 2,981 2,981
---------------------- ------------------------- ----------------------
2,981 1,004 3,985
---------------------- ------------------------- ----------------------
INDUSTRIAL GOODS & SERVICES (4.8%):
3,000 3,124 3,124
2,194 2,194
2,655 2,446 2,446
2,000 2,005 2,005
2,570 2,596 2,596
2,000 1,993 1,993
1,813 1,813
1,500 1,502 1,502
981 981
1,513 1,513
3,456 3,433 3,433
---------------------- ------------------------- ----------------------
17,099 6,501 23,600
---------------------- ------------------------- ----------------------
INSURANCE (2.1%):
1,000 1,001 1,001
1,600 1,670 1,670
330 333 333
1,000 963 963
3,100 3,088 3,088
2,008 2,008
1,250 1,250
---------------------- ------------------------- ----------------------
7,055 3,258 10,313
---------------------- ------------------------- ----------------------
</TABLE>
B-76
<PAGE> 250
<TABLE>
<S> <C> <C>
OFFICE EQUIPMENT & SERVICES (0.5%):
2,200 2,200 Xerox Corp., 7.15%, 8/1/04
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.4%):
3,158 3,158 BP America, Inc., 9.38%, 11/1/00
1,000 1,000 Conoco Inc., 6.35%, 4/15/09
864 864 Exxon Capital Corp., 7.45%, 12/15/01
2,000 2,000 Phillips Petroleum Co., 6.38%, 3/30/09
PHARMACEUTICALS (0.6%):
3,000 3,000 Warner-Lambert Co., 5.75%, 1/15/03
PHOTOGRAPHY (0.7%):
3,100 3,100 Eastman Kodak, 9.38%, 3/15/03
POLLUTION CONTROL SERVICES & EQUIPMENT (0.9%):
2,449 2,449 Waste Management, Inc., 6.38%, 12/1/03
2,000 2,000 Waste Management, Inc., 7.00%, 5/15/05
RAILROADS (0.2%):
1,000 1,000 Union Pacific Corp., 7.00%, 6/15/00
RETAIL (3.2%):
2,000 2,000 Autozone, 6.50%, 7/15/08
1,500 1,500 Dayton Hudson Co., 6.80%, 10/1/01
1,500 1,500 JCPenney & Co., 6.50%, 6/15/02
2,000 2,000 JCPenney & Co., 6.13%, 11/15/03
1,000 1,000 May Department Stores Co., 7.15%, 8/15/04
3,000 3,000 Nike, Inc., 6.38%, 12/1/03
4,000 4,000 Wal-Mart Stores, Inc., 5.85%, 6/1/00
1,000 1,000 Wal-Mart Stores, Inc., 6.75%, 5/15/02
TELECOMMUNICATIONS (0.8%):
2,000 2,000 IBM Corp., 6.50%, 1/15/28
1,000 1,000 IBM Corp., 6.25%, 2/24/00
1,250 1,250 Worldcom, Inc., 6.13%, 8/15/01
TOOLS (0.4%):
2,000 2,000 Stanley Works, 5.75%, 3/1/04
UTILITIES-ELECTRIC & GAS (9.5%):
3,100 3,100 Baltimore Gas & Electric, 7.50%, 1/15/07
1,500 1,500 Cincinnati Gas & Electric, 6.45%, 2/15/04
2,000 2,000 Consolidated Edison Co. of New York, Inc.,
6.63%, 2/1/02
1,600 1,600 Consolidated Natural Gas, 6.80%, 12/15/27
1,500 1,500 Florida Power Corp., 6.54%, 7/1/02
1,725 1,725 Houston Light & Power, 6.10%, 3/1/00
1,600 1,600 National Rural Utilities, 6.49%, 7/10/02
3,500 3,500 National Rural Utilities, 5.00%, 10/1/02
3,100 3,100 National Rural Utilities, 6.38%, 10/15/04
2,750 2,750 Northern States Power Co., 7.88%, 10/1/01
2,250 2,250 Oklahoma Gas & Electric Co., 6.25%, 10/15/00
2,500 2,500 Potomac Electric Power, 6.00%, 4/1/04
2,400 2,400 Public Service Electric & Gas, 6.25%, 1/1/07
1,500 1,500 Puget Sound Power & Light, 6.61%, 2/9/00
2,500 2,500 SCANA Corp., Series B, 6.25%, 7/8/03, MTN
2,050 2,050 Smith Enron, 5.97%, 12/15/06
2,000 2,000 Tampa Electric Co., 6.13%, 5/1/03
1,750 1,750 Virginia Electric & Power Co., 6.63%, 4/1/03
2,500 2,500 Virginia Electric & Power Co., 8.00%, 3/1/04
1,500 1,500 Washington Gas Light, 6.85%, 3/9/28
3,500 3,500 Wisconsin Electric Power, 6.63%, 11/15/06
</TABLE>
<TABLE>
<S> <C> <C> <C>
OFFICE EQUIPMENT & SERVICES (0.5%):
2,200 2,247 - 2,247
------------------- ------------------ --------------------
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.4%):
3,158 3,284 3,284
1,000 951 951
864 886 886
2,000 1,895 1,895
------------------- ------------------ --------------------
7,016 - 7,016
------------------- ------------------ --------------------
PHARMACEUTICALS (0.6%):
3,000 2,936 - 2,936
------------------- ------------------ --------------------
PHOTOGRAPHY (0.7%):
3,100 3,379 - 3,379
------------------- ------------------ --------------------
POLLUTION CONTROL SERVICES & EQUIPMENT (0.9%):
2,449 2,412 2,412
2,000 1,985 1,985
------------------- ------------------ --------------------
4,397 - 4,397
------------------- ------------------ --------------------
RAILROADS (0.2%):
1,000 1,006 - 1,006
------------------- ------------------ --------------------
RETAIL (3.2%):
1,885 1,885
1,515 1,515
1,487 1,487
2,000 1,930 1,930
1,015 1,015
3,000 2,959 2,959
4,000 4,004 4,004
1,000 1,013 1,013
------------------- ------------------ --------------------
9,906 5,902 15,808
------------------- ------------------ --------------------
TELECOMMUNICATIONS (0.8%):
1,830 1,830
1,000 1,000
1,241 1,241
------------------- ------------------ --------------------
- 4,071 4,071
------------------- ------------------ --------------------
TOOLS (0.4%):
2,000 1,938 - 1,938
------------------- ------------------ --------------------
UTILITIES-ELECTRIC & GAS (9.5%):
3,100 3,216 3,216
1,491 1,491
2,000 2,013 2,013
1,454 1,454
1,500 1,500
1,725 1,725
1,602 1,602
3,500 3,346 3,346
3,100 3,030 3,030
2,750 2,839 2,839
2,250 2,256 2,256
2,433 2,433
2,301 2,301
1,506 1,506
2,455 2,455
2,019 2,019
2,000 1,968 1,968
1,750 1,750
2,500 2,625 2,625
1,395 1,395
3,500 3,425 3,425
------------------- ------------------ --------------------
24,718 21,631 46,349
------------------- ------------------ --------------------
</TABLE>
B-77
<PAGE> 251
<TABLE>
<S> <C> <C> <C>
UTILITIES-TELECOMMUNICATIONS (5.1%):
1,500 1,500 AT&T Corp., 6.50%, 3/15/29
2,000 2,000 BellAtlantic Corp., 6.25%, 2/15/04
3,500 3,500 BellSouth Telecommunications, 6.50%, 6/15/05
475 475 BellSouth Telecommunications, 8.25%, 7/1/32
2,009 2,009 Chesapeake & Potomac Telephone, 6.00%,
5/1/03
2,000 2,000 GTE California, Inc., 5.63%, 2/1/01
1,450 1,450 GTE Corp., 7.90%, 2/1/27
2,295 2,295 GTE Northwest, Inc., Series A, 7.38%, 5/1/01
1,650 1,650 GTE Southwest, Inc., Series A, 5.82%,
12/1/99
500 500 Michigan Bell Telephone, 5.88%, 9/15/99
2,000 2,000 Southern New England Telecommunications
Corp., 6.50%, 2/15/02
2,000 2,000 Southwestern Bell Telephone, 6.63%, 4/1/05
4,000 4,000 US West Communications Group, 6.63%, 9/15/05
MUNICIPAL BONDS (0.2%):
GEORGIA (0.2%):
800 800 Atlanta Downtown Development Lease Revenue
Bond, 6.88%, 2/1/21
U.S. GOVERNMENT AGENCIES (12.2%):
FANNIE MAE (7.3%):
1,000 1,000 6.35%, 11/23/01
3,000 3,000 6.59%, 5/21/02
7,500 7,500 7.05%, 11/12/02
17,600 17,600 5.13%, 2/13/04
7,300 7,300 6.56% 11/26/07
FREDDIE MAC (0.6%):
700 700 7.14%, 3/12/07
2,000 2,000 7.10%, 4/10/07
GOVERNMENT NATIONAL MORTGAGE ASSOC. (3.6%):
364 364 8.00%, 5/15/10
762 762 6.50%, 8/15/11
584 584 7.50%, 8/15/11
1,023 1,023 7.00%, 9/15/11
9,279 9,279 7.00%, 11/20/28
1,449 1,449 6.50%, 1/15/29
1,988 1,988 6.50%, 3/15/29
2,886 2,886 6.50%, 4/20/29
TENNESSEE VALLEY AUTHORITY (0.7%):
4,000 4,000 5.38%, 11/13/08
U.S. TREASURY SECURITIES (28.6%):
U.S. TREASURY BILLS (0.2%):
950 950 4.47%, 8/5/99
BONDS (24.3%):
8,000 8,000 5.75%, 8/15/03
15,000 15,000 5.88%, 11/15/05
21,000 21,000 6.50%, 10/15/06
17,833 17,833 3.38%, 1/15/07
17,000 17,000 7.50%, 11/15/16
1,000 1,000 8.13%, 8/15/21
37,360 37,360 6.25%, 8/15/23
</TABLE>
<TABLE>
<S> <C> <C> <C>
UTILITIES-TELECOMMUNICATIONS (5.1%):
1,344 1,344
2,000 1,960 1,960
3,500 3,439 3,439
484 484
2,009 1,971 1,971
2,000 1,983 1,983
1,461 1,461
2,295 2,335 2,335
1,650 1,650 1,650
500 500 500
2,000 2,003 2,003
2,000 1,978 1,978
4,000 3,854 3,854
------------------------- ------------------------ ----------------------
21,673 3,289 24,962
------------------------- ------------------------ ----------------------
TOTAL CORPORATE BONDS $ 182,466 $ 73,979 $ 256,445
------------------------- ------------------------ ----------------------
MUNICIPAL BONDS (0.2%):
GEORGIA (0.2%):
- 752 752
------------------------- ------------------------ ----------------------
TOTAL MUNICIPAL BONDS $ - $ 752 $ 752
------------------------- ------------------------ ----------------------
U.S. GOVERNMENT AGENCIES (12.2%):
FANNIE MAE (7.3%):
1,000 1,000
3,000 3,036 3,036
7,500 7,706 7,706
17,600 16,716 16,716
7,300 7,148 7,148
------------------------- ------------------------ ----------------------
34,606 1,000 35,606
------------------------- ------------------------ ----------------------
FREDDIE MAC (0.6%):
700 704 704
2,000 2,058 2,058
------------------------- ------------------------ ----------------------
2,762 - 2,762
------------------------- ------------------------ ----------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. (3.6%)
378 378
745 745
596 596
1,022 1,022
9,279 9,014 9,013
1,376 1,376
1,888 1,888
2,727 2,728
------------------------- ------------------------ ----------------------
9,014 8,732 17,746
------------------------- ------------------------ ----------------------
TENNESSEE VALLEY AUTHORITY (0.7%):
4,000 3,632 - 3,632
------------------------- ------------------------ ----------------------
TOTAL U.S. GOVERNMENT AGENCIES $ 50,014 $ 9,732 $ 59,746
------------------------- ------------------------ ----------------------
U.S. TREASURY SECURITIES (28.6%):
U.S. TREASURY BILLS (0.2%):
- 949 949
------------------------- ------------------------ ----------------------
Bonds (24.3%):
8,000 7,958 7,958
15,000 14,884 14,884
21,000 21,480 21,480
17,833 17,070 17,070
17,000 18,963 18,963
1,206 1,206
37,360 37,060 37,060
------------------------- ------------------------ ----------------------
117,415 1,206 118,621
------------------------- ------------------------ ----------------------
</TABLE>
B-78
<PAGE> 252
<TABLE>
<S> <C> <C> <C>
Notes (3.5%):
17,000 17,000 6.13%, 8/15/07
Strips (0.6%):
4,000 4,000 2/15/04
Commercial Paper (0.4%):
Financial Services (0.4%):
2,000,000 2,000,000 General Electric Capital Corp., 4.99%, 7/6/99
Investment Companies (4.5%):
4,611,751 4,611,751 Aim Liquid Assets Money Market Fund
4,291,754 4,291,754 AIM Prime Money Market Fund
13,287,510 13,287,510 AmSouth Prime Obligations Fund
7 7 AmSouth U.S. Treasury Fund
1,000 1,000 Bank of New York Cash Reserve Money Market Fund
</TABLE>
<TABLE>
<S> <C> <C> <C>
Notes (3.5%):
17,000 17,037 - 17,037
------------------------- --------------------------------- ----------------------
Strips (0.6%):
4,000 3,067 - 3,067
------------------------- --------------------------------- ----------------------
TOTAL U.S. TREASURY SECURITIES $ 137,519 $ 2,155 $ 139,674
------------------------- --------------------------------- ----------------------
Commercial Paper (0.4%):
Financial Services (0.4%):
- 1,997 1,997
------------------------- --------------------------------- ----------------------
TOTAL COMMERCIAL PAPER $ - $ 1,997 $ 1,997
------------------------- --------------------------------- ----------------------
Investment Companies (4.5%):
4,612 4,612
4,291 4,291
13,287,510 13,288 13,288
7 * *
1 1
------------------------- --------------------------------- ----------------------
TOTAL INVESTMENT
COMPANIES $ 13,288 $ 8,904 $ 22,192
------------------------- --------------------------------- ----------------------
------------------------- --------------------------------- ----------------------
TOTAL (COST $485,653) (a) $ 383,287 $ 97,519 $ 480,806
------------------------- --------------------------------- ----------------------
</TABLE>
Percentages indicated are based on net assets of $488,258.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized depreciation of securities as follows:
Unrealized appreciation $ 5,802
Unrealized depreciation (10,649)
-------------------
Net unrealized depreciation $ (4,847)
===================
* Amount is less than one thousand dollars.
MTN - Medium Term Note
B-79
<PAGE> 253
AMSOUTH GOVERNMENT INCOME FUND
ISG GOVERNMENT INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
GOVERNMENT GOVERNMENT PRO FORMA COMBINED
INCOME INCOME ADJUSTMENTS (NOTE 1)
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value
(Cost $8,566 and $351,112, respectively) $ 8,521 $348,749 $ -- $357,270
Interest and dividends receivable 78 6,406 -- 6,484
Receivable for capital shares issued 1 1 -- 2
Receivable from investment adviser -- 32 32
Other assets 1 26 -- 27
-------- -------- -------- --------
TOTAL ASSETS 8,601 355,214 -- 363,815
-------- -------- -------- --------
LIABILITIES:
Dividends Payable -- 1,513 -- 1,513
Payable for capital shares redeemed 8 5 -- 13
Accrued expenses and other payables:
Investment advisory fees 1 180 -- 181
Administration fees -- 6 -- 6
Distribution fees -- 46 -- 46
Accounting fees 1 2 -- 3
Transfer agent fees -- 3 -- 3
Custodian fees -- 12 -- 12
Other 5 43 -- 48
-------- -------- -------- --------
TOTAL LIABILITIES 15 1,810 -- 1,825
-------- -------- -------- --------
NET ASSETS:
Class A Shares 5,436 1,973 -- 7,409
Class B Shares -- 606 -- 606
Institutional Shares 3,150 350,825 -- 353,975
======== ======== ======== ========
$ 8,586 $353,404 $ -- $361,990
======== ======== ======== ========
CAPITAL SHARES OUTSTANDING
Class A Shares 565 201 4 (a) 770
Class B Shares -- 62 1 (a) 63
Institutional Shares 328 35,777 691 (a) 36,796
======== ======== ======== ========
893 36,040 696 (a) 37,566
======== ======== ======== ========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
Class A Shares - redemption price per share $ 9.62 $ 9.82 $ 9.62
-------- -------- --------
Class A Shares - maximum sales charge 4.50% 4.75% 4.50%
-------- -------- ========
Class A Shares - POP $ 10.02 $ 10.31 $ 10.07
======== ======== ========
Class B Shares - offering price per share* $ -- $ 9.79 $ 9.62
======== ======== ========
Institutional Shares - offering and redemption
price per share $ 9.62 $ 9.81 $ 9.62
======== ======== ========
COMPOSITION OF NET ASSETS
Capital 8,967 357,534 -- 366,501
Undistributed (distributions in excess of)
net investment income -- 242 -- 242
Undistributed net realized gains/(loss)
from investment transactions (336) (2,009) -- (2,345)
Net unrealized appreciation (depreciation) of investments (45) (2,363) -- (2,408)
-------- -------- -------- --------
NET ASSETS, JULY 31, 1999 $ 8,586 $353,404 $ -- $361,990
======== ======== ======== ========
</TABLE>
* Redemption price per share varies by length of time shares are held
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
B-80
<PAGE> 254
AMSOUTH GOVERNMENT INCOME FUND
ISG GOVERNMENT INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
GOVERNMENT GOVERNMENT PRO FORMA COMBINED
INCOME INCOME ADJUSTMENTS (NOTE 1)
------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 566 $ 18,290 $ -- $ 18,856
Dividend Income 11 640 -- 651
Income from securities lending -- 35 (35)(m) --
-------- -------- -------- --------
577 18,965 (35) 19,507
-------- -------- -------- --------
EXPENSES:
Advisory fees 62 1,878 158 (a) 2,098
Administration fees 19 414 213 (b) 646
Shareholder servicing fees (Class A Shares) 17 154 105 (c) 276
Shareholder servicing fees (Class B Shares) -- -- 0 (d) 0
Shareholder servicing fees (Institutional Shares) -- 313 5 (e) 318
12b-1 fees (Class A Shares) -- 4 (4)(f) --
12b-1 fees (Class B Shares) -- 1 0 (g) 1
Accounting fees 47 38 (55)(h) 30
Transfer agent fees 23 50 7 (i) 80
Custodian fees 1 50 38 (j) 89
Trustee fees and expenses -- 5 -- 5
Other expenses 5 123 (49)(k) 79
-------- -------- -------- --------
TOTAL EXPENSES: 174 3,030 418 3,622
Less Waivers
Advisory fees (33) -- 33 (a) --
Administration fees (10) -- 10 (b) --
Shareholder servicing fees (Class A Shares) (10) -- 10 (c) --
12b-1 fees (Class A Shares) -- (4) 4 (f) --
Accounting Fees (37) -- 37 (h) --
Transfer agent fees (20) -- 20 (i) --
Reimbursements -- (177) 177 (l) --
-------- -------- -------- --------
NET EXPENSES: 64 2,849 709 3,622
-------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) 513 16,116 (744) 15,885
-------- -------- -------- --------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment transactions 51 (24) -- 27
Net change in unrealized appreciation (depreciation)
from investments (283) -- -- (283)
-------- -------- -------- --------
Net realized/unrealized gains (losses) from investments (232) (24) -- (256)
CHANGE IN NET ASSETS RESULTING FROM
-------- -------- -------- --------
OPERATIONS: $ 281 $ 16,092 $ (744) $ 15,629
======== ======== ======== ========
</TABLE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for
Advisory fees (0.65% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.25% of Class B net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder Servicing fees (0.15% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for
12b-1 fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for
12b-1 fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for
Accounting fees ($10,000 a year per additional class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for
Transfer agent fees (0.015% of net assets + $10,000 a year per
class + OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for
Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
(m) Adjustment to reflect no securities lending income since there is
not a securities lending program set up on the AmSouth Funds.
