<PAGE> 1
As filed with the Securities and Exchange Commission
on November 23, 1999
Registration Nos. 33-21660 and 811-5551
---------------------
----------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 31 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 32 [X]
AMSOUTH MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
----------------------------------------
(Address of Principal Executive Offices)
(800) 451-8379
--------------
(Registrant's Telephone Number, including Area Code)
Name and address
of agent for service: Copy to:
--------------------- --------
Mr. J. David Huber Alan G. Priest, Esq.
AmSouth Mutual Funds Ropes & Gray
3435 Stelzer Road 1301 K Street, N.W., Suite 800 East
Columbus, Ohio 43219 Washington, D.C. 20005
Approximate Date of Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b).
[X] on December 1, 1999 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(i).
[ ] on [date] pursuant to paragraph (a)(i).
[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on [date] pursuant to paragraph (a)(ii) of Rule 485.
[X] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment No. 29 filed on
September 16, 1999.
<PAGE> 2
AMSOUTH FUNDS
PROSPECTUS
CLASS A SHARES
CLASS B SHARES
DECEMBER 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these Fund shares or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is committing a crime.
[AmSouth Logo]
<PAGE> 3
AMSOUTH FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
[LOGO]
Carefully review this important 2 Overview
section, which summarizes each CAPITAL APPRECIATION FUNDS
Fund's investments, risks, past 4 Balanced Fund
performance, and fees. 7 Growth Fund
10 Enhanced Market Fund
12 Value Fund
15 Equity Income Fund
18 Regional Equity Fund
21 Select Equity Fund
23 Small Cap Fund
INCOME FUNDS
26 Bond Fund
29 Government Income Fund
32 Limited Term Bond Fund
35 Florida Tax-Exempt Fund
38 Municipal Bond Fund
MONEY MARKET FUNDS
42 Prime Money Market Fund
45 U.S. Treasury Money Market Fund
48 Tax-Exempt Money Market Fund
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
[LOGO]
Review this section for CAPITAL APPRECIATION FUNDS
information and on investment 51 Balanced Fund
strategies and their risks. 51 Growth Fund
51 Enhanced Market Fund
51 Value Fund
51 Equity Income Fund
51 Regional Equity Fund
51 Select Equity Fund
51 Small Cap Fund
INCOME FUNDS
52 Bond Fund
52 Government Income Fund
52 Limited Term Bond Fund
52 Florida Tax-Exempt Fund
53 Municipal Bond Fund
MONEY MARKET FUNDS
Prime Money Market Fund
U.S. Treasury Money Market Fund
53 Tax-Exempt Money Market Fund
FUND MANAGEMENT
[LOGO]
Review this section for details on 60 The Investment Adviser
the people and organizations who 60 The Investment Sub-Advisers
oversee the Funds. 66 Portfolio Managers
67 The Distributor and Administrator
SHAREHOLDER INFORMATION
[LOGO]
Review this section for details on 68 Choosing a Share Class
how shares are valued, how to 69 Pricing of Fund Shares
purchase, sell and exchange 70 Purchasing and Adding to Your Shares
shares, related charges and 73 Selling Your Shares
payments of dividends and Exchanging Your Shares
distributions. 75 General Policies on Selling Shares
76 Distribution Arrangements/Sales Charges
79 Distribution and Service (12b-1) Fees and Shareholder
81 Servicing Fees
Dividends, Distributions and Taxes
OTHER INFORMATION ABOUT THE FUNDS
[LOGO]
82 Financial Highlights
</TABLE>
<PAGE> 4
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
<TABLE>
<S> <C>
THE FUNDS AmSouth Funds (formerly AmSouth Mutual Funds) is a mutual
fund family that offers different classes of shares in
separate investment portfolios ("Funds"). The Funds have
individual investment goals and strategies. This prospectus
gives you important information about the Class A Shares
(formerly Classic Shares) and the Class B Shares of the
Capital Appreciation Funds, the Income Funds and the Money
Market Funds that you should know before investing. Each
Fund also offers a third class of shares called Trust Shares
which is offered in a separate prospectus. Please read this
prospectus and keep it for future reference.
Each of the Funds in this prospectus is a mutual fund. A
mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities
like stocks and bonds. Before you look at specific Funds,
you should know a few general basics about investing in
mutual funds.
The value of your investment in a Fund is based on the
market prices of the securities the Fund holds. These prices
change daily due to economic and other events that affect
securities markets generally, as well as those that affect
particular companies or government units. These price
movements, sometimes called volatility, will vary depending
on the types of securities a Fund owns and the markets where
these securities trade.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR
INVESTMENT IN A FUND. YOUR INVESTMENT IN A FUND IS NOT A
DEPOSIT OR AN OBLIGATION OF AMSOUTH BANK, ITS AFFILIATES, OR
ANY BANK. IT IS NOT INSURED BY THE FDIC OR ANY GOVERNMENT
AGENCY.
Each Fund has its own investment goal and strategies for
reaching that goal. However, it cannot be guaranteed that a
Fund will achieve its goal. Before investing, make sure that
the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way
that the manager believes will help the Fund achieve its
goal. A manager's judgments about the stock markets, economy
and companies, or selecting investments may cause a Fund to
underperform other funds with similar objectives.
</TABLE>
2
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
CAPITAL APPRECIATION FUNDS
<TABLE>
<S> <C>
These Funds seek capital appreciation and invest primarily
in equity securities, principally common stocks and, to a
limited extent, preferred stocks and convertible securities.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking a long-term goal such as retirement
- looking to add a growth component to your portfolio
- willing to accept the risks of investing in the stock
markets
These Funds may not be appropriate if you are:
- pursuing a short-term goal or investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
3
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCED FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund seeks to obtain long-term capital growth and
produce a reasonable amount of current income through a
moderately aggressive investment strategy.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in a broadly
diversified portfolio of equity and debt securities
consisting primarily of common stocks and bonds.
The Fund normally invests between 45-75% of its assets in
equity securities and at least 25% of its assets in
fixed-income securities. The portion of the Fund's assets
invested in equity and debt securities will vary depending
upon economic conditions, the general level of stock prices,
interest rates and other factors, including the risks
associated with each investment. The Fund's equity
investments consist primarily of common stocks of companies
that the portfolio manager believes are undervalued and have
a favorable outlook. The Fund's fixed-income investments
consist primarily of "high-grade" bonds, notes and
debentures. The average dollar-weighted maturity of the
fixed-income portion of the Fund's portfolio will range from
one to thirty years.
In managing the equity portion of the Fund, the portfolio
manager uses a variety of economic projections, quantitative
techniques, and earnings projections in formulating
individual stock purchase and sale decisions. The portfolio
manager selects investments that he believes have basic
investment value which will eventually be recognized by
other investors.
In managing the fixed income portion of the Fund's
portfolio, the portfolio 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 and which are deemed to be
the best relative values.
The Fund may also invest in certain other equity and debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which the equity portion of this Fund
focuses -- value stocks -- will underperform other kinds of
investments or market averages.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Generally, an increase in the average
maturity of the fixed income portion of the Fund will make
it more sensitive to interest rate risk.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
4
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCED FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1992 8.72
- ---- ----
<S> <C>
93 14.37
94 -0.39
95 23.51
96 9.72
97 20.84
98 13.12
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -0.61%.
Best
quarter: 9.21% 6/30/97
Worst
quarter: -3.48% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 8.04% 12.01% 12.80%
CLASS B SHARES(2)
(with applicable Contingent
Deferred Sales Charge) 7.24% 12.56% 13.38%
S&P 500(R) INDEX 28.58% 24.06% 21.08%
LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.30% 6.28%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Balanced Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over
seven years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks, and the Lehman
Brothers Government/Corporate Bond
Index, an unmanaged index
representative of the total return
of government and corporate bonds.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
5
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCED FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.32% 0.32%
Total Fund operating expenses(5) 1.37% 2.12%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.31%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.36%; and
Class B Shares, 2.11%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $583 $864 $1,166 $2,022
CLASS B SHARES
Assuming redemption $715 $964 $1,339 $2,261
Assuming no redemption $215 $664 $1,139 $2,261
</TABLE>
As an investor in the Balanced
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
6
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Capital Growth Fund) seeks
long-term capital appreciation by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks such as convertible bonds and
convertible preferred stocks.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
domestically traded U.S. common stocks, as well as non-U.S.
common stocks and American Depositary Receipts ("ADRs") that
the portfolio manager believes have attractive potential for
growth.
In managing the Fund, the portfolio manager seeks
reasonably-priced securities with the potential to produce
above-average earnings growth. In choosing individual stocks
the portfolio manager uses a quantitative process to
identify companies with a history of above-average growth or
companies that are expected to enter periods of
above-average growth or are positioned in emerging growth
industries. Some of the criteria that the manager uses to
select these companies are earnings growth, return on
capital, cash flow and price earnings ratios.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- growth stocks -- will
underperform other kinds of investments or market averages.
FOREIGN SECURITIES RISK: Investing in foreign markets
involves a greater risk than investing in the United States.
Foreign securities may be adversely affected by myriad
factors, including currency fluctuations and social,
economic or political instability.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
7
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1998 34.1
- ---- ----
<S> <C>
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was 2.46%.
Best
quarter: 30.36% 12/31/98
Worst
quarter: -11.65% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (8/3/97)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 28.02% 20.06%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 28.11% 20.51%
S&P 500 INDEX 28.58% 21.50%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 3, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Growth Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Class A Shares for its
first full calendar year of
operations. The table below it
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
8
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.00%
Other expenses(5) 0.71% 0.70%
Total Fund operating expenses(5) 1.76% 2.50%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.17%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.23%; and
Class B Shares, 1.97%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $621 $ 979 $1,361 $2,430
CLASS B SHARES
Assuming redemption $753 $1,079 $1,531 $2,654
Assuming no redemption $253 $ 779 $1,331 $2,654
</TABLE>
As an investor in the Growth
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
9
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH ENHANCED MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce long-term growth of capital by
investing primarily in a diversified portfolio of common
stock and securities convertible into common stocks such as
convertible bonds and convertible preferred stock. The
portfolio manager does not currently intend to purchase
convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in a broadly
diversified portfolio of S&P 500 stocks, overweighting
relative to their S&P weights those that the portfolio
manager believes to be undervalued compared to others in the
index. The Fund seeks to maintain risk characteristics
similar to that of the S&P 500 Index and, normally, invests
at least 80% of its assets in common stocks drawn from the
Index.
The portfolio manager's stock selection process utilizes
computer-aided quantitative analysis. The portfolio
manager's computer models use many types of data, but
emphasize technical data such as price and volume
information. Applying these models to stocks within the S&P
500, the portfolio manager hopes to generate more capital
growth than that of the S&P 500. The portfolio manager's
emphasis on technical analyses can result in significant
shifts in portfolio holdings at different times. However,
stringent risk controls at the style, industry and
individual stock levels help ensure the Fund maintains risk
characteristics similar to those of the S&P 500.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- stocks in the S&P 500
Index which are primarily large cap companies -- will
underperform other kinds of investments or market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
10
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH ENHANCED MARKET FUND
This section would normally include a bar chart and a table showing how the
Enhanced Market Fund has performed and how its performance has varied from
year to year. Because the Fund has not been in operation for a full calendar
year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales
charge (load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.45% 0.45%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.84% 0.85%
Total Fund operating expenses(5) 1.54% 2.30%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.20%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 0.90%; and
Class B Shares, 1.75%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $600 $ 915 $1,252 $2,202
CLASS B SHARES
Assuming redemption $733 $1,018 $1,430 $2,445
Assuming no redemption $233 $ 718 $1,230 $2,445
</TABLE>
As an investor in the Enhanced
Market Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
11
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Equity Fund) seeks capital
growth by investing primarily in a diversified portfolio of
common stock and securities convertible into common stock,
such as convertible bonds and convertible preferred stock.
The production of current income is an incidental objective.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests primarily in common
stocks that the portfolio manager believes to be
undervalued.
In managing the Fund's portfolio, the manager uses a variety
of economic projections, quantitative techniques, and
earnings projections in formulating individual stock
purchase and sale decisions. The portfolio manager will
select investments that it believes have basic investment
value which will eventually be recognized by other
investors, thus increasing their value to the Fund.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses - undervalued
stocks - will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
12
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1989 26.54
- ---- -----
<S> <C>
90 -6.49
91 19.21
92 10.33
93 18.38
94 0.37
95 27.39
96 15.74
97 32.30
98 17.62
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -1.50%.
Best
quarter: 16.33% 6/30/97
Worst
quarter: -14.77% 9/30/90
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/1/88)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 12.33% 17.06% 15.01% 15.05%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 11.70% 17.72% 15.44% 15.47%
S&P 500(R) INDEX 28.58% 24.06% 19.19% 19.22%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 3, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/services (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Value Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
13
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.31% 0.31%
Total Fund operating expenses(5) 1.36% 2.11%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.30%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.35%; and
Class B Shares, 2.10%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $582 $861 $1,161 $2,011
CLASS B SHARES
Assuming redemption $714 $961 $1,334 $2,250
Assuming no redemption $214 $661 $1,134 $2,250
</TABLE>
As an investor in the Value
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
14
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks above average income and capital appreciation
by investing primarily in a diversified portfolio of common
stocks, preferred stocks, and securities that are
convertible into common stocks, such as convertible bonds
and convertible preferred stock.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
income-producing equity securities such as common stocks,
ADRs, and securities convertible into common stocks,
including convertible bonds and convertible preferred
stocks.
In managing the Fund's portfolio, the manager seeks equity
securities which he believes to represent investment value.
In choosing individual securities, the portfolio manager
emphasizes those common stocks in each sector that have good
value, attractive yield, and dividend growth potential. The
portfolio manager will also consider higher valued companies
that show the potential for growth. Factors that the
portfolio manager considers in selecting equity securities
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.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that this Fund's
blended investment style will underperform other Funds or
market averages that focus exclusively on either growth or
value.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
15
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1998 12.14
- ---- -----
<S> <C>
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was 4.58%.
Best
quarter:17.23% 12/31/98
Worst
quarter: -12.55% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (3/20/97)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 7.07% 15.05%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 6.31% 15.34%
S&P 500(R) INDEX 28.58% 34.10%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 3, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/services (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Equity Income Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Class A Shares for its
first full calendar year of
operations. The table below it
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
16
<PAGE> 19
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service
(12b-1) fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.55% 0.55%
Total Fund operating expenses(5) 1.60% 2.35%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.38%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.43%; and
Class B Shares, 2.13%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $605 $ 932 $1,282 $2,265
CLASS B SHARES
Assuming redemption $738 $1,033 $1,455 $2,499
Assuming no redemption $238 $ 733 $1,255 $2,499
</TABLE>
As an investor in the Equity
Income Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
17
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund seeks capital growth by investing primarily in a
diversified portfolio of common stock and securities
convertible into common stock, such as convertible bonds and
convertible preferred stock. The production of current
income is an incidental objective.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests primarily in common
stocks of companies headquartered in the Southern Region of
the United States, which includes Alabama, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee and Virginia, that the portfolio manager believes
to be undervalued.
In managing the Fund's portfolio, the manager uses a variety
of economic projections, quantitative techniques, and
earnings projections in formulating individual stock
purchase and sale decisions. The portfolio manager will
select investments that he believes have basic investment
value which will eventually be recognized by other
investors.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
GEOGRAPHIC CONCENTRATION RISK: By concentrating its
investments in the Southern Region, the Fund may be more
vulnerable to unfavorable developments in that region than
funds that are more geographically diversified.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- undervalued stocks of
companies in the Southern Region -- will underperform other
kinds of investments or market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
18
<PAGE> 21
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
'1989' 24.69
- ------ -----
<S> <C>
'90' -6.33
'91' 38.83
'92' 21.49
'93' 9.48
'94' -2.15
'95' 24.1
'96' 20.14
'97' 27.63
'98' -8.38
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -20.89%.
Best
quarter: 20.87% 3/31/91
Worst
quarter: -23.43% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
The chart and table on this page
show how the Regional Equity Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
the S&P 500(R)Index, a widely
recognized, unmanaged index of
common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/1/88)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) -12.51% 10.25% 13.39% 13.31%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) -13.33% 10.79% 13.80% 13.71%
S&P 500(R) INDEX 28.58% 24.06% 19.19% 19.22%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 3, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
19
<PAGE> 22
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.39% 0.39%
Total Fund operating expenses(5) 1.44% 2.19%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.35%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.40%; and
Class B Shares, 2.15%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $590 $885 $1,201 $2,097
CLASS B SHARES
Assuming redemption $722 $985 $1,375 $2,334
Assuming no redemption $222 $685 $1,175 $2,334
</TABLE>
As an investor in the Regional
Equity Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
20
<PAGE> 23
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SELECT EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital by investing
primarily in common stocks and securities convertible into
common stocks such as convertible bonds and convertible
preferred stocks. The portfolio manager does not currently
intend to purchase convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in common
stocks of companies with market capitalizations greater than
$2 billion at the time of purchase and that possess a
dominant market share and have a barrier, such as a patent
or well-known brand name, that shields its market share and
profits from competitors.
In managing the Fund's portfolio, the managers continuously
monitor a universe of companies possessing "market power" to
look for opportunities to purchase these stocks at
reasonable prices. "Market power" is a combination of
dominant market share and a barrier that protects that
market share. In selecting individual securities, the
portfolio managers look for companies that appear
undervalued. The managers then conduct a fundamental
analysis of the stock, the industry and the industry
structure. The portfolio managers will then purchase those
companies whose market power, in the managers' opinion, is
intact. As a result, the portfolio managers may focus on a
relatively limited number of stocks (i.e., generally 25 or
less). The Fund is non-diversified.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses - undervalued growth
stocks - will underperform other kinds of investments or
market averages.
NON-DIVERSIFIED RISK: The Fund may invest in a small number
of companies which may increase the volatility of the Fund.
If the companies in which the Fund invests perform poorly,
the Fund could suffer greater losses than if it had been
invested in a greater number of companies.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. However, the
portfolio managers expect that the Fund's annual portfolio
turnover rate will average less than 50% each year. If the
Fund invests in securities with additional risks, its share
price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
21
<PAGE> 24
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SELECT EQUITY FUND
This section would normally include a bar chart and a table showing how the
Select Equity Fund has performed and how its performance has varied from year
to year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.80% 0.80%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 0.78% 0.80%
Total Fund operating expenses(5) 1.83% 2.60%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%. 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.10%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.15%; and
Class B Shares, 2.01%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $628 $1,000 $1,396 $2,501
CLASS B SHARES
Assuming redemption $763 $1,108 $1,580 $2,747
Assuming no redemption $263 $ 808 $1,380 $2,747
</TABLE>
As an investor in the Select
Equity Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
22
<PAGE> 25
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SMALL CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks capital appreciation by investing primarily
in a diversified portfolio of securities consisting of
common stocks and securities convertible into common stocks
such as convertible bonds and convertible preferred stocks.
Any current income generated from these securities is
incidental.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the 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).
In managing the Fund's portfolio, the manager seeks smaller
companies with above-average growth potential. Factors the
portfolio manager typically considers in selecting
individual securities include 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.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
SMALL COMPANY RISK: Investing in smaller, lessor-known
companies involves greater risk than investing in those that
are more established. A small company's financial well-being
may, for example, depend heavily on just a few products or
services. In addition, investors may have limited
flexibility to buy or sell small company stocks, which tend
to trade less frequently than those of larger firms.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- small company growth
stocks -- will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
23
<PAGE> 26
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SMALL CAP FUND
This section would normally include a bar chart and a table showing how the
Small Cap Fund has performed and how its performance has varied from year to
year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.50%(2) None
Maximum deferred sales charge (load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 1.20% 1.20%
Distribution and service (12b-1) fee 0.00% 1.00%
Shareholder servicing fee 0.25% 0.00%
Other expenses(5) 1.25% 1.24%
Total Fund operating expenses(5) 2.70% 3.44%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for each class
are being limited to 0.23%. Total expenses
after fee waivers and expense reimbursements
for each class are: Class A Shares, 1.68%; and
Class B Shares, 2.43%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $711 $1,251 $1,815 $3,345
CLASS B SHARES
Assuming redemption $847 $1,356 $1,988 $3,555
Assuming no redemption $347 $1,056 $1,788 $3,555
</TABLE>
As an investor in the Small
Cap Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
24
<PAGE> 27
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
INCOME FUNDS
<TABLE>
<S> <C>
TAXABLE FUNDS The Bond Fund, the Government Income Fund and the Limited
Term Bond Fund seek current income and invest primarily in
fixed income securities, such as U.S. government securities,
or corporate, bank and commercial obligations.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to add a monthly income component to your
portfolio
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
TAX-FREE FUNDS The Florida Tax-Exempt Fund and the Municipal Bond Fund seek
tax-exempt income and invest primarily in municipal
securities which are exempt from Federal and, in the case of
the Florida Tax-Exempt Fund, Florida intangible taxes.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to reduce Federal income or Florida intangible
taxes
- seeking monthly Federal tax-exempt dividends
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing through a tax-exempt retirement plan
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
25
<PAGE> 28
AMSOUTH BOND FUND AMSOUTH BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in bonds and other
fixed-income securities. These investments include 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 a nationally
recognized statistical rating organization (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 which do not provide current income but
represent ownership of future interest and principal
payments on U.S. Treasury bonds.
The 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. In managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 51 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
26
<PAGE> 29
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1989 12.67
- ---- -----
<S> <C>
90 6.92
91 15.32
92 7.30
93 9.88
94 -3.23
95 18.41
96 2.56
97 9.27
98 9.19
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -1.85%.
Best
quarter: 7.13% 6/30/89
Worst
quarter: -2.39% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS (12/31/88)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 4.80% 6.11% 8.22% 8.22%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 3.25% 6.44% 8.54% 8.54%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX 9.47% 7.30% 9.34% 9.34%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Class B Shares commenced operations on September 3, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Bond Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the Lehman Brothers
Government/ Corporate Bond Index,
an unmanaged index representative
of the total return of government
and corporate bonds. Of course,
past performance does not indicate
how the Fund will perform in the
future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
27
<PAGE> 30
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.00%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee(5) 0.65% 0.65%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.00%
Other expenses(5) 0.32% 0.32%
Total Fund operating expenses(5) 1.22% 1.97%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) During the last fiscal year, management
fees paid by the Fund were limited to 0.50%.
Additionally, shareholders servicing fees for
Class A Shares were limited to 0.10%. Other
Expenses are restated to reflect current fees.
Other expenses for each class are being
limited to 0.23%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 0.83%; and Class B
Shares, 1.73%. Any fee waiver or expense
reimbursement arrangement is voluntary and may
be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $519 $772 $1,044 $1,818
CLASS B SHARES
Assuming redemption $700 $918 $1,262 $2,102
Assuming no redemption $200 $618 $1,062 $2,102
</TABLE>
As an investor in the Bond
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
28
<PAGE> 31
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These investments are
principally mortgage-related securities, but may also
include U.S. Treasury obligations.
In managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
PREPAYMENT RISK: If a significant number of mortgages
underlying a mortgage backed security are refinanced, the
security may be "prepaid." In this case, investors receive
their principal back and are typically forced to reinvest it
in securities that pay lower interest rates. Rapid changes
in prepayment rates can cause bond prices and yields to be
volatile.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for
longer-term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
29
<PAGE> 32
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1994 -0.37
- ---- -----
<S> <C>
95 14.38
96 4.07
97 9.35
98 7.14
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was 0.36%.
Best
quarter: 4.54% 6/30/95
Worst
quarter: -1.43% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1, 2)
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS (10/01/93)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 2.88% 5.93% 5.63%
LEHMAN BROTHERS MORTGAGE INDEX 6.97% 7.23% 7.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) This Fund also offers Class B Shares. Class B Shares had not commenced
operations prior to the date of this prospectus.
The chart and table on this page
show how the Government Income Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over five years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
the Lehman Brothers Mortgage Index,
an unmanaged index generally
representative of the mortgage bond
market as a whole. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
30
<PAGE> 33
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.00%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee(5) 0.65% 0.65%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.25%
Other expenses(5) 1.02% 1.02%
Total Fund operating expenses(5) 1.92% 2.92%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) During the last fiscal year, management
fees paid by the Fund were limited to 0.30%.
Additionally, shareholder servicing fees for
Class A Shares were limited to 0.10%. Other
Expenses are restated to reflect current fees.
Other expenses for each class are being
limited to 0.32%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 0.72%; and Class B
Shares, 1.87%. Any fee waiver or expense
reimbursement arrangement is voluntary and may
be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $587 $ 979 $1,395 $2,553
CLASS B SHARES
Assuming redemption $795 $1,204 $1,738 $3,006
Assuming no redemption $295 $ 904 $1,538 $3,006
</TABLE>
As an investor in the
Government Income Fund, you
will pay the following fees
and expenses when you buy and
hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
31
<PAGE> 34
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH LIMITED TERM BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Limited Maturity Fund) seeks
current income consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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 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).
In managing the Fund's portfolio, the 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 and which the
manager believes are the best relative values.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
32
<PAGE> 35
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH LIMITED TERM BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1990 8.52
- ---- ----
<S> <C>
91 11.94
92 6.03
93 7.16
94 -1.8
95 12.72
96 3.69
97 6.80
98 7.13
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was 1.20%.
Best
quarter: 4.59% 6/30/89
Worst
quarter: -1.41% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (10/01/93)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 2.88% 4.75% 6.69%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 2.13% 5.28% 7.13%
MERRILL LYNCH 1-5 YEAR GOVERNMENT/
CORPORATE BOND INDEX 7.69% 6.28% 6.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Limited Term Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over five years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
Merrill Lynch 1-5 Year
Government/Corporate Bond Index, an
unmanaged index representative of
the total return of short-term
government and corporate bonds. Of
course, past performance does not
indicate how the Fund will perform
in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
33
<PAGE> 36
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH LIMITED TERM BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.00%(2) None
Maximum deferred sales charge (load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee(5) 0.65% 0.65%
Distribution and service (12b-1) fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.00%
Other expenses(5) 0.35% 0.33%
Total Fund operating expenses(5) 1.25% 1.98%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) During the last fiscal year, management
fees paid by the Fund were limited to 0.50%.
Additionally, shareholder servicing fees for
Class A Shares were limited to 0.10%. Other
Expenses are restated to reflect current fees.
Other expenses for each class are being
limited to 0.23% for Class A Shares and 0.21%
for Class B Shares. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 0.83%; and Class B
Shares, 1.71%. Any fee waiver or expense
reimbursement arrangement is voluntary and may
be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $522 $781 $1,059 $1,851
CLASS B SHARES
Assuming redemption $701 $921 $1,268 $2,118
Assuming no redemption $201 $621 $1,068 $2,118
</TABLE>
As an investor in the Limited
Term Bond Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent
Deferred Sales Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
34
<PAGE> 37
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Tax-Free Fund) seeks to
produce as high a level of current interest income exempt
from Federal income taxes and Florida intangibles taxes as
is consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in municipal
securities of the State of Florida and its political
subdivisions, that provide income exempt from Federal
personal income tax and Florida intangible personal property
tax. The Fund invests in Florida municipal securities only
if they are high grade (rated at the 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).