B-81
<PAGE> 255
AMSOUTH GOVERNMENT INCOME FUND
ISG GOVERNMENT INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
GOVERNMENT GOVERNMENT COMBINED
INCOME INCOME PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------------- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (12.9%):
AIRCRAFT LEASING (0.7%):
2,500 2,500 International Lease Finance Corp., 6.00%,
6/15/03
AUTOMOTIVE-FINANCE (1.6%):
3,000 3,000 Ford Motor Credit Co., 5.75%, 2/23/04
2,000 2,000 General Motors, 6.25%, 5/1/05
1,000 1,000 General Motors Acceptance Corp., 5.75%,
11/10/03
BANKING (0.3%):
1,000 1,000 NationsBank Corp., 5.38%, 4/15/00
BEVERAGES (0.7%):
2,000 2,000 Anheuser Busch Cos., 5.75%, 1/15/11,
Callable 1/15/06 @ 100
889 889 Anheuser Busch Cos., 6.90%, 10/1/02,
Callable 10/1/99 @ 100
BROKERAGE SERVICES (0.7%):
2,500 2,500 Merrill Lynch & Co., 6.00%, 7/15/05
DIVERSIFIED MANUFACTURING (1.6%):
1,400 1,400 American Home Products, 7.70%, 2/15/00
3,000 3,000 Kellogg Co., 4.875%, 10/15/05
1,000 1,000 Pharmacia & Upjohn Inc., 5.88%, 4/15/00
437 437 Texas Instruments, 9.25%, 6/15/03
ENTERTAINMENT (0.8%):
3,000 3,000 Walt Disney Co., 5.62%, 12/1/08, Callable
12/1/05 @ 100
FINANCIAL SERVICES (0.5%):
2,000 2,000 Associates Corp., 5.75%, 11/01/03
FOOD PRODUCTS & SERVICES (0.9%):
2,500 2,500 Campbell Soup Co., 4.75%, 10/1/03
1,000 1,000 H.J. Heinz Co., 6.75%, 10/15/99
INDUSTRIAL GOODS & SERVICES (0.4%):
889 889 E.I. Du Pont de Nemours & Co., 6.75%,
10/15/02
437 437 E.I. Du Pont de Nemours & Co., 9.15%,
4/15/00
INSURANCE (1.1%):
2,250 2,250 Chubb Corp., 6.15%, 8/15/05
2,000 2,000 General Electric Capital Corp., 5.92%,
4/3/01
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.0%):
3,500 3,500 Atlantic Richfield, 5.55%, 4/15/03
TELECOMMUNICATIONS (0.5%):
2,000 2,000 GTE, Inc., 6.13%, 6/15/07
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH ISG
AMSOUTH GOVERNMENT GOVERNMENT PRO FORMA
GOVERNMENT INCOME INCOME COMBINED
INCOME MARKET MARKET MARKET
AMOUNT/SHARES VALUE VALUE VALUE
--------------------------- --------------------- ------------------------ --------------------
<S> <C> <C> <C>
CORPORATE BONDS (12.9%):
AIRCRAFT LEASING (0.7%):
- $ 2,444 $ 2,444
-------------------- ------------------------ --------------------
AUTOMOTIVE-FINANCE (1.6%):
2,865 2,865
1,940 1,940
956 956
-------------------- ------------------------ --------------------
- 5,761 5,761
-------------------- ------------------------ --------------------
BANKING (0.3%):
- 998 998
-------------------- ------------------------ --------------------
BEVERAGES (0.7%):
1,800 1,800
896 896
-------------------- ------------------------ --------------------
- 2,696 2,696
-------------------- ------------------------ --------------------
BROKERAGE SERVICES (0.7%):
- 2,391 2,391
-------------------- ------------------------ --------------------
DIVERSIFIED MANUFACTURING (1.6%):
1,416 1,416
2,752 2,752
1,000 1,000
481 481
-------------------- ------------------------ --------------------
- 5,649 5,649
-------------------- ------------------------ --------------------
ENTERTAINMENT (0.8%):
- 2,760 2,760
-------------------- ------------------------ --------------------
FINANCIAL SERVICES (0.5%):
- 1,918 1,918
-------------------- ------------------------ --------------------
FOOD PRODUCTS & SERVICES (0.9%):
2,356 2,356
1,003 1,003
-------------------- ------------------------ --------------------
- 3,359 3,359
-------------------- ------------------------ --------------------
INDUSTRIAL GOODS & SERVICES (0.4%):
899 899
447 447
-------------------- ------------------------ --------------------
- 1,346 1,346
-------------------- ------------------------ --------------------
INSURANCE (1.1%):
2,171 2,171
1,990 1,990
-------------------- ------------------------ --------------------
- 4,161 4,161
-------------------- ------------------------ --------------------
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.0%):
- 3,404 3,404
-------------------- ------------------------ --------------------
TELECOMMUNICATIONS (0.5%):
- 1,900 1,900
-------------------- ------------------------ --------------------
</TABLE>
B-82
<PAGE> 256
AMSOUTH GOVERNMENT INCOME FUND
ISG GOVERNMENT INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
AMSOUTH ISG PRO FORMA
GOVERNMENT GOVERNMENT COMBINED
INCOME INCOME PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------------- ---------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC & GAS (2.1%):
3,000 3,000 Emerson Electric, 5.85%, 3/15/09
3,500 3,500 National Rural Utilities, 5.75%, 12/1/08
1,000 1,000 Pacific Gas & Electric, 6.25%, 3/1/04
1,000 1,000 Southern California Edison, 5.63%, 10/1/02
U.S. Government Agencies (36.0%):
FANNIE MAE (8.6%):
15,000 15,000 5.28%*, 9/15/99
1,600 1,600 5.75%, 4/15/03
7,000 7,000 6.00%, 5/15/08
5,000 5,000 6.46%, 5/9/05, Callable 5/9/01 @ 100
1,000 1,000 6.82%, 12/13/06
2,000 2,000 6.94%, 9/5/07, Callable 9/5/02 @ 100
FEDERAL FARM CREDIT BANK (8.5%):
15,000 15,000 5.07%, 12/15/03
7,000 7,000 5.70%, 9/3/08
10,000 10,000 6.20%, 7/1/02
FEDERAL HOME LOAN BANK (5.9%):
5,000 5,000 5.26%, 2/18/04
3,000 3,000 5.35%, 12/1/03
10,000 10,000 5.80%, 9/2/08
2,000 2,000 6.275%, 8/13/01, Callable 8/13/99 @ 100
2,250 2,250 6.34%, 6/29/04
FREDDIE MAC (9.1%):
5,000 5,000 5.00%, 1/15/04
10,000 10,000 5.75%, 3/15/09
10,000 10,000 6.75%, 5/4/09, Callable 8/4/99 @ 100
5,000 5,000 7.00%, 3/23/09, Callable 6/23/99 @ 100
4,000 4,000 7.40%, 6/9/14, Callable 6/9/00 @ 100
GOVERNMENT NATIONAL MORTGAGE ASSOC. (1.6%):
1360 1360 7.00%, 12/15/26-2/20/29
2207 2207 7.50%, 6/15/24-12/15/25
306 306 8.00%, 7/15/26
196 196 8.50%, 12/15/19-2/15/23
874 874 9.00%, 6/15/18-9/15/22
662 662 9.50%, 5/15/18-8/15/21
PRIVATE EXPORT FUNDING (1.9%):
2,000 2,000 Series B, 6.49%, 7/15/07
2,000 2,000 Series C, 6.31%, 9/30/04
3,000 3,000 Series D, 5.87%, 7/31/08
</TABLE>
<TABLE>
AMSOUTH ISG
AMSOUTH GOVERNMENT GOVERNMENT PRO FORMA
GOVERNMENT INCOME INCOME COMBINED
INCOME MARKET MARKET MARKET
AMOUNT/SHARES VALUE VALUE VALUE
--------------------------- --------------------- ------------------------ --------------------
<S> <C> <C> <C>
UTILITIES-ELECTRIC & GAS (2.1%):
2,800 2,800
3,215 3,215
985 985
978 978
------------------------ -------------------------- --------------------
- 7,978 7,978
------------------------ -------------------------- --------------------
TOTAL CORPORATE BONDS $ - $ 46,765 $ 46,765
------------------------ -------------------------- --------------------
U.S. Government Agencies (36.0%):
FANNIE MAE (8.6%):
14,908 14,908
1,600 1,568 1,568
6,673 6,673
4,952 4,952
1,001 1,001
1,989 1,989
------------------------ -------------------------- --------------------
1,568 29,523 31,091
------------------------ -------------------------- --------------------
FEDERAL FARM CREDIT BANK (8.5%):
14,298 14,298
6,574 6,574
9,993 9,993
------------------------ -------------------------- --------------------
- 30,865 30,865
------------------------ -------------------------- --------------------
FEDERAL HOME LOAN BANK (5.9%):
4,785 4,785
2,879 2,879
9,401 9,401
2,000 2,000
2,244 2,244
------------------------ -------------------------- --------------------
- 21,309 21,309
------------------------ -------------------------- --------------------
FREDDIE MAC (9.1%):
4,729 4,729
9,312 9,312
9,999 9,999
5,000 5,000
3,943 3,943
------------------------ -------------------------- --------------------
- 32,983 32,983
------------------------ -------------------------- --------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. (1.6%):
1360 1,324 1,324
2207 2,208 2,208
306 312 312
196 203 203
874 921 921
662 705 705
------------------------ -------------------------- --------------------
5,673 - 5,673
------------------------ -------------------------- --------------------
PRIVATE EXPORT FUNDING (1.9%):
2,013 2,013
2,008 2,008
2,894 2,894
------------------------ -------------------------- --------------------
- 6,915 6,915
------------------------ -------------------------- --------------------
</TABLE>
B-83
<PAGE> 257
AMSOUTH LIMITED TERM BOND FUND
ISG LIMITED TERM INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
Limited Term Bond Limited Term COMBINED
Principal Income Principal Principal
Amount/Shares Amount/Shares Amount/Shares Description
- ------------------------------- ------------------- --------------- ---------------------------------------------------
<S> <C> <C> <C>
AUTOMOTIVE-FINANCE (7.1%):
1,000 1,000 Chrysler Financial Corp., 6.08%, 4/6/01
4,000 4,000 Ford Motor Credit Co., 8.20%, 2/15/02
2,500 2,500 Ford Motor Credit Co., 6.50%, 2/28/02
2,000 2,000 General Motors Acceptance Corp., 5.80%, 4/9/01
3,500 3,500 General Motors Acceptance Corp., 6.75%, 2/7/02
2,000 2,000 Toyota Motor Credit Corp., 5.50%, 9/17/01
BANKING (7.5%):
2,500 2,500 ABN AMRO Bank, 6.63%, 10/31/01
3,000 3,000 Bank One Corp., 6.25%, 9/1/00
1,500 1,500 Bankers Trust, 6.75%, 10/3/01
1,500 1,500 Firstar Bank, 6.25%, 12/1/02
2,000 2,000 NationsBank Corp., 5.38%, 4/15/00
2,500 2,500 NationsBank Corp., 5.70%, 9/11/00
2,000 2,000 Nationsbank Corp., 7.00%, 9/15/01
900 900 Wachovia Bank, 6.30%, 3/15/01
BEVERAGES (0.6%):
1,250 1,250 Anheuser-Busch, 7.13%, 7/1/17
BROKERAGE SERVICES (3.4%):
3,500 3,500 Bear Stearns & Co., Inc., 6.50%, 8/1/02
2,000 2,000 Dean Witter Discover & Co., 6.26%, 3/15/00
1,750 1,750 Merrill Lynch & Co., 6.00%, 1/15/01
BUILDING PRODUCTS (0.9%):
2,000 2,000 Vulcan Materials Co., 5.75%, 4/1/04
CHEMICALS (0.7%):
1,500 1,500 Eastman Chemical, 6.38%, 1/15/04
COMPUTERS & PERIPHERALS (0.9%):
1,000 1,000 IBM Corp., 6.04%, 8/7/00
1,000 1,000 IBM Corp., 5.95%, 6/2/03
CONSUMER GOODS (0.9%):
2,000 2,000 Procter & Gamble Co., 5.25%, 9/15/03
ELECTRONIC COMPONENTS/
INSTRUMENTS (0.4%):
850 850 Honeywell, Inc., 6.75%, 3/15/02
ENTERTAINMENT (0.7%):
1,500 1,500 Walt Disney Co., 6.375%, 3/30/01
FARM EQUIPMENT (2.3%):
3,000 3,000 John Deere Capital Corp., 5.85%, 1/15/01
2,000 2,000 John Deere Capital Corp., 5.90%, 4/8/03
FINANCIAL SERVICES (9.7%):
3,000 3,000 Ameritech Capital Funding, 6.13%, 10/15/01
1,500 1,500 Associates Corp., 7.68%, 3/3/00
4,200 4,200 Associates Corp. of North America, 6.63%, 5/15/01
500 500 Beneficial Corp., 7.32%, 11/17/99
2,000 2,000 CIT Group Holdings, 6.38%, 10/1/02
1,000 1,000 Citigroup, Inc., 6.13%, 6/15/00
1,000 1,000 Commercial Credit Co., 8.26%, 11/1/01
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
LIMITED TERM BOND LIMITED TERM COMBINED
MARKET INCOME MARKET MARKET
Description Value Value Value
--------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
Chrysler Financial Corp., 6.08%, 4/6/01 $ 998 $ - $ 998
Ford Motor Credit Co., 8.20%, 2/15/02 4,149 4,149
Ford Motor Credit Co., 6.50%, 2/28/02 2,497 2,497
General Motors Acceptance Corp., 5.80%, 4/9/01 1,980 1,980
General Motors Acceptance Corp., 6.75%, 2/7/02 3,509 3,509
Toyota Motor Credit Corp., 5.50%, 9/17/01 1,968 1,968
------------- ------------ -------------
10,624 4,477 15,101
------------- ------------ -------------
ABN AMRO Bank, 6.63%, 10/31/01 2,509 2,509
Bank One Corp., 6.25%, 9/1/00 3,003 3,003
Bankers Trust, 6.75%, 10/3/01 1,508 1,508
Firstar Bank, 6.25%, 12/1/02 1,487 1,487
NationsBank Corp., 5.38%, 4/15/00 1,995 1,995
NationsBank Corp., 5.70%, 9/11/00 2,488 2,488
Nationsbank Corp., 7.00%, 9/15/01 2,025 2,025
Wachovia Bank, 6.30%, 3/15/01 899 899
------------- ------------ -------------
9,872 6,042 15,914
------------- ------------ -------------
Anheuser-Busch, 7.13%, 7/1/17 - 1,225 1,225
------------- ------------ -------------
Bear Stearns & Co., Inc., 6.50%, 8/1/02 3,465 3,465
Dean Witter Discover & Co., 6.26%, 3/15/00 2,005 2,005
Merrill Lynch & Co., 6.00%, 1/15/01 1,746 1,746
------------- ------------ -------------
5,470 1,746 7,216
------------- ------------ -------------
Vulcan Materials Co., 5.75%, 4/1/04 1,940 - 1,940
------------- ------------ -------------
Eastman Chemical, 6.38%, 1/15/04 - 1,466 1,466
------------- ------------ -------------
IBM Corp., 6.04%, 8/7/00 1,002 1,002
IBM Corp., 5.95%, 6/2/03 981 981
------------- ------------ -------------
------------- ------------
981 1,002 1,983
------------- ------------ -------------
Procter & Gamble Co., 5.25%, 9/15/03 1,913 - 1,913
------------- ------------ -------------
Honeywell, Inc., 6.75%, 3/15/02 857 - 857
------------- ------------ -------------
Walt Disney Co., 6.375%, 3/30/01 - 1,508 1,508
------------- ------------ -------------
John Deere Capital Corp., 5.85%, 1/15/01 2,981 2,981
John Deere Capital Corp., 5.90%, 4/8/03 1,948 1,948
------------- ------------ -------------
-------------
2,981 1,948 4,929
------------- ------------ -------------
Ameritech Capital Funding, 6.13%, 10/15/01 2,988 2,988
Associates Corp., 7.68%, 3/3/00 1,519 1,519
Associates Corp. of North America, 6.63%, 5/15/01 4,210 4,210
Beneficial Corp., 7.32%, 11/17/99 502 502
CIT Group Holdings, 6.38%, 10/1/02 1,983 1,983
Citigroup, Inc., 6.13%, 6/15/00 1,000 1,000
Commercial Credit Co., 8.26%, 11/1/01 1,038 1,038
</TABLE>
B-84
<PAGE> 258
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
Limited Term Bond Limited Term COMBINED
Principal Income Principal Principal
Amount/Shares Amount/Shares Amount/Shares Description
- ------------------------------- ------------------- --------------- ---------------------------------------------------
<S> <C> <C> <C>
2,500 2,500 General Electric Capital Corp., 6.15%, 11/5/01
2,500 2,500 Household Finance Co., 8.95%, 9/15/99
2,500 2,500 Household Netherlands, 6.20%, 12/1/03
FOOD PRODUCTS & SERVICES (1.4%):
1,000 1,000 Campbell Soup Co., 6.15%, 12/1/02
1,000 1,000 McDonald's Corp., 5.90%, 5/11/01
1,000 1,000 McDonald's Corp., 6.00%, 6/23/02
FOREST & PAPER PRODUCTS (1.4%):
2,000 2,000 International Paper Co., 6.88%, 7/10/00
1,000 1,000 Mead Corp., 6.60%, 3/1/02
HEALTH CARE (0.9%):
2,000 2,000 McKesson Corp., 6.88%, 3/1/02
INDUSTRIAL GOODS & SERVICES (6.2%):
2,000 2,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02
1,500 1,500 Archer Daniels, 6.25%, 5/15/03
1,000 1,000 Caterpillar Financial Services, 6.02%, 4/15/02
3,000 3,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02
3,000 3,000 Imperial Oil Ltd., 8.75%, 10/15/19
2,500 2,500 Martin Marietta, 6.50%, 4/15/03
INSURANCE (4.1%):
2,000 2,000 American General Finance, 5.75%, 11/01/03
1,500 1,500 AON Corp., 6.88%, 10/1/99
1,000 1,000 St. Paul Cos., Inc., Series A, 6.17%, 1/15/01
2,000 2,000 Travelers Property Casualty, 6.75%, 4/15/01
2,200 2,200 USLife Corp., 6.38%, 6/15/00
LEASING (1.0%):
2,000 2,000 USL Capital Corp., 8.13%, 2/15/00
OFFICE EQUIPMENT & SERVICES (0.6%):
1,274 1,274 Xerox Corp., 8.13%, 4/15/02
OIL & GAS EXPLORATION, PRODUCTION,
& SERVICES (1.0%):
2,200 2,200 Amoco Co., 6.25%, 10/15/04
RETAIL (5.5%):
2,500 2,500 Dayton Hudson Co., 6.40%, 2/15/03
2,000 2,000 J.C. Penney Co., Inc., 7.25%, 4/1/02
1,000 1,000 Sears, Roebuck and Co., 6.00%, 3/20/03
3,500 3,500 Wal-Mart Stores, Inc., 5.85%, 6/1/00
2,500 2,500 Wal-Mart Stores, Inc., 5.85%, 6/1/00
TELECOMMUNICATIONS (2.6%):
1,500 1,500 AT&T Corp., 5.63%, 3/15/04
1,036 1,036 IBM Corp., 6.25%, 2/24/00
1,500 1,500 MCI Communication Corp., 7.13%, 1/20/00
1,500 1,500 Worldcom, Inc., 6.13%, 8/15/01
TELECOMMUNICATIONS-EQUIPMENT (0.5%):
1,000 1,000 Lucent Technologies, Inc., 6.90%, 7/15/01
TOOLS (0.5%):
500 500 Stanley Works, 7.38%, 12/15/02
500 500 Stanley Works, 5.75%, 3/1/04
UTILITIES-ELECTRIC & GAS (12.1%):
1,250 2,000 3,250 Alabama Power Corp., 5.35%, 11/15/03
2,500 2,500 Baltimore Gas & Electric Co., 6.50%, 2/15/03
600 600 Baltimore Gas & Electric Co., 5.50%, 7/15/00
2,000 2,000 Central Power & Light, 6.00%, 4/1/00
1,300 1,300 Cincinnati Gas & Electric, 6.45%, 2/15/04
1,000 1,000 ENSERCH, 7.00%, 8/15/99
1,000 1,000 Florida Power Corp., 6.50%, 12/1/99
2,000 2,000 Florida Power Corp., 6.54%, 7/1/02
2,500 2,500 Midamerican Energy, 6.50%, 12/15/01
2,000 2,000 National Rural Utilities, 6.49%, 7/10/02
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
LIMITED TERM BOND LIMITED TERM COMBINED
MARKET INCOME MARKET MARKET
Description Value Value Value
- --------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
General Electric Capital Corp., 6.15%, 11/5/01 2,491 2,491
Household Finance Co., 8.95%, 9/15/99 2,508 2,508
Household Netherlands, 6.20%, 12/1/03 2,438 2,438
------------- ------------ -------------
19,158 1,519 20,677
------------- ------------ -------------
Campbell Soup Co., 6.15%, 12/1/02 996 996
McDonald's Corp., 5.90%, 5/11/01 995 995
McDonald's Corp., 6.00%, 6/23/02 990 990
------------- ------------ -------------
2,981 - 2,981
------------- ------------ -------------
International Paper Co., 6.88%, 7/10/00 2,007 2,007
Mead Corp., 6.60%, 3/1/02 994 994
------------- ------------
------------- ------------ -------------
994 2,007 3,001
------------- ------------ -------------
McKesson Corp., 6.88%, 3/1/02 1,985 - 1,985
------------- ------------ -------------
Air Products & Chemicals, Inc., 8.35%, 1/15/02 2,083 2,083
Archer Daniels, 6.25%, 5/15/03 1,489 1,489
Caterpillar Financial Services, 6.02%, 4/15/02 988 988