Although there is no limit on the Fund's average maturity,
normally it is expected to be between five to ten years. In
managing the Fund's portfolio, the manager uses a "top down"
investment management approach focusing on interest rates
and credit quality. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund's portfolio based on expectations about interest rate
movements. The manager then selects securities consistent
with this target based on their individual characteristics.
The Fund is non-diversified and, therefore, may concentrate
its investments in a limited number of issuers. The Fund may
also invest in certain other debt securities in addition to
those described above. For a more complete description of
the various securities in which the Fund may invest, please
see the Additional Investment Strategies and Risks on page
51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
STATE SPECIFIC RISK: By concentrating its investments in
securities issued by Florida and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Florida than funds that are more geographically diversified.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
LIQUIDITY RISK: The risk that certain securities may be
difficult or impossible to sell at the time and the price
that would normally prevail in the market.
NON-DIVERSIFIED RISK: Because the Fund is non-diversified,
it 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.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
35
<PAGE> 38
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1995 11.04
- ---- -----
<S> <C>
96 3.60
97 6.54
98 5.44
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -1.34%.
Best
quarter: 4.40% 3/31/95
Worst
quarter: -1.04% 12/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE
1 INCEPTION
YEAR (09/30/94)
<S> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 1.18% 4.93%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 0.44% 5.56%
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND INDEX 5.95% 6.23%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Florida Tax-Exempt
Fund has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Class A
Shares for its first full calendar
year of operations. The table below
it compares the Fund's performance
over time to that of the Merrill
Lynch 3-7 Year Municipal Bond
Index, an unmanaged index generally
representative of the
intermediate-term municipal bonds.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
36
<PAGE> 39
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases 4.00%(2) None
Maximum deferred sales charge
(load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee(5) 0.65% 0.65%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.00%
Other expenses(5) 0.38% 0.37%
Total Fund operating expenses(5) 1.28% 2.02%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Management fees paid by the Fund are being
limited to 0.30%. Additionally, shareholder
servicing fees for Class A Shares are being
limited to 0.10%. Other Expenses are restated
to reflect current fees. Other expenses for
each class are being limited to 0.21%. Total
expenses after fee waivers and expense
reimbursements for each class are: Class A
Shares, 0.61%; and Class B Shares, 1.51%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $525 $790 $1,074 $1,883
CLASS B SHARES
Assuming redemption $705 $934 $1,288 $2,158
Assuming no redemption $205 $634 $1,088 $2,158
</TABLE>
As an investor in the Florida
Tax-Exempt Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
37
<PAGE> 40
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce as high a level of current federal
tax-exempt income, as is consistent with the preservation of
capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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. Municipal securities are debt
obligations, such as bonds and notes, issued by states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities.
Additionally, the Fund 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 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 may purchase securities of any maturity. In
managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
TAX RISK: The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
CONCENTRATION RISK: By concentrating its investments in
securities issued by Alabama and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Alabama than funds that are more geographically diversified.
Additionally, because of the relatively small number of
issuers of Alabama municipal securities, the Fund is likely
to invest in a limited number of issuers.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 51.
</TABLE>
38
<PAGE> 41
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1998 5.42
- ---- ----
<S> <C>
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
Additionally, the performance information
shown above is based on a calendar year.
The Fund's total return from 1/1/99 to
9/30/99 was -1.22%.
Best
quarter: 2.99% 9/30/98
Worst
quarter: 0.50% 12/31/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (07/01/97)
<S> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 1.24% 5.91%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 0.42% 6.09%
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND INDEX 5.95% 6.62%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
The chart and table on this page
show how the Municipal Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Class A
Shares for its first full calendar
year of operations. The table below
it compares the Fund's performance
over time to that of the Merrill
Lynch 3-7 Year Municipal Bond
Index, an unmanaged index generally
representative of municipal bonds
with intermediate maturities. Of
course, past performance does not
indicate how the Fund will perform
in the future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
39
<PAGE> 42
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load)
on purchases 4.00%(2) None
Maximum deferred sales
charge (load) None 5.00%(3)
Redemption fee(4) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee(5) 0.65% 0.65%
Distribution and service
(12b-1) fee 0.00% 1.00%
Shareholder servicing fee(5) 0.25% 0.00%
Other expenses(5) 0.32% 0.24%
Total Fund operating expenses(5) 1.22% 1.89%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) During the last fiscal year, management
fees paid by the Fund were limited to 0.40%.
Additionally, shareholder servicing fees for
Class A Shares were limited to 0.10%. Other
Expenses are restated to reflect current fees.
Other expenses for each class are being
limited to 0.23%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 0.73%; and Class B
Shares, 1.62%. Any fee waiver or expense
reimbursement arrangement is voluntary and may
be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $519 $772 $1,044 $1,818
CLASS B SHARES
Assuming redemption $692 $894 $1,221 $2,037
Assuming no redemption $192 $594 $1,021 $2,037
</TABLE>
As an investor in the
Municipal Bond Fund, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
40
<PAGE> 43
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
MONEY MARKET FUNDS
<TABLE>
<S> <C>
These Funds seek current income with liquidity and stability
of principal by investing primarily in short-term debt
securities. The Funds seek to maintain a stable price of
$1.00 per share.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for
a higher degree of safety
- in the case of the Tax-Exempt Money Market Fund, seeking
Federal tax-exempt income
These Funds may not be appropriate if you are:
- seeking high total return
- pursuing a long-term goal or investing for retirement
</TABLE>
41
<PAGE> 44
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Prime Obligations Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests 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
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
42
<PAGE> 45
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
[Prime Obligations Fund Performance Bar
Chart]
<TABLE>
<CAPTION>
1989 9
- ---- -
<S> <C>
90 7.86
91 5.77
92 3.39
93 2.61
94 3.72
95 5.50
96 4.84
97 4.98
98 4.88
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 3.24%.
Best
quarter: 2.35% 6/30/89
Worst
quarter: 0.63% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
CLASS A SHARES 5.35% 4.78% 5.35%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) N/A N/A 2.09%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
As of December 31, 1998, the Fund's 7-day yield for Class A Shares and Class B
Shares was 4.44% and 3.54%, respectively. Without fee waivers and expense
reimbursements, the Fund's yield would have been 4.29% and 3.39%, respectively,
for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the Prime Money Market
Fund has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
The returns for Class B Shares will
differ from the Class A Share
returns shown in the bar chart
because of differences in expenses
of each class. The table assumes
that Class B shareholders redeem
all of their fund shares at the end
of the period indicated.
43
<PAGE> 46
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases None None
Maximum deferred sales charge
(load) None 5.00%(2)
Redemption fee(3) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.40% 0.40%
Distribution and service (12b-1)
fee 0.00% 1.00%
Shareholders servicing fee(4) 0.25% 0.00%
Other expenses(4) 0.31% 0.32%
Total Fund operating expenses(4) 0.96% 1.72%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(3) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(4) Shareholder servicing for Class A Shares
were limited to 0.10%. Other Expenses are
restated to reflect current fees. Other
expenses for each class are being limited to
0.31%. Total expenses after fee waivers and
expense reimbursements for each class are:
Class A Shares, 0.80%; and Class B Shares,
1.71%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $ 98 $306 $ 531 $1,178
CLASS B SHARES
Assuming redemption $675 $842 $1,133 $1,829
Assuming no redemption $175 $542 $ 933 $1,829
</TABLE>
As an investor in the Prime
Money Market Fund, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES
CHARGE
Some Fund share classes impose
a back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
44
<PAGE> 47
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH U.S. TREASURY MONEY
MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth U.S. Treasury Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests exclusively in
short-term U.S. dollar-denominated obligations issued by the
U.S. Treasury ("U.S. Treasury Securities"), separately
traded component parts of those securities called STRIPs,
and repurchase agreements collateralized by U.S. Treasury
Securities.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
45
<PAGE> 48
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH U.S. TREASURY MONEY
MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
1989 8.75
- ---- ----
<S> <C>
90 7.64
91 5.48
92 3.32
93 2.54
94 3.55
95 5.30
96 4.62
97 4.65
98 4.50
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 2.95%.
Best
quarter: 2.23% 6/30/89
Worst
quarter: 0.62% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
<S> <C> <C> <C>
CLASS A SHARES 4.50% 4.52% 5.11%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Class A Shares was 3.87%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
3.72% for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the U.S. Treasury Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
46
<PAGE> 49
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH U.S. TREASURY MONEY
MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A
(FEES PAID BY YOU DIRECTLY)(1) SHARES
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES CLASS A
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution and service (12b-1)
fee 0.00%
Shareholder servicing fee(3) 0.25%
Other expenses(3) 0.32%
Total Fund operating expenses 0.97%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Shareholder servicing for Class A Shares
were limited to 0.10%. Other Expenses are
restated to reflect current fees. Other
expenses are being limited to 0.31%. Total
expenses after fee waivers and expense
reimbursements for Class A Shares is 0.81%.
Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $99 $309 $536 $1,190
</TABLE>
As an investor in the U.S.
Treasury Money Market Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
47
<PAGE> 50
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH TAX-EXEMPT MONEY MARKET
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the Amsouth Tax-Exempt Fund) seeks as
high a level of current interest income exempt from federal
income taxes as is consistent with the preservation of
capital and relative stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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. Short-term
municipal securities are debt obligations, such as bonds and
notes, issued by states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities which, generally have remaining maturities
of one year or less. 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.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
The Fund may also invest in certain other short-term debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
TAX RISK. The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
48
<PAGE> 51
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH TAX-EXEMPT MONEY MARKET
FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
[Tax-Exempt Fund Performance Bar Chart]
<TABLE>
<CAPTION>
1991 3.91
- ---- ----
<S> <C>
92 2.59
93 1.92
94 2.33
95 3.44
96 2.95
97 3.10
98 2.89
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 1.93%.
Best
quarter: 1.40% 12/31/90
Worst
quarter: 0.44% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
CLASS A SHARES 2.89% 2.94% 3.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Class A Shares was 3.03%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
2.68% for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the Tax-Exempt Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
49
<PAGE> 52
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH TAX-EXEMPT MONEY MARKET
FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A
(FEES PAID BY YOU DIRECTLY)(1) SHARES
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES CLASS A
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution and service (12b-1)
fee 0.00%
Shareholder servicing fee 0.25%
Other expenses(3) 0.35%
Total Fund operating expenses(3) 1.00%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) For the last fiscal year, Shareholder
servicing fees were limited to 0.10%. Other
Expenses are restated to reflect current fees.
Other expenses are being limited to 0.11%.
Total expenses after fee waivers and expense
reimbursements for Class A Shares are 0.61%.
Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $102 $318 $552 $1,225
</TABLE>
As an investor in the
Tax-Exempt Money Market Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
50
<PAGE> 53
[LOGO]
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
CAPITAL APPRECIATION FUNDS
BALANCED FUND -- The Fund will normally invest in equity securities
consisting of common stocks but may also invest in other equity-type
securities such as warrants, preferred stocks and convertible debt
instruments.
As a fundamental policy, the Fund will invest at least 25% of its total
assets in fixed-income securities. Fixed-income securities include debt
securities, preferred stock and that portion of the value of securities
convertible into common stock, including convertible preferred stock and
convertible debt, which is attributable to the fixed-income characteristics
of those securities. The Fund's debt securities will consist of high grade
securities, which are those securities rated in one of the three highest
rating categories by a nationally recognized statistical rating organization
(an "NRSRO") at the time of purchase, or if not rated, found by the Advisor
under guidelines established by the Trust's Board of Trustees to be of
comparable quality. If the rating of any debt securities held by the Fund
falls below the third highest rating the Fund will not have to dispose of
those obligations and may continue to hold them if the portfolio manager
considers it to be appropriate.
GROWTH FUND -- The Fund will normally invest at least 65% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 35% of the value of its assets in preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments.
ENHANCED MARKET FUND -- The Fund will normally invest at least 80% of its
total assets in equity securities drawn from the S&P 500 Index. The Fund may
invest up to 20% of its total assets in equity securities not held in the S&P
500, corporate bonds, notes, and warrants, and short-term money market
instruments. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market.
VALUE FUND -- The Fund will normally invest at least 80% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, and warrants, and short-term money market instruments.
EQUITY INCOME FUND -- The Fund will normally invest at least 65% of its total
assets in income producing equity securities such as common stocks, preferred
stocks, and securities convertible into common stocks, such as convertible
bonds and convertible preferred stocks. The Fund may also invest up to 35% of
the value of its total assets in corporate bonds, notes, and warrants, and
short-term money market instruments or conducting substantial business.
REGIONAL EQUITY FUND -- The Fund will normally invest at least 65% of its
total assets in common stocks and securities convertible into common stocks
of companies headquartered in the Southern Region. The Fund may also invest
up to 35% of its total assets in common stocks and securities convertible
into common stock of companies headquartered outside the Southern Region,
preferred stocks, corporate bonds, notes, and warrants, and short-term money
market instruments.
SELECT EQUITY FUND -- The Fund will normally invest at least 65% of its
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization greater than $2 billion at the time of purchase. The Fund may
also invest up to 35% of the value of its total assets in common stocks and
securities convertible into common stocks of companies with market
capitalizations less than $2 billion, preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments. Stock futures
and option contracts, stock index futures and index option contracts may be
used to hedge cash and maintain exposure to the U.S. equity market.
SMALL CAP FUND -- The Fund will normally invest at least 80% of its total
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization that are equivalent to the capitalization of the companies in
the Russell 2000(R) Growth Index at the time of purchase. The Fund may invest
up to 20% of the value of its total assets in common stocks and securities
convertible into common stocks of companies with a market capitalization of
greater than $2 billion determined at the time of the purchase, preferred
stocks, corporate bonds, notes, and warrants, and short-term money market
instruments.
51
<PAGE> 54
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
ALL FUNDS: TEMPORARY DEFENSIVE MEASURES -- If deemed appropriate under the
circumstances, the Growth Fund, Equity Income Fund, Regional Equity Fund and
Select Equity Fund may each increase its holdings in short-term money market
instruments to over 35% of its total assets. Similarly, the Enhanced Market
Fund, Value Fund and Small Cap Fund may each increase its holdings in
short-term money market instruments to over 20% of its total assets. Each
Capital Appreciation Fund may hold uninvested cash pending investment.
INCOME FUNDS
BOND FUND -- The Fund will invest at least 65% of its total assets in bonds
(including debentures). For temporary defensive purposes, the Fund may hold
more than 35% of its total assets in cash and cash equivalents. "Cash
equivalents" are short-term, interest-bearing instruments or deposits known
as money market instruments.
GOVERNMENT INCOME FUND -- The Fund invests at least 65% of its total assets
in obligations issued or guaranteed by the U.S. government or its agencies
and instrumentalities. Up to 35% of the Fund's total assets may be invested
in other types of debt securities, preferred stocks and options. Under normal
market conditions, the Fund will invest up to 80% of its total assets in
mortgage-related securities issued or guaranteed by the U.S. government or
its agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related
securities issued by nongovernmental entities which are rated, at the time of
purchase, in one of the three highest rating categories by an NRSRO or, if
unrated, determined by its portfolio manager to be of comparable quality.
LIMITED TERM BOND FUND -- The Fund will normally invest at least 65% of its
total assets in bonds (including debentures), notes and other debt securities
which have a stated or remaining maturity of five years or less or which have
an unconditional redemption feature that will permit the Fund to require the
issuer of the security to redeem the security within five years from the date
of purchase by the Fund or for which the Fund has acquired an unconditional
"put" to sell the security within five years from the date of purchase by the
Fund. The remainder of the Fund's assets may be invested in bonds (including
debentures), notes and other debt securities which have a stated or remaining
maturity of greater than five years, cash, cash equivalents, and money-market
instruments. For temporary defensive purposes, the Fund may invest more than
35% of its total assets in cash, cash equivalents and corporate bonds with
remaining maturities of less than 1 year.
If the Fund acquires a debt security with a stated or remaining maturity in
excess of five years, the Fund may acquire a "put" with respect to the
security. Under a "put", the Fund would have the right to sell the debt
security within a specified period of time at a specified minimum price. The
Fund will only acquire puts from dealers, banks and broker-dealers which the
Advisor has determined are creditworthy. A put will be sold, transferred, or
assigned by the Fund only with the underlying debt security. The Fund will
acquire puts solely to shorten the maturity of the underlying debt security.
FLORIDA TAX-EXEMPT FUND -- As a fundamental policy, the Fund will normally
invest at least 80% of its net assets in Florida Municipal Securities.
Florida municipal securities include bonds, notes and warrants generally
issued by or on behalf of the State of Florida and its political
subdivisions, the interest on which, in the opinion of the issuer's bond
counsel at the time of issuance, is exempt from federal income tax, is not
subject to the federal alternative minimum tax for individuals, and is exempt
from the Florida intangible personal property tax.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations"). For purposes of the 20%
basket the Fund may also invest in municipal securities of states other than
Florida.
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. The Fund may also increase its holdings in
municipal securities of states other than Florida to over 20% of its net
assets in such situations. Taxable obligations may include obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities (some
of which may be subject to repurchase agreements), certificates of deposit,
demand and time deposits, bankers' acceptances of selected banks, and
commercial paper meeting the Tax-Free Funds' quality standards (as described
in the SAI) for tax-exempt commercial paper.
The Florida Tax-Exempt Fund is a non-diversified fund and may concentrate its
investments in the securities of a limited number of issuers. Thus, the
Florida Tax-Exempt Fund generally may invest up to 25% of its total assets in
the securities of each of any two issuers.
52
<PAGE> 55
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
MUNICIPAL BOND FUND -- As a fundamental policy, the Fund will normally invest
at least 80% of its net assets in Municipal Securities and in securities of
money market mutual funds which invest primarily in obligations exempt from
federal income tax. Additionally, as a fundamental policy, the Fund will
invest, under normal market conditions, at least 65% of the its total assets
in bonds.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations").
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. Taxable obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit, demand and time deposits, bankers' acceptances of
selected banks, and commercial paper meeting the Tax-Free Funds' quality
standards (as described in the SAI) for tax-exempt commercial paper.
The 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 from 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.
MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND -- As a fundamental policy, under normal market
conditions at least 80% of the Fund's total assets will be invested in
municipal securities and in securities of money market mutual funds which
invest primarily in obligations exempt from federal income tax. It is also a
fundamental policy that the Fund may invest up to 20% of its total assets in
obligations, the interest on which is either subject to regular federal
income tax or treated as a preference item for purposes of the federal
alternative minimum tax for individuals ("Taxable Obligations"). For
temporary defensive purposes, however, the Fund may increase its short-term
Taxable Obligations to over 20% of its total assets and hold uninvested cash
reserves pending investment. Taxable Obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit and bankers' acceptances of selected banks, and
commercial paper.
The Fund will invest only in those municipal securities and other obligations
which are considered by the portfolio manager to present minimal credit
risks. In addition, investments will be limited to those obligations which,
at the time of purchase, (i) possess one of the two highest short-term
ratings from an NRSRO in the case of single-rated securities or (ii) possess,
in the case of multiple-rated securities, one of the two highest short-term
ratings by at least two NRSROs; or (iii) do not possess a rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under the guidelines
adopted by the Trustees.
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. The following
table describes the securities and techniques the Funds use, as well as the
main risks they pose. Equity securities are subject mainly to market risk.
Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. Following the table is a more complete discussion of risk. You may
also consult the Statement of Additional Information for additional details
regarding these and other permissible investments.
53
<PAGE> 56
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
Balanced Fund 1
Growth Fund 2
Enhanced Market Fund 3
Value Fund 4
Equity Income Fund 5
Regional Equity Fund 6
Select Equity Fund 7
Small Cap Fund 8
Bond Fund 9
Government Income Fund 10
Limited Term Bond Fund 11
Florida Tax-Exempt Fund 12
Municipal Bond Fund 13
Prime Money Market Fund 14
U.S. Treasury Money Market Fund 15
Tax-Exempt Money Market Fund 16
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
AMERICAN DEPOSITARY RECEIPTS (ADRS): ADRs are foreign shares 1-8 Market
of a company held by a U.S. bank that issues a receipt Political
evidencing ownership. Foreign Investment
ASSET-BACKED SECURITIES: Securities secured by company 9,14 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Interest Rate
Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 2,4,6,9,14,16 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
Interest Rate
BONDS: Interest-bearing or discounted government or 1,9-13 Interest Rate
corporate securities that obligate the issuer to pay the Market
bondholder a specified sum of money, usually at specific Credit
intervals, and to repay the principal amount of the loan at
maturity. The Funds will only purchase bonds that are high
grade (rated at the time of purchase) in one of the three
highest rating categories by a nationally recognized
statistical rating organizations, or, if not rated,
determined to be of comparable quality by the Adviser.
CALL AND PUT OPTIONS: A call option gives the buyer the 1,3,5,7,9 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 2,9,12,14,16 Market
stated maturity. Credit
Liquidity
Interest Rate
</TABLE>
54
<PAGE> 57
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
COMMERCIAL PAPER: Secured and unsecured short-term 1-14,16 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
Interest Rate
COMMON STOCK: Shares of ownership of a company. 1-8 Market
CONVERTIBLE SECURITIES: Bonds or preferred stock that 1-8 Market
convert to common stock. Credit
DEMAND FEATURES: Securities that are subject to puts and 1,2,9-14,16 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
DERIVATIVES: Instruments whose value is derived from an 1-14,16 Management
underlying contract, index or security, or any combination Market
thereof, including futures, options (e.g., put and calls), Interest Rate
options on futures, swap agreements, and some Credit
mortgage-backed securities. Liquidity
Leverage
FOREIGN SECURITIES: Stocks issued by foreign companies, as 1-8,11 Market
well as commercial paper of foreign issuers and obligations Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Foreign Investment
FUNDING AGREEMENTS: Also known as guaranteed investment 14 Liquidity
contracts, an agreement where a Fund invests an amount of Credit
cash with an insurance company and the insurance company Market
credits such investment on a monthly basis with guaranteed Interest Rate
interest which is based on an index. These agreements
provide that the guaranteed interest will not be less than a
certain minimum rate. These agreements also provide for
adjustment of the interest rate monthly and are considered
variable rate instruments. Funding Agreements are considered
illiquid investments, and, together with other instruments
in the Fund which are not readily marketable, may not exceed
10% of the Fund's net assets.
FUTURES AND RELATED OPTIONS: A contract providing for the 3,7,9,11 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
HIGH-YIELD/HIGH-RISK/DEBT SECURITIES: 5 Credit
High-yield/High-risk/debt securities are securities that are Market
rated below investment grade by the primary rating agencies Liquidity
(e.g., BB or lower by Standard & Poor's and Ba or lower by Interest Rate
Moody's).
These securities are considered speculative and involve
greater risk of loss than investment grade debt securities.
Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and
"junk bonds."
INVESTMENT COMPANY SECURITIES: Shares of investment 1-16 Market
companies. A Fund may invest up to 5% of its assets in the
shares of any one registered investment company, but may not
own more than 3% of the securities of any one registered
investment company or invest more than 10% of its assets in
the securities of other registered investment companies.
These registered investment companies may include money
market funds of AmSouth Funds and shares of other registered
investment companies for which the Adviser or a Sub-Adviser
to a Fund or any of their affiliates serves as investment
adviser, administrator or distributor.
</TABLE>
55
<PAGE> 58
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
The Money Market Funds may only invest in shares of other
investment companies with similar objectives.
MONEY MARKET INSTRUMENTS: Investment-grade, U.S. 1-14,16 Market
dollar-denominated debt securities that have remaining Credit
maturities of one year or less. These securities may include
U.S. government obligations, commercial paper and other
short-term corporate obligations, repurchase agreements
collateralized with U.S. government securities, certificates
of deposit, bankers' acceptances, and other financial
institution obligations. These securities may carry fixed or
variable interest rates.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1,9,10,14 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate mortgage Credit
investment conduits. Regulatory
MUNICIPAL SECURITIES: Securities issued by a state or 12,13,16 Market
political subdivision to obtain funds for various public Credit
purposes Municipal securities include private activity bonds Political
and industrial development bonds, as well as general Tax
obligation bonds, tax anticipation notes, bond anticipation Regulatory
notes, revenue anticipation notes, project notes, other Interest Rate
short-term tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities (single family
revenue bonds).
There are two general types of municipal
bonds: General-obligations bonds, which are secured by the
taxing power of the issuer and revenue bonds, which take
many shapes and forms but are generally backed by revenue
from a specific project or tax. These include, but are not
limited, to certificates of participation (COPs); utility
and sales tax revenues; tax increment or tax allocations;
housing and special tax, including assessment district and
community facilities district (Mello-Roos) issues which are
secured by specific real estate parcels; hospital revenue;
and industrial development bonds that are secured by a
private company.
PREFERRED STOCKS: Preferred Stocks are equity securities 1-8 Market
that generally pay dividends at a specified rate and have
preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting
rights.
REPURCHASE AGREEMENTS: The purchase of a security and the 1-9,14,16 Market
simultaneous commitment to return the security to the seller Leverage
at an agreed upon price on an agreed upon date. This is
treated as a loan by a fund.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 2,3,7,8,9,14-16 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-14,16 Market
Fund's total assets. In return the Fund will receive cash, Leverage
other securities, and/or letters of credit. Liquidity
Credit
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 12-14,16 Liquidity
exchange for the deposit of funds. Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury investment 9-14,16 Market
growth receipts, and certificates of accrual of Treasury
securities.
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-3,7-14,16 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac. Interest Rate
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, separately 1-3,7-16 Market
traded registered interest and principal securities, and
coupons under bank entry safekeeping.
</TABLE>
56
<PAGE> 59
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured demand notes 14,16 Credit
that permit the indebtedness to vary and provide for Liquidity
periodic adjustments in the interest rate according to the Interest Rate
terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary
market in these notes, the Fund may demand payment of
principal and accrued interest at specified intervals.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 2,9,14,16 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand. Interest Rate
WARRANTS: Securities, typically issued with preferred stock 1-8 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-14,16 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
ZERO-COUPON DEBT OBLIGATIONS: Bonds and other debt that pay 1-14,16 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their Interest Rate
maturity value.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "Risk/Return Summary and Fund Expenses." Because of these risks,
the value of the securities held by the Funds may fluctuate, as will the
value of your investment in the Funds. Certain investments and Funds are more
susceptible to these risks than others.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INTEREST RATE RISK. The risk that debt prices overall will decline over
short or even long periods due to rising interest rates. A rise in interest
rates typically causes a fall in values while a fall in rates typically
causes a rise in values. Interest rate risk should be modest for shorter-term
securities, moderate for intermediate-term securities, and high for
longer-term securities. Generally, an increase in the average maturity of the
Fund will make it more sensitive to interest rate risk. The market prices of
securities structured as zero coupon or pay-in-kind securities are generally
affected to a greater extent by interest rate changes. These securities tend
to be more volatile than securities which pay interest periodically.
INVESTMENT STYLE RISK. The risk that returns from a particular class or
group of stocks (e.g., value, growth, small cap, large cap) will trail
returns from other asset classes or the overall stock market. Groups or asset
classes of stocks tend to go through cycles of doing better -- or
worse -- than common stocks in general. These periods can last for periods as
long as several years. Additionally, a particular asset class or group of
stocks could fall out of favor with the market, causing the Fund to
underperform funds that focus on other types of stocks.
57
<PAGE> 60
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may be
embedded directly in the characteristics of other securities.
HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position
that the Portfolio also holds, any loss generated by the derivative
should be substantially offset by gains on the hedged investment, and
vice versa. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance
that a Portfolio's hedging transactions will be effective.
SPECULATIVE. To the extent that a derivative is not used as a hedge,
the Portfolio is directly exposed to the risks of that derivative.
Gains or losses from speculative positions in a derivative may be
substantially greater than the derivatives original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Portfolio management or performance. This includes the
risk of missing out on an investment opportunity because the assets necessary
to take advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
PRE-PAYMENT/CALL RISK. The risk that the principal repayment of a security
will occur at an unexpected time. Prepayment risk is the chance that the
repayment of a mortgage will occur sooner than expected. Call risk is the
possibility that, during times of declining interest rates, a bond issuer
will "call" -- or repay -- higher yielding bonds before their stated
maturity. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments and calls generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid or called, a Fund
may have to reinvest in securities with a lower yield. In this event, the
Fund would experience a decline in income -- and the potential for taxable
capital gains. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss. Prepayment/call risk
is generally low for securities with a short-term maturity, moderate for
securities with an intermediate-term maturity, and high for securities with a
long-term maturity.
REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
SMALL COMPANY RISK. Stocks of small-capitalization companies are more risky
than stocks of larger companies and may be more vulnerable than larger
companies to adverse business or economic developments. Many of these
companies are young and have a limited track record. Small cap companies may
also have limited product lines, markets, or financial resources. Securities
of such companies may be less liquid and more volatile than securities of
larger companies or the market averages in general and, therefore, may
involve greater risk than investing in larger companies. In addition, small
cap companies may not be well-known to the investing public, may not have
institutional ownership, and may have only cyclical, static, or moderate
growth prospects. If a Fund concentrates on small-capitalization companies,
its performance may be more volatile than that of a fund that invests
primarily in larger companies.
58
<PAGE> 61
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
YEAR 2000 RISK. AmSouth Funds depends on the smooth functioning of computer
systems in almost every aspect of its business. Like other mutual funds,
businesses and individuals around the world, AmSouth Funds could be adversely
affected if the computer systems used by its service providers do not
properly process dates on and after January 1, 2000 and distinguish between
the year 2000 and the year 1900. AmSouth Funds has made inquiry of its
service providers to determine whether they expect to have their computer
systems adjusted for the year 2000 transition, and is seeking assurances from
each service provider that it expects its system to accommodate the year 2000
transition without material adverse consequences to AmSouth Funds. While it
is likely that such assurances will be obtained, AmSouth Funds and its
shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or custodians, banks, broker-dealers or others with
which AmSouth Funds does business.
59
<PAGE> 62
[LOGO]
FUND MANAGEMENT
THE INVESTMENT ADVISER
AmSouth Bank, (AmSouth or the "Adviser"), is the adviser for the Funds.
AmSouth is the bank affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of September 30, 1999 of $20 billion and
operated 276 banking offices in Alabama, Florida, Georgia and Tennessee.
AmSouth has provided investment management services through its Trust
Investment Department since 1915. As of June 30, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary management and
provided custody services for an additional $21 billion in securities.
AmSouth is the largest provider of trust services in Alabama and its Trust
Natural Resources and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real estate interests.
Through its portfolio management team, AmSouth makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 07/31/99
<S> <C>
------------------------------
Balanced Fund 0.80%
------------------------------
Growth Fund 0.80%
------------------------------
Enhanced Market Fund 0.45%
------------------------------
Value Fund 0.80%
------------------------------
Equity Income Fund 0.80%
------------------------------
Regional Equity Fund 0.80%
------------------------------
Select Equity Fund 0.80%
------------------------------
Small Cap Fund 1.20%
------------------------------
Bond Fund 0.50%
------------------------------
Florida Tax-Exempt Fund 0.30%
------------------------------
Government Income Fund 0.30%
------------------------------
Limited Term Bond Fund 0.50%
------------------------------
Municipal Bond Fund 0.40%
------------------------------
Prime Money Market Fund 0.40%
------------------------------
U.S. Treasury Money Market Fund 0.40%
------------------------------
Tax-Exempt Money Market Fund 0.20%
-------------------------------------------------------------------------
</TABLE>
THE INVESTMENT SUB-ADVISERS
GROWTH FUND. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
serves as investment sub-advisor to the Growth Fund, pursuant to a
Sub-Advisory Agreement with AmSouth. Under the Sub-Advisory Agreement,
Peachtree manages the Fund, selects investments, and places all orders for
purchases and sales of securities, subject to the general supervision of the
Trust's Board of Trustees and AmSouth in accordance with the Fund's
investment objectives, policies and restrictions.
Peachtree is a division of SSB Citi Fund Management LLC, which is an indirect
wholly-owned subsidiary of Citigroup, Inc. Peachtree has performed advisory
services since 1994 for institutional clients, and has its principal offices
at 303 Peachtree Street, N.E., Atlanta, GA 30308. SSB Citi Fund Management
LLC and its predecessors have been providing investment advisory services to
mutual funds since 1968. As of July 31, 1999, SSB Citi Fund Management LLC
had aggregate assets under management of approximately $114 billion.
60
<PAGE> 63
FUND MANAGEMENT
ENHANCED MARKET FUND AND SELECT EQUITY FUND. OakBrook Investments, LLC
("OakBrook") serves as investment sub-adviser to the Enhanced Market Fund and
the Select Equity Fund pursuant to a Sub-Advisory Agreement with AmSouth.
Under the Sub-Advisory Agreement, OakBrook manages the Funds, selects
investments, and places all orders for purchases and sales of securities,
subject to the general supervision of the Trust's Board of Trustees and
AmSouth in accordance with each Fund's investment objective, policies, and
restrictions.
OakBrook is 50% owned by AmSouth and 50% owned by Neil Wright, Janna Sampson
and Peter Jankovskis. OakBrook was organized in February, 1998 to perform
advisory services for investment companies and other institutional clients
and has its principal offices at 701 Warrenville Road, Suite 135, Lisle, IL
60532.
The following table sets forth the performance data relating to the
historical performance of two institutional funds, the Multiple Fund
Investment Trust for the Employee Benefit Plans Large Cap Equity Growth Fund
(the "Large Cap Fund") and the Multiple Fund Investment Trust for the
Employee Benefit Plans Enhanced S&P 500 Equity Fund (the "Enhanced S&P
Fund"), since the dates indicated, that have investment objectives, policies,
strategies and risks substantially similar to those of the AmSouth Select
Equity Fund and the AmSouth Enhanced Market Fund, respectively.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Select Equity Fund, and, as such, have the primary responsibility for the
day-to-day portfolio management of the Fund. From November 1, 1993 to
February 25, 1998, Dr. Wright was the portfolio manager of the Large Cap
Fund, a commingled investment fund managed by ANB Investment Management and
Trust Company ("ANB") for employee benefit plan accounts. Dr. Wright received
the same portfolio management assistance and support in managing the Large
Cap Fund from Ms. Sampson and Dr. Jankovskis that he receives from them in
managing the Select Equity Fund. This data is provided to illustrate the past
performance of Dr. Neil Wright in managing a substantially similar account as
measured against a specified market index and does not represent the
performance of the Select Equity Fund. Investors should not consider this
performance data as an indication of future performance of the Select Equity
Fund.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Enhanced Market Fund, and, as such, have the primary responsibility for
the day-to-day portfolio management of the Fund. From December 1, 1994 to
February 25, 1998, Dr. Wright, Ms. Sampson, and Dr. Jankovskis were the
portfolio managers of the Enhanced S&P Fund, a commingled investment fund
managed by ANB for employee benefit plan accounts. This data is provided to
illustrate the past performance of Dr. Neil Wright, Ms. Sampson, and Dr.
Jankovskis in managing a substantially similar account as measured against a
specified market index and does not represent the performance of the Enhanced
Market Fund. Investors should not consider this performance data as an
indication of future performance of the Enhanced Market Fund.
The performance data shown below relating to the institutional accounts was
calculated on a total return basis and includes all dividends and interest,
accrued income and realized and unrealized gains and losses. The returns of
the Large Cap Fund reflect the deduction of an investment advisory fee of
1.00%, the returns of the Enhanced S&P Fund reflect the deduction of an
investment advisory fee of .50%, and both accounts reflect deductions of
brokerage commissions, execution costs, and custodial fees paid by ANB's
institutional private accounts, without provision for federal or state income
taxes. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns.
The institutional private accounts were not subject to the same types of
expenses to which the Select Equity Fund and the Enhanced Market Fund are
subject nor to the diversification requirements, specific tax restrictions
and investment limitations imposed on the Fund by the Investment Company Act
or Subchapter M of the Internal Revenue Code. Consequently, the performance
results for the institutional accounts could have been adversely affected if
the accounts had been regulated as investment company under the federal
securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
61
<PAGE> 64
FUND MANAGEMENT
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Select Equity
Fund and the Enhanced Market Fund or an individual investor investing in such
Funds. The investment results were not calculated pursuant to the methodology
established by the SEC that will be used to calculate the Select Equity
Fund's and the Enhanced Market Fund's performance results. Investors should
also be aware that the use of a methodology different from that used below to
calculate performance would result in different performance data. All
information set forth in the table below relies on data supplied by OakBrook
or from statistical services, reports or other sources believed by OakBrook
to be reliable. However, except as otherwise indicated, such information has
not been verified and is unaudited.
<TABLE>
<CAPTION>
ENHANCED S&P 500
YEAR LARGE CAP FUND S&P FUND INDEX(1)
---- ------------------ ------------ ------------
<S> <C> <C> <C>
1993(2) 2.62% -- .30%
1994 4.39% -- 1.37%
1994(3) -- 1.24% 1.45%
1995 31.26% 35.49% 37.43%
1996 19.34% 25.86% 23.14%
1997 37.36% 33.00% 33.34%
1998(4) 1.44% 1.10% 1.11%
Since inception(5) 22.12% -- 21.90%
Since inception(6) -- 30.47% 30.35%
</TABLE>
(1) The S&P 500 Index is an unmanaged index which measures the performance of
500 stocks representative of the U.S. equity market.
(2) Total return for the period from November 1, 1993 through December 31,
1993. Returns have not been annualized.
(3) Total return for the period from December 1, 1994 through December 31,
1994. Returns have not been annualized.
(4) Total return for the period from January 1, 1998, through January 31,
1998. Returns have not been annualized.
(5) Annualized total return for the Large Cap Fund is for the period from
November 1, 1993 through January 31, 1998.
(6) Annualized total return for the Enhanced S&P Fund is for the period from
December 1, 1994 through January 31, 1998.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
EQUITY INCOME FUND. Rockhaven Asset Management, LLC ("Rockhaven") serves as
investment sub-adviser to the Equity Income Fund pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Rockhaven manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objective,
policies, and restrictions.
Rockhaven is 50% owned by AmSouth and 50% owned by Mr. Christopher H. Wiles.
Rockhaven was organized in 1997 to perform advisory services for investment
companies and has its principal offices at 100 First Avenue, Suite 1050,
Pittsburgh, PA 15222.
Mr. Wiles is the portfolio manager of the Equity Income Fund and has primary
responsibility for the day-to-day portfolio management of the Fund. From
August 1, 1991 to January 31, 1997, he was the portfolio manager of the
Federated Equity Income Fund.
62
<PAGE> 65
FUND MANAGEMENT
The cumulative total return for the Class A Shares of the Federated Equity
Income Fund from August 1, 1991 through January 31, 1997 was 139.82%, absent
the imposition of a sales charge. The cumulative total return for the same
period for the Standard & Poor's Composite Stock Price Index ("S&P 500
Index") was 135.09%. The cumulative total return for the Class B Shares of
the Federated Equity Income Fund from September 27, 1994 (date of initial
public offering) through January 31, 1997 was 62.64%, absent the imposition
of a contingent deferred sales charge. The cumulative total return for the
same period for the S&P 500 Index was 79.69%. At January 31, 1997, the
Federated Equity Income Fund had approximately $970 million in net assets. As
portfolio manager of the Federated Equity Income Fund, Mr. Wiles had full
discretionary authority over the selection of investments for that fund.
Average annual total returns for the one-year, three-year, and five-year
periods ended January 31, 1997 and for the entire period during which Mr.
Wiles managed the Class A Shares of the Federated Equity Income Fund and for
the one-year and since inception period for the Class B Shares of the
Federated Equity Income Fund compared with the performance of the S&P 500
Index and the Lipper Equity Income Fund Index were:
PRIOR PERFORMANCE OF CLASS A SHARES AND CLASS B SHARES OF THE FEDERATED
EQUITY INCOME FUND
<TABLE>
<CAPTION>
LIPPER
FEDERATED EQUITY S&P 500 EQUITY INCOME
INCOME FUND(+*) INDEX(@) FUND INDEX(#)
---------------------- ----------- -----------------
<S> <C> <C> <C>
CLASS A SHARES
(absent imposition of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through 17.25% 16.78% 14.99%
January 31, 1997
CLASS B SHARES
(absent imposition of Federated Equity
Income Fund's maximum sales charge)
One Year 16.48%
Three Years 14.85%
Five Years 15.20%
August 1, 1991 through January 31, 1997 16.05%
CLASS B SHARES
(absent imposition of contingent deferred
sales charge)
One Year 22.26% 26.34% 19.48%
September 27, 1994 through January 31, 1997 23.15% 28.44% 20.65%
CLASS B SHARES
(assuming imposition of the Federated Equity
Income Fund's maximum contingent deferred
sales charge)
One Year 16.76%
September 27, 1994 through January 31, 1997 22.79%
</TABLE>
(+) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(*) During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares (the shares most similar to the
Class A Shares of the AmSouth Equity Income Fund) of the Federated Equity
Income Fund ranged from 0.95% to 1.05% of the fund's average daily net
assets. During the period from September 27, 1994 through January 31, 1997
the operating expense ratio for the Class B Shares of the Federated Equity
Income Fund ranged from 1.80% to 1.87% of the fund's average daily net
assets. The operating expenses of the Class A Shares and Class B Shares of
the Federated Equity Income Fund were lower than the projected operating
expenses of the Class A Shares and Class B Shares, respectively, of the
AmSouth Equity Income Fund. If the actual operating expenses of the AmSouth
Equity Fund are higher than the historical operating expenses of the
Federated Equity Income Fund, this could negatively affect performance.
(@) The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock market.
The Index is adjusted to reflect reinvestment of dividends.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
63
<PAGE> 66
FUND MANAGEMENT
The Federated Equity Income Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Equity Income Fund. Share prices and investment returns will fluctuate
reflecting market conditions, as well as changes in company-specific
fundamentals of portfolio securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager
from August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors
in 1990 and served as a Vice President of the fund's investment advisor from
1992 and Senior Vice President from October, 1996 to January 31, 1997. Mr.
Wiles served as Assistant Vice President of the Fund's investment advisor in
1991. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
SMALL CAP FUND. Sawgrass Asset Management, LLC ("Sawgrass") serves as
investment sub-adviser to the Small Cap Fund, pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Sawgrass manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objectives,
policies and restrictions.
Sawgrass is 50% owned by AmSouth and 50% owned by Sawgrass Asset Management,
Inc. Sawgrass Asset Management, Inc. is controlled by Mr. Dean McQuiddy, Mr.
Brian Monroe and Mr. Andrew Cantor. Sawgrass was organized in January, 1998
to perform advisory services for investment companies and other institutional
clients and has its principal offices at 4337 Pablo Oaks Court, Jacksonville,
FL 32224.
The following tables set forth the performance data relating to the
historical performance of an institutional fund (the Employee Benefit Small
Capitalization Fund) and a mutual fund (the Emerald Small Capitalization
Fund), since the dates indicated, that have investment objectives, policies,
strategies and risks substantially similar to those of the AmSouth Small Cap
Fund. Mr. Dean McQuiddy, a Principal of Sawgrass, is the portfolio manager
for the Small Cap Fund, and, as such, has the primary responsibility for the
day-to-day portfolio management of the Fund. From January 1, 1987 to December
31, 1997, he was the portfolio manager of the Employee Benefit Small
Capitalization Fund, a common trust fund managed by Barnett Bank for employee
benefit plan accounts. On January 4, 1994, the Employee Benefits Small
Capitalization Fund transferred the majority of its assets to the Emerald
Small Capitalization Fund. Mr. McQuiddy was the portfolio manager for the
Emerald Small Capitalization Fund from its inception through December 31,
1997. This data is provided to illustrate the past performance of Mr.
McQuiddy in managing substantially similar accounts as measured against a
specified market index and does not represent the performance of the Small
Cap Fund. Investors should not consider this performance data as an
indication of future performance of the Small Cap Fund.
The performance data shown below relating to the institutional account was
calculated on a total return basis and includes all dividends and interest,
accrued income and realized and unrealized gains and losses. The returns of
the institutional account reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by Barnett's institutional
private account, without provision for federal or state income taxes.
Custodial fees of the institutional account, if any, were not included in the
calculation. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns. The yearly returns of the institutional fund are
calculated by geometrically linking the monthly returns.
The institutional private account was not subject to the same types of
expenses to which the Small Cap Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Fund by the Investment Company Act or Subchapter M of the Internal
Revenue Code. Consequently, the performance results for the institutional
account could have been adversely affected if the account had been regulated
as investment company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Small Cap
Fund or an individual investor investing in such Fund. The investment results
were not calculated pursuant to the methodology established by the SEC that
will be used to calculate the Small Cap Fund's performance results. Investors
should also be aware that the use of a methodology different from that used
below to calculate performance could result in different performance data.
64
<PAGE> 67
FUND MANAGEMENT
All information set forth in the tables below relies on data supplied by
Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
<TABLE>
<CAPTION>
SAWGRASS SMALL CAP Russell 2000(R)
YEAR COMPOSITE GROWTH INDEX(1)
---- ---------------------- -----------------
<S> <C> <C>
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years(2) 16.38% 12.76%
Last 10 Years(2) 16.09% 13.50%
</TABLE>
(1) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
(2) Through December 31, 1997.
PRIOR PERFORMANCE OF RETAIL SHARES AND CLASS B SHARES OF THE EMERALD SMALL
CAPITALIZATION FUND
The cumulative total return for the Retail Shares of the Emerald Small
Capitalization Fund from March 1, 1994 through December 31, 1997 was 56.78%
absent the imposition of a sales charge and was 49.72% including the
imposition of a sales charge. The cumulative total return for the same period
for the Russell 2000(R) Growth Index was 57.31%. The cumulative total return
for the Class B Shares of the Emerald Small Capitalization Fund from March 1,
1994 through March 11, 1996 was 39.85% absent the imposition of a contingent
deferred sales charge and was 34.25% including the imposition of a contingent
deferred sales charge. The cumulative total return for the same period for
the Russell 2000(R) Growth Index was 29.71%. At December 31, 1997, the
Emerald Small Capitalization Fund had approximately $180 million in assets.
As portfolio manager of the Emerald Small Capitalization Fund, Mr. McQuiddy
had full discretionary authority over the selection of investments for that
fund. Average annual total returns for the Retail Shares for the one-year,
three-year and since inception through December 31, 1997 period (the entire
period during which Mr. McQuiddy managed the Retail Shares of the Emerald
Small Capitalization Fund) and for the one-year and since inception through
March 11, 1996 period for the Class B Shares, compared with the performance
of the Russell 2000(R) Growth Index were:
<TABLE>
<CAPTION>
EMERALD SMALL Russell 2000(R)
CAPITALIZATION GROWTH
FUND(1) INDEX(2)
------------------ -----------------
<S> <C> <C>
RETAIL SHARES
(absent imposition of sales charges)
One Year 12.62% 12.86%
Three Years 18.39% 18.12%
Since Inception 12.41% 12.55%
RETAIL SHARES
(absent imposition of the Emerald Small
Capitalization Fund's maximum sales charge)
One Year 7.55% 12.86%
Three Years 16.58% 18.12%
Since Inception 10.17% 12.55%
</TABLE>
65
<PAGE> 68
FUND MANAGEMENT
<TABLE>
<CAPTION>
EMERALD SMALL Russell 2000(R)
CAPITALIZATION GROWTH
FUND(1) INDEX(2)
------------------ -----------------
<S> <C> <C>
CLASS B SHARES
(absent imposition of sales charges)
One Year 8.02% 12.86%
Since Inception 18.26% 13.89%
CLASS B SHARES
(assuming imposition of the Emerald Small
Capitalization Fund's maximum contingent
deferred sales charge)
One Year 4.99% 12.86%
Since Inception 15.87% 13.89%
</TABLE>
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
During the period from March 1, 1994 through December 31, 1997, the operating
expense ratio of the Retail Shares (the shares most similar to the Class A
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 1.73% to 2.50% of the Fund's average daily net assets.
During the period from March 1, 1994 through March 11, 1996, the operating
expense ratio of the Class B Shares (the shares most similar to the Class B
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 2.50% to 3.29% of the Fund's average daily net assets. If
the actual operating expenses of the AmSouth Small Cap Fund are higher than
the historical operating expenses of the Emerald Small Capitalization Fund,
this could negatively affect performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
The Emerald Small Capitalization Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Small Cap Fund, Share prices and investment returns will fluctuate reflecting
market conditions, as well as change in company-specific fundamentals of
portfolio securities.
PORTFOLIO MANAGERS
The primary portfolio manager for each Fund is as follows:
BALANCED FUND, VALUE FUND, AND REGIONAL EQUITY FUND -- Pedro Verdu, CFA, has
been the portfolio manager for the Value Fund, Regional Equity Fund and
Balanced Fund since their inception. Mr. Verdu has twenty-nine years of
experience as an analyst and portfolio manager; he is currently Senior Vice
President and Trust Investment Officer in charge of equity investments at
AmSouth.
GROWTH FUND -- Dennis A. Johnson, CFA, has been the portfolio manager for the
Capital Growth Fund since its inception. Mr. Johnson, who has been employed
by Peachtree since 1994, is President and Chief Investment Officer of
Peachtree. From 1989 to 1994, Mr. Johnson was Vice President and Portfolio
Manager at Trusco Capital, the investment management subsidiary of Trust
Company Bank, Atlanta, Georgia.
EQUITY INCOME FUND -- Christopher H. Wiles has been the portfolio manager for
the Equity Income Fund since its inception. Mr. Wiles is the President and
Chief Investment Officer of Rockhaven. From August 1, 1991 to January 31,
1997, he was the portfolio manager of the Federated Equity Income Fund. Mr.
Wiles joined Federated Investors in 1990 and served as a Vice President of
the fund's investment advisor from 1992 and Senior Vice President from
October, 1996 to January 31, 1997.
SMALL CAP FUND -- Mr. Dean McQuiddy, CFA, has been the portfolio manager for
the Small Cap Fund since its inception. Mr. McQuiddy, who has been employed
by Sawgrass since 1998, is a Principal and the Director of Equity Investing
of Sawgrass. From 1983 to 1988, Mr. McQuiddy was portfolio manager at Barnett
Capital Advisors, Inc. Mr. McQuiddy holds membership in the Association of
Management and Research. He has 17 years of investment experience.
66
<PAGE> 69
FUND MANAGEMENT
SELECT EQUITY FUND AND ENHANCED MARKET FUND -- The Select Equity Fund and
Enhanced Market Fund are managed by a team of investment professionals, all
of whom take an active part in the decision making process. Dr. Neil Wright,
Ms. Janna Sampson and Dr. Peter Jankovskis are the team members and have been
the portfolio managers of the Enhanced Market Fund and Select Equity Fund
since their inception. Each of the portfolio managers has been with OakBrook
since 1998. Dr. Wright is OakBrook's President and Chief Investment Officer.
From 1993 to 1997, Dr. Wright was the Chief Investment Officer of ANB
Investment Management & Trust Co. ("ANB"). Ms. Sampson is OakBrook's Director
of Portfolio Management. From 1993 to 1997, she was Senior Portfolio Manager
for ANB. Dr. Jankovskis is OakBrook's Director of Research. From 1992 to
1996, he was an Investment Strategist for ANB and from 1996 to 1997 he was
the Manager of Research for ANB.
BOND FUND -- The Bond Fund is co-managed by Brian B. Sullivan, CFA, and John
P. Boston, CFA. Mr. Sullivan has been the portfolio manager for the Bond Fund
since 1992. Mr. Sullivan has been a portfolio manager at the Advisor since
1984, and is currently Senior Vice President and Senior Trust Investment
Officer at AmSouth. Mr. Boston has co-managed the Bond Fund with Mr. Sullivan
since 1999. Mr. Boston has been associated with AmSouth Trust Investment
Group for over five years and is currently Senior Vice President and Trust
Investment Officer in charge of taxable fixed income investments.
FLORIDA TAX-EXEMPT FUND -- Steven L. Cass is the portfolio manager for the
Florida Tax-Exempt Fund. Mr. Cass has been associated with AmSouth's Trust
Investment Group since October, 1995 and is currently Assistant Vice
President and Trust Investment Officer. Prior to joining AmSouth, Mr. Cass
was a registered representative and insurance agent employed by First of
America Securities.
GOVERNMENT INCOME FUND AND LIMITED TERM BOND FUND -- John P. Boston, CFA, has
been the portfolio manager for the Limited Term Bond Fund since August, 1995,
and of the Government Income Fund since inception. Mr. Boston has been
associated with AmSouth's Trust Investment Group for over five years and is
currently Senior Vice President and Trust Investment Officer in charge of
taxable fixed-income investments.
MUNICIPAL BOND FUND -- Dorothy E. Thomas, CFA, is the portfolio manager for
the Municipal Bond Fund. Ms. Thomas has been associated with AmSouth's Trust
Investment Group for over sixteen years and is currently Senior Vice
President and Trust Investment Officer in charge of tax-free fixed income
investments.
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as each Fund's administrator. Management and
administrative services of ASC include providing office space, equipment and
clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services. ASC is a
wholly owned subsidiary of BISYS Fund Services ("BISYS").
BISYS, whose address is also 3435 Stelzer Road, Columbus, Ohio 43219-3035,
serves as the distributor of each Fund's shares. BISYS may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
67
<PAGE> 70
[LOGO]
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
Class A Shares and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have
it invested, and whether you plan to make additional investments. Your
financial representative can help you decide which share class is best for
you.