E. I. Dupont de Nemours & Co., 6.50%, 9/1/02 3,007 3,007
Imperial Oil Ltd., 8.75%, 10/15/19 3,127 3,127
Martin Marietta, 6.50%, 4/15/03 2,487 2,487
------------- ------------ -------------
6,078 7,103 13,181
------------- ------------ -------------
American General Finance, 5.75%, 11/01/03 1,923 1,923
AON Corp., 6.88%, 10/1/99 1,502 1,502
St. Paul Cos., Inc., Series A, 6.17%, 1/15/01 996 996
Travelers Property Casualty, 6.75%, 4/15/01 2,007 2,007
USLife Corp., 6.38%, 6/15/00 2,199 2,199
------------- ------------ -------------
6,620 2,007 8,627
------------- ------------ -------------
USL Capital Corp., 8.13%, 2/15/00 2,024 - 2,024
------------- ------------ -------------
Xerox Corp., 8.13%, 4/15/02 1,331 - 1,331
------------- ------------ -------------
Amoco Co., 6.25%, 10/15/04 2,178 - 2,178
------------- ------------ -------------
Dayton Hudson Co., 6.40%, 2/15/03 2,497 2,497
J.C. Penney Co., Inc., 7.25%, 4/1/02 2,020 2,020
Sears, Roebuck and Co., 6.00%, 3/20/03 975 975
Wal-Mart Stores, Inc., 5.85%, 6/1/00 3,504 3,504
Wal-Mart Stores, Inc., 5.85%, 6/1/00 2,503 2,503
------------- ------------ -------------
4,479 7,020 11,499
------------- ------------ -------------
AT&T Corp., 5.63%, 3/15/04 1,438 1,438
IBM Corp., 6.25%, 2/24/00 1,036 1,036
MCI Communication Corp., 7.13%, 1/20/00 1,510 1,510
Worldcom, Inc., 6.13%, 8/15/01 1,489 1,489
------------- ------------ -------------
1,438 4,035 5,473
------------- ------------ -------------
Lucent Technologies, Inc., 6.90%, 7/15/01 1,013 - 1,013
------------- ------------ -------------
Stanley Works, 7.38%, 12/15/02 514 514
Stanley Works, 5.75%, 3/1/04 484 484
------------- ------------ -------------
998 - 998
------------- ------------ -------------
Alabama Power Corp., 5.35%, 11/15/03 1,194 1,918 3,112
Baltimore Gas & Electric Co., 6.50%, 2/15/03 2,493 2,493
Baltimore Gas & Electric Co., 5.50%, 7/15/00 599 599
Central Power & Light, 6.00%, 4/1/00 2,000 2,000
Cincinnati Gas & Electric, 6.45%, 2/15/04 1,292 1,292
ENSERCH, 7.00%, 8/15/99 1,001 1,001
Florida Power Corp., 6.50%, 12/1/99 1,003 1,003
Florida Power Corp., 6.54%, 7/1/02 2,000 2,000
Midamerican Energy, 6.50%, 12/15/01 2,493 2,493
National Rural Utilities, 6.49%, 7/10/02 2,003 2,003
</TABLE>
B-85
<PAGE> 259
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
Limited Term Bond Limited Term COMBINED
Principal Income Principal Principal
Amount/Shares Amount/Shares Amount/Shares Description
- ------------------------------- ------------------- --------------- ---------------------------------------------------
<S> <C> <C> <C>
2,500 2,500 Potomac Electric Power, 6.00%, 4/1/04
2,000 2,000 Puget Sound Power & Light, 6.61%, 2/9/00
2,000 2,000 SCANA Corp., Series B, 6.25%, 7/8/03
1,321 1,321 Smith Enron, 5.97%, 12/15/06
UTILITIES-TELECOMMUNICATIONS
(0.9%):
2,000 2,000 BellSouth Telecommunications, 6.00%, 6/15/02
FANNIE MAE (0.7%):
1,500 1,500 6.35%, 11/23/01
FREDDIE MAC (0.9%):
2,000 2,000 6.75%, 4/1/08
GOVERNMENT NATIONAL MORTGAGE
ASSOC. (9.2%):
450 450 8.00%, 12/15/07
823 823 8.00%, 8/15/08
521 521 7.50%, 4/15/09
373 373 7.50%, 4/15/09
467 467 7.50%, 6/15/09
492 492 8.50%, 9/15/09
921 921 8.00%, 11/15/09
373 373 8.50%, 12/15/09
451 451 8.50%, 12/15/09
855 855 8.00%, 4/15/10
1,119 1,119 8.00%, 4/15/10
1,199 1,199 7.50%, 8/15/11
1,928 1,928 6.00%, 1/15/14
1,930 1,930 6.00%, 1/15/14
1,932 1,932 6.50%, 1/15/29
1,942 1,942 6.50%, 1/20/29
1,988 1,988 6.50%, 3/15/29
1,990 1,990 6.50%, 4/20/29
1,500 1,500 7.75%, 1/31/00
1,000 1,000 6.25%, 6/30/02
18,000 18,000 7.25%, 5/15/04
3,835,297 3,835,297 AIM Liquid Assets Money Market Fund
2,024,579 2,024,579 AIM Prime Money Market Fund
2,248,559 2,248,559 AmSouth Prime Obligations Fund
339 339 AmSouth U.S. Treasury Fund
1,000 1,000 Bank of New York Cash Reserve Money Market Fund
Unrealized appreciation $ 929
Unrealized depreciation (2,354)
--------
Net unrealized depreciation $ (1,425)
========
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
LIMITED TERM BOND LIMITED TERM COMBINED
MARKET INCOME MARKET MARKET
Description Value Value Value
- --------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
Potomac Electric Power, 6.00%, 4/1/04 2,432 2,432
Puget Sound Power & Light, 6.61%, 2/9/00 2,007 2,007
SCANA Corp., Series B, 6.25%, 7/8/03 1,965 1,965
Smith Enron, 5.97%, 12/15/06 1,301 1,301
------------- ------------ -------------
2,796 22,905 25,701
------------- ------------ -------------
BellSouth Telecommunications, 6.00%, 6/15/02 1,975 - 1,975
------------- ------------ -------------
TOTAL CORPORATE BONDS $ 90,686 $ 66,010 $ 156,696
--------- ------------ -------------
6.35%, 11/23/01 - 1,501 1,501
--------- ------------ -------------
6.75%, 4/1/08 - 2,000 2,000
--------- ------------ -------------
8.00%, 12/15/07 466 466
8.00%, 8/15/08 854 854
7.50%, 4/15/09 531 531
7.50%, 4/15/09 380 380
7.50%, 6/15/09 477 477
8.50%, 9/15/09 514 514
8.00%, 11/15/09 955 955
8.50%, 12/15/09 389 389
8.50%, 12/15/09 471 471
8.00%, 4/15/10 886 886
8.00%, 4/15/10 1,160 1,160
7.50%, 8/15/11 1,223 1,223
6.00%, 1/15/14 1,846 1,846
6.00%, 1/15/14 1,849 1,849
6.50%, 1/15/29 1,835 1,835
6.50%, 1/20/29 1,836 1,836
6.50%, 3/15/29 1,889 1,889
6.50%, 4/20/29 1,882 1,882
--------- ------------ -------------
- 19,443 19,443
--------- ------------ -------------
TOTAL U.S. GOVERNMENT AGENCIES $ - $ 22,944 $ 22,944
--------- ------------ -------------
7.75%, 1/31/00 1,519 1,519
6.25%, 6/30/02 1,013 1,013
7.25%, 5/15/04 18,971 18,971
--------- ------------ -------------
TOTAL U.S. TREASURY NOTES $ 18,971 $ 2,532 $ 21,503
--------- ------------ -------------
AIM Liquid Assets Money Market Fund 3,835 3,835
AIM Prime Money Market Fund 2,025 2,025
AmSouth Prime Money Market Fund 2,248 2,248
AmSouth Treasury Reserve Money Market Fund - -
Bank of New York Cash Reserve Money Market Fund 1 1
--------- ------------ -------------
TOTAL INVESTMENT COMPANIES $ 2,248 $ 5,861 $ 8,109
--------- ------------ -------------
TOTAL (COST $210,677) (A) $ 111,905 $ 97,347 $ 209,252
--------- ------------ -------------
</TABLE>
B-86
<PAGE> 260
AmSouth Limited Term Bond Fund
ISG Limited Term Income Fund ISG
Pro Forma Combining Statement of Operations ANA # Days
for the 12 month period ended 07/31/99 7/31/99 A 7,358,647
(Amounts in thousands) B 602,460
(Unaudited) I 88,566,034
<TABLE>
<CAPTION>
ISG Pro Forma
AmSouth Limited Term Pro Forma Combined
Limited Term Bond Income Adjustments (Note 1)
----------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 7,037 $ 5,884 $ - $12,921
Dividend Income 95 191 - 286
Income from securities lending - 8 (8)(m) -
--------- ------------ ---------- ------------
7,132 6,083 (8) 13,207
--------- ------------ ---------- ------------
EXPENSES:
Advisory fees 735 483 144 (a) 1,362
Administration fees 226 145 48 (b) 419
Shareholder servicing fees (Class A Shares) 8 6 12 (c) 26
Shareholder servicing fees (Class B Shares) - 2 1 (d) 3
Shareholder servicing fees (Institutional Shares) - 80 217 (e) 297
12b-1 fees (Class A Shares) - 18 (18) (f) -
12b-1 fees (Class B Shares) 4 5 (1) (g) 8
Accounting fees 57 49 (73) (h) 33
Transfer agent fees 48 57 (42) (i) 63
Custodian fees 7 25 26 (j) 58
Trustee fees and expenses 3 5 (3) (k) 5
Other expenses 28 93 (58) (k) 63
--------- ------------ ---------- ------------
Total Expenses: 1,116 968 253 2,337
Less Waivers:
Advisory fees (170) - 170 (a) -
Administration fees (90) - 90 (b) -
Shareholder servicing fees (Class A Shares) (5) - 5 (c) -
Accounting fees (15) - 15 (h) -
Transfer agent fees (25) - 25 (i) -
--------- ------------ ---------- ------------
Net Expenses: 811 968 558 2,337
--------- ------------ ---------- ------------
Net Investment Income 6,321 5,115 (566) 10,870
--------- ------------ ---------- ------------
Realized/Unrealized Gains (Losses) from
Investments
Net realized gains (losses) from investment transaction 464 130 - 594
Net change in unrealized appreciation (depreciation)
from investments (2,240) (1,948) - (4,188)
--------- ------------ ---------- ------------
Net realized/unrealized gains (losses) from investments (1,776) (1,818) - (3,594)
Change in net assets resulting from
========= ============ ========== ============
Operations: $ 4,545 $ 3,297 $ (566) $ 7,276
</TABLE>
Notes to Pro Forma Financial Statements
(a) Adjustment to reflect the AmSouth contractual fee structure for
Advisory fees (0.65% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class A net assets)
(d) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Class B net assets)
(e) Adjustment to reflect the AmSouth contractual fee structure for
Shareholder servicing fees (0.25% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1
fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for
Accounting fees ($10,000 a year per additional class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for
Transfer agent fees (0.015% of net assets + $10,000 a year per class +
OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for
Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
(m) Adjustment to reflect no securities lending income since there is not
a securities lending program set up on the AmSouth Funds.
B-87
<PAGE> 261
AMSOUTH LIMITED TERM BOND FUND
ISG Limited Term Income Fund
Pro Forma Combining Statement of Assets and Liabilities
for the 12 month period ended 07/31/99
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
ISG PRO FORMA
AmSouth Limited Term Pro Forma Combined
Limited Term Bond Income Adjustments (Note 1)
----------------- ------------- ------------ -------------
ASSETS:
Investment in securities, at value
<S> <C> <C> <C> <C>
(cost $112,420 and $98,257, respectively) $ 111,905 $ 97,347 $ - $ 209,252
Interest and dividends receivable 1,999 1,384 - 3,383
Other assets 5 22 - 27
--------------- ------------- ------------ -------------
TOTAL ASSETS 113,909 98,753 - 212,662
--------------- ------------- ------------ -------------
LIABILITIES:
Dividends payable - 444 - 444
Payable for capital shares redeemed 2 - - 2
Accrued expenses and other payables: -
Advisory fees 25 42 - 67
Administration fees 1 2 - 3
Distribution fees 2 15 - 17
Accounting fees 1 2 - 3
Transfer agent fees 3 3 - 6
Custodian fees 1 7 - 8
Other 5 22 - 27
--------------- ------------- ------------ -------------
TOTAL LIABILITIES 40 537 - 577
--------------- ------------- ------------ -------------
NET ASSETS:
Class A Shares 2,716 6,850 - 9,566
Class B Shares 1,599 696 - 2,295
Institutional Shares 109,554 90,670 - 200,224
--------------- ------------- ------------ -------------
$ 113,869 $ 98,216 $ - $212,085
=============== ============= ============ =============
CAPITAL SHARES OUTSTANDING
Class A Shares 264 702 (36)(a) 930
Class B Shares 156 71 (3)(a) 224
Institutional Shares 10,647 9,287 (476)(a) 19,458
--------------- ------------- ------------ -------------
11,067 10,060 (515)(a) 20,612
=============== ============= ============ =============
Net Asset Value
Class A Shares - redemption price per share $ 10.29 $ 9.76 $ 10.29
=============== ============= =============
Class A Shares - maximum sales charge 4.00% 3.00% 4.00%
--------------- ------------- -------------
Class A Shares - POP $ 10.72 $ 10.06 $ 10.72
=============== ============= =============
Class B Shares - offering price per share* $ 10.27 $ 9.75 $ 10.27
=============== ============= =============
Institutional Shares - offering and redemption
price per share $ 10.29 $ 9.76 $ 10.29
=============== ============= =============
COMPOSITION OF NET ASSETS
Capital $ 115,003 $ 99,310 $ - $ 214,313
Undistributed (distributions in excess of)
net investment income 483 (1) - 482
Undistributed net realized gains (losses)
from investment transactions (1,102) (183) - (1,285)
Net unrealized appreciation (depreciation) of
investments (515) (910) - (1,425)
--------------- ------------- ------------ -------------
NET ASSETS, JULY 31, 1999 $ 113,869 $ 98,216 $ - $212,085
=============== ============= ============ =============
</TABLE>
* Redemption price per share varies by length of time shares are held.
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
B-88
<PAGE> 262
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL MUNICIPAL PRO FORMA COMBINED
BOND INCOME ADJUSTMENTS (NOTE 1)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value
(cost $321,757 and $66,213, respectively) $323,878 $ 64,489 $ -- $388,367
Interest and dividends receivable 4,967 916 -- 5,883
Other assets 13 18 -- 31
-------- -------- -------- --------
TOTAL ASSETS 328,858 65,423 -- 394,281
-------- -------- -------- --------
LIABILITIES:
Cash overdraft -- 26 -- 26
Payable for capital shares redeemed -- 226 -- 226
Payable to brokers for investments purchased 4,754 991 -- 5,745
Accrued expenses:
Advisory fees 57 17 -- 74
Administration fees 4 1 -- 5
Distribution fees -- 8 -- 8
Accounting fees 2 1 -- 3
Transfer agent fees 8 4 -- 12
Custodian fees 3 2 -- 5
Other 27 15 -- 42
-------- -------- -------- --------
TOTAL LIABILITIES 4,855 1,291 -- 6,146
-------- -------- -------- --------
NET ASSETS
Class A Shares 2,694 3,270 -- 5,964
Class B Shares 16 347 -- 363
Institutional Shares 321,293 60,515 -- 381,808
-------- -------- -------- --------
$324,003 $ 64,132 $ -- $388,135
======== ======== ======== ========
CAPITAL SHARES OUTSTANDING
Class A Shares 273 312 19 (a) 604
Class B Shares 2 33 2 (a) 37
Institutional Shares 32,557 5,782 349 (a) 38,688
-------- -------- -------- --------
32,832 6,127 370 (a) 39,329
======== ======== ======== ========
NET ASSET VALUE
Class A Shares - redemption price per share $ 9.87 $ 10.47 $ 9.87
-------- -------- ========
Class A Shares - maximum sales charge 4.00% 3.00% 4.00%
======== ======== ========
Class A Shares - POP $ 10.28 $ 10.79 $ 10.28
======== ======== ========
Class B Shares - offering price per share* $ 9.87 $ 10.44 $ 9.87
======== ======== ========
Institutional Shares - offering and redemption
price per share $ 9.87 $ 10.47 $ 9.87
======== ======== ========
COMPOSITION OF NET ASSETS
Capital $319,649 $ 63,867 $ -- $383,516
Undistributed (distributions in excess of)
net investment income 599 (148) -- 451
Undistributed net realized gains/(loss)
from investment transactions 1,634 2,137 -- 3,771
Net unrealized appreciation (depreciation) of
investments 2,121 (1,724) -- 397
-------- -------- -------- --------
NET ASSETS, JULY 31, 1999 $324,003 $ 64,132 $ -- $388,135
======== ======== ======== ========
<FN>
* Redemption price per share varies by length of time shares are held.
(a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding
based on AmSouth's NAV's.
</TABLE>
B-89
<PAGE> 263
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL MUNICIPAL PRO FORMA COMBINED
BOND INCOME ADJUSTMENTS (NOTE 1)
-------- -------- --------- --------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest Income $ 15,208 $ 2,787 $ -- $ 17,995
Dividend Income 193 26 -- 219
-------- -------- --------- --------
15,401 2,813 -- 18,214
-------- -------- --------- --------
EXPENSES:
Advisory fees 2,121 356 29 (a) 2,506
Administration fees 653 95 23 (b) 771
Shareholder servicing fees (Class A Shares) 6 33 23 (c) 62
Shareholder servicing fees (Class B Shares) -- -- 0 (d) 0
Shareholder servicing fees (Institutional Shares) -- 55 486 (e) 541
12b-1 fees (Class A Shares) -- 4 (4) (f) --
12b-1 fees (Class B Shares) -- 1 0 (g) 1
Accounting fees 129 49 (146) (h) 32
Transfer agent fees 90 38 (30) (i) 98
Custodian fees 20 13 73 (j) 106
Trustee fees and expenses 6 2 (2) (k) 6
Other expenses 83 69 (62) (k) 90
-------- -------- --------- --------
TOTAL EXPENSES: 3,108 715 391 4,214
Less Waivers
Advisory fees (816) (178) 994 (a) --
Administration fees (261) -- 261 (b) --
Shareholder servicing fees (Class A Shares) (4) -- 4 (c) --
12b-1 fees (Class A Shares) -- (4) 4 (f) --
Accounting Fees (15) -- 15 (h) --
Transfer agent fees (25) -- 25 (i) --
Reimbursements -- (1) 1 (l) --
-------- -------- --------- --------
NET EXPENSES: 1,987 532 1,695 4,214
-------- -------- --------- --------
NET INVESTMENT INCOME (LOSS) 13,414 2,281 (1,695) 14,000
-------- -------- --------- --------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment transactions 2,189 2,081 -- 4,270
Net change in unrealized appreciation (depreciation)
from investments (7,994) -- -- (7,994)
-------- -------- --------- --------
Net realized/unrealized gains (losses) from investments (5,805) 2,081 -- (3,724)
CHANGE IN NET ASSETS RESULTING FROM
-------- -------- --------- --------
OPERATIONS: $ 7,609 $ 4,362 $ (1,695) $ 10,276
======== ======== ========= ========
<FN>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.65% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A
net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class B
net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional
net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets).
(h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional
class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a
year per class + OOP).
(j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets).