CLASS A SHARES
- Capital Appreciation and Income Funds: Front-end sales charges, as
described below.
Money Market Funds: No sales charges
- Shareholder servicing fees of 0.25% of average daily net assets.
CLASS B SHARES
- No front-end sales charge; all your money goes to work for you right away.
- Distribution and service (12b-1) fees of 1.00% of average daily net assets.
- A deferred sales charge, as described on page 77.
- Automatic conversion to Class A Shares after eight years, thus reducing
future annual expenses.
- Maximum investment for all Class B purchases: $250,000.
- PRIME MONEY MARKET FUND: Class B Shares of the Prime Money Market Fund are
only available through exchange of Class B Shares of another AmSouth Fund
or if you participate in the Automatic Exchange program (see page 80).
For actual past expenses of each share class, see the fund-by-fund
information earlier in this prospectus.
Because 12b-1 fees are paid on an ongoing basis, Class B shareholders could
end up paying more expenses over the long term than if they had paid a sales
charge.
The Funds also offer Trust Shares, which have their own expense structure and
are only available to financial institutions, fiduciary clients of AmSouth
Bank and certain other qualified investors. Call the Distributor for more
information (see back cover of this prospectus).
68
<PAGE> 71
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
-------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding
the total value of the Fund's
investments and other assets,
subtracting its liabilities and
then dividing that figure by
the number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
-------------------------------
Number of Shares
Outstanding
Generally, for other than the
Money Market Funds, you can
find the Fund's NAV daily in
The Wall Street Journal and
other newspapers. NAV is
calculated separately for each
class of shares.
-------------------------------
MONEY MARKET FUNDS
Per share net asset value (NAV) for each
Fund is determined and its shares are
priced twice a day. The NAV for the Prime
Money Market Fund and the U.S. Treasury
Money Market Fund is determined at 1:00
p.m. Eastern time and at the close of
regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern
time on days the Exchange and the Federal
Reserve Bank of Atlanta are open. The NAV
for the Tax-Exempt Money Market Fund is
determined at 12:00 p.m. Eastern time and
at the close of regular trading on the New
York Stock Exchange.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is received.
This is what is known as the offering
price.
Each Fund uses the amortized cost method
of valuing its investments, which does not
take into account unrealized gains or
losses. For further information regarding
the methods used in valuing the Fund's
investments, please see the SAI.
OTHER FUNDS
Per share net asset value (NAV) for each
Fund is determined and its shares are
priced at the close of regular trading on
the New York Stock Exchange, normally at
4:00 p.m. Eastern time on days the
Exchange and the Federal Reserve Bank of
Atlanta are open.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is accepted by
the Fund less any applicable sales charge
as noted in the section on "Distribution
Arrangements/Sales Charges." This is what
is known as the offering price. For
further information regarding the methods
used in valuing the Fund's investments,
please see the SAI.
The Fund's securities are generally valued
at current market prices. If market
quotations are not available, prices will
be based on fair value as determined by
the Fund's Trustees. For further
information regarding the methods used in
valuing the Fund's investments, please see
the SAI.
69
<PAGE> 72
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Class A or Class B
----------------------------------------------------------
Regular $1,000 $0
----------------------------------------------------------
Automatic Investment Plan $1,000 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that
do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement. The Distributor may reject
a purchase order if it considers it in
the best interest of the Fund and its
shareholders.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with
IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
-----------------------------------------------------------------------------
You may purchase Funds through
the Distributor or through
banks, brokers and other
investment representatives,
which may charge additional
fees and may require higher
minimum investments or impose
other limitations on buying
and selling shares.
Additionally, banks, brokers
and other financial
institutions and
representatives may use shares
of the Money Market Funds in
"sweep" programs whereby the
accounts of a participating
customer of the financial
institution or representative
is automatically "swept" into
shares of one of the Money
Market Funds. If you purchase
shares through an investment
representative, that party is
responsible for transmitting
orders by close of business
and may have an earlier
cut-off time for purchase and
sale requests. Consult your
investment representative or
institution for specific
information.
70
<PAGE> 73
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY REGULAR MAIL
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases, follow the instructions below.
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "AmSouth Funds."
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
- AmSouth Funds/Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
4. Send to: AmSouth Funds
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road, Columbus, OH 43219.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a U. S. Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-451-8382. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-451-8382 to arrange a transfer from your bank account.
QUESTIONS?
Call 800-451-8382 or your
investment representative.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to
each other, almost
instantaneously. With an
electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH)
and may take up to eight days to
clear. There is generally no fee
for ACH transactions.
71
<PAGE> 74
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
For initial investment:
Fax the completed application, along with a request for a confirmation number
to 1-800-451-8382. Follow the instructions below after receiving your
confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
AmSouth Bank
Routing Number: ABA #044000024
DDA#
Include:
Your name
Your confirmation number
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 1-800-451-8382 TO ADVISE
US OF THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK
--------------------------------------
YOU CAN ADD TO YOUR ACCOUNT BY USING
THE CONVENIENT OPTIONS DESCRIBED
BELOW. THE FUND RESERVES THE RIGHT TO
CHANGE OR ELIMINATE THESE PRIVILEGES
AT ANY TIME WITH 60 DAYS NOTICE.
--------------------------------------
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in
the Funds from your bank account,
through payroll deduction or from your
federal employment, Social Security or
other regular government checks.
Automatic investments can be as little
as $50, once you've invested the
$1,000 minimum required to open the
account.
To invest regularly from your bank
account:
- Complete the Automatic Investment
Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and
account number
- The amount you wish to invest
automatically (minimum $50)
- How often you want to invest
(every month, 4 times a year,
twice a year or once a year)
- Attach a voided personal check.
To invest regularly from your paycheck
or government check:
Call 1-800-451-8382 for an enrollment
form or consult the SAI for additional
information.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A Shares than for Class B Shares, because
Class A Shares have lower distribution expenses. Income dividends are usually
paid monthly. Capital gains are distributed at least annually.
Distributions are made on a per share basis regardless of how long you've
owned your shares. Therefore, if you invest shortly before the distribution
date, some of your investment will be returned to you in the form of a
distribution.
-----------------------------------------------------------------------------
DIRECTED DIVIDEND OPTION
By selecting the appropriate box
in the Account Application, you
can elect to receive your
distributions in cash (check) or
have distributions (capital gains
and dividends) reinvested in
another AmSouth Fund without a
sales charge. You must maintain
the minimum balance in each Fund
into which you plan to reinvest
dividends or the reinvestment
will be suspended and your
dividends paid to you. The Fund
may modify or terminate this
reinvestment option without
notice. You can change or
terminate your participation in
the reinvestment option at any
time.
72
<PAGE> 75
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is received by
the Fund, its transfer agent,
or your investment
representative. Normally you
will receive your proceeds
within a week after your
request is received. See
section on "General Policies
on Selling Shares below."
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
1. Call 1-800-451-8382 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on
Selling Shares -- Verifying Telephone Redemptions" below.)
BY MAIL
1. Call 1-800-451-8382 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: AmSouth Funds, P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE (SEE "GENERAL POLICIES ON SELLING SHARES - REDEMPTIONS
IN WRITING REQUIRED" BELOW.)
1. See instruction 1 above.
2. Send to AmSouth Funds, c/o BISYS Fund Services, Attn: T.A. Operations,
3435 Stelzer Road, Columbus, OH 43219
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request a
withdrawal in cash. This is also known as
redeeming shares or a redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B Shares, you will be
charged a fee for any shares that have not
been held for a sufficient length of time.
These fees will be deducted from the money
paid to you. See the section on "Distribution
Arrangements/Sales Charges" below for
details.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial
adviser or broker, ask him or her for
redemption procedures. Your adviser and/or
broker may have transaction minimums and/or
transaction times which will affect your
redemption. For all other sales transactions,
follow the instructions below.
73
<PAGE> 76
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must indicate this option on your application.
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
Call 1-800-451-8382 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Your bank may charge for this service.
Call 1-800-451-8382 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 7 days.
REDEMPTION BY CHECK WRITING
PRIME MONEY MARKET FUND ONLY
You may write checks in amounts of $1,000 or more on your account in the
Prime Money Market Fund. To obtain checks, complete the signature card
section of the account application or contact the Fund to obtain a signature
card. Dividends and distributions will continue to be paid up to the day the
check is presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum
required account balance in the Prime Money Market Fund of $1,000 and you may
not close your Fund account by writing a check.
74
<PAGE> 77
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing and obtain a signature guarantee if:
- The check is not being mailed to the address on your account; or
- The check is not being made payable to the owner of the account.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50, the Fund may ask you to increase your
balance. If it is still below $50 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the appropriate Fund.
75
<PAGE> 78
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A Shares are sold at their public offering price. This price equals NAV
plus the initial sales charge, if applicable. Therefore, part of the money
you invest will be used to pay the sales charge. The remainder is invested in
Fund shares. The sales charge decreases with larger purchases. There is no
sales charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
FOR THE CAPITAL APPRECIATION FUNDS
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
YOUR AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $49,999 4.50% 4.71%
------------------------------------------------------------------------
$50,000 up to $99,999 4.00% 4.17%
------------------------------------------------------------------------
$100,000 up to $249,999 3.00% 3.09%
------------------------------------------------------------------------
$250,000 up to $499,999 2.00% 2.04%
------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00%
</TABLE>
FOR THE INCOME FUNDS
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
YOUR AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $99,999 4.00% 4.17%
------------------------------------------------------------------------
$100,000 up to $249,999 3.00% 3.09%
------------------------------------------------------------------------
$250,000 up to $499,999 2.00% 2.04%
------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00%
</TABLE>
FOR THE MONEY MARKET FUNDS
No sales charges.
(1) There is no initial sales charge on purchases of $1 million or more.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of the
purchase price will be charged to the shareholder if shares are redeemed in
the first year after purchase. This charge will be based on the lower of your
cost for the shares or their NAV at the time of redemption. There will be no
CDSC on reinvested distributions. The Distributor will provide additional
compensation in an amount up to 1.00% of the offering price of Class A Shares
of the Funds for sales of $1 million to $3 million. For sales over $3
million, the amount of additional compensation will be negotiated.
76
<PAGE> 79
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
If you sell some but not all of your Class shares, certain shares not subject
to the CDSC (i.e., shares purchased with reinvested dividends) will be
redeemed first, followed by shares subject to the lowest CDSC (typically
shares held for the longest time).
CONVERSION FEATURE -- CLASS B SHARES
- Class B Shares automatically convert to Class A Shares of the same Fund
after eight years from the end of the month of purchase.
- After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A Shares which will
increase your investment return compared to the Class B Shares.
- You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- If you purchased Class B Shares of one Fund which you exchanged for Class
B Shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B Shares.
- The dollar value of Class A Shares you receive will equal the dollar value
of the Class B Shares converted.
CLASS B SHARES
Class B Shares are offered at NAV,
without any up-front sales charge.
Therefore, all the money you
invest is used to purchase Fund
shares. However, if you sell your
Class B Shares of the Fund before
the sixth anniversary, you will
have to pay a contingent deferred
sales charge at the time of
redemption. The CDSC will be based
upon the lower of the NAV at the
time of purchase or the NAV at the
time of redemption according to
the schedule below. There is no
CDSC on reinvested dividends or
distributions.
77
<PAGE> 80
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A Shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced
sales charges under the following circumstances.
- LETTER OF INTENT. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
- RIGHTS OF ACCUMULATION. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- COMBINATION PRIVILEGE. Combine accounts of multiple Funds (excluding the
Money Market Funds) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
The following qualify for waivers of sales charges:
- Shares purchased by investment representatives through fee-based
investment products or accounts.
- Shares purchased with proceeds from redemptions from another mutual fund
complex within 30 days after redemption, if you paid a front end sales
charge for those shares.
- Shares purchased upon the reinvestment of dividend and capital gain
distributions.
- Shares purchased by investors through a payroll deduction plan.
- Shares purchased by officers, directors, trustees, employees, retired
employees, and their immediate family members of AmSouth Bancorporation,
its affiliates and BISYS Fund Services and its affiliates and the
sub-advisers of the Funds and their affiliates.
- Shares purchased by employees and their immediate family members of
dealers who have an agreement with the Distributor.
- Shares purchased by former Plan Participants using proceeds from
distributions of AmSouth Bank 401(K) plans.
The Distributor may also waive the sales charge at anytime in its own
discretion. Consult the SAI for more details concerning sales charges
waivers.
REINSTATEMENT PRIVILEGE
If you have sold Class A Shares and decide to reinvest in the Fund
within a 90 day period, you will not be charged the applicable sales
charge on amounts up to the value of the shares you sold. You must
provide a written request for reinstatement and payment within 90 days
of the date your instructions to sell were processed.
78
<PAGE> 81
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The CDSC will be waived under certain circumstances, including the following:
- Redemptions from accounts following the death or disability of the
shareholder.
- Returns of excess contributions to retirement plans.
- Distributions of less than 10% of the annual account value under a
Systematic Withdrawal Plan.
- Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
DISTRIBUTION AND SERVICE (12B-1) FEES AND SHAREHOLDER SERVICING FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Fund's shares and/or for providing shareholder services.
Shareholder servicing fees compensate financial institutions that provide
shareholder services to their customers and account holders. 12b-1 and
shareholder servicing fees are paid from Fund assets on an ongoing basis, and
will increase the cost of your investment.
- The 12b-1 and shareholder servicing fees vary by share class as follows:
- Class A Shares pay a non-Rule 12b-1 shareholder servicing fee of up to
.25% of the average daily net assets of a Fund.
- Class B Shares pay a 12b-1 fee of up to 1.00% of the average daily net
assets of the applicable Fund. This will cause expenses for Class B
Shares to be higher and dividends to be lower than for Class A Shares.
- The higher 12b-1 fee on Class B Shares, together with the CDSC, help the
Distributor sell Class B Shares without an "up-front" sales charge. In
particular, these fees help to defray the Distributor's costs of advancing
brokerage commissions to investment representatives.
- The Distributor may use up to .25% of the 12b-1 fee for shareholder
servicing and up to .75% for distribution.
Over time shareholders will pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 distribution and service fees
are paid out of the Fund's assets on an on-going basis.
79
<PAGE> 82
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in
one Fund for shares of the same
class of another AmSouth Fund,
usually without paying additional
sales charges (see "Notes"
below). You must meet the minimum
investment requirements for the
Fund into which you are
exchanging. Exchanges from one
Fund to another are taxable.
Class A Shares may also be
exchanged for Trust Shares of the
same Fund if you become eligible
to purchase Trust Shares. Please
consult the Trust Share
prospectus for more information.
No transaction fees are currently
charged for exchanges.
AUTOMATIC EXCHANGES
You can use the Funds' Automatic
Exchange feature to purchase
shares of the Funds at regular
intervals through regular,
automatic redemptions from the
AmSouth Prime Money Market Fund.
To participate in the Automatic
Exchange:
- Complete the appropriate
section of the Account
Application.
- Keep a minimum of $10,000 in
the AmSouth Prime Money
Market Fund and $1,000 in the
Fund whose shares you are
buying.
To change the Automatic Exchange
instructions or to discontinue
the feature, you must send a
written request to AmSouth Funds,
P.O. Box 182733, Columbus, Ohio
43218-2733.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written
request to AmSouth Funds, P.O. Box 182733,
Columbus OH 43218-2733, or by calling
1-800-451-8382. Please provide the
following information:
- Your name and telephone number
- The exact name on your account and
account number
- Taxpayer identification number (usually
your Social Security number)
- Dollar value or number of shares to be
exchanged
- The name of the Fund from which the
exchange is to be made
- The name of the Fund into which the
exchange is being made
See "Selling your Shares" for important
information about telephone transactions.
To prevent disruption in the management of
the Funds, due to market timing strategies,
exchange activity may be limited to four
exchanges from a Fund during a calendar
year.
NOTES ON EXCHANGES
- When exchanging from a Fund that has no
sales charge or a lower sales charge to
a Fund with a higher sales charge, you
will pay the difference.
- The registration and tax identification
numbers of the two accounts must be
identical.
- The Exchange Privilege (including
automatic exchanges) may be changed or
eliminated at any time upon a 60-day
notice to shareholders.
- Be sure to read carefully the
Prospectus of any Fund into which you
wish to exchange shares.
80
<PAGE> 83
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Please consult your tax adviser regarding your specific questions about
federal, state and local income taxes. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.
Each Fund distributes any net investment income monthly and any net realized
capital gains at least once a year. All distributions will be automatically
reinvested in additional Fund Shares unless you request to receive all
distributions in cash.
Generally, for federal income tax purposes, Fund distributions are taxable as
ordinary income, except that distributions of long-term capital gains will be
taxed as such regardless of how long you have held your shares. Distributions
are taxable whether you received them in cash or in additional shares.
Distributions are also taxable to you even if they are paid from income or
gains earned by the Fund before your investment (and thus were included in
the price you paid).
For the Florida Tax-Exempt Fund, Municipal Bond Fund, and Tax-Exempt Money
Market Fund, the income dividends that you receive are expected to be exempt
from federal income taxes and, in the case of the Florida Tax-Exempt Fund,
Florida intangible taxes. However, if you receive social security or railroad
retirement benefits, you should consult your tax adviser to determine what
effect, if any, an investment in the Florida Tax-Exempt Fund, Municipal Bond
Fund, or Tax-Exempt Money Market Fund may have on the federal taxation of
your benefits. In addition, an investment in the Florida Tax-Exempt Fund,
Municipal Bond Fund, or Tax-Exempt Money Market Fund may result in liability
for federal alternative minimum tax, both for individual and corporate
shareholders.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would be
decreased. Shareholders generally will not be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate a Fund's
recognition of ordinary income and may affect the timing or amount of a
Fund's distributions.
Any gain resulting from the sale or exchange of your Fund Shares (even if the
income from which is tax exempt) will generally be subject to tax. You should
consult your tax adviser for more information on your own tax situation,
including possible state and local taxes.
AmSouth Funds will send you a statement each year showing the tax status of
all your distributions.
- For each Fund, other than the Florida Tax-Exempt Fund, Municipal Bond Fund,
and Tax-Exempt Money Market Fund, the dividends and short-term capital
gains that you receive are considered ordinary income for tax purposes. For
the Florida Tax-Exempt Fund, Municipal Bond Fund, and Tax-Exempt Money
Market Fund, any short-term capital gains that you receive are taxable to
you as ordinary dividend income for Federal income tax purposes.
- Any distributions of net long-term capital gains by a Fund are taxable to
you as long-term capital gains for tax purposes, no matter how long you've
owned shares in the Fund.
- Generally, the Funds' advisers do not consider taxes when deciding to buy
or sell securities. Capital gains are realized from time to time as
by-products of ordinary investment activities. Distributions may vary
considerably from year to year.
- If you sell or exchange shares, any gain or loss you have is a taxable
event. This means that you may have a capital gain to report as income, or
a capital loss to report as a deduction, when you complete your federal
income tax return.
- Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account
such as an IRA or a qualified employee benefit plan. (Non-U.S. investors may
be subject to U.S. withholding and estate tax.)
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
81
<PAGE> 84
OTHER INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or, if shorter, the period of the
Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the SAI, which is
available upon request.
82
<PAGE> 85
OTHER INFORMATION ABOUT THE FUNDS BALANCED FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------- -------------------------------
A SHARES B SHARES A SHARES (A) B Shares (b)
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.19 $ 15.16 $ 15.21 $ 14.99
--------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.29 0.38 0.28
Net realized and unrealized gains (losses)
from investments 0.93 0.95 0.98 1.15
--------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.34 1.24 1.36 1.43
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.40) (0.30) (0.41) (0.29)
Net realized gains from investment
transactions (1.20) (1.20) (0.97) (0.97)
--------------------------------------------------------------------------------------------------------------
Total Distributions (1.60) (1.50) (1.38) (1.26)
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.93 $ 14.90 $ 15.19 $ 15.16
--------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 9.40% 8.66% 9.54% 10.07%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 43,223 $ 10,131 $ 46,814 $ 5,309
Ratio of expenses to average net assets 1.34% 2.09% 1.24% 2.12%(d)
Ratio of net investment income to average
net assets 2.67% 1.93% 2.77% 1.83%(d)
Ratio of expenses to average net assets* 1.35% 2.10% 1.24% 2.12%(d)
Portfolio Turnover(e) 23.24% 23.24% 25.40% 25.40%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 2, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
83
<PAGE> 86
OTHER INFORMATION ABOUT THE FUNDS BALANCED FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.03 $ 12.76 $ 11.81
------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.48 0.47 0.47
Net realized and unrealized gains (losses)
from investments 2.78 0.58 1.24
------------------------------------------------------------------------------------
Total from Investment Activities 3.26 1.05 1.71
------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.50) (0.47) (0.46)
Net realized gains from investment
transactions (0.58) (0.31) (0.30)
------------------------------------------------------------------------------------
Total Distributions (1.08) (0.78) (0.76)
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.21 $ 13.03 $ 12.76
------------------------------------------------------------------------------------
Total Return (excludes sales charge) 26.42% 8.37% 15.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 372,769 $ 338,425 $ 295,509
Ratio of expenses to average net assets 1.05% 0.98% 0.94%
Ratio of net investment income to average
net assets 3.49% 3.61% 3.91%
Ratio of expenses to average net assets* 1.10% 1.11% 1.12%
Portfolio Turnover 25.00% 20.47% 16.97%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
84
<PAGE> 87
GROWTH FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY CAPITAL GROWTH FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 3, 1997
JULY 31, 1999 to July 31, 1998 (f)
----------------------- -------------------------------
A SHARES B SHARES A SHARES (A) B Shares (b)
-------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.62 $11.54 $10.00 $ 9.82
--------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.06) (0.12) (0.03) (0.06)
Net realized and unrealized gains (losses)
from investments 2.57 2.52 1.65 1.78
--------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.51 2.40 1.62 1.72
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- -- --
Net realized gains from investment
transactions (0.09) (0.09) -- --
--------------------------------------------------------------------------------------------------------
Total Distributions (0.09) (0.09) -- --
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.04 $13.85 $11.62 $11.54
--------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 21.76% 20.96% 16.20%(c) 17.52%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $14,040 $7,463 $9,720 $3,477
Ratio of expenses to average net assets 1.23% 1.97% 1.40%(d) 2.05%(d)
Ratio of net investment income to average
net assets (0.50)% (1.26)% (0.42)%(d) (1.10)%(d)
Ratio of expenses to average net assets* 1.74% 2.48% 2.37%(d) 3.11%(d)
Portfolio Turnover (e) 79.30% 79.30% 77.26% 77.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations.
85
<PAGE> 88
OTHER INFORMATION ABOUT THE FUNDS ENHANCED MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1999
-------------------------------------
A SHARES(a) B SHARES(b)
------------ -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.30
-----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.09 0.03
Net realized and unrealized gains (losses) from
investments 3.89 3.55
-----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.98 3.58
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.09) (0.03)
Net realized gains from investment transactions (0.03) (0.03)
-----------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.06)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.86 $13.82
-----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 39.93%(c) 34.85%(c)
-----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $14,365 $6,132
Ratio of expenses to average net assets 0.88%(d) 1.73%(d)
Ratio of net investment income to average net assets 0.79%(d) (0.12)%(d)
Ratio of expenses to average net assets* 1.52%(d) 2.28%(d)
Portfolio Turnover(e) 36.03% 36.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 1, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from September 2, 1998 (commencement of operations)
through July 31, 1999.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
86
<PAGE> 89
VALUE FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY EQUITY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------- -------------------------------
A SHARES B SHARES A SHARES (a) B Shares (b)
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $24.60 $24.55 $23.35 $23.15
--------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.20 0.02 0.21 0.09
Net realized and unrealized gains (losses)
from investments 3.11 3.10 2.54 2.68
--------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.31 3.12 2.75 2.77
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.19) (0.06) (0.25) (0.12)
Net realized gains from investment
transactions (2.47) (2.47) (1.25) (1.25)
--------------------------------------------------------------------------------------------------------------
Total Distributions (2.66) (2.53) (1.50) (1.37)
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $25.25 $25.14 $24.60 $24.55
--------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.92% 14.03% 12.34% 12.49%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $70,740 $12,394 $73,165 $7,929
Ratio of expenses to average net assets 1.33% 2.08% 1.19% 2.11%(d)
Ratio of net investment income to average
net assets 0.82% 0.05% 0.89% 0.26%(d)
Ratio of expenses to average net assets* 1.34% 2.09% 1.19% 2.11%(d)
Portfolio Turnover(e) 17.65% 17.65% 16.95% 16.95%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
87
<PAGE> 90
OTHER INFORMATION ABOUT THE FUNDS VALUE FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.62 $ 16.75 $ 14.82
-----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.30 0.33 0.33
Net realized and unrealized gains (losses)
from investments 6.77 1.48 2.39
-----------------------------------------------------------------------------------
Total from Investment Activities 7.07 1.81 2.72
-----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.30) (0.33) (0.32)
Net realized gains from investment
transactions (1.04) (0.61) (0.47)
-----------------------------------------------------------------------------------
Total Distributions (1.34) (0.94) (0.79)
-----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.35 $ 17.62 $ 16.75
-----------------------------------------------------------------------------------
Total Return (excludes sales charge) 42.35% 11.09% 19.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 974,985 $ 374,622 $ 275,757
Ratio of expenses to average net assets 1.06% 1.02% 1.03%
Ratio of net investment income to average
net assets 1.52% 1.86% 2.17%
Ratio of expenses to average net assets* 1.10% 1.11% 1.11%
Portfolio Turnover 24.47% 19.11% 19.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
88
<PAGE> 91
OTHER INFORMATION ABOUT THE FUNDS EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------- -------------------------------
A SHARES B SHARES A SHARES (a) B Shares (b)
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.89 $ 11.86 $ 11.72 $ 11.60
----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.17 0.07 0.24 0.15
Net realized and unrealized gains (losses)
from investments 1.46 1.47 0.59 0.68
----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.63 1.54 0.83 0.83
----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.16) (0.09) (0.25) (0.16)
Net realized gains from investment
transactions (0.26) (0.26) (0.41) (0.41)
----------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.35) (0.66) (0.57)
----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.10 $ 13.05 $ 11.89 $ 11.86
----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.17% 13.34% 7.29% 7.26%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 21,526 $ 7,919 $ 26,686 $ 7,733
Ratio of expenses to average net assets 1.41% 2.16% 1.42% 2.19%(d)
Ratio of net investment income to average
net assets 1.37% 0.61% 2.03% 1.29%(d)
Ratio of expenses to average net assets* 1.58% 2.33% 1.57% 2.35%(d)
Portfolio Turnover(e) 133.74% 133.74% 83.26% 83.26%
<CAPTION>
MARCH 20, 1997
to July 31, 1997 (f)
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.07
Net realized and unrealized gains (losses)
from investments 1.71
----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.78
----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.06)
Net realized gains from investment
transactions --
----------------------------------------------------------------------------------------------------------
Total Distributions (0.06)
----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.72
----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 17.81%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 22,273
Ratio of expenses to average net assets 1.30%(d)
Ratio of net investment income to average
net assets 2.13%(d)
Ratio of expenses to average net assets* 1.51%(d)
Portfolio Turnover(e) 27.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations.
89
<PAGE> 92
OTHER INFORMATION ABOUT THE FUNDS REGIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1999 July 31, 1998
------------------------- -------------------------------
A SHARES B SHARES A SHARES (a) B Shares (b)
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.18 $27.05 $ 28.23 $28.49
----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.09 (0.09) 0.05 (0.05)
Net realized and unrealized gains (losses)
from investments (2.74) (2.73) (0.08) (0.42)
----------------------------------------------------------------------------------------------------------
Total from Investment Activities (2.65) (2.82) (0.03) (0.47)
----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.10) (0.02) (0.07) (0.03)
In excess of net investment income -- -- (0.01) --
Net realized gains from investment
transactions (1.53) (1.53) (0.94) (0.94)
----------------------------------------------------------------------------------------------------------
Total Distributions (1.63) (1.55) (1.02) (0.97)
----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.90 $22.68 $ 27.18 $27.05
----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (9.85)% (10.54)% (0.31)% (1.86)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $20,911 $ 965 $42,700 $1,998
Ratio of expenses to average net assets 1.38% 2.13% 1.30% 2.14%(d)
Ratio of net investment income to average
net assets 0.37% (0.37)% 0.14% (0.65)%(d)
Ratio of expenses to average net assets* 1.42% 2.17% 1.32% 2.15%(d)
Portfolio Turnover(e) 15.60% 15.60% 8.17% 8.17%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
90
<PAGE> 93
OTHER INFORMATION ABOUT THE FUNDS REGIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.95 $ 18.94 $ 16.68
---------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.24 0.26 0.23
Net realized and unrealized gains (losses)
from investments 7.77 2.20 2.26
---------------------------------------------------------------------------
Total from Investment Activities 8.01 2.46 2.49
---------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.24) (0.26) (0.23)
Net realized gains from investment
transactions (0.49) (0.19) --
---------------------------------------------------------------------------
Total Distributions (0.73) (0.45) (0.23)
---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 28.23 $ 20.95 $ 18.94
---------------------------------------------------------------------------
Total Return (excludes sales charge) 39.02% 13.10% 15.10%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $149,838 $93,584 $68,501
Ratio of expenses to average net assets 1.06% 1.05% 1.07%
Ratio of net investment income to average
net assets 0.99% 1.30% 1.35%
Ratio of expenses to average net assets* 1.10% 1.13% 1.15%
Portfolio Turnover 10.30% 8.22% 14.25%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
91
<PAGE> 94
OTHER INFORMATION ABOUT THE FUNDS SELECT EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1999
-------------------------------------
A SHARES (a) B Shares (b)
------------ -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.98
-----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.04 0.02
Net realized and unrealized gains (losses) from
investments 1.91 1.86
-----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.95 1.88
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.05) (0.01)
In excess of net investment income (0.01) (0.01)
Net realized gains from investment transactions (0.01) (0.01)
-----------------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.03)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.88 $ 11.83
-----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 19.44%(c) 18.83%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 10,258 $ 1,933
Ratio of expenses to average net assets 1.13%(d) 1.99%(d)
Ratio of net investment income to average net assets 0.43%(d) (0.49)%(d)
Ratio of expenses to average net assets* 1.81%(d) 2.58%(d)
Portfolio Turnover(e) 9.72% 9.72%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 1, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from September 2, 1998 (commencement of operations)
through July 31, 1999.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
92
<PAGE> 95
OTHER INFORMATION ABOUT THE FUNDS SMALL CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED MARCH 2, 1998
JULY 31, 1999 to July 31, 1998 (a)
------------------------- -------------------------------
A SHARES B SHARES A SHARES (b) B SHARES
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.14 $ 9.11 $ 9.97 $ 10.00
--------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.10) (0.14) (0.03) (0.04)
Net realized and unrealized gains (losses)
from investments (0.64) (0.66) (0.80) (0.85)
--------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.74) (0.80) (0.83) (0.89)
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.40 $ 8.31 $ 9.14 $ 9.11
--------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (8.10)% (8.78)% (8.31)%(c) (8.90)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 1,073 $ 929 $ 1,372 $ 871
Ratio of expenses to average net assets 1.66% 2.41% 1.78%(d) 2.54%(d)
Ratio of net investment income to average
net assets (1.07)% (1.83)% (0.92)%(d) (1.69)%(d)
Ratio of expenses to average net assets* 2.68% 3.42% 4.23%(d) 4.98%(d)
Portfolio Turnover(e) 208.13% 208.13% 70.64% 70.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) For the period from March 3, 1998 (commencement of operations) through
July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
93
<PAGE> 96
OTHER INFORMATION ABOUT THE FUNDS BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------- -------------------------------
A SHARES B SHARES A SHARES (a) B Shares (b)
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 11.04 $ 10.92 $ 10.88
----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.61 0.50 1.41 0.46
Net realized and unrealized gains (losses)
from investments (0.32) (0.31) (0.62) 0.24
----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.29 0.19 0.79 0.70
----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.58) (0.50) (0.63) (0.51)
Net realized gains from investment
transactions (0.13) (0.13) (0.03) (0.03)
----------------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.63) (0.66) (0.54)
----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 10.60 $ 11.05 $ 11.04
----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.58% 1.58% 7.45% 6.58%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 7,070 $ 2,521 $ 7,032 $ 442
Ratio of expenses to average net assets 0.81% 1.71% 0.73% 1.74%(d)
Ratio of net investment income to average
net assets 5.46% 4.63% 5.78% 4.75%(d)
Ratio of expenses to average net assets* 1.20% 1.95% 0.95% 1.99%(d)
Portfolio Turnover(e) 18.26% 18.26% 40.41% 40.41%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) For the period from September 16, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
94
<PAGE> 97
OTHER INFORMATION ABOUT THE FUNDS BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------
1997 1996 1995
------------ ---------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.83 $ 10.59
------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.65 0.65 0.69
Net realized and unrealized gains (losses)
from investments 0.42 (0.18) 0.28
------------------------------------------------------------------------------------------
Total from Investment Activities 1.07 0.47 0.97
------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.69) (0.65) (0.69)
Net realized gains from investment
transactions -- (0.11) (0.04)
------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.76) (0.73)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.92 $ 10.54 $ 10.83
------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 10.48% 4.40% 9.70%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 311,881 $ 132,737 $ 94,671
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets 6.10% 6.12% 6.63%
Ratio of expenses to average net assets* 0.98% 0.98% 0.98%
Portfolio Turnover 34.62% 9.60% 17.70%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
95
<PAGE> 98
OTHER INFORMATION ABOUT THE FUNDS GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998 YEAR ENDED JULY 31,
------------- ------------- ------------------------------
A SHARES A SHARES (a) 1997 1996 1995
------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 9.75 $ 9.40 $ 9.54 $ 9.48
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.54 0.63 0.58 0.66 0.68
Net realized and unrealized gains (losses)
from investments (0.28) 0.09 0.35 (0.20) 0.08
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.26 0.72 0.93 0.46 0.76
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.52) (0.53) (0.58) (0.59) (0.70)
In excess of net investment income -- (0.06) -- (0.01) --
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.59) (0.58) (0.60) (0.70)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.62 $ 9.88 $ 9.75 $ 9.40 $ 9.54
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.62% 7.58% 10.21% 4.91% 8.43%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 5,436 $ 8,176 $ 11,622 $ 15,752 $ 16,679
Ratio of expenses to average net assets 0.70% 0.71% 0.69% 0.65% 0.58%
Ratio of net investment income to average
net assets 5.35% 5.95% 5.98% 6.81% 7.18%
Ratio of expenses to average net assets* 1.90% 1.77% 1.29% 1.10% 1.19%
Portfolio Turnover(c) 26.85% 34.89% 2.96% 78.31% 27.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Not annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
96
<PAGE> 99
LIMITED TERM BOND FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY LIMITED MATURITY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
----------------------------- ---------------
A SHARES B SHARES (c) A Shares (a)
------------ -------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 10.58 $ 10.42
----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.57 0.27 0.85
Net realized and unrealized gains (losses)
from investments (0.15) (0.30) (0.25)
----------------------------------------------------------------------------------------------
Total from Investment Activities 0.42 (0.03) 0.60
----------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.56) (0.28) (0.59)
----------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.28) (0.59)
----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.29 $ 10.27 $ 10.43
----------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.01% (0.33)%(b) 5.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 2,716 $ 1,599 $ 3,531
Ratio of expenses to average net assets 0.81% 1.69%(d) 0.74%
Ratio of net investment income to average
net assets 5.49% 4.61%(d) 5.65%
Ratio of expenses to average net assets* 1.23% 1.96%(d) 0.96%
Portfolio Turnover(e) 39.15% 39.15% 39.31%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares.
(b) Not annualized.
(c) For the period from January 21, 1999 (commencement of operations) through
July 31, 1999.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
97
<PAGE> 100
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.31 $ 10.41 $ 10.23
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.58 0.58 0.58
Net realized and unrealized gains (losses)
from investments 0.14 (0.10) 0.17
------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.48 0.75
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.61) (0.57) (0.57)
Net realized gains from investment
transactions -- (0.01) --
In excess of net realized gains -- -- --
------------------------------------------------------------------------------
Total Distributions (0.61) (0.58) (0.57)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.42 $ 10.31 $ 10.41
------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.25% 4.74% 7.65%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 138,675 $ 46,005 $ 59,798
Ratio of expenses to average net assets 0.77% 0.76% 0.80%
Ratio of net investment income to average
net assets 5.65% 5.48% 5.69%
Ratio of expenses to average net assets* 1.02% 0.99% 1.03%
Portfolio Turnover 64.89% 29.56% 38.11%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
98
<PAGE> 101
FLORIDA TAX-EXEMPT FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY FLORIDA TAX-FREE FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998 JULY 31,
----------------------------- --------------- -------------------
A SHARES CLASS B (f) A SHARES (a) 1997 1996
------------ -------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.45 $ 10.52 $ 10.50 $ 10.30 $ 10.32
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.12 0.45 0.45 0.45
Net realized and unrealized gains (losses)
from investments (0.18) (0.30) 0.01 0.24 (0.01)
--------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.23 (0.18) 0.46 0.69 0.44
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.40) (0.14) (0.44) (0.48) (0.45)
Net realized gains from investment
transactions (0.06) -- (0.07) (0.01) (0.01)
--------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.14) (0.51) (0.49) (0.46)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.22 $ 10.20 $ 10.45 $ 10.50 $ 10.30
--------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.06% (1.77)%(b) 4.46% 6.89% 4.24%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 12,195 $ 569 $ 8,883 $ 53,688 $ 48,869
Ratio of expenses to average net assets 0.59% 1.49%(c) 0.55% 0.57% 0.59%
Ratio of net investment income to average
net assets 4.00% 3.06%(c) 4.24% 4.36% 4.33%
Ratio of expenses to average net assets* 1.26% 2.00%(c) 1.06% 1.06% 1.04%
Portfolio Turnover(d) 34.33% 34.33% 29.55% 24.05% 12.21%
<CAPTION>
SEPTEMBER 30,
1994 TO
JULY 31,
1995 (e)
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.34
Net realized and unrealized gains (losses)
from investments 0.30
--------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.64
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.32)
Net realized gains from investment
transactions --
--------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.32
--------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 6.53%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 48,333
Ratio of expenses to average net assets 0.70%(c)
Ratio of net investment income to average
net assets 4.16%(c)
Ratio of expenses to average net assets* 1.01%(c)
Portfolio Turnover(d) 2.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from March 16, 1999 (commencement of operations) through
July 31, 1999.
99
<PAGE> 102
OTHER INFORMATION ABOUT THE FUNDS MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
----------------------------- --------------- JULY 1, 1997
A SHARES CLASS B (f) A SHARES (b) July 31, 1997 (a)
------------ -------------- --------------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.13 $10.28 $10.15 $ 10.00
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.14 0.86 0.04
Net realized and unrealized gains (losses)
from investments (0.17) (0.41) (0.43) 0.15
--------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.24 (0.27) 0.43 0.19
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.39) (0.14) (0.42) (0.04)
Net realized gains from investment
transactions (0.11) -- (0.03) --
--------------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.14) (0.45) (0.04)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $10.13 $ 10.15
--------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.31% (2.60)%(c) 4.30% 1.86%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $2,694 $ 16 $2,689 $337,933
Ratio of expenses to average net assets 0.71% 1.60%(d) 0.62% 0.71%(d)
Ratio of net investment income to average
net assets 4.01% 3.17%(d) 4.26% 4.31%(d)
Ratio of expenses to average net assets* 1.20% 1.87%(d) 0.92% 1.04%(d)
Portfolio Turnover(e) 20.74% 20.74% 28.75% 1.59%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Premier
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) For the period from February 3, 1999 (commencement of operations) through
July 31, 1999.
100
<PAGE> 103
PRIME MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY PRIME OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------
1999 1998
------------------------- ---------------------------
A SHARES B SHARES A SHARES B SHARES (a)
------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.044 0.035 0.049 0.005
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.044) (0.035) (0.049) (0.005)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
Total Return 4.48% 3.55% 4.99% 0.49%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $136,078 $ 224 $116,960 $ 1
Ratio of expenses to average net assets 0.78% 1.69% 0.79% 1.85%(c)
Ratio of net investment income to average
net assets 4.40% 3.39% 4.88% 3.83%(c)
Ratio of expenses to average net assets* 0.94% 1.70% 0.95% 1.88%(c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from June 15, 1998 (commencement of operations) through
July 31, 1998.
(b) Not annualized.
(c) Annualized.
101
<PAGE> 104
OTHER INFORMATION ABOUT THE FUNDS PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------
1997 1996 1995
------------ -------------- --------
A SHARES A Shares (a)
------------ --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.048 0.016 0.050
-------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.048) (0.016) (0.050)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------
Total Return 4.90% 5.07%(b) 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $111,027 $125,075 $617,673
Ratio of expenses to average net assets 0.78% 0.81%(c) 0.69%
Ratio of net investment income to average
net assets 4.79% 4.61%(c) 5.04%
Ratio of expenses to average net assets* 0.93% 0.96%(c) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Premier Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) to July 31,
1996 was 1.55%.
(c) Annualized.
(d) There were no waivers during the period.
102
<PAGE> 105
U.S. TREASURY MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY U.S. TREASURY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------
1999 1998 1997
------------ ---------- ----------
A SHARES A SHARES A SHARES
------------ ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.040 0.046 0.045
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.040) (0.046) (0.045)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
Total Return 4.06% 4.67% 4.60%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 4,390 $ 8,070 $ 9,885
Ratio of expenses to average net assets 0.79% 0.80% 0.79%
Ratio of net investment income to average
net assets 4.03% 4.57% 4.50%
Ratio of expenses to average net assets* 0.95% 0.95% 0.94%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
103
<PAGE> 106
OTHER INFORMATION ABOUT THE FUNDS U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------
1996 1995
--------------- --------
A Shares (a)
---------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.015 0.048
-------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.015) (0.048)
-------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------
Total Return 4.90%(b) 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $12,263 $322,939
Ratio of expenses to average net assets 0.82%(c) 0.70%
Ratio of net investment income to average
net assets 4.44%(c) 4.81%
Ratio of expenses to average net assets* 0.97%(c) (c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Premier Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) to July 31,
1996 was 1.49%.
(c) Annualized.
(d) There were no waivers during the period.
104
<PAGE> 107
TAX-EXEMPT MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY TAX-EXEMPT FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------
1999 1998 1997
------------ --------------- ----------
A SHARES A SHARES
------------ ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.026 0.030 0.030
------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.026) (0.030) (0.030)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------
Total Return 2.66% 3.03% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 22,844 $ 28,657 $ 27,926
Ratio of expenses to average net assets 0.59% 0.60% 0.62%
Ratio of net investment income to average
net assets 2.64% 2.97% 3.00%
Ratio of expenses to average net assets* 0.98% 0.98% 0.97%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
105
<PAGE> 108
OTHER INFORMATION ABOUT THE FUNDS TAX-EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------
1996 1995
---------------- -------
A Shares (a)
----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-----------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.010 0.032
-----------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.010) (0.032)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-----------------------------------------------------------------------------
Total Return 3.12%(b) 3.22%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $17,116 $57,640
Ratio of expenses to average net assets 0.68%(c) 0.54%
Ratio of net investment income to average
net assets 2.82%(c) 3.15%
Ratio of expenses to average net assets* 1.03%(c) 0.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Premier Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) through July
31, 1996 was 0.95%.
(c) Annualized.
106
<PAGE> 109
This page intentionally left blank
<PAGE> 110
This page intentionally left blank
<PAGE> 111
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OH 43219
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operational and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Reports and the SAI, prospectuses of other members of
the AmSouth Funds family, or request other information and discuss your
questions about the Funds by contacting a broker or bank that sells the Funds.
Or contact the Funds at:
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
INTERNET: http://www.amsouthfunds.com
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or by calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-5551.
<PAGE> 112
AmSouth Funds
Prospectus
Trust Shares
December 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these Fund shares or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is committing a crime.
[AmSouth Logo]
<PAGE> 113
AMSOUTH MUTUAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
[ICON] RISK/RETURN SUMMARY AND FUND EXPENSES
Carefully review this important 2 Overview
section, which summarizes each CAPITAL APPRECIATION FUNDS
Fund's investments, risks, past 4 Balanced Fund
performance, and fees. 7 Growth Fund
10 Enhanced Market Fund
12 Value Fund
15 Equity Income Fund
18 Regional Equity Fund
21 Select Equity Fund
23 Small Cap Fund
INCOME FUNDS
26 Bond Fund
29 Government Income Fund
32 Limited Term Bond Fund
35 Florida Tax-Exempt Fund
38 Municipal Bond Fund
MONEY MARKET FUNDS
42 Prime Money Market Fund
45 U.S. Treasury Money Market Fund
48 Tax-Exempt Money Market Fund
[ICON] ADDITIONAL INVESTMENT STRATEGIES AND RISKS
Review this section for CAPITAL APPRECIATION FUNDS
information and on investment 51 Balanced Fund
strategies and their risks. 51 Growth Fund
51 Enhanced Market Fund
51 Value Fund
51 Equity Income Fund
51 Regional Equity Fund
51 Select Equity Fund
51 Small Cap Fund
INCOME FUNDS
52 Bond Fund
52 Government Income Fund
52 Limited Term Bond Fund
52 Florida Tax-Exempt Fund
53 Municipal Bond Fund
MONEY MARKET FUNDS
0 Prime Money Market Fund
0 U.S. Treasury Money Market Fund
53 Tax-Exempt Money Market Fund
[ICON] FUND MANAGEMENT
Review this section for details on 60 The Investment Adviser
the people and organizations who 60 The Investment Sub-Advisers
oversee the Funds. 66 Portfolio Managers
67 The Distributor and Administrator
[ICON] SHAREHOLDER INFORMATION
Review this section for details on 68 Choosing a Share Class
how shares are valued, how to 69 Pricing of Fund Shares
purchase, sell and exchange 70 Purchasing and Adding to Your Shares
shares, related charges and 71 Selling Your Shares
payments of dividends and 73 General Policies on Selling Shares
distributions. 74 Exchanging Your Shares
75 Dividends, Distributions and Taxes
[ICON] OTHER INFORMATION ABOUT THE FUNDS
76 Financial Highlights
</TABLE>
<PAGE> 114
[ICON]
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
<TABLE>
<S> <C>
THE FUNDS AmSouth Funds (formerly AmSouth Mutual Funds) is a mutual
fund family that offers different classes of shares in
separate investment portfolios ("Funds"). The Funds have
individual investment goals and strategies. This prospectus
gives you important information about the Trust Shares
(formerly Premier Shares) of the Capital Appreciation Funds,
the Income Funds and the Money Market Funds that you should
know before investing. The Funds also offer two additional
classes of shares called Class A Shares (formerly Classic
Shares) and Class B Shares which are offered in a separate
prospectus. Please read this prospectus and keep it for
future reference.
Each of the Funds in this prospectus is a mutual fund. A
mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities
like stocks and bonds. Before you look at specific Funds,
you should know a few general basics about investing in
mutual funds.
The value of your investment in a Fund is based on the
market prices of the securities the Fund holds. These prices
change daily due to economic and other events that affect
securities markets generally, as well as those that affect
particular companies or government units. These price
movements, sometimes called volatility, will vary depending
on the types of securities a Fund owns and the markets where
these securities trade.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR
INVESTMENT IN A FUND. YOUR INVESTMENT IN A FUND IS NOT A
DEPOSIT OR AN OBLIGATION OF AMSOUTH BANK, ITS AFFILIATES, OR
ANY BANK. IT IS NOT INSURED BY THE FDIC OR ANY GOVERNMENT
AGENCY.
Each Fund has its own investment goal and strategies for
reaching that goal. However, it cannot be guaranteed that a
Fund will achieve its goal. Before investing, make sure that
the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way
that the manager believes will help the Fund achieve its
goal. A manager's judgments about the stock markets, economy
and companies, or selecting investments may cause a Fund to
underperform other funds with similar objectives.
</TABLE>
2
<PAGE> 115
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
CAPITAL APPRECIATION FUNDS
<TABLE>
<S> <C>
These Funds seek capital appreciation and invest primarily
in equity securities, principally common stocks and, to a
limited extent, preferred stocks and convertible securities.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking a long-term goal such as retirement
- looking to add a growth component to your portfolio
- willing to accept the risks of investing in the stock
markets
These Funds may not be appropriate if you are:
- pursuing a short-term goal or investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
3
<PAGE> 116
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCED FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund seeks to obtain long-term capital growth and
produce a reasonable amount of current income through a
moderately aggressive investment strategy.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests in a broadly
diversified portfolio of equity and debt securities
consisting primarily of common stocks and bonds.
The Fund normally invests between 45-75% of its assets in
equity securities and at least 25% of its assets in
fixed-income securities. The portion of the Fund's assets
invested in equity and debt securities will vary depending
upon economic conditions, the general level of stock prices,
interest rates and other factors, including the risks
associated with each investment. The Fund's equity
investments consist primarily of common stocks of companies
that the portfolio manager believes are undervalued and have
a favorable outlook. The Fund's fixed-income investments
consist primarily of "high-grade" bonds, notes and
debentures. The average dollar-weighted maturity of the
fixed-income portion of the Fund's portfolio will range from
one to thirty years.
In managing the equity portion of the Fund, the portfolio
manager uses a variety of economic projections, quantitative
techniques, and earnings projections in formulating
individual stock purchase and sale decisions. The portfolio
manager selects investments that he believes have basic
investment value which will eventually be recognized by
other investors.
In managing the fixed income portion of the Fund's
portfolio, the portfolio 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 and which are deemed to be
the best relative values.
The Fund may also invest in certain other equity and debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which the equity portion of this Fund
focuses -- value stocks -- will underperform other kinds of
investments or market averages.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Generally, an increase in the average
maturity of the fixed income portion of the Fund will make
it more sensitive to interest rate risk.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
4
<PAGE> 117
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCE FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1992 8.72%
93 14.37%
94 0.59%
95 23.51%
96 9.72%
97 20.95%
98 13.42%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -0.43%.
Best
quarter: 9.21% 6/30/97
Worst
quarter: -3.35% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS 12/19/91
<S> <C> <C> <C>
TRUST SHARES 13.42% 13.11% 13.60%
S&P 500(R) INDEX 28.58% 24.06% 21.08%
LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.30% 8.28%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
The chart and table on this page
show how the Balanced Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over
seven years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks, and the Lehman
Brothers Government/Corporate Bond
Index, an unmanaged index
representative of the total return
of government and corporate bonds.
Of course, past performance does
not indicate how the Fund will
perform in the future.
5
<PAGE> 118
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BALANCE FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.32%
Total Fund operating expenses(3) 1.12%
</TABLE>
[CAPTION]
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.31%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.11%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $114 $356 $617 $1,363
</TABLE>
As an investor in the Balanced
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
6
<PAGE> 119
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Capital Growth Fund) seeks
long-term capital appreciation by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks such as convertible bonds and
convertible preferred stocks.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
domestically traded U.S. common stocks, as well as non-U.S.
common stocks and American Depositary Receipts ("ADRs") that
the portfolio manager believes have attractive potential for
growth.
In managing the Fund, the portfolio manager seeks
reasonably-priced securities with the potential to produce
above-average earnings growth. In choosing individual stocks
the portfolio manager uses a quantitative process to
identify companies with a history of above-average growth or
companies that are expected to enter periods of
above-average growth or are positioned in emerging growth
industries. Some of the criteria that the manager uses to
select these companies are earnings growth, return on
capital, cash flow and price earnings ratios.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- growth stocks -- will
underperform other kinds of investments or market averages.
FOREIGN SECURITIES RISK: Investing in foreign markets
involves a greater risk than investing in the United States.
Foreign securities may be adversely affected by myriad
factors, including currency fluctuations and social,
economic or political instability.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 51.
</TABLE>
7
<PAGE> 120
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1998 34.46%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 2.67%.
Best
quarter: 30.59% 12/31/98
Worst
quarter: -11.70% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 SINCE INCEPTION
YEAR (8/3/97)
<S> <C> <C>
TRUST SHARES 34.46% 24.36%
S&P 500 INDEX 28.58% 21.50%
</TABLE>
(1 )Both charts assume reinvestment of dividends and distributions.
The chart and table on this page
show how the Growth Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Trust Shares for its
first full calendar year of
operations. The table below it
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
8
<PAGE> 121
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH GROWTH FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.69%
Total Fund operating expenses(3) 1.49%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.18%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.98%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
TRUST SHARES $152 $471 $813 $1,779
</TABLE>
As an investor in the Growth
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
9
<PAGE> 122
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH ENHANCED MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce long-term growth of capital by
investing primarily in a diversified portfolio of common
stock and securities convertible into common stocks such as
convertible bonds and convertible preferred stock. The
portfolio manager does not currently intend to purchase
convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in a broadly
diversified portfolio of S&P 500 stocks, overweighting
relative to their S&P weights those that the portfolio
manager believes to be undervalued compared to others in the
index. The Fund seeks to maintain risk characteristics
similar to that of the S&P 500 Index and, normally, invests
at least 80% of its assets in common stocks drawn from the
Index.