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
</TABLE>
B-90
<PAGE> 264
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ ------------- --------------- -----------------------------------------------------------------
MUNICIPAL BONDS (97.7%):
ALABAMA (47.4%):
<S> <C> <C> <C>
$ 2,245 $ 2,245 Alabama State Agriculture & Mechanical University
Revenue, 4.55%, 11/1/09, Callable 5/1/08 @ 102, MBIA
2,355 2,355 Alabama State Agriculture & Mechanical University
Revenue, 4.65%, 11/1/10, Callable 5/1/08 @ 102, MBIA
2,035 2,035 Alabama State Agriculture & Mechanical University
Revenue, 6.50%, 11/1/25, Callable 11/1/05 @ 102, MBIA
3,060 3,060 Alabama State Corrections Institution, Series A, 4.90%,
4/1/03, MBIA
1,520 1,520 Alabama State Industrial Access Road & Bridge Corp.,
Capital Improvements, Series A, 4.60%, 6/1/03
3,700 3,700 Alabama State Judicial Building Authority, Judicial Facilities
Project, 4.75%, 1/1/05, AMBAC
3,880 3,880 Alabama State Judicial Building Authority, Judicial Facilities
Project, 4.85%, 1/1/06, AMBAC
2,000 2,000 Alabama State Mental Health Finance Authority, Special
Tax, 4.88%, 5/1/03, MBIA
7,350 7,350 Alabama State Public School & College Authority, 4.75%,
12/1/03, Callable 6/1/03 @ 103
3,390 3,390 Alabama State Public School & College Authority, 5.00%,
12/1/05, Callable 6/1/03 @ 103
10,000 10,000 Alabama State Public School & College Authority Revenue,
Series A, 4.38%, 8/1/04
5,000 5,000 Alabama State Public School & College Authority, Capital
Improvement, 4.75%, 11/1/06, Callable 11/1/05 @ 101
1,760 1,760 Alabama State Water Pollution Control Authority, Revolving
Fund, Series B, 5.25%, 8/15/08, Callable 8/15/06 @ 100,
AMBAC
1,350 1,350 Alabama State Water Pollution Control Authority, Revolving
Fund, Series B, 5.38%, 8/15/10, Callable 8/15/06 @ 100,
AMBAC
2,495 2,495 Alabama State Water Pollution Control Authority, Revolving
Fund, Series B, 5.40%, 8/15/11, Callable 8/15/06 @ 100,
AMBAC
5,000 5,000 Alabama State Water Pollution Control Authority, Revolving
Fund, Series B, 5.50%, 8/15/16, Callable 8/15/06 @ 100,
AMBAC
3,500 3,500 Alabama State, Series A, GO, 4.60%, 10/1/05
1,000 1,000 Auburn University, University Revenues, General Fee, 5.25%,
6/1/06, Callable 6/1/03 @ 102, MBIA
1,040 1,040 Birmingham Capital Improvement, Series B, GO, 4.80%,
10/1/08, Callable 4/1/07 @ 102
1,375 1,375 Birmingham Waterworks & Sewer Board, Water & Sewer
Revenue, 5.90%, 1/1/03, Callable 1/1/02 @ 102
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
------------------------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Alabama State Agriculture & Mechanical University $ 2,155 $ 2,155
Revenue, 4.55%, 11/1/09, Callable 5/1/08 @ 102, MBIA
Alabama State Agriculture & Mechanical University 2,248 2,248
Revenue, 4.65%, 11/1/10, Callable 5/1/08 @ 102, MBIA
Alabama State Agriculture & Mechanical University 2,287 2,287
Revenue, 6.50%, 11/1/25, Callable 11/1/05 @ 102, MBIA
Alabama State Corrections Institution, Series A, 4.90%, 3,118 3,118
4/1/03, MBIA
Alabama State Industrial Access Road & Bridge Corp., 1,528 1,528
Capital Improvements, Series A, 4.60%, 6/1/03
Alabama State Judicial Building Authority, Judicial Facilities 3,739 3,739
Project, 4.75%, 1/1/05, AMBAC
Alabama State Judicial Building Authority, Judicial Facilities 3,927 3,927
Project, 4.85%, 1/1/06, AMBAC
Alabama State Mental Health Finance Authority, Special 2,039 2,039
Tax, 4.88%, 5/1/03, MBIA
Alabama State Public School & College Authority, 4.75%, 7,474 7,474
12/1/03, Callable 6/1/03 @ 103
Alabama State Public School & College Authority, 5.00%, 3,479 3,479
12/1/05, Callable 6/1/03 @ 103
Alabama State Public School & College Authority Revenue, 9,981 9,981
Series A, 4.38%, 8/1/04
Alabama State Public School & College Authority, Capital 5,039 5,039
Improvement, 4.75%, 11/1/06, Callable 11/1/05 @ 101
Alabama State Water Pollution Control Authority, Revolving 1,805 1,805
Fund, Series B, 5.25%, 8/15/08, Callable 8/15/06 @ 100,
AMBAC
Alabama State Water Pollution Control Authority, Revolving 1,379 1,379
Fund, Series B, 5.38%, 8/15/10, Callable 8/15/06 @ 100,
AMBAC
Alabama State Water Pollution Control Authority, Revolving 2,552 2,552
Fund, Series B, 5.40%, 8/15/11, Callable 8/15/06 @ 100,
AMBAC
Alabama State Water Pollution Control Authority, Revolving 5,046 5,046
Fund, Series B, 5.50%, 8/15/16, Callable 8/15/06 @ 100,
AMBAC
Alabama State, Series A, GO, 4.60%, 10/1/05 3,517 3,517
Auburn University, University Revenues, General Fee, 5.25%, 1,032 1,032
6/1/06, Callable 6/1/03 @ 102, MBIA
Birmingham Capital Improvement, Series B, GO, 4.80%, 1,039 1,039
10/1/08, Callable 4/1/07 @ 102
Birmingham Waterworks & Sewer Board, Water & Sewer 1,453 1,453
Revenue, 5.90%, 1/1/03, Callable 1/1/02 @ 102
</TABLE>
B-91
<PAGE> 265
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ ------------- -------------- ----------------------------------------------------------------
1,340 1,340 Birmingham, Capital Improvements, Series A, GO, 4.75%,
10/1/10, Callable 4/1/08 @ 102
1,430 1,430 Birmingham, Capital Improvements, Series A, GO, 4.85%,
10/1/11, Callable 4/1/08 @ 102
1,500 1,500 Birmingham, GO, 4.90%, 7/1/06
1,300 1,300 Birmingham, Industrial Water Board, Industrial Water
Supply, 5.50%, 3/1/06, Pre-refunded 3/1/05 @ 100
3,465 3,465 Birmingham, Industrial Water Board, Industrial Water
Supply, 6.20%, 7/1/08, Pre-refunded 1/1/07 @ 100
1,100 1,100 Birmingham, Industrial Water Board, Industrial Water
Supply, ETM, 5.30%, 3/1/04, Callable 3/1/03 @ 102
1,000 1,000 Birmingham, Industrial Water Board, Industrial Water
Supply, ETM, 5.40%, 3/1/05, Callable 3/1/03 @ 102
1,045 1,045 Clark & Mobile County, Gas District, 5.60%, 12/1/17, Callable
12/1/06 @ 102, MBIA
9,500 9,500 Daphne, Special Care Facilities Financing Authority,
Presbyterian Retirement Corp., 7.30%, 8/15/18, Pre-refunded
8/15/01 @ 100
720 720 Decatur, Warrants, Series E, Limited GO, 5.10%, 8/1/05,
Callable 8/1/02 @ 102
760 760 Decatur, Warrants, Series E, Limited GO, 5.20%, 8/1/06,
Callable 8/1/02 @ 102
750 750 Decatur, Warrants, Series E, Limited GO, 5.25%, 8/1/08,
Callable 8/1/02 @ 102
780 780 Decatur, Warrants, Series E, Limited GO, 5.30%, 8/1/09,
Callable 8/1/02 @ 102
2,845 2,845 Florence, Warrants, Series A, GO, 4.65%, 9/1/03, MBIA
390 390 Florence, Warrants, Series A, GO, 4.35%, 12/1/07, FSA
405 405 Florence, Warrants, Series A, GO, 4.40%, 12/1/08
425 425 Florence, Warrants, Series A, GO, 4.50%, 12/1/09
445 445 Florence, Warrants, Series A, GO, 4.60%, 12/1/10, Callable
12/1/08 @ 102
790 790 Florence, Warrants, Series B, GO, 4.35%, 12/1/07, FSA
825 825 Florence, Warrants, Series B, GO, 4.40%, 12/1/08, FSA
865 865 Florence, Warrants, Series B, GO, 4.50%, 12/1/09, Callable
12/1/08 @ 102, FSA
900 900 Florence, Warrants, Series B, GO, 4.60%, 12/1/10, Callable
12/1/08 @ 102, FSA
4,700 4,700 Gadsden, East Alabama Medical Clinic Board, Baptist
Hospital of Gadsden, Inc., Series A, 7.80%, 11/1/21,
Pre-refunded 11/1/01 @ 102
5,450 5,450 Hoover, Warrants, GO, 4.50%, 3/1/13, Pre-refunded 3/1/03 @ 100
550 550 Huntsville Electric, 4.60%, 12/1/09, Callable 12/1/07 @ 102
660 660 Huntsville Electric, 4.70%, 12/1/10, Callable 12/1/07 @ 102
680 680 Huntsville Electric, 4.80%, 12/1/11, Callable 12/1/07 @ 102
3,120 3,120 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/05
3,245 3,245 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/06
3,380 3,380 Huntsville, Warrants, Series B, GO, 4.10%, 11/1/07
2,000 2,000 Huntsville, Water System, Warrants, 5.00%, 5/1/02, AMBAC
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
- -------------------------------------------------------------------- --------------------- ------------------ --------------
<S> <C> <C> <C>
Birmingham, Capital Improvements, Series A, GO, 4.75%, 1,309 1,309
10/1/10, Callable 4/1/08 @ 102
Birmingham, Capital Improvements, Series A, GO, 4.85%, 1,396 1,396
10/1/11, Callable 4/1/08 @ 102
Birmingham, GO, 4.90%, 7/1/06 1,525 1,525
Birmingham, Industrial Water Board, Industrial Water 1,362 1,362
Supply, 5.50%, 3/1/06, Pre-refunded 3/1/05 @ 100
Birmingham, Industrial Water Board, Industrial Water 3,663 3,663
Supply, 6.20%, 7/1/08, Pre-refunded 1/1/07 @ 100
Birmingham, Industrial Water Board, Industrial Water 1,139 1,139
Supply, ETM, 5.30%, 3/1/04, Callable 3/1/03 @ 102
Birmingham, Industrial Water Board, Industrial Water 1,042 1,042
Supply, ETM, 5.40%, 3/1/05, Callable 3/1/03 @ 102
Clark & Mobile County, Gas District, 5.60%, 12/1/17, Callable 1,064 1,064
12/1/06 @ 102, MBIA
Daphne, Special Care Facilities Financing Authority, 10,071 10,071
Presbyterian Retirement Corp., 7.30%, 8/15/18, Pre-refunded
8/15/01 @ 100
Decatur, Warrants, Series E, Limited GO, 5.10%, 8/1/05, 738 738
Callable 8/1/02 @ 102
Decatur, Warrants, Series E, Limited GO, 5.20%, 8/1/06, 779 779
Callable 8/1/02 @ 102
Decatur, Warrants, Series E, Limited GO, 5.25%, 8/1/08, 763 763
Callable 8/1/02 @ 102
Decatur, Warrants, Series E, Limited GO, 5.30%, 8/1/09, 792 792
Callable 8/1/02 @ 102
Florence, Warrants, Series A, GO, 4.65%, 9/1/03, MBIA 2,879 2,879
Florence, Warrants, Series A, GO, 4.35%, 12/1/07, FSA 380 380
Florence, Warrants, Series A, GO, 4.40%, 12/1/08 392 392
Florence, Warrants, Series A, GO, 4.50%, 12/1/09 410 410
Florence, Warrants, Series A, GO, 4.60%, 12/1/10, Callable 428 428
12/1/08 @ 102
Florence, Warrants, Series B, GO, 4.35%, 12/1/07, FSA 769 769
Florence, Warrants, Series B, GO, 4.40%, 12/1/08, FSA 798 798
Florence, Warrants, Series B, GO, 4.50%, 12/1/09, Callable 834 834
12/1/08 @ 102, FSA
Florence, Warrants, Series B, GO, 4.60%, 12/1/10, Callable 865 865
12/1/08 @ 102, FSA
Gadsden, East Alabama Medical Clinic Board, Baptist 5,150 5,150
Hospital of Gadsden, Inc., Series A, 7.80%, 11/1/21,
Pre-refunded 11/1/01 @ 102
Hoover, Warrants, GO, 4.50%, 3/1/13, Pre-refunded 3/1/03 @ 100 5,016 5,016
Huntsville Electric, 4.60%, 12/1/09, Callable 12/1/07 @ 102 534 534
Huntsville Electric, 4.70%, 12/1/10, Callable 12/1/07 @ 102 639 639
Huntsville Electric, 4.80%, 12/1/11, Callable 12/1/07 @ 102 656 656
Huntsville, Warrants, Series B, GO, 4.00%, 11/1/05 3,026 3,026
Huntsville, Warrants, Series B, GO, 4.00%, 11/1/06 3,108 3,108
Huntsville, Warrants, Series B, GO, 4.10%, 11/1/07 3,218 3,218
Huntsville, Water System, Warrants, 5.00%, 5/1/02, AMBAC 2,042 2,042
</TABLE>
B-92
<PAGE> 266
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ ---------------- ---------------- ---------------------------------------------------------------
3,125 3,125 Huntsville, Water System, Warrants, 5.05%, 5/1/03, Callable
5/1/02 @ 102, AMBAC
1,000 1,000 Jefferson County Board of Education, Capital Outlay, 5.40%,
2/15/10, Callable 2/15/03 @ 102, AMBAC
4,000 4,000 Jefferson County, GO, 5.30%, 4/1/09, Pre-refunded 4/1/03 @ 102
2,400 2,400 Jefferson County, Sewer Revenue Warrants, 5.40%, 9/1/04,
Pre-refunded 3/1/03 @ 102.5, MBIA
5,000 5,000 Jefferson County, Warrants, GO, 5.00%, 4/1/04, Callable
4/1/03 @ 102
1,000 1,000 Jefferson Sewer, 6.00%, 9/1/13, Callable 9/1/02 @ 102
2,000 2,000 Mobile County Board of School Commissioners, Warrants,
Capital Outlay, 4.80%, 3/1/02, AMBAC
1,350 1,350 Mobile County, Series A, GO, 5.00%, 2/1/04, Callable 2/1/03
@ 102
1,000 1,000 Mobile County, Warrants, Series A, Limited GO, 5.00%,
2/1/04, Callable 2/1/03 @ 102
5,000 5,000 Mobile County, Warrants, Series A, Limited GO, 5.10%,
2/1/05, Callable 2/1/03 @ 102
1,630 1,630 Mobile, Warrants, GO, 6.50%, 2/15/05, AMBAC
1,685 1,685 Mobile, Warrants, GO, 6.50%, 2/15/06, AMBAC
2,700 2,700 Mobile, Warrants, GO, 4.85%, 2/15/09, Callable 2/15/00 @ 100
3,250 3,250 Mobile, Water & Sewer Commissioners, Water & Sewer
Revenue, 5.00%, 1/1/05, FGIC
1,500 1,500 Montgomery County, Warrants, GO, 5.00%, 11/1/04, Callable
11/1/04 @ 102
1,040 1,040 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/05,
Callable 5/1/03 @ 102
1,000 1,000 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/06,
Callable 5/1/03 @ 102
3,000 3,000 Montgomery, Waterworks & Sanitary Sewer Board, 5.50%,
9/1/08, Callable 9/1/06 @ 101, MBIA
1,000 1,000 Montgomery, Waterworks & Sanitary Sewer Board, Series B,
5.70%, 9/1/02
2,500 2,500 Montgomery, Waterworks & Sanitary Sewer Board, Series B,
6.25%, 9/1/08, Callable 9/1/02 @ 102
3,565 3,565 Montgomery, Waterworks & Sanitary Sewer Board, Series B,
6.30%, 9/1/10, Callable 9/1/02 @ 102
1,005 1,005 Shelby County, Warrants, Board of Education, Capital
Outlay, 4.80%, 2/1/10, Callable 2/1/09 @ 101, AMBAC
1,990 1,990 Shelby County, Warrants, Series A, 5.60%, 8/1/02, AMBAC
1,830 1,830 Shelby County, Warrants, Series A, 5.70%, 2/1/03, AMBAC
335 335 Talladega County, Industrial Development Board, Cyprus 1
Project, 9.75%, 12/1/13
740 740 Tuscaloosa County, Warrants, GO, 5.60%, 10/1/04
1,200 1,200 University Alabama General Fee, 4.60%, 6/1/09, Callable
6/1/07 @ 102, MBIA
1,300 1,300 University Alabama General Fee, 4.70%, 6/1/10, Callable
6/1/07 @ 102, MBIA
1,500 1,500 University Alabama General Fee, 4.75%, 6/1/11, Callable
6/1/07 @ 102, MBIA
2,185 2,185 University of South Alabama, University Revenues, Tuition,
4.70%, 11/15/08, Callable 5/15/06 @ 102, AMBAC
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
------------------------------------------------------------------- ----------------- ---------------- --------------
<S> <C> <C> <C>
Huntsville, Water System, Warrants, 5.05%, 5/1/03, Callable 3,202 3,202
5/1/02 @ 102, AMBAC
Jefferson County Board of Education, Capital Outlay, 5.40%, 1,053 1,053
2/15/10, Callable 2/15/03 @ 102, AMBAC
Jefferson County, GO, 5.30%, 4/1/09, Pre-refunded 4/1/03 @ 102 4,070 4,070
Jefferson County, Sewer Revenue Warrants, 5.40%, 9/1/04, 2,539 2,539
Pre-refunded 3/1/03 @ 102.5, MBIA
Jefferson County, Warrants, GO, 5.00%, 4/1/04, Callable 5,119 5,119
4/1/03 @ 102
Jefferson Sewer, 6.00%, 9/1/13, Callable 9/1/02 @ 102 1,069 1,069
Mobile County Board of School Commissioners, Warrants, 2,030 2,030
Capital Outlay, 4.80%, 3/1/02, AMBAC
Mobile County, Series A, GO, 5.00%, 2/1/04, Callable 2/1/03 1,382 1,382
@ 102
Mobile County, Warrants, Series A, Limited GO, 5.00%, 1,024 1,024
2/1/04, Callable 2/1/03 @ 102
Mobile County, Warrants, Series A, Limited GO, 5.10%, 5,142 5,142
2/1/05, Callable 2/1/03 @ 102
Mobile, Warrants, GO, 6.50%, 2/15/05, AMBAC 1,782 1,782
Mobile, Warrants, GO, 6.50%, 2/15/06, AMBAC 1,857 1,857
Mobile, Warrants, GO, 4.85%, 2/15/09, Callable 2/15/00 @ 100 2,662 2,662
Mobile, Water & Sewer Commissioners, Water & Sewer 3,327 3,327
Revenue, 5.00%, 1/1/05, FGIC
Montgomery County, Warrants, GO, 5.00%, 11/1/04, Callable 1,539 1,539
11/1/04 @ 102
Montgomery, Warrants, Series A, GO, 5.00%, 5/1/05, 1,066 1,066
Callable 5/1/03 @ 102
Montgomery, Warrants, Series A, GO, 5.00%, 5/1/06, 1,019 1,019
Callable 5/1/03 @ 102
Montgomery, Waterworks & Sanitary Sewer Board, 5.50%, 3,135 3,135
9/1/08, Callable 9/1/06 @ 101, MBIA
Montgomery, Waterworks & Sanitary Sewer Board, Series B, 1,041 1,041
5.70%, 9/1/02
Montgomery, Waterworks & Sanitary Sewer Board, Series B, 2,667 2,667
6.25%, 9/1/08, Callable 9/1/02 @ 102
Montgomery, Waterworks & Sanitary Sewer Board, Series B, 3,808 3,808
6.30%, 9/1/10, Callable 9/1/02 @ 102
Shelby County, Warrants, Board of Education, Capital 986 986
Outlay, 4.80%, 2/1/10, Callable 2/1/09 @ 101, AMBAC
Shelby County, Warrants, Series A, 5.60%, 8/1/02, AMBAC 2,070 2,070
Shelby County, Warrants, Series A, 5.70%, 2/1/03, AMBAC 1,912 1,912
Talladega County, Industrial Development Board, Cyprus 1 336 336
Project, 9.75%, 12/1/13
Tuscaloosa County, Warrants, GO, 5.60%, 10/1/04 780 780
University Alabama General Fee, 4.60%, 6/1/09, Callable 1,171 1,171
6/1/07 @ 102, MBIA
University Alabama General Fee, 4.70%, 6/1/10, Callable 1,265 1,265
6/1/07 @ 102, MBIA
University Alabama General Fee, 4.75%, 6/1/11, Callable 1,450 1,450
6/1/07 @ 102, MBIA
University of South Alabama, University Revenues, Tuition, 2,163 2,163
4.70%, 11/15/08, Callable 5/15/06 @ 102, AMBAC
----------------- ---------------- --------------
183,221 1,069 184,290
----------------- ---------------- --------------
</TABLE>
B-93
<PAGE> 267
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
----------------- ---------------- ---------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
ARKANSAS (0.2%):
1,400 1,400 Arkansas State Capital Appreciation, College Savings,
Series C, GO, 0.00%, 6/1/11
CALIFORNIA (2.4%):
1,285 1,285 California State, 7.00%, 10/1/09, GO
2,655 2,655 Los Angeles County Metro Transit Authority Sales Tax
Revenues, Series A, 6.00%, 7/1/09
4,765 4,765 San Mateo County, Transit District Sales Tax Revenue,
Series A, 5.25%, 6/1/16, Callable 6/1/09 @ 101, FSA
FLORIDA (5.6%):
1,760 1,760 Dade County, Series DD, 7.70%, 10/1/08, AMBAC
1,000 1,000 Dade County, Series DD, 7.70%, 10/1/12, AMBAC
1,150 1,150 Escambia County, Utilities Authority Revenue, Series D,
5.00%, 1/1/04, FGIC
2,000 2,000 Escambia County, Utilities Authority Revenue, Series D,
5.00%, 1/1/05, FGIC
6,500 6,500 Florida State Board of Education, Capital Outlay, Series A,
GO, 5.00%, 6/1/08
8,070 8,070 Reedy Creek, Improvement District, Series 1, 5.50%, 10/1/08,
Callable 10/1/07 @ 101, AMBAC
GEORGIA (2.1%):
1,000 1,000 Georgia Municipal Gas Authority, 4.50%, 9/1/06, Gas
Revenue Gas Portfolio Ii PJ - Series B
2,350 2,350 Georgia State, Series A, GO, 6.25%, 4/1/08
2,500 2,500 Georgia State, Series B, 7.20%, 3/1/06
1,500 1,500 Savannah Hospital Authority Revenue, St. Josephs Hospital
Project, 6.20%, 7/1/23, Callable 7/1/03 @ 102
HAWAII (0.3%):
270 270 Honolulu City & County Prerefunded, Series B, 5.50%,
10/1/11, GO
730 730 Honolulu City & County Unrefunded Balance, Series B,
5.50%, 10/1/11, GO
ILLINOIS (1.6%):
1,830 1,830 Chicago Metropolitan Water Reclamation District, Greater
Chicago Capital Improvements, 6.90%, 1/1/07
2,830 2,830 Illinois Educational Facilities Authority Revenue, Loyola
University, Series A, 6.10%, 7/1/15, Pre-Refunded 7/1/03 @
102
3,000 3,000 Will County Forest Preservation District,, Series B, 0.00%,
12/1/18, GO, FGIC
KENTUCKY (0.5%):
2,000 2,000 Carrollton & Henderson, 5.00%, 1/1/09, Public Energy
Authority Gas Revenue
MICHIGAN (2.5%):
1,000 1,000 Battle Creek Downtown Development Authority, 7.30%,
5/1/10, Prerefunded 5/1/07 @ 102
7,000 7,000 Municipal Bond Authority Revenue, 5.00%, 12/1/05
1,500 1,500 Rochester Community School District, 5.00%, 5/1/19, GO,
MBIA, Q-SBLF
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
- ------------------------------------------------------------------------------------ -------------------- ----------------
<S> <C> <C> <C>
Arkansas State Capital Appreciation, College Savings, - 774 774
Series C, GO, 0.00%, 6/1/11
-------------------- -------------------- ----------------
California State, 7.00%, 10/1/09, GO 1,513 1,513
Los Angeles County Metro Transit Authority Sales Tax 2,907 2,907
Revenues, Series A, 6.00%, 7/1/09
San Mateo County, Transit District Sales Tax Revenue, 4,744 4,744
Series A, 5.25%, 6/1/16, Callable 6/1/09 @ 101, FSA
-------------------- -------------------- ----------------
4,744 4,420 9,164
-------------------- -------------------- ----------------
Dade County, Series DD, 7.70%, 10/1/08, AMBAC 2,125 2,125
Dade County, Series DD, 7.70%, 10/1/12, AMBAC 1,256 1,256
Escambia County, Utilities Authority Revenue, Series D, 1,179 1,179
5.00%, 1/1/04, FGIC
Escambia County, Utilities Authority Revenue, Series D, 2,051 2,051
5.00%, 1/1/05, FGIC
Florida State Board of Education, Capital Outlay, Series A, 6,606 6,606
GO, 5.00%, 6/1/08
Reedy Creek, Improvement District, Series 1, 5.50%, 10/1/08, 8,510 8,510
Callable 10/1/07 @ 101, AMBAC
-------------------- -------------------- ----------------
18,346 3,381 21,727
-------------------- -------------------- ----------------
Georgia Municipal Gas Authority, 4.50%, 9/1/06, Gas 993 993
Revenue Gas Portfolio Ii PJ - Series B
Georgia State, Series A, GO, 6.25%, 4/1/08 2,606 2,606
Georgia State, Series B, 7.20%, 3/1/06 2,865 2,865
Savannah Hospital Authority Revenue, St. Josephs Hospital 1,624 1,624
Project, 6.20%, 7/1/23, Callable 7/1/03 @ 102
-------------------- -------------------- ----------------
- 8,088 8,088
-------------------- -------------------- ----------------
Honolulu City & County Prerefunded, Series B, 5.50%, 283 283
10/1/11, GO
Honolulu City & County Unrefunded Balance, Series B, 754 754