The portfolio manager's stock selection process utilizes
computer-aided quantitative analysis. The portfolio
manager's computer models use many types of data, but
emphasize technical data such as price and volume
information. Applying these models to stocks within the S&P
500, the portfolio manager hopes to generate more capital
growth than that of the S&P 500. The portfolio manager's
emphasis on technical analyses can result in significant
shifts in portfolio holdings at different times. However,
stringent risk controls at the style, industry and
individual stock levels help ensure the Fund maintains risk
characteristics similar to those of the S&P 500.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses - stocks in the S&P 500
Index which are primarily large cap companies - will
underperform other kinds of investments or market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
10
<PAGE> 123
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH ENHANCED MARKET FUND
This section would normally include a bar chart and a table showing how the
Enhanced Market Fund has performed and how its performance has varied from
year to year. Because the Fund has not been in operation for a full calendar
year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption Fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.45%
Distribution (12b-1) fee 0.00%
Other expenses(3) 1.04%
Total Fund operating expenses(3) 1.49%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.31%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.76%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
<S> <C> <C> <C> <C>
YEAR YEARS YEARS YEARS
TRUST SHARES $133 $415 $718 $1,579
</TABLE>
As an investor in the Enhanced
Market Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
11
<PAGE> 124
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Equity Fund) seeks capital
growth by investing primarily in a diversified portfolio of
common stock and securities convertible into common stock,
such as convertible bonds and convertible preferred stock.
The production of current income is an incidental objective.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests primarily in common
stocks that the portfolio manager believes to be
undervalued.
In managing the Fund's portfolio, the manager uses a variety
of economic projections, quantitative techniques, and
earnings projections in formulating individual stock
purchase and sale decisions. The portfolio manager will
select investments that it believes have basic investment
value which will eventually be recognized by other
investors, thus increasing their value to the Fund.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- undervalued
stocks -- will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
12
<PAGE> 125
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1989 26.54%
90 6.99%
91 19.21%
92 10.33%
93 18.38%
94 0.37%
95 27.40%
96 15.75%
97 32.23%
98 18.13%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -1.30%.
Best
quarter: 16.62% 12/31/98
Worst
quarter: -14.37% 9/30/90
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS (12/1/88)
<S> <C> <C> <C> <C>
TRUST SHARES 18.13% 18.25% 15.60% 15.62%
S&P 500(R) INDEX 28.58% 24.06% 19.19% 19.22%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
The chart and table on this page
show how the Value Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
13
<PAGE> 126
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH VALUE FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.31%
Total Fund operating expenses(3) 1.11%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.30%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.10%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
TRUST SHARES $113 $353 $612 $1,352
</TABLE>
As an investor in the Value
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
14
<PAGE> 127
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks above average income and capital appreciation
by investing primarily in a diversified portfolio of common
stocks, preferred stocks, and securities that are
convertible into common stocks, such as convertible bonds
and convertible preferred stock.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
income-producing equity securities such as common stocks,
ADRs, and securities convertible into common stocks,
including convertible bonds and convertible preferred
stocks.
In managing the Fund's portfolio, the manager seeks equity
securities which he believes to represent investment value.
In choosing individual securities, the portfolio manager
emphasizes those common stocks in each sector that have good
value, attractive yield, and dividend growth potential. The
portfolio manager will also consider higher valued companies
that show the potential for growth. Factors that the
portfolio manager considers in selecting equity securities
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.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that this Fund's
blended investment style will underperform other Funds or
market averages that focus exclusively on either growth or
value.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
15
<PAGE> 128
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1998 12.42%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 4.83%.
Best quarter: 17.42%
Worst
quarter: -12.57%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (3/20/97)
<S> <C> <C>
TRUST SHARES 12.42% 18.27%
S&P 500(R) INDEX 28.58% 34.10%
</TABLE>
(1 )Both charts assume reinvestment of dividends and distributions.
The chart and table on this page
show how the Equity Income Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Trust Shares for its
first full calendar year of
operations. The table below it
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
16
<PAGE> 129
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH EQUITY INCOME FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.55%
Total Fund operating expenses(3) 1.35%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.38%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.18%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $137 $428 $739 $1,624
</TABLE>
As an investor in the Equity
Income Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
17
<PAGE> 130
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund seeks capital growth by investing primarily in a
diversified portfolio of common stock and securities
convertible into common stock, such as convertible bonds and
convertible preferred stock. The production of current
income is an incidental objective.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests primarily in common
stocks of companies headquartered in the Southern Region of
the United States, which includes Alabama, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee and Virginia, that the portfolio manager believes
to be undervalued.
In managing the Fund's portfolio, the manager uses a variety
of economic projections, quantitative techniques, and
earnings projections in formulating individual stock
purchase and sale decisions. The portfolio manager will
select investments that he believes have basic investment
value which will eventually be recognized by other
investors.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
GEOGRAPHIC CONCENTRATION RISK: By concentrating its
investments in the Southern Region, the Fund may be more
vulnerable to unfavorable developments in that region than
funds that are more geographically diversified.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- undervalued stocks of
companies in the Southern Region -- will underperform other
kinds of investments or market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
18
<PAGE> 131
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1989 24.67%
90 6.30%
91 38.80%
92 21.50%
93 18.38%
94 2.15%
95 24.08%
96 20.14%
97 27.67%
98 8.10%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -20.71%.
Best
quarter: 20.86% 3/31/91
Worst
quarter: -23.37% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS (12/1/88)
<S> <C> <C> <C> <C>
TRUST SHARES -8.10% 11.35% 13.95% 13.86%
S&P 500(R) INDEX 28.58% 24.06% 19.19% 19.22%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
The chart and table on this page
show how the Regional Equity Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
the S&P 500(R) Index, a widely
recognized, unmanaged index of
common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
19
<PAGE> 132
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH REGIONAL EQUITY FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.39%
Total Fund operating expenses(3) 1.19%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.35%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.15%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $121 $378 $654 $1,443
</TABLE>
As an investor in the Regional
Equity Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
20
<PAGE> 133
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SELECT EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital by investing
primarily in common stocks and securities convertible into
common stocks such as convertible bonds and convertible
preferred stocks. The portfolio manager does not currently
intend to purchase convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in common
stocks of companies with market capitalizations greater than
$2 billion at the time of purchase and that possess a
dominant market share and have a barrier, such as a patent
or well-known brand name, that shields its market share and
profits from competitors.
In managing the Fund's portfolio, the managers continuously
monitor a universe of companies possessing "market power" to
look for opportunities to purchase these stocks at
reasonable prices. "Market power" is a combination of
dominant market share and a barrier that protects that
market share. In selecting individual securities, the
portfolio managers look for companies that appear
undervalued. The managers then conduct a fundamental
analysis of the stock, the industry and the industry
structure. The portfolio managers will then purchase those
companies whose market power, in the managers' opinion, is
intact. As a result, the portfolio managers may focus on a
relatively limited number of stocks (i.e., generally 25 or
less). The Fund is non-diversified.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- undervalued growth
stocks -- will underperform other kinds of investments or
market averages.
NON-DIVERSIFIED RISK: The Fund may invest in a small number
of companies which may increase the volatility of the Fund.
If the companies in which the Fund invests perform poorly,
the Fund could suffer greater losses than if it had been
invested in a greater number of companies.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. However, the
portfolio managers expect that the Fund's annual portfolio
turnover rate will average less than 50% each year. If the
Fund invests in securities with additional risks, its share
price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
21
<PAGE> 134
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SELECT EQUITY FUND
This section would normally include a bar chart and a table showing how the
Select Equity Fund has performed and how its performance has varied from year
to year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.80%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.80%
Total Fund operating expenses(3) 1.60%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.21%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.01%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $163 $505 $871 $1,900
</TABLE>
As an investor in the Select
Equity Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
22
<PAGE> 135
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SMALL CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks capital appreciation by investing primarily
in a diversified portfolio of securities consisting of
common stocks and securities convertible into common stocks
such as convertible bonds and convertible preferred stocks.
Any current income generated from these securities is
incidental.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the 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).
In managing the Fund's portfolio, the manager seeks smaller
companies with above-average growth potential. Factors the
portfolio manager typically considers in selecting
individual securities include 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.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
SMALL COMPANY RISK: Investing in smaller, lesser-known
companies involves greater risk than investing in those that
are more established. A small company's financial well-
being may, for example, depend heavily on just a few
products or services. In addition, investors may have
limited flexibility to buy or sell small company stocks,
which tend to trade less frequently than those of larger
firms.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- small company growth
stocks -- will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
23
<PAGE> 136
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH SMALL CAP FUND
This section would normally include a bar chart and a table showing how the
Small Cap Fund has performed and how its performance has varied from year to
year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 1.20%
Distribution (12b-1) fee 0.00%
Other expenses(3) 1.20%
Total Fund operating expenses(3) 2.40%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.21%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
1.41%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $243 $748 $1,280 $2,736
</TABLE>
As an investor in the Small Cap
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
24
<PAGE> 137
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
INCOME FUNDS
<TABLE>
<S> <C>
TAXABLE FUNDS The Bond Fund, the Government Income Fund and the Limited
Term Bond Fund seek current income and invest primarily in
fixed income securities, such as U.S. government securities,
or corporate, bank and commercial obligations.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to add a monthly income component to your
portfolio
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
TAX-FREE FUNDS The Florida Tax-Exempt Fund and the Municipal Bond Fund seek
tax-exempt income and invest primarily in municipal
securities which are exempt from Federal and, in the case of
the Florida Tax-Exempt Fund, Florida intangible taxes.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to reduce Federal income or Florida intangible
taxes
- seeking monthly Federal tax-exempt dividends
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing through a tax-exempt retirement plan
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
25
<PAGE> 138
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in bonds and other
fixed-income securities. These investments include 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 a nationally
recognized statistical rating organization (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 which do not provide current income but
represent ownership of future interest and principal
payments on U.S. Treasury bonds.
The 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. In managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 51 or consult the
SAI.
PRINCIPAL Your investment in the Fund may be subject to the following
INVESTMENT RISKS principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
26
<PAGE> 139
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1989 12.67%
90 6.92%
91 15.32%
92 7.30%
93 9.86%
94 3.23%
95 18.41%
96 2.56%
97 9.21%
98 9.40%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -1.78%.
Best
quarter: 7.13% 6/30/89
Worst
quarter: -2.39% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS (12/31/88)
<S> <C> <C> <C> <C>
TRUST SHARES 9.40% 7.02% 8.68% 8.68%
LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.30% 9.34% 9.34%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
The chart and table on this page
show how the Bond Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below it compares
the Fund's performance over time to
that of the Lehman Brothers
Government/ Corporate Bond Index,
an unmanaged index representative
of the total return of government
and corporate bonds. Of course,
past performance does not indicate
how the Fund will perform in the
future.
27
<PAGE> 140
RISK/RETURN SUMMARY AND FUND EXPENSES AMSOUTH BOND FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee(3) 0.65%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.32%
Total Fund operating expenses(3) 0.97%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the last fiscal year, management
fees paid by the Fund were limited to 0.50%.
Other expenses are restated to reflect current
fees. Other expenses are being limited to
0.23%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.73%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $99 $309 $536 $1,190
</TABLE>
As an investor in the Bond
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
28
<PAGE> 141
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These investments are
principally mortgage-related securities, but may also
include U.S. Treasury obligations.
In managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
PREPAYMENT RISK: If a significant number of mortgages
underlying a mortgage backed security are refinanced, the
security may be "prepaid." In this case, investors receive
their principal back and are typically forced to reinvest it
in securities that pay lower interest rates. Rapid changes
in prepayment rates can cause bond prices and yields to be
volatile.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
29
<PAGE> 142
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1994 -0.39%
95 14.32%
96 4.05%
97 9.39%
98 7.26%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 0.43%.
Best
quarter: 4.53% 6/30/95
Worst
quarter: -1.43% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS (10/01/93)
<S> <C> <C> <C>
TRUST SHARES 7.26% 6.81% 6.48%
LEHMAN BROTHERS MORTGAGE INDEX 6.97% 7.23% 7.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
The chart and table on this page
show how the Government Income Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over five years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
the Lehman Brothers Mortgage Index,
an unmanaged index generally
representative of the mortgage bond
market as a whole. Of course, past
performance does not indicate how
the Fund will perform in the
future.
30
<PAGE> 143
AMSOUTH GOVERNMENT
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee(3) 0.65%
Distribution (12b-1) fee 0.00%
Other expenses(3) 1.02%
Total Fund operating expenses(3) 1.67%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the last fiscal year, management
fees paid by the Fund were limited to 0.30%.
Other expenses are restated to reflect current
fees. Other expenses are being limited to
0.32%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.62%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $170 $526 $907 $1,976
</TABLE>
As an investor in the
Government Income Fund, you
will pay the following fees
and expenses when you buy and
hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
31
<PAGE> 144
AMSOUTH LIMITED
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Limited Maturity Fund) seeks
current income consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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 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).
In managing the Fund's portfolio, the 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 and which the
manager believes are the best relative values.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
32
<PAGE> 145
AMSOUTH LIMITED
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1990 8.52%
91 11.94%
92 6.03%
93 7.16%
94 -1.8%
95 12.72%
96 3.69%
97 6.89%
98 7.26%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 1.28%.
Best
quarter: 4.59% 6/30/89
Worst
quarter: -1.41% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (10/01/93)
<S> <C> <C> <C>
TRUST SHARES 7.26% 5.63% 7.15%
MERRILL LYNCH 1-5 YEAR
GOVERNMENT/CORPORATE BOND INDEX 7.69% 6.28% 6.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
The chart and table on this page
show how the Limited Term Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over five years to
demonstrate that the Fund's value
varied at different times. The
table below it compares the Fund's
performance over time to that of
Merrill Lynch 1-5 Year
Government/Corporate Bond Index, an
unmanaged index representative of
the total return of short-term
government and corporate bonds. Of
course, past performance does not
indicate how the Fund will perform
in the future.
33
<PAGE> 146
AMSOUTH LIMITED
RISK/RETURN SUMMARY AND FUND EXPENSES TERM BOND FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee(3) 0.65%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.35%
Total Fund operating expenses(3) 1.00%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the last fiscal year, management
fees paid by the Fund were limited to 0.50%.
Other expenses are restated to reflect current
fees. Other expenses are being limited to
0.23%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.73%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $102 $318 $552 $1,225
</TABLE>
As an investor in the Limited
Term Bond Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
34
<PAGE> 147
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Florida Tax-Free Fund) seeks
to produce as high a level of current interest income exempt
from Federal income taxes and Florida intangibles taxes as
is consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in municipal
securities of the State of Florida and its political
subdivisions, that provide income exempt from Federal
personal income tax and Florida intangible personal property
tax. The Fund invests in Florida municipal securities only
if they are high grade (rated at the 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).
Although there is no limit on the Fund's average maturity,
normally it is expected to be between five to ten years. In
managing the Fund's portfolio, the manager uses a "top down"
investment management approach focusing on interest rates
and credit quality. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund's portfolio based on expectations about interest rate
movements. The manager then selects securities consistent
with this target based on their individual characteristics.
The Fund is non-diversified and, therefore, may concentrate
its investments in a limited number of issuers. The Fund may
also invest in certain other debt securities in addition to
those described above. For a more complete description of
the various securities in which the Fund may invest, please
see the Additional Investment Strategies and Risks on page
51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
STATE SPECIFIC RISK: By concentrating its investments in
securities issued by Florida and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Florida than funds that are more geographically diversified.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
LIQUIDITY RISK: The risk that certain securities may be
difficult or impossible to sell at the time and the price
that would normally prevail in the market.
NON-DIVERSIFIED RISK: Because the Fund is non-diversified,
it 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.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
35
<PAGE> 148
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1995 11.09%
96 3.60%
97 6.69%
98 5.44%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -1.18%.
Best
quarter: 4.40% 3/31/95
Worst
quarter: -1.04% 12/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 SINCE INCEPTION
YEAR (09/30/94)
<S> <C> <C>
TRUST SHARES 5.42% 6.50%
MERRILL LYNCH 3-7 YEAR MUNICIPAL
BOND INDEX 5.95% 6.23%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
The chart and table on this page
show how the Florida Tax-Exempt
Fund has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Trust
shares for its first full calendar
year of operations. The table below
it compares the Fund's performance
over time to that of the Merrill
Lynch 3-7 Year Municipal Bond
Index, an unmanaged index generally
representative of the
intermediate-term municipal bonds.
Of course, past performance does
not indicate how the Fund will
perform in the future.
36
<PAGE> 149
AMSOUTH FLORIDA
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-EXEMPT FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee(3) 0.65%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.38%
Total Fund operating expenses(3) 1.03%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the last fiscal year, management
fees paid by the Fund were limited to 0.30%.
Other expenses are restated to reflect current
fees. Other expenses are being limited to
0.21%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.51%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $105 $328 $569 $1,259
</TABLE>
As an investor in the Florida
Tax-Exempt Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
37
<PAGE> 150
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce as high a level of current federal
tax-exempt income, as is consistent with the preservation of
capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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. Municipal securities are debt
obligations, such as bonds and notes, issued by states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities.
Additionally, the Fund 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 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 may purchase securities of any maturity. In
managing the Fund's portfolio, the 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.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
TAX RISK. The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
CONCENTRATION RISK: By concentrating its investments in
securities issued by Alabama and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Alabama than funds that are more geographically diversified.
Additionally, because of the relatively small number of
issuers of Alabama municipal securities, the Fund is likely
to invest in a limited number of issuers.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
</TABLE>
38
<PAGE> 151
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-TO-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1998 5.42%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was -1.15%.
Best
quarter: 3.02% 9/30/98
Worst
quarter: 0.43% 12/31/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 SINCE INCEPTION
YEAR (07/01/97)
<S> <C> <C>
TRUST SHARES 5.42% 6.50%
MERRILL LYNCH 3-7 YEAR
MUNICIPAL BOND INDEX 5.95% 6.62%
</TABLE>
(1 )Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
The chart and table on this page
show how the Municipal Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Trust
Shares for its first full calendar
year of operations. The table below
it compares the Fund's performance
over time to that of the Merrill
Lynch 3-7 Year Municipal Bond
Index, an unmanaged index generally
representative of municipal bonds
with intermediate maturities. Of
course, past performance does not
indicate how the Fund will perform
in the future.
39
<PAGE> 152
AMSOUTH MUNICIPAL
RISK/RETURN SUMMARY AND FUND EXPENSES BOND FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee(3) 0.65%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.32%
Total Fund operating expenses(3) 0.97%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the last fiscal year, management
fees paid by the Fund were limited to 0.40%.
Other expenses are restated to reflect current
fees. Other expenses are being limited to
0.23%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.63%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $99 $309 $536 $1,190
</TABLE>
As an investor in the
Municipal Bond Fund, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
40
<PAGE> 153
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
MONEY MARKET FUNDS
<TABLE>
<S> <C>
These Funds seek current income with liquidity and stability
of principal by investing primarily in short-term debt
securities. The Funds seek to maintain a stable price of
$1.00 per share.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for
a higher degree of safety
- in the case of the Tax-Exempt Money Market Fund, seeking
Federal tax-exempt income
These Funds may not be appropriate if you are:
- seeking high total return
- pursuing a long-term goal or investing for retirement
</TABLE>
41
<PAGE> 154
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Prime Obligations Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests 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
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
42
<PAGE> 155
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1989 9%
90 7.86%
91 5.77%
92 3.39%
93 2.61%
94 3.72%
95 5.50%
96 4.92%
97 5.09%
98 4.98%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 3.32%.
Best
quarter: 2.35% 6/30/89
Worst
quarter: 0.63% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
TRUST SHARES 4.98% 4.84% 5.38%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Trust Shares was 4.54%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
4.39% for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the Prime Money Market
Fund has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
43
<PAGE> 156
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.31%
Total Fund operating expenses(3) 0.71%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.30%. Total expenses after fee waivers and
expense reimbursements for Trust shares are
0.70%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $73 $227 $395 $883
</TABLE>
As an investor in the Prime
Money Market Fund, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
44
<PAGE> 157
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth U.S. Treasury Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests exclusively in
short-term U.S. dollar-denominated obligations issued by the
U.S. Treasury ("U.S. Treasury Securities"), separately
traded component parts of those securities called STRIPs,
and repurchase agreements collateralized by U.S. Treasury
Securities.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
45
<PAGE> 158
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1989 8.75%
90 7.64%
91 5.48%
92 3.32%
93 2.54%
94 3.55%
95 5.30%
96 4.69%
97 4.75%
98 4.60%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 3.03%.
Best
quarter: 2.23% 6/30/89
Worst
quarter: 0.62% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
TRUST SHARES 4.60% 4.58% 5.14%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Trust Shares was 3.97%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
3.82% for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the U.S. Treasury Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
46
<PAGE> 159
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption Fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.32%
Total Fund operating expenses(3) 0.72%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.31%. Total expenses after fee waivers and
expense reimbursements for Premier shares are
0.71%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
TRUST SHARES $74 $230 $401 $894
</TABLE>
As an investor in the U.S.
Treasury Money Market Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
47
<PAGE> 160
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Tax-Exempt Fund) seeks as
high a level of current interest income exempt from federal
income taxes as is consistent with the preservation of
capital and relative stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund 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. Short-term
municipal securities are debt obligations, such as bonds and
notes, issued by states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities which, generally have remaining maturities
of one year or less. 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.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
The Fund may also invest in certain other short-term debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 51 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
TAX RISK. The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 51.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
48
<PAGE> 161
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
1991 3.91%
92 2.59%
93 1.92%
94 2.33%
95 3.44%
96 3.03%
97 3.20%
98 2.99%
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 2.01%.
Best
quarter: 1.40% 12/31/90
Worst
quarter: 0.44% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1998)(1)
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS (12/19/91)
<S> <C> <C> <C>
TRUST SHARES 2.99% 3.00% 3.09%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Trust Shares was 3.13%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
2.78% for this time period. For current yield information on the Fund, call
1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
The chart and table on this page
show how the Tax-Exempt Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
49
<PAGE> 162
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(2) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution (12b-1) fee 0.00%
Other expenses(3) 0.35%
Total Fund operating expenses(3) 0.75%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.11%. Total expenses after fee waivers and
expense reimbursements for Trust shares is
0.51%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
TRUST SHARES $77 $240 $417 $930
</TABLE>
As an investor in the
Tax-Exempt Money Market Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
50
<PAGE> 163
[ICON]
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
CAPITAL APPRECIATION FUNDS
BALANCED FUND -- The Fund will normally invest in equity securities
consisting of common stocks but may also invest in other equity-type
securities such as warrants, preferred stocks and convertible debt
instruments.
As a fundamental policy, the Fund will invest at least 25% of its total
assets in fixed-income securities. Fixed-income securities include debt
securities, preferred stock and that portion of the value of securities
convertible into common stock, including convertible preferred stock and
convertible debt, which is attributable to the fixed-income characteristics
of those securities. The Fund's debt securities will consist of high grade
securities, which are those securities rated in one of the three highest
rating categories by a nationally recognized statistical rating organization
(an "NRSRO") at the time of purchase, or if not rated, found by the Advisor
under guidelines established by the Trust's Board of Trustees to be of
comparable quality. If the rating of any debt securities held by the Fund
falls below the third highest rating the Fund will not have to dispose of
those obligations and may continue to hold them if the portfolio manager
considers it to be appropriate.
GROWTH FUND -- The Fund will normally invest at least 65% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 35% of the value of its assets in preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments.
ENHANCED MARKET FUND -- The Fund will normally invest at least 80% of its
total assets in equity securities drawn from the S&P 500 Index. The Fund may
invest up to 20% of its total assets in equity securities not held in the S&P
500, corporate bonds, notes, and warrants, and short-term money market
instruments. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market.
VALUE FUND -- The Fund will normally invest at least 80% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, and warrants, and short-term money market instruments.
EQUITY INCOME FUND -- The Fund will normally invest at least 65% of its total
assets in income producing equity securities such as common stocks, preferred
stocks, and securities convertible into common stocks, such as convertible
bonds and convertible preferred stocks. The Fund may also invest up to 35% of
the value of its total assets in corporate bonds, notes, and warrants, and
short-term money market instruments or conducting substantial business.
REGIONAL EQUITY FUND -- The Fund will normally invest at least 65% of its
total assets in common stocks and securities convertible into common stocks
of companies headquartered in the Southern Region. The Fund may also invest
up to 35% of its total assets in common stocks and securities convertible
into common stock of companies headquartered outside the Southern Region,
preferred stocks, corporate bonds, notes, and warrants, and short-term money
market instruments.
SELECT EQUITY FUND -- The Fund will normally invest at least 65% of its
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization greater than $2 billion at the time of purchase. The Fund may
also invest up to 35% of the value of its total assets in common stocks and
securities convertible into common stocks of companies with market
capitalizations less than $2 billion, preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments. Stock futures
and option contracts, stock index futures and index option contracts may be
used to hedge cash and maintain exposure to the U.S. equity market.
SMALL CAP FUND -- The Fund will normally invest at least 80% of its total
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization that are equivalent to the capitalization of the companies in
the Russell 2000(R) Growth Index at the time of purchase. The Fund may invest
up to 20% of the value of its total assets in common stocks and securities
convertible into common stocks of companies with a market capitalization of
greater than $2 billion determined at the time of the purchase, preferred
stocks, corporate bonds, notes, and warrants, and short-term money market
instruments.
51
<PAGE> 164
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
ALL FUNDS: Temporary Defensive Measures -- If deemed appropriate under the
circumstances, the Growth Fund, Equity Income Fund, Regional Equity Fund and
Select Equity Fund may each increase its holdings in short-term money market
instruments to over 35% of its total assets. Similarly, the Enhanced Market
Fund, Value Fund and Small Cap Fund may each increase its holdings in
short-term money market instruments to over 20% of its total assets. Each
Capital Appreciation Fund may hold uninvested cash pending investment.
INCOME FUNDS
BOND FUND -- The Fund will invest at least 65% of its total assets in bonds
(including debentures). For temporary defensive purposes, the Fund may hold
more than 35% of its total assets in cash and cash equivalents. "Cash
equivalents" are short-term, interest-bearing instruments or deposits known
as money market instruments.
GOVERNMENT INCOME FUND -- The Fund invests at least 65% of its total assets
in obligations issued or guaranteed by the U.S. government or its agencies
and instrumentalities. Up to 35% of the Fund's total assets may be invested
in other types of debt securities, preferred stocks and options. Under normal
market conditions, the Fund will invest up to 80% of its total assets in
mortgage-related securities issued or guaranteed by the U.S. government or
its agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related
securities issued by nongovernmental entities which are rated, at the time of
purchase, in one of the three highest rating categories by an NRSRO or, if
unrated, determined by its portfolio manager to be of comparable quality.
LIMITED TERM BOND FUND -- The Fund will normally invest at least 65% of its
total assets in bonds (including debentures), notes and other debt securities
which have a stated or remaining maturity of five years or less or which have
an unconditional redemption feature that will permit the Fund to require the
issuer of the security to redeem the security within five years from the date
of purchase by the Fund or for which the Fund has acquired an unconditional
"put" to sell the security within five years from the date of purchase by the
Fund. The remainder of the Fund's assets may be invested in bonds (including
debentures), notes and other debt securities which have a stated or remaining
maturity of greater than five years, cash, cash equivalents, and money-market
instruments. For temporary defensive purposes, the Fund may invest more than
35% of its total assets in cash, cash equivalents and corporate bonds with
remaining maturities of less than 1 year.