5.50%, 10/1/11, GO
-------------------- -------------------- ----------------
- 1,037 1,037
-------------------- -------------------- ----------------
Chicago Metropolitan Water Reclamation District, Greater 2,070 2,070
Chicago Capital Improvements, 6.90%, 1/1/07
Illinois Educational Facilities Authority Revenue, Loyola 3,051 3,051
University, Series A, 6.10%, 7/1/15, Pre-Refunded 7/1/03 @
102
Will County Forest Preservation District,, Series B, 0.00%, 1,024 1,024
12/1/18, GO, FGIC
-------------------- -------------------- ----------------
- 6,145 6,145
-------------------- -------------------- ----------------
Carrollton & Henderson, 5.00%, 1/1/09, Public Energy - 2,018 2,018
-------------------- -------------------- ----------------
Authority Gas Revenue
Battle Creek Downtown Development Authority, 7.30%, 1,136 1,136
5/1/10, Prerefunded 5/1/07 @ 102
Municipal Bond Authority Revenue, 5.00%, 12/1/05 7,191 7,191
Rochester Community School District, 5.00%, 5/1/19, GO, 1,438 1,438
MBIA, Q-SBLF
-------------------- -------------------- ----------------
7,191 2,574 9,765
-------------------- -------------------- ----------------
</TABLE>
B-94
<PAGE> 268
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ -------------- --------------- -----------------------------------------------------------
<S> <C> <C> <C> <C>
MINNESOTA (0.6%):
2,175 2,175 Centennial Independent School District, No. 12, Series A,
GO, 5.60%, 2/1/07, MBIA
MISSISSIPPI (1.2%):
1,000 1,000 Hinds County Refunding Bonds, 5.50%, 3/1/08, GO, MBIA
1,430 1,430 Jackson Mississippi Water & Sewer Revenue, 5.13%,
9/1/14, Callable @ 100 9/1/09
2,000 2,000 Mississippi State, Capital Improvements, Series A, GO,
5.20%, 8/1/11, Callable 8/1/03 @ 100
MISSOURI (2.0%):
7,535 7,535 Missouri State, Water Pollution, Series B, GO, 5.00%,
8/1/07, Callable 8/1/03 @ 102
NEW JERSEY (0.4%):
1,605 1,605 New Jersey Health Care, Cathedral Health Services, 5.50%,
2/1/11, MBIA
NEW YORK (1.8%):
1,150 1,150 Hempstead Town, GO, 5.00%, 2/15/09, Callable 2/15/06 @
102
1,500 1,500 Municipal Assistance Corp. for New York City, GO, 6.00%,
7/1/05
1,225 1,225 New York State Dorm Authority, New York University, Series
A, 5.75%, 7/1/13, MBIA
2,500 2,500 New York State Environmental Facilities Corp., Pollution
Control Revenue, Series E, 6.00%, 6/15/12
NORTH CAROLINA (1.9%):
355 355 Durham, Water & Sewer Revenue, 4.60%, 6/1/05
675 675 Durham, Water & Sewer Revenue, 4.60%, 6/1/06
555 555 Durham, Water & Sewer Revenue, 4.60%, 6/1/07
765 765 Durham, Water & Sewer Revenue, 4.60%, 6/1/08
5,000 5,000 North Carolina State, Series A, GO, 4.75%, 4/1/09, Callable
4/1/08 @ 100.5
OKLAHOMA (0.4%):
1,530 1,530 Moore Oklahoma Refunding, 5.75%, 4/1/12, GO, MBIA
OREGON (2.0%):
2,365 2,365 Salem, GO, 4.45%, 12/1/10, Callable 6/1/09 @ 100, FSA
5,285 5,285 Washington County, Criminal Justice Facilities, GO, 5.00%,
12/1/09, Callable 12/1/07 @ 100
PENNSYLVANIA (1.3%):
1,500 1,500 Bethlehem Area School District, 6.00%, 3/1/16, Prerefunded
3/1/06 @100, MBIA
3,075 3,075 Pennsylvania Convention Center Authority Revenue, Series
A, 6.70%, 9/1/16, FGIC
RHODE ISLAND (0.3%):
1,000 1,000 Rhode Island Port Authority & Economic Development Corp.,
Shepard Building Project, Series B, 6.75%, 6/1/25,
Prerefunded 6/1/04 @ 102, AMBAC
SOUTH CAROLINA (2.4%):
5,525 5,525 Beaufort County School District, Series B, GO, 4.10%,
2/1/09, Callable 2/1/07 @ 101, SCSDE
4,325 4,325 Beaufort County School District, Series B, GO, 4.90%,
3/1/09, Callable 3/1/05 @ 101
<CAPTION>
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
---------------------------------------------------------------------------------------- ------------------ --------------
Centennial Independent School District, No. 12, Series A, 2,296 - 2,296
------------------ ------------------ --------------
GO, 5.60%, 2/1/07, MBIA
Hinds County Refunding Bonds, 5.50%, 3/1/08, GO, MBIA 1,048 1,048
Jackson Mississippi Water & Sewer Revenue, 5.13%, 1,412 1,412
9/1/14, Callable @ 100 9/1/09
Mississippi State, Capital Improvements, Series A, GO, 2,007 2,007
5.20%, 8/1/11, Callable 8/1/03 @ 100
------------------ ------------------ --------------
2,007 2,460 4,467
------------------ ------------------ --------------
Missouri State, Water Pollution, Series B, GO, 5.00%, 7,699 - 7,699
------------------ ------------------ --------------
8/1/07, Callable 8/1/03 @ 102
New Jersey Health Care, Cathedral Health Services, 5.50%, - 1,663 1,663
------------------ ------------------ --------------
2/1/11, MBIA
Hempstead Town, GO, 5.00%, 2/15/09, Callable 2/15/06 @ 1,163 1,163
102
Municipal Assistance Corp. for New York City, GO, 6.00%, 1,615 1,615
7/1/05
New York State Dorm Authority, New York University, Series 1,306 1,306
A, 5.75%, 7/1/13, MBIA
New York State Environmental Facilities Corp., Pollution 2,731 2,731
Control Revenue, Series E, 6.00%, 6/15/12
------------------ ------------------ --------------
2,778 4,037 6,815
------------------ ------------------ --------------
Durham, Water & Sewer Revenue, 4.60%, 6/1/05 357 357
Durham, Water & Sewer Revenue, 4.60%, 6/1/06 676 676
Durham, Water & Sewer Revenue, 4.60%, 6/1/07 552 552
Durham, Water & Sewer Revenue, 4.60%, 6/1/08 754 754
North Carolina State, Series A, GO, 4.75%, 4/1/09, Callable 4,988 4,988
4/1/08 @ 100.5
------------------ ------------------ --------------
7,327 - 7,327
------------------ ------------------ --------------
Moore Oklahoma Refunding, 5.75%, 4/1/12, GO, MBIA - 1,635 1,635
------------------ ------------------ --------------
Salem, GO, 4.45%, 12/1/10, Callable 6/1/09 @ 100, FSA 2,247 2,247
Washington County, Criminal Justice Facilities, GO, 5.00%, 5,331 5,331
12/1/09, Callable 12/1/07 @ 100
------------------ ------------------ --------------
7,578 - 7,578
------------------ ------------------ --------------
Bethlehem Area School District, 6.00%, 3/1/16, Prerefunded 1,618 1,618
3/1/06 @100, MBIA
Pennsylvania Convention Center Authority Revenue, Series 3,540 3,540
A, 6.70%, 9/1/16, FGIC
------------------ ------------------ --------------
- 5,158 5,158
------------------ ------------------ --------------
- 1,115 1,115
------------------ ------------------ --------------
Rhode Island Port Authority & Economic Development Corp.,
Shepard Building Project, Series B, 6.75%, 6/1/25, Prerefunded
6/1/04 @ 102, AMBAC
Beaufort County School District, Series B, GO, 4.10%, 5,151 5,151
2/1/09, Callable 2/1/07 @ 101, SCSDE
Beaufort County School District, Series B, GO, 4.90%, 4,325 4,325
3/1/09, Callable 3/1/05 @ 101
------------------ ------------------ --------------
9,476 - 9,476
------------------ ------------------ --------------
</TABLE>
B-95
<PAGE> 269
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ ------------ --------------- -------------------------------------------------------------
TENNESSEE (4.3%):
2,000 2,000 Jackson, Improvements, 5.00%, 3/1/10, Pre-refunded 3/1/05
@102
2,500 2,500 Metropolitan Government Nashville & Davidson, 5.50%,
5/15/08, County, Tn Electric Revenue Refunded, Series B
1,000 1,000 Metropolitan Government Nashville & Davidson, Industrial
Development Board Revenue, 7.50%, 11/15/10, Prerefunded
5/15/10 @ 100
3,000 3,000 Metropolitan Government, Nashville & Davidson County, GO,
5.25%, 5/15/06
1,000 1,000 Metropolitan Nashville & Davidson County, Industrial
Development Board Revenue, Multi-family Housing, Arbor,
Series C, 7.50%, 11/15/12, Callable 5/15/12 @ 100
1,000 1,000 Montgomery County, GO, 5.25%, 5/1/08, FSA
5,495 5,495 Tennessee State, Series B, GO, 4.60%, 5/1/07, Callable
5/1/06 @ 100
TEXAS (7.0%):
1,000 1,000 Austin Utility Systems Revenue Combined, Series A, 9.50%,
5/15/15, Prerefunded 5/15/00 @ 100
3,000 3,000 Dallas County, Series A, GO, 5.25%, 8/15/09
1,000 1,000 Harris County Housing Financial Corp., Multi-Family Housing
Revenue, Breton Mill Partners, 7.00%, 3/1/07, Prerefunded
2/15/07 @ 100
1,000 1,000 Lubbock Health Facilities Development Hospital Revenue,
Methodist Hospital, Series B, 6.75%, 12/1/10
4,000 4,000 Mesquite Independent School District, Series A, GO, 4.70%,
8/15/08, Callable 8/15/07 @ 100
1,600 1,600 North Central Health Facilities Development Corp., Baylor
Health Care System, 6.25%, 5/15/10
1,000 1,000 Richardson Independent School District, Series C, 4.75%,
2/15/22, Callable 2/15/08 @ 100
5,000 5,000 Texas State, Series B, GO, 5.25%, 10/1/08, Callable 10/1/03
@ 100
3,575 3,575 University of Texas, 4.60%, 7/1/08, Callable 7/1/06 @ 100
5,455 5,455 University of Texas, Series B, 4.25%, 8/15/09, Callable
8/15/07 @ 100
1,000 1,000 Whitehouse Texas Independent School District, GO, 4.80%,
2/15/12, Callable 2/15/08 @ 100
UTAH (3.8%):
4,805 4,805 Davis County, School District, GO, 4.38%, 6/1/08, School
Board Guaranty
3,810 3,810 Jordan School District, GO, 4.80%, 6/15/08, Callable 6/15/07
@ 100
6,000 6,000 Utah State, GO, Series F, 5.50%, 7/1/07
VIRGINIA (2.8%):
2,000 2,000 Virginia College Building Authority, Series A, 5.00%, 9/1/12,
Callable 9/1/07 @ 101
5,000 5,000 Virginia State, GO, 5.00%, 6/1/08, Callable 6/1/07 @ 100
3,500 3,500 Virginia State, Public School Authority, Series S, 5.25%,
8/1/09
WASHINGTON (2.2%):
1,675 1,675 Seattle, Series A GO, 5.50%, 3/1/09
6,500 6,500 Washington State, GO, 5.75%, 9/1/08
<CAPTION>
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
------------------------------------------------------------------------------------------ ----------------- ---------------
<S> <C> <C> <C>
Jackson, Improvements, 5.00%, 3/1/10, Pre-refunded 3/1/05 1,997 1,997
@102
Metropolitan Government Nashville & Davidson, 5.50%, 2,625 2,625
5/15/08, County, Tn Electric Revenue Refunded, Series B
Metropolitan Government Nashville & Davidson, Industrial 1,211 1,211
Development Board Revenue, 7.50%, 11/15/10, Prerefunded
5/15/10 @ 100
Metropolitan Government, Nashville & Davidson County, GO, 3,118 3,118
5.25%, 5/15/06
Metropolitan Nashville & Davidson County, Industrial 1,229 1,229
Development Board Revenue, Multi-family Housing, Arbor,
Series C, 7.50%, 11/15/12, Callable 5/15/12 @ 100
Montgomery County, GO, 5.25%, 5/1/08, FSA 1,035 1,035
Tennessee State, Series B, GO, 4.60%, 5/1/07, Callable 5,487 5,487
5/1/06 @ 100
----------------- ----------------- ---------------
10,602 6,100 16,702
----------------- ----------------- ---------------
Austin Utility Systems Revenue Combined, Series A, 9.50%, 1,045 1,045
5/15/15, Prerefunded 5/15/00 @ 100
Dallas County, Series A, GO, 5.25%, 8/15/09 3,080 3,080
Harris County Housing Financial Corp., Multi-Family Housing 1,145 1,145
Revenue, Breton Mill Partners, 7.00%, 3/1/07, Prerefunded
2/15/07 @ 100
Lubbock Health Facilities Development Hospital Revenue, 1,151 1,151
Methodist Hospital, Series B, 6.75%, 12/1/10
Mesquite Independent School District, Series A, GO, 4.70%, 3,967 3,967
8/15/08, Callable 8/15/07 @ 100
North Central Health Facilities Development Corp., Baylor 1,734 1,734
Health Care System, 6.25%, 5/15/10
Richardson Independent School District, Series C, 4.75%, 894 894
2/15/22, Callable 2/15/08 @ 100
Texas State, Series B, GO, 5.25%, 10/1/08, Callable 10/1/03 5,082 5,082
@ 100
University of Texas, 4.60%, 7/1/08, Callable 7/1/06 @ 100 3,534 3,534
University of Texas, Series B, 4.25%, 8/15/09, Callable 5,143 5,143
8/15/07 @ 100
Whitehouse Texas Independent School District, GO, 4.80%, 956 956
2/15/12, Callable 2/15/08 @ 100
----------------- ----------------- ---------------
21,762 5,969 27,731
----------------- ----------------- ---------------
Davis County, School District, GO, 4.38%, 6/1/08, School 4,662 4,662
Board Guaranty
Jordan School District, GO, 4.80%, 6/15/08, Callable 6/15/07 3,817 3,817
@ 100
Utah State, GO, Series F, 5.50%, 7/1/07 6,343 6,343
----------------- ----------------- ---------------
14,822 - 14,822
----------------- ----------------- ---------------
Virginia College Building Authority, Series A, 5.00%, 9/1/12, 1,975 1,975
Callable 9/1/07 @ 101
Virginia State, GO, 5.00%, 6/1/08, Callable 6/1/07 @ 100 5,110 5,110
Virginia State, Public School Authority, Series S, 5.25%, 3,613 3,613
8/1/09
----------------- ----------------- ---------------
10,698 - 10,698
----------------- ----------------- ---------------
Seattle, Series A GO, 5.50%, 3/1/09 1,750 1,750
Washington State, GO, 5.75%, 9/1/08 6,930 6,930
----------------- ----------------- ---------------
6,930 1,750 8,680
----------------- ----------------- ---------------
</TABLE>
B-96
<PAGE> 270
<TABLE>
<CAPTION>
AMSOUTH MUNICIPAL BOND FUND
ISG MUNICIPAL INCOME FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG
MUNICIPAL MUNICIPAL PRO FORMA
BOND INCOME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
------------------ ---------------- ---------------------- -----------------------------------------------------------
<S> <C> <C> <C>
WISCONSIN (0.7%):
2,420 2,420 Wisconsin State Health & Educational Facilities Authority
Revenue, Wheaton Franciscan Services, Inc., 6.10%,
8/15/09, MBIA
INVESTMENT COMPANIES (2.3%):
2,375,454 2,375,454 Aim Tax Free Money Market
67,559 67,559 Dreyfus Tax Free Money Market
33,471 33,471 Federated Tax-Free Fund
6,367,832 6,367,832 Goldman Sachs Tax-Free Fund
<CAPTION>
AMSOUTH ISG PRO FORMA
MUNICIPAL BOND MUNICIPAL INCOME COMBINED
MARKET MARKET MARKET
DESCRIPTION VALUE VALUE VALUE
--------------------------------------------------------------------------------------- ---------------- --------------
<S> <C> <C> <C>
Wisconsin State Health & Educational - 2,653 2,653
Facilities Authority Revenue, Wheaton ---------------- ---------------- --------------
Franciscan Services, Inc., 6.10%,
8/15/09, MBIA
---------------- ---------------- --------------
TOTAL MUNICIPAL BONDS $317,477 $ 62,046 $379,523
---------------- ---------------- --------------
Aim Tax Free Money Market 2,375 2,375
Dreyfus Tax Free Money Market 68 68
Federated Tax-Free Fund 33 33
Goldman Sachs Tax-Free Fund 6,368 6,368
---------------- ---------------- --------------
TOTAL INVESTMENT COMPANIES $ 6,401 $ 2,443 $ 8,844
---------------- ---------------- --------------
---------------- ---------------- --------------
TOTAL (COST $387,970) (a) $323,878 $ 64,489 $388,367
---------------- ---------------- --------------
<FN>
------------
PERCENTAGES INDICATED ARE BASED ON NET ASSETS OF $388,135
(a) Represents cost for federal income
tax and financial reporting purposes
and differs from value by net unrealized
appreciation of securities as follows:
Unrealized appreciation 5,258
Unrealized depreciation (4,861)
----------------
Net unrealized appreciation 397
================
AMBAC - Insured by AMBAC Indemnity Corp.
ETM - Escrowed to Maturity
FGIC - Insured by Financial Guaranty Insurance Corp.
FSA - Insured by Financial Security Assurance
GO - General Obligation
MBIA - Insured by Municipal Bond Insurance Assoc.
SCSDE - South Carolina School District Enhancement
Q-SBLF - Qualified School Bond Loan Fund
</TABLE>
B-97
<PAGE> 271
<TABLE>
<CAPTION>
AMSOUTH PRIME MONEY MARKET FUND
ISG PRIME MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
for the 12 month period ended 07/31/99
(UNAUDITED)
AMSOUTH ISG PRO FORMA
PRIME PRIME PRO FORMA COMBINED
MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at amortized cost $ 582,351 $ 574,097 $ -- $ 1,156,448
Repurchase agreements 92,189 30,778 -- 122,967
------------ ------------ ------------ ------------
Total Investments 674,540 604,875 -- 1,279,415
Interest and dividends receivable 1,515 1,356 -- 2,871
Receivable for capital shares issued -- 423 -- 423
Receivable from investment advisor -- 21 -- 21
Other assets 33 65 -- 98
============ ============ ============ ============
TOTAL ASSETS 676,088 606,740 -- 1,282,828
============ ============ ============ ============
LIABILITIES:
Distributions payable 2,540 1,912 -- 4,452
Accrued expenses and other payables:
Advisory fees 233 108 -- 341
Administration fees 15 7 -- 22
Distribution fees 12 96 -- 108
Accounting fees 2 -- -- 2
Transfer agent fees 16 -- -- 16
Custodian fees 7 16 -- 23
Other 62 47 -- 109
------------ ------------ ------------ ------------
TOTAL LIABILITIES 2,887 2,186 -- 5,073
============ ============ ============ ============
NET ASSETS:
Class A Shares 136,078 466,274 -- 602,352
Class B Shares 224 196 -- 420
Institutional Shares 536,899 138,084 -- 674,983
------------ ------------ ------------ ------------
$ 673,201 $ 604,554 -- $ 1,277,755
============ ============ ============ ============
CAPITAL SHARES OUTSTANDING
Class A Shares 136,085 466,314 -- 602,399
Class B Shares 224 196 -- 420
Institutional Shares 536,913 138,101 -- 675,014
------------ ------------ ------------ ------------
$ 673,222 $ 604,611 -- $ 1,277,833
============ ============ ============ ============
Net Asset Value - offering price and
redemption price per share
Class A Shares $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Class B Shares* $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Institutional Shares $ 1.00 $ 1.00 $ 1.00
============ ============ ============
COMPOSITION OF NET ASSETS
Capital 673,208 604,611 -- 1,277,819
Undistributed net realized gains (losses)
from investments (7) (57) -- (64)
------------ ------------ ------------ ------------
NET ASSETS, JULY 31, 1999 $ 673,201 $ 604,554 -- $ 1,277,755
============ ============ ============ ============
* Redemption price per share varies by length of time shares are held.
</TABLE>
B-98
<PAGE> 272
AMSOUTH PRIME MONEY MARKET FUND
ISG PRIME MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
PRIME PRIME MONEY PRO FORMA COMBINED
MONEY MARKET MARKET ADJUSTMENTS (NOTE 1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 35,908 $ 16,703 $ -- $ 52,611
------------ ------------ ------------ ------------
35,908 16,703 -- 52,611
------------ ------------ ------------ ------------
EXPENSES:
Advisory fees 2,765 820 492 (a) 4,077
Administration fees 1,383 328 328 (b) 2,039
Shareholder servicing fees (Class A Shares) 336 583 1 (c) 920
Shareholder servicing fees (Class B Shares) -- 1 - (d) 1
Shareholder servicing fees (Institutional Shares) -- 98 879 (e) 977
12b-1 fees (B Shares) 1 2 - (f) 3
Accounting fees 230 46 (248)(g) 28
Transfer agent fees 171 53 (39)(h) 185
Custodian fees 41 74 165 (i) 280
Trustee fees and expenses 15 10 (10)(j) 15
Registration and filing fees 31 70 (24)(k) 77
Other expenses 138 143 (131)(k) 150
------------ ------------ ------------ ------------
TOTAL EXPENSES: 5,111 2,228 1,413 8,752
Less Waivers
Advisory fees -- -- -- --
Administration fees -- -- -- --
12b-1 fees (Class A Shares) -- -- -- --
Shareholder servicing fees (Class A Shares) (202) -- 202 (c) --
Accounting fees (20) -- 20 (g) --
Transfer agent fees (30) -- 30 (h) --
Reimbursement -- (74) 74 (l) --
------------ ------------ ------------ ------------
NET EXPENSES: 4,859 2,154 1,739 8,752
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) 31,049 14,549 (1,739) 43,859
------------ ------------ ------------ ------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment
transactions 2 (53) -- (51)
------------ ------------ ------------ ------------
Net realized/unrealized gains (losses) from investments 2 (53) -- (51)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: $ 31,051 $ 14,496 $ (1,739) $ 43,808
============ ============ ============ ============
</TABLE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for Advisory
fees (0.40% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder
Servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder
Servicing fees (0.25% of Class B net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder
Servicing fees (0.15% of Institutional net assets).
(f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees
(0.75% of Class B net assets).
(g) Adjustment to reflect the AmSouth contractual fee structure for Accounting
fees ($10,000 a year per additional class + OOP).
(h) Adjustment to reflect the AmSouth contractual fee structure for Transfer
agent fees (0.015% of net assets + $10,000 a year per class + OOP).
(i) Adjustment to reflect the AmSouth contractual fee structure for Custodian
fees (0.0275% of net assets).
(j) Adjustment to reflect the AmSouth contractual fee structure.
(k) Reduction reflects expected savings when the two funds merge.
(l) Adjustment to reflect the AmSouth contractual fee structure.
B-99
<PAGE> 273
AMSOUTH PRIME MONEY MARKET FUND
ISG PRIME MONEY MARKET FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
PRIME MONEY MARKET PRIME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
- -------------------- ------------- ------------- ----------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER-FOREIGN (b) (10.1%):
BANKING (8.5%):
20,000 20,000 Bank Austria, 5.08%, 10/01/99
19,000 19,000 Banque Generale du Luxembourg, S.A., 5.01%, 8/13/99
22,000 22,000 Bayer Hypo Vereinsbank, 5.05%, 09/24/99
19,000 19,000 Bayerische Landesbank NY, 4.98%, 9/13/99
20,000 20,000 Rabobank Nederland NV, 5.10%, 9/28/99
10,000 10,000 Toronto Dominion Holdings, 5.01%, 12/7/99
FINANCIAL SERVICES (0.8%):
10,000 10,000 Island Finance Puerto Rico, 5.13%, 10/18/99
FOOD PRODUCTS & SERVICES (0.8%):
10,000 10,000 Canadian Wheat Board, 4.74%, 8/20/99
TOTAL COMMERCIAL PAPER-FOREIGN
CERTIFICATES OF DEPOSIT (2.0%):
BANKING (2.0%):
10,000 10,000 BankAmerica, 5.24%, 9/24/99
10,000 10,000 Canadian Imperial Bank of Commerce, 5.01%, 2/7/00
5,000 5,000 Harris Trust, 5.05%, 2/14/00
TOTAL CERTIFICATES OF DEPOSIT
CORPORATE BONDS (2.0%):
BROKERAGE SERVICES (0.8%):
5,000 5,000 Bear Stearns & Co., Inc., 6.50%, 7/5/00
5,000 5,000 Morgan Stanley Dean Witter, 5.89%, 3/20/00
ELECTRIC UTILITY (0.4%):
5,000 5,000 Alabama Power Co., 6.00%, 3/1/00
FINANCIAL SERVICES (0.4%):
5,000 5,000 American General Finance Corp., 7.25%, 4/15/00
FOOD PRODUCTS & SERVICES (0.4%):
5,000 5,000 Diagio PLC, 6.50%, 9/15/99
TOTAL CORPORATE BONDS
FLOATING RATE FUNDING AGREEMENTS (2.9%):
INSURANCE (2.9%):
12,000 12,000 General American Life Insurance Co., 5.31%*, 9/1/99**
12,500 12,500 Monumental Life Insurance Co., 5.40%*, 9/1/99**
12,500 12,500 Monumental Life Insurance Co., 5.45%*, 9/1/99**
TOTAL FLOATING RATE FUNDING AGREEMENTS
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH
PRIME ISG PRO FORMA
MONEY MARKET PRIME COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- ----------------------------------------------------------------------- ----------- ----------
<S> <C> <C> <C>
Bank Austria, 5.08%, 10/01/99 $ 19,828 $ 19,828
Banque Generale du Luxembourg, S.A., 5.01%, 8/13/99 18,968 18,968
Bayer Hypo Vereinsbank, 5.05%, 09/24/99 21,833 21,833
Bayerische Landesbank NY, 4.98%, 9/13/99 18,887 18,887
Rabobank Nederland NV, 5.10%, 9/28/99 19,836 19,836
Toronto Dominion Holdings, 5.01%, 12/7/99 $ 9,822 9,822
---------- ---------- ----------
9,822 99,352 109,174
---------- ---------- ----------
Island Finance Puerto Rico, 5.13%, 10/18/99 9,889 -- 9,889
---------- ---------- ----------
Canadian Wheat Board, 4.74%, 8/20/99 9,975 9,975
---------- ---------- ----------
TOTAL COMMERCIAL PAPER-FOREIGN $ 29,686 $ 99,352 $ 129,038
---------- ---------- ----------
BankAmerica, 5.24%, 9/24/99 10,001 10,001
Canadian Imperial Bank of Commerce, 5.01%, 2/7/00 9,998 9,998
Harris Trust, 5.05%, 2/14/00 4,999 4,999
---------- ---------- ----------
TOTAL CERTIFICATES OF DEPOSIT $ 24,998 $ -- $ 24,998
---------- ---------- ----------
Bear Stearns & Co., Inc., 6.50%, 7/5/00 5,037 5,037
Morgan Stanley Dean Witter, 5.89%, 3/20/00 5,022 5,022
---------- ---------- ----------
10,059 -- 10,059
---------- ---------- ----------
Alabama Power Co., 6.00%, 3/1/00 5,022 -- 5,022
---------- ---------- ----------
American General Finance Corp., 7.25%, 4/15/00 5,051 -- 5,051
---------- ---------- ----------
Diagio PLC, 6.50%, 9/15/99 5,005 5,005
---------- ---------- ----------
TOTAL CORPORATE BONDS $ 25,137 $ -- $ 25,137
---------- ---------- ----------
General American Life Insurance Co., 5.31%*, 9/1/99** 12,000 12,000
Monumental Life Insurance Co., 5.40%*, 9/1/99** 12,500 12,500
Monumental Life Insurance Co., 5.45%*, 9/1/99** 12,500 12,500
---------- ---------- ----------
37,000 -- 37,000
---------- ---------- ----------
TOTAL FLOATING RATE FUNDING AGREEMENTS $ 37,000 $ -- $ 37,000
---------- ---------- ----------
</TABLE>
B-100
<PAGE> 274
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
PRIME MONEY MARKET PRIME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES
--------------------------- ------------------------- -------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (5.2%):
FANNIE MAE (2.8%):
15,000 15,000
15,000 15,000
6,500 6,500
FEDERAL FARM CREDIT BANK (1.2%):
15,000 15,000
STUDENT LOAN MARKETING ASSOC. (1.2%):
15,000 15,000
COMMERCIAL PAPER-DOMESTIC (b) (68.3%):
AGRICULTURE (1.6%):
10,000 10,000
10,000 10,000
AIRCRAFT LEASING (3.1%):
10,000 10,000
10,000 10,000
20,000 20,000
ALUMINUM (1.6%):
10,000 10,000
10,000 10,000
AUTOMOTIVE (1.6%):
10,000 10,000
10,000 10,000
AUTOMOTIVE CREDIT (5.8%):
10,000 10,000
18,000 18,000
10,000 10,000
10,000 10,000
17,000 17,000
10,000 10,000
BANKING (7.2%):
10,000 10,000
10,000 10,000
5,000 5,000
18,000 18,000
10,000 10,000
10,000 10,000
10,000 10,000
19,000 19,000
BEVERAGES (2.2%):
10,000 10,000
19,000 19,000
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH
PRIME ISG PRO FORMA
MONEY MARKET PRIME COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- -------------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C> <C>
5.00%, 2/24/00 15,000 15,000
5.10%, 3/8/00, Callable 6/8/99 @ 100 15,000 15,000
5.07%, 4/19/00 6,500 6,500
------------ -------------- ---------------
- 36,500 36,500
------------ -------------- ---------------
Federal Farm Credit Bank, 5.26%, 3/17/00 - 15,000 15,000
------------ -------------- ---------------
Student Loan Marketing Assoc., 5.16%, 3/8/00, Callable
6/8/99 @ 100 - 15,000 15,000
------------ -------------- ---------------
TOTAL U.S. GOVERNMENT AGENCIES $ - $ 66,500 $ 66,500
------------ -------------- ---------------
Cargill Inc., 4.77%, 8/2/99 9,999 9,999
Monsanto Co., 4.91%, 9/21/99 9,930 9,930
------------ -------------- ---------------
19,929 - 19,929
------------ -------------- ---------------
International Lease Finance Corp., 4.80%, 8/5/99 9,995 9,995
International Lease Finance Corp., 4.74%, 8/13/99 9,984 9,984
International Lease Finance Corp., 5.06%, 9/21/99 19,857 19,857
------------ -------------- ---------------
19,979 19,857 39,836
------------ -------------- ---------------
Alcoa, 4.78%, 8/24/99 9,969 9,969
Alcoa, 4.84%, 8/31/99 9,960 9,960
------------ -------------- ---------------
19,929 - 19,929
------------ -------------- ---------------
Daimler Chrysler, 4.85%, 9/20/99 9,932 9,932
Daimler Chrysler, 5.14%, 10/6/99 9,906 9,906
------------ -------------- ---------------
19,838 - 19,838
------------ -------------- ---------------
BMW US Capital, 5.17%, 12/10/99 9,812 9,812
Ford Motor Credit, 5.16%, 10/21/99 17,791 17,791
Ford Motor Credit Co., 4.80%, 8/27/99 9,965 9,965
Ford Motor Credit Co., 4.70%, 11/5/99 9,875 9,875
General Motors Accept Corp., 5.15%, 10/5/99 16,842 16,842
General Motors Acceptance Corp., 5.28%, 1/25/00 9,740 9,740
------------ -------------- ---------------
39,392 34,633 74,025
------------ -------------- ---------------
Banca Credit Financial Corp., 4.80%, 8/9/99 9,989 9,989
J.P. Morgan & Co., 4.80%, 10/8/99 9,909 9,909
J.P. Morgan & Co., 4.80%, 10/15/99 4,950 4,950
Lloyds Bank PLC, 4.94%, 8/23/99 17,946 17,946
SunTrust Banks, 5.06%, 8/11/99 9,986 9,986
SunTrust Banks, 5.06%, 8/25/99 9,966 9,966
Wells Fargo & Co., 4.86%, 9/10/99 9,946 9,946
Wells Fargo Co., 5.01%, 8/20/99 18,950 18,950
------------ -------------- ---------------
44,757 46,885 91,642
------------ -------------- ---------------
Coca Cola Co., 5.00%, 9/17/99 9,935 9,935
Coca Cola Co., 5.10%, 10/7/99 18,819 18,819
------------ -------------- ---------------
9,935 18,819 28,754
------------ -------------- ---------------
</TABLE>
B-101
<PAGE> 275
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
PRIME MONEY MARKET PRIME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES
--------------------------- ----------------- -------------
<S> <C> <C>
BROKERAGE SERVICES (1.5%):
10,000 10,000
10,000 10,000
CONSUMER GOODS (6.1%):
10,000 10,000
10,000 10,000
10,000 10,000
10,000 10,000
10,000 10,000
19,000 19,000
10,000 10,000
ELECTRIC UTILITY (3.6%):
10,000 10,000
5,000 5,000
10,000 10,000
22,000 22,000
FARM EQUIPMENT (3.1%):
20,000 20,000
10,000 10,000
10,000 10,000
FINANCIAL SERVICES (16.3%):
18,000 18,000
19,000 19,000
10,000 10,000
10,000 10,000
18,000 18,000
10,000 10,000
18,000 18,000
10,000 10,000
19,000 19,000
19,000 19,000
10,000 10,000
19,000 19,000
10,000 10,000
9,000 9,000
12,654 12,654
INDUSTRIALS (1.4%):
18,000 18,000
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (4.5%):
10,000 10,000
10,000 10,000
10,000 10,000
18,000 18,000
10,000 10,000
PHARMACEUTICALS (2.3%):
19,000 19,000
10,000 10,000
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH
PRIME ISG PRO FORMA
MONEY MARKET PRIME COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- --------------------------------------------------------------------------- -------------- -----------
<S> <C> <C> <C>
Goldman Sachs, 5.36%, 1/21/00 9,742 9,742
Merrill Lynch, 5.13%, 9/16/99 9,935 9,935
---------------- -------------- -----------
19,677 - 19,677
---------------- -------------- -----------
Clorox Co., 4.88%, 9/8/99 9,948 9,948
Clorox Co., 5.11%, 10/21/99 9,885 9,885
Hasbro Inc., 4.94%, 10/26/99 9,882 9,882
Kimberly Clark, 5.05%, 8/19/99 9,975 9,975
Procter & Gamble, 4.97%, 8/9/99 9,989 9,989
Proctor & Gamble, 4.88%, 8/2/99 18,998 18,998
Proctor & Gamble, 5.10%, 9/29/99 9,916 9,916
---------------- -------------- -----------
59,595 18,998 78,593
---------------- -------------- -----------
Alabama Power Co., 5.08%, 8/24/99 9,968 9,968
National Rural Utilities, 4.83%, 8/23/99 4,985 4,985
National Rural Utilities, 4.79%, 8/26/99 9,967 9,967
National Rural Utilities, 5.15%, 10/27/99 21,726 21,726
---------------- -------------- -----------
24,920 21,726 46,646
---------------- -------------- -----------
John Deere & Co., 5.07%, 9/1/99 19,912 19,912
John Deere Capital Corp., 4.77%, 8/17/99 9,979 9,979
John Deere Capital Corp., 4.78%, 9/7/99 9,951 9,951
---------------- -------------- -----------
19,930 19,912 39,842
---------------- -------------- -----------
Abbey National North America, 5.01%, 9/15/99 17,887 17,887
American Express, 4.94%, 8/25/99 18,937 18,937
American Express, 4.80%, 12/14/99 9,820 9,820
American Express, 4.78%, 1/11/00 9,784 9,784
American General, 5.09%, 9/9/99 17,901 17,901
American General Finance Corp., 5.14%, 10/28/99 9,874 9,874
Associates Corp., 5.10%, 9/7/99 17,906 17,906
Associates First Capital, 5.30%, 4/3/00 9,638 9,638
Commercial Credit Co., 5.06%, 8/30/99 18,923 18,923
General Electric, 4.93%, 8/16/99 18,961 18,961
General Electric Capital Corp., 5.38%, 4/4/00 9,631 9,631
Household Financial, 4.90%, 8/11/99 18,973 18,973
Transamerica Finance, 4.80%, 8/12/99 9,985 9,985
USAA Capital Corp., 5.13%, 10/18/99 8,900 8,900
USAA Capital Corp., 5.15%, 10/19/99 12,511 12,511
---------------- -------------- -----------
58,732 150,899 209,631
---------------- -------------- -----------
Emerson Electric, 5.08%, 8/5/99 17,990 17,990
---------------- -------------- -----------
Chevron USA, 5.03%, 9/3/99 9,954 9,954
Equilon Enterprises, 5.00%, 8/16/99 9,979 9,979
Equilon Enterprises, 5.16%, 10/19/99 9,887 9,887
Shell Oil Co., 5.05%, 9/3/99 17,917 17,917
Texaco Inc., 5.33%, 1/18/00 9,748 9,748
---------------- -------------- -----------
39,568 17,917 57,485
---------------- -------------- -----------
Glaxo Wellcome PLC, 5.06%, 9/17/99 18,875 18,875
Pfizer Inc., 5.05%, 9/2/99 9,955 9,955
---------------- -------------- -----------
9,955 18,875 28,830
---------------- -------------- -----------
</TABLE>
B-102
<PAGE> 276
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
PRIME MONEY MARKET PRIME COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES
--------------------------- ------------------------- -------------------
<S> <C> <C>
TECHNOLOGY (2.9%):
5,000 5,000
10,000 10,000
22,000 22,000
TELECOMMUNICATIONS (2.3%):
10,000 10,000
10,000 10,000
10,000 10,000
TELECOMMUNICATIONS-WIRELESS (1.2%):
5,109 5,109
10,000 10,000
INVESTMENT COMPANIES (0.0%):
568 568
REPURCHASE AGREEMENTS (9.6%):
30,778 30,778
92,189 92,189
</TABLE>
<TABLE>
<CAPTION>
AMSOUTH
PRIME ISG PRO FORMA
MONEY MARKET PRIME COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- --------------------------------------------------------------------------------------------- ------------- ------------
<S> <C> <C> <C>
IBM Credit Corp., 4.67%, 8/6/99 4,997 4,997
IBM Credit Corp., 4.80%, 9/13/99 9,943 9,943
IBM Credit Corp., 5.12%, 10/25/99 21,733 21,733
---------------- -------------- ------------
14,940 21,733 36,673
---------------- -------------- ------------
BellSouth Telecommunications Inc., 5.11%, 9/28/99 9,918 9,918
Lucent Technologies, 4.98%, 1/27/00 9,752 9,752
Lucent Technologies, 4.97%, 2/10/00 9,734 9,734
---------------- -------------- ------------
29,404 - 29,404
---------------- -------------- ------------
Motorola, 5.05%, 8/4/99 5,107 5,107
Motorola, 5.08%, 9/10/99 9,943 9,943
---------------- -------------- ------------
15,050 - 15,050
---------------- -------------- ------------
TOTAL COMMERCIAL PAPER-DOMESTIC $ 465,530 $ 408,244 $ 873,774
---------------- -------------- ------------
Bank Of New York Cash Reserve 1 1
---------------- -------------- ------------
TOTAL INVESTMENT COMPANIES $ - $ 1 $ 1
---------------- -------------- ------------
Cantor Fizgerald, 5.08%, 8/02/99 30,778 30,778
Solomon Smith Barney, 5.13%, 7/30/99 92,189 92,189
---------------- -------------- ------------
TOTAL REPURCHASE AGREEMENTS $ 92,189 $ 30,778 $ 122,967
---------------- -------------- ------------
---------------- -------------- ------------
TOTAL (COST $1,279,415) (a) $ 674,540 $ 604,875 $ 1,279,415
---------------- -------------- ------------
</TABLE>
---------------------------
Percentages are based on net assets of $1,277,755.
(a) Cost and value for federal income tax and financial reporting
purposes are the same.
(b) Yield effective at purchase.
* Variable rate security. Rate presented represents the rate in
effect at July 31, 1999. Date presented reflects next rate change
date
** Put and demand features exist allowing the Fund to require the
repurchase of the instrument within variable time periods
including daily, weekly, monthly, quarterly, or semiannually.
PLC - Public Limited Co.
B-103
<PAGE> 277
AMSOUTH TAX-EXEMPT MONEY MARKET FUND
ISG TAX-EXEMPT MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG PRO FORMA
TAX-EXEMPT TAX-EXEMPT PRO FORMA COMBINED
MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $ 2,906 $ 792 $ -- $ 3,698
Dividend Income 165 38 -- 203
------------ ------------ ------------ ------------
3,071 830 -- 3,901
------------ ------------ ------------ ------------
EXPENSES:
Advisory fees 383 88 13 (a) 484
Administration fees 192 25 25 (b) 242
Shareholder servicing fees (Class A Shares) 63 2 (1)(c) 64
Shareholder servicing fees (Institutional Shares) -- 37 106 (d) 143
Accounting fees 53 4 (27)(e) 30
Transfer agent fees 39 7 22 (f) 68
Custodian fees 6 9 18 (g) 33
Trustee fees and expenses 2 -- -- 2
Registration and filing fees 6 14 (5)(h) 15
Other expenses 16 16 (11)(h) 21
------------ ------------ ------------ ------------
TOTAL EXPENSES: 760 202 141 1,103
Less Waivers
Advisory fees (192) -- 192 (a) --
Administration fees -- -- -- --
Shareholder servicing fees (Class A Shares) (38) -- 38 (c) --
12b-1 fees (Class A Shares) -- -- -- --
Accounting fees (21) -- 21 (e) --
Transfer agent fees (20) -- 20 (i) --
Reimbursements -- -- -- --
------------ ------------ ------------ ------------
NET EXPENSES: 489 202 412 1,103
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) 2,582 628 (412) 2,798
------------ ------------ ------------ ------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions 1 (40) -- (39)
------------ ------------ ------------ ------------
Net realized/unrealized gains (losses) from investments 1 (40) -- (39)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: $ 2,583 $ 588 $ (412) $ 2,759
============ ============ ============ ============
</TABLE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) Adjustment to reflect the AmSouth contractual fee structure for Advisory
fees (0.40% of net assets).
(b) Adjustment to reflect the AmSouth contractual fee structure for
Administration fees (0.20% of net assets).
(c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder
Servicing fees (0.25% of Class A net assets).
(d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder
Servicing fees (0.15% of Institutional net assets).
(e) Adjustment to reflect the AmSouth contractual fee structure for Accounting
fees ($10,000 a year per additional class + OOP).
(f) Adjustment to reflect the AmSouth contractual fee structure for Transfer
agent fees (0.015% of net assets + $10,000 a year per class + OOP).
(g) Adjustment to reflect the AmSouth contractual fee structure for Custodian
fees (0.0275% of net assets).
(h) Reduction reflects expected savings when the two funds merge.
(i) Adjustment to reflect the AmSouth contractual fee structure.