If the Fund acquires a debt security with a stated or remaining maturity in
excess of five years, the Fund may acquire a "put" with respect to the
security. Under a "put", the Fund would have the right to sell the debt
security within a specified period of time at a specified minimum price. The
Fund will only acquire puts from dealers, banks and broker-dealers which the
Advisor has determined are creditworthy. A put will be sold, transferred, or
assigned by the Fund only with the underlying debt security. The Fund will
acquire puts solely to shorten the maturity of the underlying debt security.
FLORIDA TAX-EXEMPT FUND -- As a fundamental policy, the Fund will normally
invest least at 80% of its net assets in Florida Municipal Securities.
Florida municipal securities include bonds, notes and warrants generally
issued by or on behalf of the State of Florida and its political
subdivisions, the interest on which, in the opinion of the issuer's bond
counsel at the time of issuance, is exempt from federal income tax, is not
subject to the federal alternative minimum tax for individuals, and is exempt
from the Florida intangible personal property tax.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations"). For purposes of the 20%
basket the Fund may also invest in municipal securities of states other than
Florida.
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. The Fund may also increase its holdings in
municipal securities of states other than Florida to over 20% of its net
assets in such situations. Taxable obligations may include obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities (some
of which may be subject to repurchase agreements), certificates of deposit,
demand and time deposits, bankers' acceptances of selected banks, and
commercial paper meeting the Tax-Free Funds' quality standards (as described
in the SAI) for tax-exempt commercial paper.
52
<PAGE> 165
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
The Florida Fund is a non-diversified fund and may concentrate its
investments in the securities of a limited number of issuers. Thus, the
Florida Fund generally may invest up to 25% of its total assets in the
securities of each of any two issuers.
MUNICIPAL BOND FUND -- As a fundamental policy, the Fund will normally invest
at least 80% of its net assets in Municipal Securities and in securities of
money market mutual funds which invest primarily in obligations exempt from
federal income tax. Additionally, as a fundamental policy, the Fund will
invest, under normal market conditions, at least 65% of the its total assets
in bonds.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations").
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. Taxable obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit, demand and time deposits, bankers' acceptances of
selected banks, and commercial paper meeting the Tax-Free Funds' quality
standards (as described in the SAI) for tax-exempt commercial paper.
The 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 from 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.
MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND -- As a fundamental policy, under normal market
conditions at least 80% of the Fund's total assets will be invested in
municipal securities and in securities of money market mutual funds which
invest primarily in obligations exempt from federal income tax. It is also a
fundamental policy that the Fund may invest up to 20% of its total assets in
obligations, the interest on which is either subject to regular federal
income tax or treated as a preference item for purposes of the federal
alternative minimum tax for individuals ("Taxable Obligations"). For
temporary defensive purposes, however, the Fund may increase its short-term
Taxable Obligations to over 20% of its total assets and hold uninvested cash
reserves pending investment. Taxable Obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit and bankers' acceptances of selected banks, and
commercial paper.
The Fund will invest only in those municipal securities and other obligations
which are considered by the portfolio manager to present minimal credit
risks. In addition, investments will be limited to those obligations which,
at the time of purchase, (i) possess one of the two highest short-term
ratings from an NRSRO in the case of single-rated securities or (ii) possess,
in the case of multiple-rated securities, one of the two highest short-term
ratings by at least two NRSROs; or (iii) do not possess a rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under the guidelines
adopted by the Trustees.
53
<PAGE> 166
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. The following
table describes the securities and techniques the Funds use, as well as the
main risks they pose. Equity securities are subject mainly to market risk.
Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. Following the table is a more complete discussion of risk. You may
also consult the Statement of Additional Information for additional details
regarding these and other permissible investments.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
Balanced Fund 1
Growth Fund 2
Enhanced Market Fund 3
Value Fund 4
Equity Income Fund 5
Regional Equity Fund 6
Select Equity Fund 7
Small Cap Fund 8
Bond Fund 9
Government Income Fund 10
Limited Term Bond Fund 11
Florida Tax-Exempt Fund 12
Municipal Bond Fund 13
Prime Money Market Fund 14
U.S. Treasury Money Market Fund 15
Tax-Exempt Money Market Fund 16
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
AMERICAN DEPOSITARY RECEIPTS (ADRS): ADRs are foreign shares 1-8 Market
of a company held by a U.S. bank that issues a receipt Political
evidencing ownership. Dividends are paid in U.S. dollars. Foreign Investment
ASSET-BACKED SECURITIES: Securities secured by company 9,14 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Interest Rate
Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 2,4,6,9,14,16 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
Interest Rate
BONDS: Interest-bearing or discounted government or 1, 9-13 Interest Rate
corporate securities that obligate the issuer to pay the Market
bondholder a specified sum of money, usually at specific Credit
intervals, and to repay the principal amount of the loan at
maturity. The Funds will only purchase bonds that are high
grade (rated at the time of purchase in one of the three
highest rating categories by a nationally recognized
statistical rating organizations, or, if not rated,
determined to be of comparable quality by the Adviser.
</TABLE>
54
<PAGE> 167
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
CALL AND PUT OPTIONS: A call option gives the buyer the 1,3,5,7,9 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 2,9,12,14,16 Market
stated maturity. Credit
Liquidity
Interest Rate
COMMERCIAL PAPER: Secured and unsecured short-term 1-14,16 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
Interest Rate
COMMON STOCK: Shares of ownership of a company. 1-8 Market
CONVERTIBLE SECURITIES: Bonds or preferred stock that 1-8 Market
convert to common stock. Credit
DEMAND FEATURES: Securities that are subject to puts and 1,2,9-14,16 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
DERIVATIVES: Instruments whose value is derived from an 1-14,16 Management
underlying contract, index or security, or any combination Market
thereof, including futures, options (e.g., put and calls), Credit
options on futures, swap agreements, and some Interest Rate
mortgage-backed securities. Liquidity
Leverage
FOREIGN SECURITIES: Stocks issued by foreign companies, as 1-8,11 Market
well as commercial paper of foreign issuers and obligations Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Foreign Investment
FUTURES AND RELATED OPTIONS: A contract providing for the 3,7,9,11 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
FUNDING AGREEMENTS: Also known as guaranteed investment 14 Liquidity
contracts, an agreement where a Fund invests an amount of Credit
cash Credit with an insurance company and the insurance Market
company credits such investment on a monthly basis with Interest Rate
guaranteed interest which is based on an index. These
agreements provide that the guaranteed interest will not be
less than a certain minimum rate. These agreements also
provide for adjustment of the interest rate monthly and are
considered variable rate instruments. Funding Agreements are
considered illiquid investments, and, together with other
instruments in the Fund which are not readily marketable,
may not exceed 10% of the Fund's net assets.
HIGH-YIELD/HIGH-RISK/DEBT SECURITIES: 5 Credit
High-yield/High-risk/debt securities are securities that are Market
rated below investment grade by the primary rating agencies Liquidity
(e.g., BB or lower by Standard & Poor's and Ba or lower by Interest Rate
Moody's). These securities are considered speculative and
involve greater risk of loss than investment grade debt
securities. Other terms commonly used to describe such
securities include "lower rated bonds," "noninvestment grade
bonds" and "junk bonds."
</TABLE>
55
<PAGE> 168
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other investment 1-16 Market
companies. A Fund may invest up to 5% of its assets in the
shares of any one registered investment company, but may not
own more than 3% of the securities of any one registered
investment company or invest more than 10% of its assets in
the securities of other registered investment companies.
These registered investment companies may include money
market funds of AmSouth Funds and shares of other registered
investment companies for which the Adviser or a Sub-Adviser
to a Fund or any of their affiliates serves as investment
adviser, administrator or distributor. The Money Market
Funds may only invest in shares of other investment
companies with similar objectives.
MONEY MARKET INSTRUMENTS: Investment-grade, U.S. 1-14,16 Market
dollar-denominated debt securities that have remaining Credit
maturities of one year or less. These Securities may include
U.S. government obligations, Commercial paper and other
short-term corporate Obligations, repurchase agreements
collateralized with U.S. government securities, certificates
of deposit, bankers' acceptances, and other financial
Institution obligations. These securities may carry fixed or
variable interest rates.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1,9,10,14 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate mortgage Credit
investment conduits. Regulatory
MUNICIPAL SECURITIES: Securities issued by a state or 12,13,16 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as general Tax
obligation bonds, tax anticipation notes, bond anticipation Regulatory
notes, revenue anticipation notes, project notes, other Interest Rate
short-term tax-exempt obligations, municipal leases, and
Obligations of municipal housing authorities (single Family
revenue bonds).
There are two general types of municipal bonds:
General-obligation bonds, which are secured by the taxing
power of the issuer and revenue bonds, which take many
shapes and forms but are generally backed by revenue from a
specific project or tax. These include, but are not limited,
to certificates of participation (COPs); utility and sales
tax revenues; tax increment or tax allocations; housing and
special tax, including assessment district and community
facilities district (Mello-Roos) issues which are secured by
specific real estate parcels; hospital revenue; and
industrial development bonds that are secured by a private
company.
PREFERRED STOCKS: Preferred Stocks are equity securities 1-8 Market
that generally pay dividends at a specified rate and have
preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting
rights.
REPURCHASE AGREEMENTS: The purchase of a security and the 1-9,14,16 Market
simultaneous commitment to return the security to the seller Leverage
at an agreed upon price on an agreed upon date. This is
treated as a loan by a fund.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 2,3,7,8,9,14-16 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-14,16 Market
Fund's total assets. In return the Fund will receive cash, Leverage
other securities, and/or letters of credit. Liquidity
Credit
</TABLE>
56
<PAGE> 169
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 12-14,16 Liquidity
exchange for the deposit of funds. Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury investment 9-14,16 Market
growth receipts, and certificates of accrual of Treasury
securities.
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-3,7-14,16 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac. Interest Rate
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, separately 1-3,7-16 Market
traded registered interest and principal securities, and
coupons under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured demand notes 14,16 Credit
that permit the indebtedness to vary and provide Liquidity Liquidity
for periodic adjustments in the interest rate according to Interest Rate
the terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary
market in these notes, the Fund may demand payment of
principal and accrued interest at specified intervals.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 2,9,14,16 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand. Interest Rate
WARRANTS: Securities, typically issued with preferred stock 1-8 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-14,16 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
ZERO-COUPON DEBT OBLIGATIONS: Bonds and other debt that pay 1-14,16 Credit
no interest, but are issued at a discount from their value Interest Rate
at maturity. When held to maturity, their entire return Market
equals the difference between their issue price and their
maturity value.
</TABLE>
57
<PAGE> 170
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "Risk/Return Summary and Fund Expenses." Because of these risks,
the value of the securities held by the Funds may fluctuate, as will the
value of your investment in the Funds. Certain investments and Funds are more
susceptible to these risks than others.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INTEREST RATE RISK. The risk that debt prices overall will decline over
short or even long periods due to rising interest rates. A rise in interest
rates typically causes a fall in values while a fall in rates typically
causes a rise in values. Interest rate risk should be modest for shorter-term
securities, moderate for intermediate-term securities, and high for
longer-term securities. Generally, an increase in the average maturity of the
Fund will make it more sensitive to interest rate risk. The market prices of
securities structured as zero coupon or pay-in-kind securities are generally
affected to a greater extent by interest rate changes. These securities tend
to be more volatile than securities which pay interest periodically.
INVESTMENT STYLE RISK. The risk that returns from a particular class or
group of stocks (e.g., value, growth, small cap, large cap) will trail
returns from other asset classes or the overall stock market. Groups or asset
classes of stocks tend to go through cycles of doing better -- or
worse -- than common stocks in general. These periods can last for periods as
long as several years. Additionally, a particular asset class or group of
stocks could fall out of favor with the market, causing the Fund to
underperform funds that focus on other types of stocks.
LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may be
embedded directly in the characteristics of other securities.
HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Portfolio also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
Hedges are sometimes subject to imperfect matching between the derivative
and underlying security, and there can be no assurance that a Portfolio's
hedging transactions will be effective.
SPECULATIVE. To the extent that a derivative is not used as a hedge, the
Portfolio is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivatives original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Portfolio management or performance. This includes the
risk of missing out on an investment opportunity because the assets necessary
to take advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it
58
<PAGE> 171
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
PRE-PAYMENT/CALL RISK. The risk that the principal repayment of a security
will occur at an unexpected time. Prepayment risk is the chance that the
repayment of a mortgage will occur sooner than expected. Call risk is the
possibility that, during times of declining interest rates, a bond issuer
will "call" -- or repay -- higher yielding bonds before their stated
maturity. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments and calls generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid or called, a Fund
may have to reinvest in securities with a lower yield. In this event, the
Fund would experience a decline in income -- and the potential for taxable
capital gains. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss. Prepayment/call risk
is generally low for securities with a short-term maturity, moderate for
securities with an intermediate-term maturity, and high for securities with a
long-term maturity.
REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
SMALL COMPANY RISK. Stocks of small-capitalization companies are more risky
than stocks of larger companies and may be more vulnerable than larger
companies to adverse business or economic developments. Many of these
companies are young and have a limited track record. Small cap companies may
also have limited product lines, markets, or financial resources. Securities
of such companies may be less liquid and more volatile than securities of
larger companies or the market averages in general and, therefore, may
involve greater risk than investing in larger companies. In addition, small
cap companies may not be well-known to the investing public, may not have
institutional ownership, and may have only cyclical, static, or moderate
growth prospects. If a Fund concentrates on small-capitalization companies,
its performance may be more volatile than that of a fund that invests
primarily in larger companies.
TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
YEAR 2000 RISK. AmSouth Funds depends on the smooth functioning of computer
systems in almost every aspect of its business. Like other mutual funds,
businesses and individuals around the world, AmSouth Funds could be adversely
affected if the computer systems used by its service providers do not
properly process dates on and after January 1, 2000 and distinguish between
the year 2000 and the year 1900. AmSouth Funds has made inquiry of its
service providers to determine whether they expect to have their computer
systems adjusted for the year 2000 transition, and is seeking assurances from
each service provider that it expects its system to accommodate the year 2000
transition without material adverse consequences to AmSouth Funds. While it
is likely that such assurances will be obtained, AmSouth Funds and its
shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or custodians, banks, broker-dealers or others with
which AmSouth Funds does business.
59
<PAGE> 172
FUND MANAGEMENT
THE INVESTMENT ADVISER
AmSouth Bank, (AmSouth or the "Adviser"), is the adviser for the Funds.
AmSouth is the bank affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of September 30, 1999 of $20 billion and
operated 276 banking offices in Alabama, Florida, Georgia and Tennessee.
AmSouth has provided investment management services through its Trust
Investment Department since 1915. As of July 31, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary management and
provided custody services for an additional $21 billion in securities.
AmSouth is the largest provider of trust services in Alabama and its Trust
Natural Resources and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real estate interests.
Through its portfolio management team, AmSouth makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 07/31/99
<S> <C>
-----------------
Balanced Fund 0.80%
------------------------------
Growth Fund 0.80%
------------------------------
Enhanced Market Fund 0.45%
------------------------------
Value Fund 0.80%
------------------------------
Equity Income Fund 0.80%
------------------------------
Regional Equity Fund 0.80%
------------------------------
Select Equity Fund 0.80%
------------------------------
Small Cap Fund 1.20%
------------------------------
Bond Fund 0.50%
------------------------------
Florida Tax-Exempt Fund 0.30%
------------------------------
Government Income Fund 0.30%
------------------------------
Limited Term Bond Fund 0.50%
------------------------------
Municipal Bond Fund 0.40%
------------------------------
Prime Money Market Fund 0.40%
------------------------------
U.S. Treasury Money Market Fund 0.40%
------------------------------
Tax-Exempt Money Market Fund 0.20%
--------------------------------------------------------------------------
</TABLE>
THE INVESTMENT SUB-ADVISERS
GROWTH FUND. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
serves as investment sub-advisor to the Growth Fund, pursuant to a
Sub-Advisory Agreement with AmSouth. Under the Sub-Advisory Agreement,
Peachtree manages the Fund, selects investments, and places all orders for
purchases and sales of securities, subject to the general supervision of the
Trust's Board of Trustees and AmSouth in accordance with the Fund's
investment objectives, policies and restrictions.
Peachtree is a division of SSB Citi Fund Management LLC, which is an indirect
wholly-owned subsidiary of Citigroup, Inc. Peachtree has performed advisory
services since 1994 for institutional clients, and has its principal offices
at 303 Peachtree Street, N.E., Atlanta, GA 30308. SSB Citi Fund Management
LLC and its predecessors have been providing investment advisory services to
mutual funds since 1968. As of July 31, 1999, SSB Citi Fund Management LLC
had aggregate assets under management of approximately $114 billion.
60
<PAGE> 173
FUND MANAGEMENT
ENHANCED MARKET FUND AND SELECT EQUITY FUND. OakBrook Investments, LLC
("OakBrook") serves as investment sub-adviser to the Enhanced Market Fund and
the Select Equity Fund pursuant to a Sub-Advisory Agreement with AmSouth.
Under the Sub-Advisory Agreement, OakBrook manages the Funds, selects
investments, and places all orders for purchases and sales of securities,
subject to the general supervision of the Trust's Board of Trustees and
AmSouth in accordance with each Fund's investment objective, policies, and
restrictions.
OakBrook is 50% owned by AmSouth and 50% owned by Neil Wright, Janna Sampson
and Peter Jankovskis. OakBrook was organized in February, 1998 to perform
advisory services for investment companies and other institutional clients
and has its principal offices at 701 Warrenville Road, Suite 135, Lisle, IL
60532.
The following table sets forth the performance data relating to the
historical performance of two institutional funds, the Employee Benefit Plans
Large Cap Equity Growth Fund (the "Large Cap Fund") and the Employee Benefit
Plans Enhanced S&P 500 Equity Fund (the "Enhanced S&P Fund"), since the dates
indicated, that have investment objectives, policies, strategies and risks
substantially similar to those of the AmSouth Select Equity Fund and the
AmSouth Enhanced Market Fund, respectively.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Select Equity Fund, and, as such, have the primary responsibility for the
day-to-day portfolio management of the Fund. From November 1, 1993 to
February 25, 1998, Dr. Wright was the portfolio manager of the Large Cap
Fund, a commingled investment fund managed by ANB Investment Management and
Trust Company ("ANB") for employee benefit plan accounts. Dr. Wright received
the same portfolio management assistance and support in managing the Large
Cap Fund from Ms. Sampson and Dr. Jankovskis that he receives from them in
managing the Select Equity Fund. This data is provided to illustrate the past
performance of Dr. Neil Wright in managing a substantially similar account as
measured against a specified market index and does not represent the
performance of the Select Equity Fund. Investors should not consider this
performance data as an indication of future performance of the Select Equity
Fund.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Enhanced Market Fund, and, as such, have the primary responsibility for
the day-to-day portfolio management of the Fund. From December 1, 1994 to
February 25, 1998, Dr. Wright, Ms. Sampson, and Dr. Jankovskis were the
portfolio managers of the Enhanced S&P Fund, a commingled investment fund
managed by ANB for employee benefit plan accounts. This data is provided to
illustrate the past performance of Dr. Neil Wright, Ms. Sampson, and Dr.
Jankovskis in managing a substantially similar account as measured against a
specified market index and does not represent the performance of the Enhanced
Market Fund. Investors should not consider this performance data as an
indication of future performance of the Enhanced Market Fund.
The performance data shown below relating to the institutional accounts was
calculated on a total return basis and includes all dividends and interest,
accrued income and realized and unrealized gains and loses. The returns of
the institutional account reflect the deduction of an investment advisory fee
of 1.00%, brokerage commissions, execution costs, and custodial fees paid by
ANB's institutional private accounts, without provision for federal or state
income taxes. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns.
The institutional private accounts were not subject to the same types of
expenses to which the Select Equity Fund and the Enhanced Market Fund are
subject nor to the diversification requirements, specific tax restrictions
and investment limitations imposed on the Fund by the Investment Company Act
or Subchapter M of the Internal Revenue Code. Consequently, the performance
results for the institutional accounts could have been adversely affected if
the accounts had been regulated as investment company under the federal
securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
61
<PAGE> 174
FUND MANAGEMENT
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Select Equity
Fund and the Enhanced Market Fund or an individual investor investing in such
Funds. The investment results were not calculated pursuant to the methodology
established by the SEC that will be used to calculate the Select Equity
Fund's and the Enhanced Market Fund's performance results. Investors should
also be aware that the use of a methodology different from that used below to
calculate performance would result in different performance data. All
information set forth in the table below relies on data supplied by OakBrook
or from statistical services, reports or other sources believed by OakBrook
to be reliable. However, except as otherwise indicated, such information has
not been verified and is unaudited.
<TABLE>
<CAPTION>
ENHANCED S&P 500
YEAR LARGE CAP FUND S&P FUND INDEX(1)
---- ------------------ ------------ ------------
<S> <C> <C> <C>
1993(2) 2.79% -- 0.28%
1994 5.39% -- 1.31%
1994(3) -- 1.28% 1.46%
1995 32.26% 35.99% 37.43%
1996 20.34% 26.36% 23.27%
1997 38.36% 33.50% 33.36%
1998(4) 6.72% 8.63% 8.33%
Since inception(5) 24.09% -- 23.47%
Since inception(6) -- 32.96% 32.36%
</TABLE>
(1) The S&P 500 Index is an unmanaged index which measures the performance of
500 stocks representative of the U.S. equity market.
(2) Total return for the period from November 1, 1993 through December 31,
1993. Returns have not been annualized.
(3) Total return for the period from December 1, 1994 through December 31,
1994. Returns have not been annualized.
(4) Total return for the period from January 1, 1998, through January 31,
1998. Returns have not been annualized.
(5) Annualized total return for the Large Cap Fund is for the period from
November 1, 1993 through January 31, 1998.
(6) Annualized total return for the Enhanced S&P Fund is for the period from
December 1, 1994 through January 31, 1998.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
EQUITY INCOME FUND. Rockhaven Asset Management, LLC ("Rockhaven") serves as
investment sub-adviser to the Equity Income Fund pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Rockhaven manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objective,
policies, and restrictions.
Rockhaven is 50% owned by AmSouth and 50% owned by Mr. Christopher H. Wiles.
Rockhaven was organized in 1997 to perform advisory services for investment
companies and has its principal offices at 100 First Avenue, Suite 1050,
Pittsburgh, PA 15222.
Mr. Wiles is the portfolio manager of the Equity Income Fund and has primary
responsibility for the day-to-day portfolio management of the Fund. From
August 1, 1991 to January 31, 1997, he was the portfolio manager of the
Federated Equity Income Fund.
62
<PAGE> 175
FUND MANAGEMENT
The cumulative total return for the Class A Shares of the Federated Equity
Income Fund from August 1, 1991 through January 31, 1997 was 139.82%, absent
the imposition of a sales charge. The cumulative total return for the same
period for the Standard & Poor's Composite Stock Price Index ("S&P 500
Index") was 135.09%. The cumulative total return for the Class B Shares of
the Federated Equity Income Fund from September 27, 1994 (date of initial
public offering) through January 31, 1997 was 62.64%, absent the imposition
of a contingent deferred sales charge. The cumulative total return for the
same period for the S&P 500 Index was 79.69%. At January 31, 1997, the
Federated Equity Income Fund had approximately $970 million in net assets. As
portfolio manager of the Federated Equity Income Fund, Mr. Wiles had full
discretionary authority over the selection of investments for that fund.
Average annual total returns for the one-year, three-year, and five-year
periods ended January 31, 1997 and for the entire period (during which Mr.
Wiles managed the Class A Shares of the Federated Equity Income Fund and for
the one-year and since inception period for the Class B Shares of the
Federated Equity Income Fund) compared with the performance of the S&P 500
Index and the Lipper Equity Income Fund Index were:
PRIOR PERFORMANCE OF CLASS A SHARES AND CLASS B SHARES OF THE FEDERATED
EQUITY INCOME FUND
<TABLE>
<CAPTION>
LIPPER
FEDERATED EQUITY S&P 500 EQUITY INCOME
INCOME FUND(+*) INDEX(@) FUND INDEX(+)
---------------------- ----------- -----------------
<S> <C> <C> <C>
CLASS A SHARES
(absent imposition of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through
January 31, 1997 17.25% 16.78% 14.99%
CLASS A SHARES
(assuming imposition of the Federated Equity
Income Fund's maximum sales charge)
One Year 16.48%
Three Years 14.85%
Five Years 15.20%
August 1, 1991 through January 31, 1997 16.05%
CLASS B SHARES
(absent imposition of contingent deferred
sales charge)
One Year 22.26% 26.34% 19.48%
September 27, 1994 through January 31, 1997 23.15% 28.44% 20.65%
CLASS B SHARES
(assuming imposition of the Federated Equity
Income Fund's maximum contingent deferred
sales charge)
One Year 16.76%
September 27, 1994 through January 31, 1997 22.79%
</TABLE>
(+) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(*) During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares (the shares most similar to the
Class A Shares of the AmSouth Equity Income Fund) of the Federated Equity
Income Fund ranged from 0.95% to 1.05% of the fund's average daily net
assets. During the period from September 27, 1994 through January 31, 1997
the operating expense ratio for the Class B Shares of the Federated Equity
Income Fund ranged from 1.80% to 1.87% of the fund's average daily net
assets. The operating expenses of the Class A Shares and Class B Shares of
the Federated Equity Income Fund were lower than the projected operating
expenses of the Class A Shares and Class B Shares, respectively, of the
AmSouth Equity Income Fund. If the actual operating expenses of the AmSouth
Equity Fund are higher than the historical operating expenses of the
Federated Equity Income Fund, this could negatively affect performance.
(@) The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock market.
The Index is adjusted to reflect reinvestment of dividends.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
63
<PAGE> 176
FUND MANAGEMENT
The Federated Equity Income Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Equity Income Fund. Share prices and investment returns will fluctuate
reflecting market conditions, as well as changes in company-specific
fundamentals of portfolio securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager
from August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors
in 1990 and served as a Vice President of the fund's investment advisor from
1992 and Senior Vice President from October, 1996 to January 31, 1997. Mr.
Wiles served as Assistant Vice President of the Fund's investment advisor in
1991. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
SMALL CAP FUND. Sawgrass Asset Management, LLC ("Sawgrass") serves as
investment sub-adviser to the Small Cap Fund, pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Sawgrass manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objectives,
policies and restrictions.
Sawgrass is 50% owned by AmSouth and 50% owned by Sawgrass Asset Management,
Inc. Sawgrass Asset Management, Inc. is controlled by Mr. Dean McQuiddy, Mr.
Brian Monroe and Mr. Andrew Cantor. Sawgrass was organized in January, 1998
to perform advisory services for investment companies and other institutional
clients and has its principal offices at 4337 Pablo Oaks Court, Jacksonville,
FL 32224.