B-104
<PAGE> 278
<TABLE>
<CAPTION>
AMSOUTH TAX-EXEMPT MONEY MARKET FUND
ISG TAX-EXEMPT MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
AMSOUTH ISG PRO FORMA
TAX-EXEMPT TAX-EXEMPT PRO FORMA COMBINED
MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at amortized cost $ 96,133 $ 110,571 $ -- $ 206,704
Interest and dividends receivable 817 735 -- 1,552
Other assets 6 2 -- 8
------------ ------------ ------------ ------------
TOTAL ASSETS 96,956 111,308 -- 208,264
------------ ------------ ------------ ------------
LIABILITIES:
Distributions payable 202 212 -- 414
Securities purchased payable -- 2,904 -- 2,904
Accrued expenses and other payables:
Investment advisory fees 16 31 -- 47
Administration fees 2 1 -- 3
Distribution fees 2 13 -- 15
Accounting fees 1 -- -- 1
Transfer agent fees 1 7 -- 8
Custodian fees 1 6 -- 7
Other 7 29 -- 36
------------ ------------ ------------ ------------
TOTAL LIABILITIES 232 3,203 -- 3,435
------------ ------------ ------------ ------------
NET ASSETS:
Class A Shares 22,844 10,046 -- 32,890
Institutional Shares 73,880 98,059 -- 171,939
------------ ------------ ------------ ------------
$ 96,724 $ 108,105 $ -- $ 204,829
============ ============ ============ ============
CAPITAL SHARES OUTSTANDING
Class A Shares 22,845 10,047 -- 32,892
Institutional Shares 73,880 98,099 -- 171,979
------------ ------------ ------------ ------------
96,725 108,146 -- 204,871
============ ============ ============ ============
NET ASSET VALUE - OFFERING AND
REDEMPTION PRICE PER SHARE
Class A Shares $ 1.00 $ 1.00 -- $ 1.00
------------ ------------ ------------
Institutional Shares $ 1.00 $ 1.00 -- $ 1.00
------------ ------------ ------------
COMPOSITION OF NET ASSETS
Capital $ 96,725 $ 108,146 $ -- $ 204,871
Undistributed (distributions in excess of)
net investment income -- (41) -- (41)
Undistributed net realized gains (losses)
from investment transactions (1) -- -- (1)
------------ ------------ ------------ ------------
NET ASSETS, JULY 31, 1999 $ 96,724 $ 108,105 $ -- $ 204,829
============ ============ ============ ============
</TABLE>
B-105
<PAGE> 279
AMSOUTH TAX-EXEMPT MONEY MARKET FUND
ISG TAX-EXEMPT MONEY MARKET FUND
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
for the 12 month period ended 07/31/99
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- ------------------ -----------------------------------------------------------------------------
<S> <C> <C> <C>
TAX ANTICIPATION NOTES (4.7%):
FLORIDA (0.5%):
$ 1,000 $ 1,000 Orange County School District Tax Anticipation Notes,
3.10%, 9/15/99
PENNSYLVANIA (0.7%):
1,500 1,500 Philadelphia Tax & Revenue Anticipation Notes, 4.25%,
6/30/00
TEXAS (3.5%):
2,200 5,000 7,200 Texas State Tax & Revenue Anticipation Notes, 4.50%,
8/31/99
DEMAND NOTES (19.0%):
ALABAMA (6.2%):
1,500 1,500 Alabama Housing Finance Authority, Huntsville, Series B,
3.15%*, 8/4/99**, FNMA
2,000 2,000 Alabama State Housing Finance Authority, Multi Family
Housing Revenue, Rime VLG Hoover Project, Series A,
3.15%*,8/4/99**, FNMA
1,000 1,000 Bon Air, Industrial Development Board, Avondale Mills,
3.15%*, 8/4/99**
2,000 2,000 City of Birmingham, Series 1992A, GO, 3.20%*, 8/4/99**
350 350 Columbia, Industrial Development Board, PCR, Alabama
Power Co. Project , Series D, 3.40%*, 8/2/99**
1,000 1,000 Jacksonville, Industrial Development Board, Parker Hannifin
Corp., 3.15%*, 8/5/99**
2,000 2,000 Mobile, Industrial Development Board, PCR, Alabama Power
Co. Project, Series B, 3.20%*, 8/5/99**
500 500 North Alabama, Environmental Improvement Authority, PCR,
Reynolds Metals Co., 3.40%*, 8/2/99**
1,000 1,000 Port City Medical Clinic Board, Infirmary Health Systems,
Series B, 3.15%*, 8/5/99**, AMBAC
1,365 1,365 Stevenson, Industrial Development Board, Environmental
Improvement Revenue, Mead Corp. Project, 3.35%*, 8/2/99**
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
------------------------------------------------------------------------------------ ---------------- --------------------
<S> <C> <C> <C>
Orange County School District Tax Anticipation Notes, $ 1,000 - $ 1,000
3.10%, 9/15/99 ------------------- ---------------- ----------------
Philadelphia Tax & Revenue Anticipation Notes, 4.25%, 1,510 - 1,510
6/30/00 ------------------- ---------------- ----------------
Texas State Tax & Revenue Anticipation Notes, 4.50%, 2,203 5,005 7,208
8/31/99 ------------------- ---------------- ----------------
TOTAL TAX ANTICIPATION NOTES $ 4,713 $ 5,005 $ 9,718
------------------- ---------------- ----------------
Alabama Housing Finance Authority, Huntsville, Series B, 1,500 1,500
3.15%*, 8/4/99**, FNMA
Alabama State Housing Finance Authority, Multi Family 2,000 2,000
Housing Revenue, Rime VLG Hoover Project, Series A,
3.15%*,8/4/99**, FNMA
Bon Air, Industrial Development Board, Avondale Mills, 1,000 1,000
3.15%*, 8/4/99**
City of Birmingham, Series 1992A, GO, 3.20%*, 8/4/99** 2,000 2,000
Columbia, Industrial Development Board, PCR, Alabama 350 350
Power Co. Project , Series D, 3.40%*, 8/2/99**
Jacksonville, Industrial Development Board, Parker Hannifin 1,000 1,000
Corp., 3.15%*, 8/5/99**
Mobile, Industrial Development Board, PCR, Alabama Power 1,999 1,999
Co. Project, Series B, 3.20%*, 8/5/99**
North Alabama, Environmental Improvement Authority, PCR, 500 500
Reynolds Metals Co., 3.40%*, 8/2/99**
Port City Medical Clinic Board, Infirmary Health Systems, 1,000 1,000
Series B, 3.15%*, 8/5/99**, AMBAC
Stevenson, Industrial Development Board, Environmental 1,365 1,365
Improvement Revenue, Mead Corp. Project, 3.35%*, 8/2/99**
------------------- --------------------- -----------------
12,714 12.714
------------------- --------------------- -----------------
</TABLE>
B-106
<PAGE> 280
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- ---------------- ------------------- ---------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (1.2%):
2,500 2,500 Los Angeles, Regional Airports Improvements Corp., Los
Angeles International-LAX 2, 3.40%*, 8/2/99 **
FLORIDA (1.5%):
1,500 1,500 Alachua County Florida Health, 3.00%*, 8/4/99**, MBIA
1,680 1,680 Laurel Club, Certificates of Participation, Series 96A,
3.25%*, 8/4/99**
GEORGIA (0.5%):
1,000 1,000 Cobb County, Post Mill Project, 3.15%*, 8/4/99**
MICHIGAN (1.2%):
2,500 2,500 Cornell Township Economic Development Corporation,
Environment Improvement Revenue, 3.35%*, 8/2/99**
MINNESOTA (1.7%):
1,000 1,000 Minneapolis, GO, Sewer Improvements, Series A, 3.05%*,
8/4/99**
2,400 2,400 Minneapolis, GO, Sewer Improvements, Series B, 3.05%*,
8/5/99**
NEW YORK (1.2%):
900 900 New York, GO, 3.50%*, 8/2/99**, LOC: Morgan Guaranty Trust
1,600 1,600 New York, GO, Series D, 3.00%*, 8/4/99**, FGIC
NORTH CAROLINA (0.2%):
500 500 North Carolina Educational Facilities, 3.00%*, 8/5/99**
PENNSYLVANIA (1.1%):
2,200 2,200 Schuylkill County, Industrial Development Authority,
Resource Recovery Revenue, Gilberton Power Project,
3.05%*, 8/4/99**
SOUTH CAROLINA (0.5%):
1,000 1,000 South Carolina State Jobs & Economic Development
Revenue, St. Francis Hospital, 3.40%*, 8/2/99**
TENNESSEE (0.9%):
1,300 1,300 Metropolitan Nashville Airport Authority, Special Facilitie
Revenue, American Airlines Project, Series A, 3.40%*,
8/2/99**
500 500 Sullivan County, Industrial Development Board , PCR, Mead
Corp. Project, 2.80%*, 8/2/99**
TEXAS (1.5%):
1,000 1,000 Grapevine, Industrial Development Corp., American Airlines
A4, 3.40%*, 8/2/99**
2,000 2,000 North Central Texas Series C, 3.40%*, 8/2/99**
WASHINGTON (0.3%):
600 600 Seattle Municipal Light & Power, 3.00%*, 8/4/99**
WYOMING (1.0%):
2,000 2,000 Lincoln County PCR, Project D, 3.35%*, 8/2/99**
TOTAL DEMAND NOTES
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
-------------------------------------------------------------------------------------- --------------------- ------------------
<S> <C> <C> <C>
Los Angeles, Regional Airports Improvements Corp., Los 2,500 - 2,500
Angeles International-LAX 2, 3.40%*, 8/2/99 ** ------------------- ---------------- -----------------
Alachua County Florida Health, 3.00%*, 8/4/99**, MBIA 1,500 1,500
Laurel Club, Certificates of Participation, Series 96A, 1,680 1,680
3.25%*, 8/4/99**
------------------- ---------------- -----------------
3,180 - 3,180
------------------- ---------------- -----------------
Cobb County, Post Mill Project, 3.15%*, 8/4/99** 1,000 - 1,000
------------------- ---------------- -----------------
Cornell Township Economic Development Corporation, 2,500 - 2,500
------------------- ---------------- -----------------
Environment Improvement Revenue, 3.35%*, 8/2/99**
Minneapolis, GO, Sewer Improvements, Series A, 3.05%*, 1,000 1,000
8/4/99**
Minneapolis, GO, Sewer Improvements, Series B, 3.05%*, 2,400 2,400
8/5/99**
------------------- ---------------- -----------------
3,400 - 3,400
------------------- ---------------- -----------------
New York, GO, 3.50%*, 8/2/99**, LOC: Morgan Guaranty Trust 900 900
New York, GO, Series D, 3.00%*, 8/4/99**, FGIC 1,600 1,600
------------------- ---------------- -----------------
2,500 - 2,500
------------------- ---------------- -----------------
North Carolina Educational Facilities, 3.00%*, 8/5/99** 500 - 500
------------------- ---------------- -----------------
Schuylkill County, Industrial Development Authority, 2,200 - 2,200
Resource Recovery Revenue, Gilberton Power Project, ------------------- ---------------- -----------------
3.05%*, 8/4/99**
South Carolina State Jobs & Economic Development 1,000 - 1,000
Revenue, St. Francis Hospital, 3.40%*, 8/2/99** ------------------- ---------------- -----------------
Metropolitan Nashville Airport Authority, Special Facilities 1,300 1,300
Revenue, American Airlines Project, Series A, 3.40%*,
8/2/99**
Sullivan County, Industrial Development Board , PCR, Mead 500 500
Corp. Project, 2.80%*, 8/2/99**
------------------- ---------------- -----------------
1,800 - 1,800
------------------- ---------------- -----------------
Grapevine, Industrial Development Corp., American Airlines 1,000 1,000
A4, 3.40%*, 8/2/99**
North Central Texas Series C, 3.40%*, 8/2/99** 2,000 - 2,000
------------------- ---------------- -----------------
3,000 - 3,000
------------------- ---------------- -----------------
Seattle Municipal Light & Power, 3.00%*, 8/4/99** 600 - 600
------------------- ---------------- -----------------
Lincoln County PCR, Project D, 3.35%*, 8/2/99** 2,000 - 2,000
------------------ ---------------- -----------------
TOTAL DEMAND NOTES $ 38,894 - $ 38,894
------------------- ---------------- -----------------
</TABLE>
B-107
<PAGE> 281
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- --------------------- --------------- ---------------------------------------------------------
<S> <C> <C> <C>
TAX FREE COMMERCIAL PAPER (5.5%):
ALABAMA (1.2%):
1,500 1,500 Montgomery, 3.00%, 8/6/99
1,000 1,000 Port City Medical Clinic Board, Mobile, 3.05%, 8/4/99
FLORIDA (2.3%):
1,000 1,000 Jacksonville, 3.25%, 10/22/99
1,500 1,500 Jacksonville, PCR, 3.35%, 10/18/99
1,200 1,200 Sarasota County, Public Hospital Revenue, 3.20%,9/7/99
1,000 1,000 St. Lucie County, PCR, 3.05%, 8/5/99
MISSISSIPPI (1.0%):
1,000 1,000 Mississippi Hospital Equiment & Facilities Authority, 3.10%
5/15/27
1,000 1,000 Mississippi Hospital Equipment Authority Revenue, 3.25%,
10/7/99
NEVADA (0.5%):
1,000 1,000 Clark County, 5.70%, 6/1/00
UTAH (0.5%):
1,000 1,000 Intermountain Power Agency, 3.20%, 10/13/99
TOTAL TAX FREE COMMERCIAL PAPER
MUNICIPAL BONDS (66.4%):
ALABAMA (1.6%):
1,000 1,000 Alabama State College Authority, 5.00%, 8/1/99
1,000 1,000 Alabama State, Municipal Electric Authority Power Supply
Revenue, 6.10%, 9/1/99
380 380 Alabama Water Pollution Control Authority, 5.00%, 8/15/99
600 600 University Birmingham Alabama Medical & Educational
Foundation Revenue, 7.00%, 12/1/19, Prerefunded 12/1/99
@ 102
250 250 University of Alabama Revenue, 4.15%, 10/1/99
ARIZONA (0.5%):
1,000 1,000 Salt River Agriculture Improvement, Series B, Salt River
Project, 4.45%, 1/1/00
CALIFORNIA (0.7%):
1,500 1,500 Los Angeles County, Tax & Revenue, 4.00%, 6/30/00
COLORADO (0.5%):
1,000 1,000 El Paso County School District, 0.00%, 12/1/99, LOC: MBIA
CONNECTICUT (2.4%):
5,000 5,000 Connecticut State Health & Educational Facilities Authority
Series T-1, Yale University, 3.60%*, 7/1/29
DIST OF COLUMBIA (0.0%):
25 25 District Of Columbia, 1998 Series A, 6.75%, 6/1/08,
Prerefunded 6/1/00 @ 102, MBIA, GO
30 30 District Of Columbia, Series B, 7.40%, 6/1/05, Prerefunded
6/1/00 @ 102, FSA, GO
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- ------------------------------------------------------------------------------------- --------------------- -------------------
<S> <C> <C> <C>
Montgomery, 3.00%, 8/6/99 1,500 1,500
Port City Medical Clinic Board, Mobile, 3.05%, 8/4/99 1,000 1,000
------------------- --------------------- -----------------
2,500 - 2,500
------------------- --------------------- -----------------
Jacksonville, 3.25%, 10/22/99 1,000 1,000
Jacksonville, PCR, 3.35%, 10/18/99 1,500 1,500
Sarasota County, Public Hospital Revenue, 3.20%,9/7/99 1,200 1,200
St. Lucie County, PCR, 3.05%, 8/5/99 1,000 1,000
------------------- --------------------- -----------------
4,700 - 4,700
------------------- --------------------- -----------------
Mississippi Hospital Equiment & Facilities Authority, 3.10%, 1,000 1,000
5/15/27
Mississippi Hospital Equipment Authority Revenue, 3.25%, 1,000 1,000
10/7/99
------------------- --------------------- -----------------
2,000 - 2,000
------------------- --------------------- -----------------
Clark County, 5.70%, 6/1/00 1,018 - 1,018
------------------- --------------------- -----------------
Intermountain Power Agency, 3.20%, 10/13/99 1,000 - 1,000
------------------- --------------------- -----------------
TOTAL TAX FREE COMMERCIAL PAPER $ 11,218 - $ 11,218
------------------- --------------------- -----------------
Alabama State College Authority, 5.00%, 8/1/99 1,000 1,000
Alabama State, Municipal Electric Authority Power Supply 1,003 1,003
Revenue, 6.10%, 9/1/99
Alabama Water Pollution Control Authority, 5.00%, 8/15/99 380 380
University Birmingham Alabama Medical & Educational 620 620
Foundation Revenue, 7.00%, 12/1/19, Prerefunded 12/1/99
@ 102
University of Alabama Revenue, 4.15%, 10/1/99 250 250
------------------- --------------------- -----------------
3,253 - 3,253
------------------- --------------------- -----------------
Salt River Agriculture Improvement, Series B, Salt River - 1,004 1,004
Project, 4.45%, 1/1/00 ------------------- --------------------- -----------------
Los Angeles County, Tax & Revenue, 4.00%, 6/30/00 1,509 - 1,509
------------------- --------------------- -----------------
El Paso County School District, 0.00%, 12/1/99, LOC: MBIA 989 - 989
------------------- --------------------- -----------------
Connecticut State Health & Educational Facilities Authority, - 5,000 5,000
Series T-1, Yale University, 3.60%*, 7/1/29 ---------------- --------------------- -----------------
District Of Columbia, 1998 Series A, 6.75%, 6/1/08, 26 26
Prerefunded 6/1/00 @ 102, MBIA, GO
District Of Columbia, Series B, 7.40%, 6/1/05, Prerefunded 31 31
6/1/00 @ 102, FSA, GO
------------------- --------------------- -----------------
- 57 57
------------------- --------------------- -----------------
</TABLE>
B-108
<PAGE> 282
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- -------------------- ---------------- -----------------------------------------------------------
<S> <C> <C> <C>
FLORIDA (0.7%):
250 250 Homestead, Special Insurance Assessment Revenue,
4.75%, 9/1/99, LOC: MBIA
30 30 Martin County, 6.50%, 2/1/10, Prerefunded 2/1/00 @ 102,
AMBAC, GO
40 40 Orlando & Orange County Expressway Revenue, Jr. Lien,
6.50%, 7/1/20, Prerefunded 7/1/00 @ 102, FGIC
30 30 Pinellas County Health Facilities Authority, Morton Plant
Health System Project, 4.50%, 11/15/99, MBIA
1,000 1,000 Tampa, Water & Sewer Revenue, 6.20%, 10/1/99, LOC: Bank
of America
GEORGIA (3.7%):
50 50 Albany Sewer Systems, 5.35%, 7/1/00, FGIC
30 30 Atlanta Airport Extension & Improvement, 7.00%, 1/1/00
1,000 1,000 Clayton County, GO, 4.25%, 8/1/99
1,000 1,000 Douglas County Water & Sewer Authority, 6.70%, 6/1/05,
Prerefunded 6/1/00 @ 102, MBIA
2,900 2,900 Georgia Municipal Gas Authority Gas Revenue, Series A
4.25%, 11/1/99
1,500 1,500 Gwinnett County School District, 3.50, 12/31/99
30 30 Jackson County School District, 4.90%, 7/1/00, MBIA
1,000 1,000 Muscogee County School District, 4.00%, 11/1/99
HAWAII (1.4%):
1,300 1,300 Hawaii County, Series A, 4.80%, 5/1/00, FGIC, GO
1,500 1,500 Hawaii State, 4.75%, 11/1/99, LOC: FGIC
ILLINOIS (8.9%):
1,075 1,075 Chicago Wastewater Transmission Revenue, 7.20%,
11/15/19, Prerefunded 11/15/99 @ 102, LOC:MBIA
3,000 3,000 Chicago, O'Hare International Airport,, Series A, General
Airport Second Lien, 3.40%*, 1/1/18
750 750 Cook County High School District, 6.50%, 12/1/99, LOC: FSA
50 50 Du Page County Forest Preservation, 4.00%, 10/1/99
4,895 4,895 Elmhurst Revenue Bond, Joint Common Accreditation,
3.65%*, 7/1/18
5,000 5,000 Illinois Developmental Finance Authority, Series C, Provena
Health, 3.45%*, 5/1/28
1,000 1,000 Illinois Health Facilities Authority Revenue, 4.00% 8/15/99
90 90 Illinois Health Facilities Authority Revenue, 7.00%, 1/1/19
Prerefunded 1/1/00 @ 102, MBIA
1,190 1,190 Kane County Public Building Revenue Bond, 4.20%, 12/1/99
1,000 1,000 Peoria Public Building & School Facilities, 6.50%, 12/1/05,
Prerefunded 12/1/99 @ 100, AMBAC
INDIANA (0.1%):
235 235 Hamilton Southeastern, School Building Corp., 4.25%,
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
------------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C>
Homestead, Special Insurance Assessment Revenue, 250 250
4.75%, 9/1/99, LOC: MBIA
Martin County, 6.50%, 2/1/10, Prerefunded 2/1/00 @ 102, 31 31
AMBAC, GO
Orlando & Orange County Expressway Revenue, Jr. Lien, 42 42
6.50%, 7/1/20, Prerefunded 7/1/00 @ 102, FGIC
Pinellas County Health Facilities Authority, Morton Plant 30 30
Health System Project, 4.50%, 11/15/99, MBIA
Tampa, Water & Sewer Revenue, 6.20%, 10/1/99, LOC: Bank 1,005 1,005
of America
------------------- --------------------- --------------------
1,255 103 1,358
------------------- --------------------- --------------------
Albany Sewer Systems, 5.35%, 7/1/00, FGIC 51 51
Atlanta Airport Extension & Improvement, 7.00%, 1/1/00 30 30
Clayton County, GO, 4.25%, 8/1/99 1,000 1,000
Douglas County Water & Sewer Authority, 6.70%, 6/1/05, 1,048 1,048
Prerefunded 6/1/00 @ 102, MBIA
Georgia Municipal Gas Authority Gas Revenue, Series A 2,904 2,904
4.25%, 11/1/99
Gwinnett County School District, 3.50, 12/31/99 1,501 1,501
Jackson County School District, 4.90%, 7/1/00, MBIA 30 30
Muscogee County School District, 4.00%, 11/1/99 1,003 1,003
------------------- --------------------- --------------------
3,504 4,063 7,567
------------------- --------------------- --------------------
Hawaii County, Series A, 4.80%, 5/1/00, FGIC, GO 1,316 1,316
Hawaii State, 4.75%, 11/1/99, LOC: FGIC 1,505 1,505
------------------- --------------------- --------------------
1,505 1,316 2,821
------------------- --------------------- --------------------
Chicago Wastewater Transmission Revenue, 7.20%, 1,109 1,109
11/15/19, Prerefunded 11/15/99 @ 102, LOC:MBIA
Chicago, O'Hare International Airport,, Series A, General 3,000 3,000
Airport Second Lien, 3.40%*, 1/1/18
Cook County High School District, 6.50%, 12/1/99, LOC: FSA 758 758
Du Page County Forest Preservation, 4.00%, 10/1/99 50 50
Elmhurst Revenue Bond, Joint Common Accreditation, 4,895 4,895
3.65%*, 7/1/18
Illinois Developmental Finance Authority, Series C, Provena 5,000 5,000
Health, 3.45%*, 5/1/28
Illinois Health Facilities Authority Revenue, 4.00% 8/15/99 1,000 1,000
Illinois Health Facilities Authority Revenue, 7.00%, 1/1/19, 93 93
Prerefunded 1/1/00 @ 102, MBIA
Kane County Public Building Revenue Bond, 4.20%, 12/1/99 1,194 1,194
Peoria Public Building & School Facilities, 6.50%, 12/1/05, 1,011 1,011
Prerefunded 12/1/99 @ 100, AMBAC
------------------- --------------------- --------------------
2,867 15,243 18,110
------------------- --------------------- --------------------
Hamilton Southeastern, School Building Corp., 4.25%, - 236 236
</TABLE>
B-109
<PAGE> 283
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- -------------------- --------------------- -----------------------------------------------------
<S> <C> <C> <C>
IOWA (2.4%):
5,000 5,000 Iowa Finance Authority Revenue, Series B, Wheaton
Franciscan, 3.30%*, 8/15/24, MBIA
KANSAS (0.0%):
100 100 Shawnee County, Series A, 7.00%, 9/1/99, GO
KENTUCKY (0.5%):
1,000 1,000 Kentucky Asset/Liability Revenue, 4.25%, 6/28/00
LOUISIANA (0.3%):
525 525 Louisiana State Gas & Fuels Tax Revenue, 3.35%, 11/15/99
MARYLAND (0.5%):
1,000 1,000 Montgomery County, GO, 5.80%, 10/1/99
50 50 Prince Georges County, Series A, Construction Public
Improvement, 4.90%, 9/1/99, MBIA, GO
MASSACHUSETTS (4.3%):
500 500 Boston Water & Sewer Common Revenue, 7.10%, 11/01/19,
Prerefunded 11/1/99 @ 102, LOC: US Government Securities
2,278 2,278 Dedham, 3.75%, 10/8/99
5,300 5,300 Greenfield, 3.50%, 1/14/00
300 300 Hingham, 5.50, 10/15/99
500 500 Massachusetts State Convention Center Authority, 6.00%,
9/1/99
MICHIGAN (0.1%):
125 125 Macomb County Transportation Funding Notes, 6.50%,
25 25 Marquette Electric Utility Revenue, 4.80%, 7/1/00, AMBAC
MISSISSIPPI (0.1%):
250 250 Mississippi Higher Education, Series B, 6.00%, 1/1/00
NEBRASKA (0.6%):
250 250 American Public Energy Agency, Series A, Nebraska Gas
Supply, 3.35%, 6/1/00, AMBAC
990 990 Nebraska Public Power Revenue, 4.50%, 1/1/00
NEVADA (0.0%):
25 25 Washoe County, Reno Sparks Convention/Visitor, 7.10%,
7/1/07, Prerefunded 7/1/00 @ 102, AMBAC
NEW HAMPSHIRE (5.1%):
130 130 Hudson School District, Lot C, 7.25%, 12/15/99
2,000 2,000 Nashua, 3.50%, 12/10/99
2,000 2,000 New Hampshire State Capital Appreciation, College
Savings Bond Program, 0.00%, 8/1/99
2,150 2,150 Salem, 3.75%, 12/16/99, GO
4,200 4,200 Strafford, 3.60%, 12/31/99, GO
NEW YORK (4.1%):
2,500 2,500 Arlington Central School District, 3.88%, 11/9/99, GO
450 450 New York City Transitional Finance Authority Revenue,
4.00%, 8/15/99
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
-------------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C>
Iowa Finance Authority Revenue, Series B, Wheaton - 5,000 5,000
Franciscan, 3.30%*, 8/15/24, MBIA ------------------- --------------------- --------------------
Shawnee County, Series A, 7.00%, 9/1/99, GO - 100 100
------------------- --------------------- --------------------
Kentucky Asset/Liability Revenue, 4.25%, 6/28/00 1,008 - 1,008
------------------- --------------------- --------------------
Louisiana State Gas & Fuels Tax Revenue, 3.35%, 11/15/99 525 - 525
------------------- --------------------- --------------------
Montgomery County, GO, 5.80%, 10/1/99 1,005 1,005
Prince Georges County, Series A, Construction Public 50 50
Improvement, 4.90%, 9/1/99, MBIA, GO
------------------- --------------------- --------------------
1,005 50 1,055
------------------- --------------------- --------------------
Boston Water & Sewer Common Revenue, 7.10%, 11/01/19, 516 516
Prerefunded 11/1/99 @ 102, LOC: US Government Securities
Dedham, 3.75%, 10/8/99 2,280 2,280
Greenfield, 3.50%, 1/14/00 5,305 5,305
Hingham, 5.50, 10/15/99 301 301
Massachusetts State Convention Center Authority, 6.00%, 501 501
9/1/99
------------------- --------------------- --------------------
1,318 7,585 8,903
------------------- --------------------- --------------------
Macomb County Transportation Funding Notes, 6.50%, 125 125
Marquette Electric Utility Revenue, 4.80%, 7/1/00, AMBAC 25 25
------------------- --------------------- --------------------
- 150 150
------------------- --------------------- --------------------
Mississippi Higher Education, Series B, 6.00%, 1/1/00 - 253 253
------------------- --------------------- --------------------
American Public Energy Agency, Series A, Nebraska Gas 249 249
Supply, 3.35%, 6/1/00, AMBAC
Nebraska Public Power Revenue, 4.50%, 1/1/00 994 994
------------------- --------------------- --------------------
- 1,243 1,243
------------------- --------------------- --------------------
Washoe County, Reno Sparks Convention/Visitor, 7.10%, - 26 26
7/1/07, Prerefunded 7/1/00 @ 102, AMBAC ------------------- --------------------- --------------------
Hudson School District, Lot C, 7.25%, 12/15/99 131 131
Nashua, 3.50%, 12/10/99 2,001 2,001
New Hampshire State Capital Appreciation, College 2,000 2,000
Savings Bond Program, 0.00%, 8/1/99
Salem, 3.75%, 12/16/99, GO 2,152 2,152
Strafford, 3.60%, 12/31/99, GO 4,203 4,203
------------------- --------------------- --------------------
2,000 8,487 10,487
------------------- --------------------- --------------------
Arlington Central School District, 3.88%, 11/9/99, GO 2,503 2,503
New York City Transitional Finance Authority Revenue, 450 450
4.00%, 8/15/99
</TABLE>
B-110
<PAGE> 284
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- --------------------- --------------- -----------------------------------------------------------
<S> <C> <C> <C>
4.00%, 8/15/99
20 20 New York City, Series B, 7.50%, 10/1/11, Prerefunded
10/1/99 @ 101.50, GO
250 250 New York State Dorm Authority, Series B, 4.80%, 5/15/00
5,000 5,000 New York, Series F-3, 3.30%*, 2/15/13, GO
100 100 Suffock County, Series B, 4.50%, 10/15/99, AMBAC
NORTH CAROLINA (0.2%):
155 155 Clinton, 4.00%, 6/1/00, GO
250 250 Stokes County, 4.80%, 6/1/00, LOC: FGIC
OHIO (3.6%):
1,000 1,000 Columbus Sewer Revenue, 5.70%, 6/1/00
1,500 1,500 Cuyahoga County, 6.70%, 10/1/10, Prerefunded 10/1/99 @
102, LOC: US Government Securities
3,425 3,425 Dayton Water System Revenue, 3.50%,12/1/99
700 700 Ohio Air Quality Development Authority Revenue, Mead
Corp., 3.80%*, 10/1/01
625 625 Ottawa County, 4.25%, 9/1/99, LOC: MBIA
OKLAHOMA (2.0%):
750 750 Broken Arrow, 7.00%, 7/1/00, GO
610 610 Cleveland County Independent School District, 7.40%,
4/1/00, GO
1,100 1,100 Oklahoma City, 4.65%, 8/1/99
1,555 1,555 Oklahoma County Independent School District #12, Series
B, 4.50-6.20%, 7/1/00, GO
PENNSYLVANIA (4.8%):
5,000 5,000 Allegheny County Hospital Development Authority, St.
Francis Medical Center, 3.65%*, 11/1/27
50 50 Derry Township School District, 6.20%, 9/1/13. Prerefunded
3/1/00 @ 100, AMBAC
1,000 1,000 Lehigh County Purpose Authority Revenue, 8.75%, 11/1/14,
Prerefunded 11/1/99 @ 102, LOC: US Treasury Obligation
25 25 Mahheim Township School District, 4.50%, 6/1/00, FGIC, GO
1,000 1,000 Pennsylvania State Turnpike Commission Turnpike
Revenue, 7.63%, 12/1/09, Prerefunded 12/1/99 @ 102
2,000 2,000 Pennsylvania Housing Finance Agency, Rental Housing,
5.40%, 1/1/00, FNMA COLL
25 25 Perkiomen Valley School District, 4.35%, 3/1/00, AMBAC,
600 600 Philadelphia, School District, 4.00%, 6/30/00, LOC: Mellon
Bank
25 25 Westmorland County Municipal Authority Revenue, 7.25%,
7/1/15, Prerefunded 7/1/00 @ 100, MBIA
RHODE ISLAND (0.5%):
1,000 1,000 Rhode Island State Construction Capital Development Loan,
Series A, 4.25% 9/1/99, LOC: FGIC
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- ------------------------------------------------------------------------------- --------------------- -----------------------
<S> <C> <C> <C>
4.00%, 8/15/99
New York City, Series B, 7.50%, 10/1/11, Prerefunded 20 20
10/1/99 @ 101.50, GO
New York State Dorm Authority, Series B, 4.80%, 5/15/00 253 253
New York, Series F-3, 3.30%*, 2/15/13, GO 5,001 5,001
Suffock County, Series B, 4.50%, 10/15/99, AMBAC 100 100
--------------- --------------------- --------------------
450 7,877 8,327
--------------- --------------------- --------------------
Clinton, 4.00%, 6/1/00, GO 155 155
Stokes County, 4.80%, 6/1/00, LOC: FGIC 252 252
--------------- --------------------- --------------------
252 155 407
--------------- --------------------- --------------------
Columbus Sewer Revenue, 5.70%, 6/1/00 1,020 1,020
Cuyahoga County, 6.70%, 10/1/10, Prerefunded 10/1/99 @ 1,539 1,539
102, LOC: US Government Securities
Dayton Water System Revenue, 3.50%,12/1/99 3,427 3,427
Ohio Air Quality Development Authority Revenue, Mead 700 700
Corp., 3.80%*, 10/1/01
Ottawa County, 4.25%, 9/1/99, LOC: MBIA 625 625
--------------- --------------------- --------------------
2,164 5,147 7,311
--------------- --------------------- --------------------
Broken Arrow, 7.00%, 7/1/00, GO 772 772
Cleveland County Independent School District, 7.40%, 625 625
4/1/00, GO
Oklahoma City, 4.65%, 8/1/99 1,100 1,100
Oklahoma County Independent School District #12, Series 1,583 1,583
B, 4.50-6.20%, 7/1/00, GO
--------------- --------------------- --------------------
1,100 2,980 4,080
--------------- --------------------- --------------------
Allegheny County Hospital Development Authority, St. 4,999 4,999
Francis Medical Center, 3.65%*, 11/1/27
Derry Township School District, 6.20%, 9/1/13. Prerefunded 51 51
3/1/00 @ 100, AMBAC
Lehigh County Purpose Authority Revenue, 8.75%, 11/1/14, 1,034 1,034
Prerefunded 11/1/99 @ 102, LOC: US Treasury Obligation
Mahheim Township School District, 4.50%, 6/1/00, FGIC, GO 25 25
Pennsylvania State Turnpike Commission Turnpike 1,035 1,035
Revenue, 7.63%, 12/1/09, Prerefunded 12/1/99 @ 102
Pennsylvania Housing Finance Agency, Rental Housing, 2,017 2,017
5.40%, 1/1/00, FNMA COLL
Perkiomen Valley School District, 4.35%, 3/1/00, AMBAC, 25 25
Philadelphia, School District, 4.00%, 6/30/00, LOC: Mellon 603 603
Bank
Westmorland County Municipal Authority Revenue, 7.25%, 26 26
7/1/15, Prerefunded 7/1/00 @ 100, MBIA
--------------- --------------------- --------------------
2,672 7,143 9,815
--------------- --------------------- --------------------
Rhode Island State Construction Capital Development Loan, 1,001 - 1,001
Series A, 4.25% 9/1/99, LOC: FGIC --------------- --------------------- --------------------
</TABLE>
B-111
<PAGE> 285
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- --------------------- ---------------- ----------------------------------------------------------
<S> <C> <C> <C>
SOUTH CAROLINA (0.3%):
20 20 Oconee County School District, 5.50%, 1/1/00, MBIA
665 665 South Carolina State Capital Improvement, Series B, 5.60%,
3/1/00
TENNESSEE (7.1%):
2,245 2,245 Knox County Health & Hospital Facilities, Baptist Health
System, 5.00%, 4/15/00, AMBAC
25 25 Knox County Hospital Facilities Revenue, Series A, Mercy
Health System, 7.60%, 9/1/19, Prerefunded 9/1/99 @ 102,
AMBAC
25 25 Knox County Hospital Facilities Revenue, Series C, Fort
Sanders Alliance Obligation, 7.00, 1/1/08, Prerefunded
1/1/00 @ 102, MBIA
1,000 1,000 Metro Government Nashville & Davidson Public
Improvement, Series A, 4.60%, 11/15/99
40 40 Metropolitan Government Nashville & Davidson, County,
Series C, Airport Revenue 5.90%, 7/1/00, FGIC
30 30 Metropolitan Government Nashville & Davidson, County,
4.63%, 5/15/00
5,000 5,000 Metropolitan Government, Nashville & Davidson County,
Country Music Hall of Fame, 3.65%*, 6/1/22
40 40 Rhea County, 5.25%, 3/1/00, AMBAC, GO
5,000 5,000 Sevier County Public Building Authority, Local Public
Improvement, 4.00%*, 6/1/25
1,000 1,000 Sullivan County, Health Education & Housing, 7.20%,
2/15/00, LOC: MBIA
TEXAS (1.7%):
500 500 Dallas Water Works & Sewer Revenue, 5.90%, 10/1/99
80 80 Houston Water & Sewer System Revenue, Series C, Jr. Lien,
5.90%, 12/1/99, MBIA-IBC
435 435 Hurst Bedford Independent School District, 6.60%, 8/15/05,
Prerefunded 8/15/99 @ 102
1,000 1,000 Irving Independent School District GO, 4.50%, 8/15/99
300 300 Lone Star Texas Airport Improvement Authority, Series A-5,
Multiple Mode, 3.85%*, 12/1/14
400 400 Lone Star Texas Airport Improvement Authority, Series B-1,
Multiple Mode, 3.85%*, 12/1/14
25 25 San Antonio Certificates of Obligation, 6.80%, 8/1/06,
Prerefunded 8/1/99 @ 100, GO
100 100 San Antonio Certificates of Obligation, 7.75%, 8/1/99, GO
700 700 Texas State Public Finance Authority, Series D, 6.60%,
10/1/03 Prerefunded 10/1/99 @ 100
VIRGINIA (0.7%):
1,000 1,000 Arlington Count, 5.50%, 6/1/00, GO
355 355 James City County, 6.40%, 12/15/99, LOC: FGIC
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT P RO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- ----------------------------------------------------------- --------------------- ---------------- -----------------
<S> <C> <C> <C>
Oconee County School District, 5.50%, 1/1/00, MBIA 20 20
South Carolina State Capital Improvement, Series B, 5.60%, 673 673
3/1/00
--------------- --------------------- ----------------
673 20 693
--------------- --------------------- ----------------
Knox County Health & Hospital Facilities, Baptist Health 2,270 2,270
System, 5.00%, 4/15/00, AMBAC
Knox County Hospital Facilities Revenue, Series A, Mercy 26 26
Health System, 7.60%, 9/1/19, Prerefunded 9/1/99 @ 102,
AMBAC
Knox County Hospital Facilities Revenue, Series C, Fort 26 26
Sanders Alliance Obligation, 7.00, 1/1/08, Prerefunded
1/1/00 @ 102, MBIA
Metro Government Nashville & Davidson Public 1,004 1,004
Improvement, Series A, 4.60%, 11/15/99
Metropolitan Government Nashville & Davidson, County, 41 41
Series C, Airport Revenue 5.90%, 7/1/00, FGIC
Metropolitan Government Nashville & Davidson, County, 30 30
4.63%, 5/15/00
Metropolitan Government, Nashville & Davidson County, 5,000 5,000
Country Music Hall of Fame, 3.65%*, 6/1/22
Rhea County, 5.25%, 3/1/00, AMBAC, GO 40 40
Sevier County Public Building Authority, Local Public 5,000 5,000
Improvement, 4.00%*, 6/1/25
Sullivan County, Health Education & Housing, 7.20%, 1,040 1,040
2/15/00, LOC: MBIA
--------------- --------------------- ----------------
2,044 12,433 14,477
--------------- --------------------- ----------------
Dallas Water Works & Sewer Revenue, 5.90%, 10/1/99 502 502
Houston Water & Sewer System Revenue, Series C, Jr. Lien, 80 80
5.90%, 12/1/99, MBIA-IBC
Hurst Bedford Independent School District, 6.60%, 8/15/05, 444 444
Prerefunded 8/15/99 @ 102
Irving Independent School District GO, 4.50%, 8/15/99 1,001 1,001
Lone Star Texas Airport Improvement Authority, Series A-5, 300 300
Multiple Mode, 3.85%*, 12/1/14
Lone Star Texas Airport Improvement Authority, Series B-1, 400 400
Multiple Mode, 3.85%*, 12/1/14
San Antonio Certificates of Obligation, 6.80%, 8/1/06, 25 25
Prerefunded 8/1/99 @ 100, GO
San Antonio Certificates of Obligation, 7.75%, 8/1/99, GO 100 100
Texas State Public Finance Authority, Series D, 6.60%, 704 704
10/1/03 Prerefunded 10/1/99 @ 100
--------------- --------------------- ----------------
1,503 2,053 3,556
--------------- --------------------- ----------------
Arlington Count, 5.50%, 6/1/00, GO 1,019 1,019
James City County, 6.40%, 12/15/99, LOC: FGIC 359 359
--------------- --------------------- ----------------
359 1,019 1,378
--------------- --------------------- ----------------
</TABLE>
B-112
<PAGE> 286
<TABLE>
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION
--------------------- --------------------- --------------------- ------------------------------------------------------
<S> <C> <C> <C>
WASHINGTON (5.1%):
500 500 King County, GO, 4.70% 10/1/99
435 435 Richland Electric Revenue, 5.30% 11/1/99
1,000 1,000 Snohomish County Public Utility, 6.40%, 1/1/00
100 100 Snohomish Water & Sewer, 4.45%, 11/1/99, FSA
1,750 1,750 Spokane Revenue Anticipation Note, 3.50%, 1/31/00
500 500 Tacoma Electric System Revenue, 7.30%, 1/1/00
1,000 1,000 Washington State Public Power Supply, Series B, Project 3
7.25%, 7/1/15, Prerefunded 1/1/00 @ 102
30 30 Washington State Public Power Supply, Series B, 7.50%,
7/1/18, Prerefunded 7/1/00 @ 102
50 50 Washington State Public Water Supply, 5.10%, 7/1/00
5,000 5,000 Washington State, Series VR 96B, 3.40%*, 6/1/20, GO
WEST VIRGINIA (0.7%):
500 500 West Virginia State Hospital Finance Authority, 7.00%,
8/1/04, Prerefunded 8/1/99 @ 102, LOC: FSA
1,000 1,000 West Virginia State, State Road, 3.50%, 6/1/00
WISCONSIN (0.8%):
100 100 Madison Waterworks Management, 6.80%, 1/1/00
30 30 Wisconsin State Health & Educational Facilities Authority
Revenue, Series B, SSM Healthcare Projects, 7.00%, 6/1/20
Prerefunded 6/1/00 @ 102, MBIA
1,500 1,500 Wisconsin State Transportation Revenue, 4.10%, 7/1/00
WYOMING (0.3%):
600 600 Lincoln County PCR, Series C, Exxon Co. Project, 3.80%*,
11/1/14
TOTAL MUNICIPAL BONDS
INVESTMENT COMPANIES (5.3%):
5,093,044 5,093,044 Aim Tax Free Money Market
100 100 Bank Of New York Cash Reserve Money Market Fund
1,000 1,000 Dreyfus Tax Free Money Market
4,012,917 4,012,917 Federated Tax-Free Fund
1,890,596 1,890,596 Goldman Sachs Tax-Free Fund
TOTAL INVESTMENT COMPANIES
TOTAL (COST $206,704) (a)
<CAPTION>
AMSOUTH ISG
TAX-EXEMPT TAX-EXEMPT PRO FORMA
MMF MMF COMBINED
AMORTIZED AMORTIZED AMORTIZED
DESCRIPTION COST COST COST
- --------------------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C> <C>
King County, GO, 4.70% 10/1/99 501 501
Richland Electric Revenue, 5.30% 11/1/99 437 437
Snohomish County Public Utility, 6.40%, 1/1/00 1,012 1,012
Snohomish Water & Sewer, 4.45%, 11/1/99, FSA 100 100
Spokane Revenue Anticipation Note, 3.50%, 1/31/00 1,750 1,750
Tacoma Electric System Revenue, 7.30%, 1/1/00 508 508
Washington State Public Power Supply, Series B, Project 3 1,035 1,035
7.25%, 7/1/15, Prerefunded 1/1/00 @ 102
Washington State Public Power Supply, Series B, 7.50%, 32 32
7/1/18, Prerefunded 7/1/00 @ 102
Washington State Public Water Supply, 5.10%, 7/1/00 50 50
Washington State, Series VR 96B, 3.40%*, 6/1/20, GO 5,001 5,001
------------------- --------------------- --------------------
938 9,488 10,426
------------------- --------------------- --------------------
West Virginia State Hospital Finance Authority, 7.00%, 510 510
8/1/04, Prerefunded 8/1/99 @ 102, LOC: FSA
West Virginia State, State Road, 3.50%, 6/1/00 1,000 1,000
------------------- --------------------- --------------------
1,510 - 1,510
------------------- --------------------- --------------------
Madison Waterworks Management, 6.80%, 1/1/00 101 101
Wisconsin State Health & Educational Facilities Authority 31 31
Revenue, Series B, SSM Healthcare Projects, 7.00%, 6/1/20
Prerefunded 6/1/00 @ 102, MBIA
Wisconsin State Transportation Revenue, 4.10%, 7/1/00 1,509 1,509
------------------- --------------------- --------------------
- 1,641 1,641
------------------- --------------------- --------------------
Lincoln County PCR, Series C, Exxon Co. Project, 3.80%*, - 600 600
11/1/14 ------------------- --------------------- --------------------
------------------- --------------------- --------------------
TOTAL MUNICIPAL BONDS $ 35,404 $ 100,472 $135,876
------------------- --------------------- --------------------
Aim Tax Free Money Market 5,093 5,093
Bank Of New York Cash Reserve Money Market Fund *** ***
Dreyfus Tax Free Money Market 1 1
Federated Tax-Free Fund 4,013 4,013
Goldman Sachs Tax-Free Fund 1,891 1,891
------------------- --------------------- --------------------
TOTAL INVESTMENT COMPANIES $ 5,904 $ 5,094 $ 10,998
------------------- --------------------- --------------------
------------------- --------------------- --------------------
TOTAL (COST $206,704) (a) $ 96,133 $ 110,571 $206,704
------------------- --------------------- --------------------
- -----------------------
PERCENTAGES INDICATED ARE BASED ON NET ASSETS OF $204,829.
(a) Cost for federal income tax and financial reporting purposes are the
same.
* Variable rate security. Rate presented represents rate in effect at
July 31, 1999. Date presented reflects next rate change date.
** Put and demand features exist allowing the fund to require the
repurchase of the instrument within variable time periods including
daily, weekly, monthly, and semiannually.
*** Amount is less than one thousand dollars.
AMBAC - Insured by AMBAC Indemnity Corp.
FGIC - Insured by Financial Guaranty Insurance Corp.
FNMA - Insured by Federal National Mortgage Assoc.
FSA - Insured by Financial Security Assoc.
GO - General Obligation
LOC - Letter of Credit
MBIA - Insured by Municipal Bond Insurance Assoc.
PCR - Pollution Control Revenue
</TABLE>
B-113
<PAGE> 1
Two Quick and Easy Ways ISG
To Vote Your Proxy Instantly FUNDS
As a valued ISG Funds shareholder, your proxy vote is important to us. That's
why we've made it faster and easier to vote your proxy at your convenience, 24
hours a day. After reviewing the enclosed Proxy Statement, which outlines
important issues affecting your fund, select one of the following quick and easy
methods to register your vote -- accurately and immediately.
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1. Read the enclosed Proxy Statement and have your Proxy Card* at hand.
2. Go to Web site WWW.PROXYVOTE.COM.
3. Enter the 12-digit Control Number found on your Proxy Card
4. Cast your vote using the easy-to-follow instructions.
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1. Read the enclosed Proxy Statement and have your Proxy Card* at hand.
2. Call the toll-free Number found on your Proxy Card.
3. Enter the 12-digit Control Number found on your Proxy Card.
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