The following tables set forth the performance data relating to the
historical performance of an institutional fund (the Employee Benefit Small
Capitalization Fund) and a mutual fund (the Emerald Small Capitalization
Fund), since the dates indicated, that have investment objectives, policies,
strategies and risks substantially similar to those of the AmSouth Small Cap
Fund. Mr. Dean McQuiddy, a Principal of Sawgrass, is the portfolio manager
for the Small Cap Fund, and, as such, has the primary responsibility for the
day-to-day portfolio management of the Fund. From January 1, 1987 to December
31, 1997, he was the portfolio manager of the Employee Benefit Small
Capitalization Fund, a common trust fund managed by Barnett Bank for employee
benefit plan accounts. On January 4, 1994, the Employee Benefits Small
Capitalization Fund transferred the majority of its assets to the Emerald
Small Capitalization Fund. Mr. McQuiddy was the portfolio manager for the
Emerald Small Capitalization Fund from its inception through December 31,
1997. This data is provided to illustrate the past performance of Mr.
McQuiddy in managing substantially similar accounts as measured against a
specified market index and does not represent the performance of the Small
Cap Fund. Investors should not consider this performance data as an
indication of future performance of the Small Cap Fund.
The performance data shown below relating to the institutional account was
calculated in accordance with required recommended standards of the
Association for Investment Management and Research(1) ("AIMR"), retroactively
applied to all time periods. The returns of the institutional account were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and losses. The returns of
the institutional account reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by Barnett's institutional
private account, without provision for federal or state income taxes.
Custodial fees of the institutional account, if any, were not included in the
calculation. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns. The yearly returns of the institutional fund are
calculated by geometrically linking the monthly returns.
The institutional private account was not subject to the same types of
expenses to which the Small Cap Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Fund by the Investment Company Act or Subchapter M of the Internal
Revenue Code. Consequently, the performance results for the institutional
account could have been adversely affected if the account had been regulated
as investment company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Small Cap
Fund or an individual investor investing in such Fund. The investment results
were not calculated pursuant to the methodology established by the SEC that
will be used to calculate the Small Cap Fund's performance results. Investors
should also be aware that the use of a methodology different from that used
below to calculate performance could result in different performance data.
(1) AIMR is a non-profit membership and education organization with more than
30,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.
64
<PAGE> 177
FUND MANAGEMENT
All information set forth in the tables below relies on data supplied by
Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
<TABLE>
<CAPTION>
SAWGRASS SMALL CAP Russell 2000(R)
YEAR COMPOSITE GROWTH INDEX(1)
---- ---------------------- -----------------
<S> <C> <C>
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years(2) 16.38% 12.76%
Last 10 Years(2) 16.09% 13.50%
</TABLE>
(1) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
(2) Through December 31, 1997.
PRIOR PERFORMANCE OF RETAIL SHARES AND CLASS B SHARES OF THE EMERALD SMALL
CAPITALIZATION FUND
The cumulative total return for the Retail Shares of the Emerald Small
Capitalization Fund from March 1, 1994 through December 31, 1997 was 56.78%
absent the imposition of a sales charge and was 49.72% including the
imposition of a sales charge. The cumulative total return for the same period
for the Russell 2000(R) Growth Index was 57.31%. The cumulative total return
for the Class B Shares of the Emerald Small Capitalization Fund from March 1,
1994 through March 11, 1996 was 39.85% absent the imposition of a contingent
deferred sales charge and was 34.25% including the imposition of a contingent
deferred sales charge. The cumulative total return for the same period for
the Russell 2000(R) Growth Index was 29.71%. At December 31, 1997, the
Emerald Small Capitalization Fund had approximately $180 million in assets.
As portfolio manager of the Emerald Small Capitalization Fund, Mr. McQuiddy
had full discretionary authority over the selection of investments for that
fund. Average annual total returns for the Retail Shares for the one-year,
three-year and since inception through December 31, 1997 period (the entire
period during which Mr. McQuiddy managed the Retail Shares of the Emerald
Small Capitalization Fund) and for the one-year and since inception through
March 11, 1996 period for the Class B Shares, compared with the performance
of the Russell 2000(R) Growth Index were:
65
<PAGE> 178
FUND MANAGEMENT
<TABLE>
<CAPTION>
EMERALD SMALL Russell 2000(R)
CAPITALIZATION GROWTH
FUND(1) INDEX(2)
------------------ -----------------
<S> <C> <C>
RETAIL SHARES
(absent imposition of sales charge)
One Year 12.62% 12.86%
Three Years 18.39% 18.12%
Since Inception 12.41% 12.55%
RETAIL SHARES
(assuming imposition of the Emerald Small
Capitalization Fund's maximum sales charge)
One Year 7.55% 12.86%
Three Years 16.58% 18.12%
Since Inception 10.17% 12.55%
CLASS B SHARES
(absent imposition of sales charge)
One Year 8.02% 12.86%
Since Inception 18.26% 13.89%
CLASS B SHARES
(assuming imposition of the Emerald Small
Capitalization Fund's maximum contingent
deferred sales charge)
One Year 4.99% 12.86%
Since Inception 15.87% 13.89%
</TABLE>
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
During the period from March 1, 1994 through December 31, 1997, the operating
expense ratio of the Retail Shares (the shares most similar to the Class A
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 1.73% to 2.50% of the Fund's average daily net assets.
During the period from March 1, 1994 through March 11, 1996, the operating
expense ratio of the Class B Shares (the shares most similar to the Class B
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 2.50% to 3.29% of the Fund's average daily net assets. If
the actual operating expenses of the AmSouth Small Cap Fund are higher than
the historical operating expenses of the Emerald Small Capitalization Fund,
this could negatively affect performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
The Emerald Small Capitalization Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Small Cap Fund. Share prices and investment returns will fluctuate reflecting
market conditions, as well as change in company-specific fundamentals of
portfolio securities.
PORTFOLIO MANAGERS
The primary portfolio manager for each Fund is as follows:
BALANCED FUND, VALUE FUND, AND REGIONAL EQUITY FUND -- Pedro Verdu, CFA, has
been the portfolio manager for the Value Fund, Regional Equity Fund and
Balanced Fund since their inception. Mr. Verdu has twenty-nine years of
experience as an analyst and portfolio manager; he is currently Senior Vice
President and Trust Investment Officer in charge of equity investments at
AmSouth.
GROWTH FUND -- Dennis A. Johnson, CFA, has been the portfolio manager for the
Growth Fund since its inception. Mr. Johnson, who has been employed by
Peachtree since 1994, is President and Chief Investment Officer of Peachtree.
From 1989 to 1994, Mr. Johnson was Vice President and Portfolio Manager at
Trusco Capital, the investment management subsidiary of Trust Company Bank,
Atlanta, Georgia.
66
<PAGE> 179
FUND MANAGEMENT
EQUITY INCOME FUND -- Christopher H. Wiles has been the portfolio manager for
the Equity Income Fund since its inception. Mr. Wiles is the President and
Chief Investment Officer of Rockhaven. From August 1, 1991 to January 31,
1997, he was the portfolio manager of the Federated Equity Income Fund. Mr.
Wiles joined Federated Investors in 1990 and served as a Vice President of
the fund's investment advisor from 1992 and Senior Vice President from
October 1996 to January 31, 1997.
SMALL CAP FUND -- Mr. Dean McQuiddy, CFA, has been the portfolio manager for
the Small Cap Fund since its inception. Mr. McQuiddy, who has been employed
by Sawgrass since 1998, is a Principal and the Director of Equity Investing
of Sawgrass. From 1983 to 1988, Mr. McQuiddy was portfolio manager at Barnett
Capital Advisors, Inc. Mr. McQuiddy holds membership in the Association of
Management and Research. He has 17 years of investment experience.
SELECT EQUITY FUND AND ENHANCED MARKET FUND -- The Select Equity Fund and
Enhanced Market Fund are managed by a team of investment professionals, all
of whom take an active part in the decision making process. Dr. Neil Wright,
Ms. Janna Sampson and Dr. Peter Jankovskis are the team members and have been
the portfolio managers of the Enhanced Market Fund and Select Equity Fund
since their inception. Each of the portfolio managers has been with OakBrook
since 1998. Dr. Wright is OakBrook's President and Chief Investment Officer.
From 1993 to 1997, Dr. Wright was the Chief Investment Officer of ANB
Investment Management & Trust Co. ("ANB"). Ms. Sampson is OakBrook's Director
of Portfolio Management. From 1993 to 1997, she was Senior Portfolio Manager
for ANB. Dr. Jankovskis is OakBrook's Director of Research. From 1992 to
1996, he was an Investment Strategist for ANB and from 1996 to 1997 he was
the Manager of Research for ANB.
BOND FUND -- The Bond Fund is co-managed by Brian B. Sullivan, CFA, and John
P. Boston, CFA. Mr. Sullivan has been the portfolio manager for the Bond Fund
since 1992. Mr. Sullivan has been a portfolio manager at the Advisor since
1984, and is currently Senior Vice President and Senior Trust Investment
Officer at AmSouth. Mr. Boston has co-managed the Bond Fund with Mr. Sullivan
since 1999. Mr. Boston has been associated with AmSouth's Trust Investment
Group for over five years and is currently Senior Vice President and Trust
Investment Officer in charge of taxable fixed-income investments.
FLORIDA TAX-EXEMPT FUND -- Steven L. Cass is the portfolio manager for the
Florida Tax-Exempt Fund. Mr. Cass has been associated with AmSouth's Trust
Investment Group since October 1995 and is currently Assistant Vice President
and Trust Investment Officer. Prior to joining AmSouth, Mr. Cass was a
registered representative and insurance agent employed by First of America
Securities.
GOVERNMENT INCOME FUND AND LIMITED TERM BOND FUND -- John P. Boston, CFA, has
been the portfolio manager for the Limited Term Bond Fund since August 1995,
and of the Government Income Fund since inception. Mr. Boston has been
associated with AmSouth's Trust Investment Group for over five years and is
currently Senior Vice President and Trust Investment Officer in charge of
taxable fixed-income investments.
MUNICIPAL BOND FUND -- Dorothy E. Thomas, CFA, is the portfolio manager for
the Municipal Bond Fund. Ms. Thomas has been associated with AmSouth's Trust
Investment Group for over sixteen years and is currently Senior Vice
President and Trust Investment Officer in charge of tax-free fixed-income
investments.
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as each Fund's administrator. Management and
administrative services of ASC include providing office space, equipment and
clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services. ASC is a
wholly owned subsidiary of BISYS Fund Services ("BISYS").
BISYS, whose address is also 3435 Stelzer Road, Columbus, Ohio 43219-3035,
serves as the distributor of each Fund's shares. BISYS may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
67
<PAGE> 180
[ICON]
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
AmSouth Funds offers different classes of Fund shares, which have different
expenses and other characteristics. Only one class of Fund shares, Trust
Shares, is offered in this prospectus. To choose the one that is best suited
to your needs and goals, consider the amount of money you want to invest, how
long you expect to invest it and whether you plan to make additional
investments. The following are some of the main characteristics of the Trust
Shares:
TRUST SHARES
- No sales charges.
- No Distribution and service (12b-1) fees.
- Available only to the following investors:
- investors for whom AmSouth acts in a fiduciary, advisory, custodial,
agency or similar capacity through an account with its Trust Department;
- investors who purchase Shares of a Fund through a 401(k) plan or a 403(b)
plan which by its terms permits purchases of Shares;
- orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies;
- investors who purchase through financial institutions approved by the
Distributor; and
- investors who provide an AmSouth Fund with its initial seed capital. All
other investors are eligible to purchase Class A Shares or Class B Shares
only.
For actual past expenses of each share class, see the fund-by-fund
information earlier in this prospectus.
The Funds also offer Class A Shares and Class B Shares, each of which has its
own expense structure. Class A Shares and Class B Shares are available to
investors who are not fiduciary clients of AmSouth Bank and who are not
otherwise eligible for Trust Shares. Call the Distributor for more
information (see back cover of this prospectus).
68
<PAGE> 181
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
-------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding
the total value of the Fund's
investments and other assets,
subtracting its liabilities and
then dividing that figure by
the number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
-------------------------------
Number of Shares
Outstanding
Generally, for other than the
Money Market Funds, you can
find the Fund's NAV daily in
The Wall Street Journal and
other newspapers. NAV is
calculated separately for each
class of shares.
-------------------------------
MONEY MARKET FUNDS
Per share net asset value (NAV) for each
Fund is determined and its shares are
priced twice a day. The NAV for the Prime
Money Market Fund and the U.S. Treasury
Money Market Fund is determined at 1:00
p.m. Eastern time and at the close of
regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern
time on days the Exchange and the Federal
Reserve Bank of Atlanta are open. The NAV
for the Tax-Exempt Money Market Fund is
determined at 12:00 p.m. Eastern time and
at the close of regular trading on the New
York State Exchange.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is accepted by
the Fund. This is what is known as the
offering price.
Each Fund uses the amortized cost method
of valuing its investments, which does not
take into account unrealized gains or
losses. For further information regarding
the methods used in valuing the Fund's
investments, please see the SAI.
OTHER FUNDS
Per share net asset value (NAV) for each
Fund is determined and its shares are
priced at the close of regular trading on
the New York Stock Exchange, normally at
4:00 p.m. Eastern time on days the
Exchange and the Federal Reserve Bank of
Atlanta are open.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is accepted by
the Fund. This is what is known as the
offering price.
The Fund's securities are generally valued
at current market prices. If market
quotations are not available, prices will
be based on fair value as determined by
the Fund's Trustees. For further
information regarding the methods used in
valuing the Fund's investments, please see
the SAI.
69
<PAGE> 182
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Trust
----------------------------------------------------------
Regular $1,000 $0
----------------------------------------------------------
Retirement $250 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that
do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement. The Distributor may reject
a purchase order if it considers it in
the best interest of the Fund and its
shareholders.
----------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31%
of taxable dividends, capital gains
distributions and redemptions paid to
shareholders who have not provided the
Fund with their certified taxpayer
identification number in compliance
with IRS rules. To avoid this, make
sure you provide your correct Tax
Identification Number (Social Security
Number for most investors) on your
account application.
---------------------------------------
You may purchase Funds through
the Distributor or through banks,
brokers and other investment
representatives, which may charge
additional fees and may require
higher minimum investments or
impose other limitations on
buying and selling shares.
Additionally, banks, brokers and
other financial institutions and
representatives may use shares of
the Money Market Funds in "sweep"
programs whereby the accounts of
a participating customer of the
financial institution or
representative is automatically
"swept" into shares of one of the
Money Market Funds. If you
purchase shares through an
investment representative, that
party is responsible for
transmitting orders by close of
business and may have an earlier
cut-off time for purchase and
sale requests. Consult your
investment representative or
institution for specific
information.
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
You may purchase Trust Shares by
following the procedures
established by the Distributor in
connection with the requirements
of qualified accounts maintained
by AmSouth Bank or other
financial institutions approved
by the Distributor. These
procedures may include sweep
arrangements where an account is
"swept" automatically no less
frequently than weekly into Trust
Shares of a Money Market Fund.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Income dividends are usually paid monthly. Capital gains are distributed at
least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
-----------------------------------------------------------------------------
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in
the Account Application, you can
elect to receive your distributions
in cash (check) or have distributions
(capital gains and dividends)
reinvested in another AmSouth Fund
without a sales charge. You must
maintain the minimum balance in each
Fund into which you plan to reinvest
dividends or the reinvestment will be
suspended and your dividends paid to
you. The Fund may modify or terminate
this reinvestment option without
notice. You can change or terminate
your participation in the
reinvestment option at any time.
70
<PAGE> 183
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is received by
the Fund, its transfer agent,
or your investment
representative. Normally you
will receive your proceeds
within a week after your
request is received. See
section on "General Policies
on Selling Shares below."
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
Call 1-800-451-8382 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on Selling
Shares -- Verifying Telephone Redemptions" below)
BY MAIL
1. Call 1-800-451-8382 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: AmSouth Funds P.O. Box 182733 Columbus, OH 43218-2733
BY OVERNIGHT SERVICE (SEE "GENERAL POLICIES ON SELLING SHARES -- REDEMPTIONS
IN WRITING REQUIRED" BELOW)
1. See instruction 1 above.
2. Send to: AmSouth Funds, c/o BISYS Fund Services Attn: T.A. Operations,
3435 Stelzer Road Columbus, OH 43219
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request a
withdrawal in cash. This is also known as
redeeming shares or a redemption of shares.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial
adviser or broker, ask him or her for
redemption procedures. Your adviser and/or
broker may have transaction minimums and/or
transaction times which will affect your
redemption. For all other sales transactions,
follow the instructions below.
71
<PAGE> 184
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must indicate this option on your application.
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
Call 1-800-451-8382 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank. Note: Your bank may charge for this service.
Call 1-800-451-8382 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 7 days.
REDEMPTION BY CHECK WRITING
PRIME MONEY MARKET FUND ONLY
You may write checks in amounts of $1,000 or more on your account in the
Prime Money Market Fund. To obtain checks, complete the signature card
section of the account application or contact the Fund to obtain a signature
card. Dividends and distributions will continue to be paid up to the day the
check is presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum
required account balance in the Prime Money Market Fund of $1,000 and you may
not close your Fund account by writing a check.
72
<PAGE> 185
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN
WRITING REQUIRED
You must request redemption in writing and obtain a signature guarantee if:
- The check is not being mailed to the address on your account; or
- The check is not being made payable to the owner of the account.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $250, the Fund may ask you to increase your
balance. If it is still below $250 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the appropriate Fund.
73
<PAGE> 186
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your Trust
shares in one Fund for Trust
shares of another AmSouth Fund
provided that you are eligible on
the date of the exchange to
purchase Trust shares. You must
meet the minimum investment
requirements for the Fund into
which you are exchanging.
Exchanges from one Fund to
another are taxable. Trust Shares
may also be exchanged for Class A
Shares of another Fund if you are
no longer eligible to purchase
Trust Shares. Please consult the
Trust Share prospectus for more
information. No transaction fees
are currently charged for
exchanges.
NOTES ON EXCHANGES
- When exchanging Trust Shares of a Fund for Class A Shares of a Fund,
you will be exempt from any applicable sales charge.
- The registration and tax identification numbers of the two accounts
must be identical.
- The Exchange Privilege may be changed or eliminated at any time upon a
60-day notice to shareholders.
- Be sure to read carefully the Prospectus of any Fund into which you
wish to exchange shares.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written
request to AmSouth Funds, P.O. Box 182733,
Columbus OH 43218-2733, or by calling
1-800-451-8382. Please provide the
following information:
- Your name and telephone number
- The exact name on your account and
account number
- Taxpayer identification number (usually
your Social Security number)
- Dollar value or number of shares to be
exchanged
- The name of the Fund from which the
exchange is to be made
- The name of the Fund into which the
exchange is being made
See "Selling your Shares" for important
information about telephone transactions.
To prevent disruption in the management of
the Funds, due to market timing strategies,
exchange activity may be limited to four
exchanges from a Fund during a calendar
year.
74
<PAGE> 187
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT
FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.
Each Fund distributes any net investment income monthly and any net realized
capital gains at least once a year. All distributions will be automatically
reinvested in additional Fund Shares unless you request to receive all
distributions in cash.
Generally, for federal income tax purposes, Fund distributions are taxable as
ordinary income, except that distributions of long-term capital gains will be
taxed as such regardless of how long you have held your shares. Distributions
are taxable whether you received them in cash or in additional shares.
Distributions are also taxable to you even if they are paid from income or
gains earned by the Fund before your investment (and thus were included in
the price you paid).
For the Florida Tax-Exempt Fund, Municipal Bond Fund, and Tax-Exempt Money
Market Fund, the income dividends that you receive are expected to be exempt
from federal income taxes and, in the case of the Florida Tax-Exempt Fund,
Florida intangible taxes. However, if you receive social security or railroad
retirement benefits, you should consult your tax adviser to determine what
effect, if any, an investment in the Florida Tax-Exempt Fund, Municipal Bond
Fund, or Tax-Exempt Money Market Fund may have on the federal taxation of
your benefits. In addition, an investment in the Florida Tax-Exempt Fund,
Municipal Bond Fund, or Tax-Exempt Money Market Fund may result in liability
for federal alternative minimum tax, both for individual and corporate
shareholders.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would be
decreased. Shareholders generally will not be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate a Fund's
recognition of ordinary income and may affect the timing or amount of a
Fund's distributions.
Any gain resulting from the sale or exchange of your Fund Shares (even if the
income from which is tax exempt) will generally be subject to tax. You should
consult your tax adviser for more information on your own tax situation,
including possible state and local taxes.
AmSouth Funds will send you a statement each year showing the tax status of
all your distributions.
- For each Fund, other than the Florida Tax-Exempt Fund, Municipal Bond Fund,
and Tax-Exempt Money Market Fund, the dividends and short-term capital
gains that you receive are considered ordinary income for tax purposes. For
the Florida Tax-Exempt Fund, Municipal Bond Fund, and Tax-Exempt Money
Market Fund, any short-term capital gains that you receive are taxable to
you as ordinary dividend income for Federal income tax purposes.
- Any distributions of net long-term capital gains by a Fund are taxable to
you as long-term capital gains for tax purposes, no matter how long you've
owned shares in the Fund.
- Generally, the Fund's advisers do not consider taxes when deciding to buy
or sell securities. Capital gains are realized from time to time as
by-products of ordinary investment activities. Distributions may vary
considerably from year to year.
- If you sell or exchange shares, any gain or loss you have is a taxable
event. This means that you may have a capital gain to report as income, or
a capital loss to report as a deduction, when you complete your federal
income tax return.
- Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account
such as an IRA or a qualified employee benefit plan. (Non-U.S. investors may
be subject to U.S. withholding and estate tax.)
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
75
<PAGE> 188
[ICON]
OTHER INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or, if shorter, the period of the
Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the SAI, which is
available upon request.
76
<PAGE> 189
OTHER INFORMATION ABOUT THE FUNDS BALANCED FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ----------
TRUST TRUST (a)
--------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.18 $ 14.77 13.03 $ 12.76 $ 11.81
-----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.44 0.41 0.48 0.47 0.47
Net realized and unrealized gains (losses)
from investments 0.95 1.38 2.78 0.58 1.24
-----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.39 1.79 3.26 1.05 1.71
-----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.44) (0.41) (0.50) (0.47) (0.46)
Net realized gains from investment
transactions (1.20) (0.97) (0.58) (0.31) (0.30)
-----------------------------------------------------------------------------------------------------------
Total Distributions (1.64) (1.38) (1.08) (0.78) (0.76)
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.93 $ 15.18 $ 15.21 $ 13.03 $ 12.76
-----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 9.74% 9.73%(b) 26.42% 8.37% 15.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 319,016 $ 329,626 $ 372,769 $ 338,425 $ 295,509
Ratio of expenses to average net assets 1.09% 1.10%(c) 1.05% 0.98% 0.94%
Ratio of net investment income to average
net assets 2.93% 2.95%(c) 3.49% 3.61% 3.91%
Ratio of expenses to average net assets* 1.10% 1.10%(c) 1.10% 1.11% 1.12%
Portfolio Turnover(d) 23.24% 25.40% 25.00% 20.47% 16.97%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 12.70%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
77
<PAGE> 190
GROWTH FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY CAPITAL GROWTH FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 3, 1997
JULY 31, TO JULY 31,
1999 1998
-------------- ----------------
TRUST TRUST (a)(e)
-------------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.65 $ 9.55
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) (0.02) --
Net realized and unrealized gains (losses) from
investments 2.57 2.10
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.55 2.10
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income -- --
Net realized gains from investment transactions (0.09) --
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.09) --
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.11 $ 11.65
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 22.05% 16.50%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 18,055 $ 2,824
Ratio of expenses to average net assets 0.96% 0.99%(c)
Ratio of net investment income to average net assets (0.28)% 0.00%(c)
Ratio of expenses to average net assets* 1.47% 2.05%(c)
Portfolio Turnover(d) 79.30% 77.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 4, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 21.99%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
78
<PAGE> 191
OTHER INFORMATION ABOUT THE FUNDS ENHANCED MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
DECEMBER 11, 1998
TO JULY 31,
1999 (a)
-------------------
TRUST
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.18
-------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.07
Net realized and unrealized gains (losses) from
investments 1.71
-------------------------------------------------------------------------------------------
Total from Investment Activities 1.78
-------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.07)
Net realized gains from investment transactions (0.03)
-------------------------------------------------------------------------------------------
Total Distributions (0.10)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.86
-------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.71%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 14,273
Ratio of expenses to average net assets 0.74%(c)
Ratio of net investment income to average net assets 0.90%(c)
Ratio of expenses to average net assets* 1.29%(c)
Portfolio Turnover(d) 36.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
79
<PAGE> 192
VALUE FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY EQUITY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------
TRUST TRUST (a) 1997 1996 1995
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.57 $ 22.51 $ 17.62 $ 16.75 $ 14.82
-----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.26 0.28 0.30 0.33 0.33
Net realized and unrealized gains (losses)
from investments 3.16 3.31 6.77 1.48 2.39
-----------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.42 3.59 7.07 1.81 2.72
-----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.25) (0.28) (0.30) (0.33) (0.32)
Net realized gains from investment
transactions (2.47) (1.25) (1.04) (0.61) (0.47)
-----------------------------------------------------------------------------------------------------------
Total Distributions (2.72) (1.53) (1.34) (0.94) (0.79)
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.27 $ 24.57 $ 23.35 $ 17.62 $ 16.75
-----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 15.43% 12.46%(b) 42.35% 11.09% 19.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 960,660 $ 947,575 $ 974,985 $ 374,622 $ 275,757
Ratio of expenses to average net assets 1.08% 1.09%(c) 1.06% 1.02% 1.03%
Ratio of net investment income to average
net assets 1.07% 1.26%(c) 1.52% 1.86% 2.17%
Ratio of expenses to average net assets* 1.09% 1.10%(c) 1.10% 1.11% 1.11%
Portfolio Turnover(d) 17.65% 16.95% 24.47% 19.11% 19.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 16.52%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
80
<PAGE> 193
OTHER INFORMATION ABOUT THE FUNDS EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED MARCH 20, 1997
JULY 31, JULY 31, TO JULY 31,
1999 1998 1997 (e)
-------------- ------------ ----------------
TRUST TRUST (a)
-------------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.89 $ 11.35 $ 10.00
-----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.19 0.25 0.07
Net realized and unrealized gains (losses)
from investments 1.47 0.95 1.71
-----------------------------------------------------------------------------------------------
Total from Investment Activities 1.66 1.20 1.78
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.19) (0.25) (0.06)
Net realized gains from investment
transactions (0.26) (0.41) --
-----------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.66) (0.06)
-----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.10 $ 11.89 $ 11.72
-----------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.43% 7.54%(b) 17.81%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 10,908 $ 8,087 $ 22,273
Ratio of expenses to average net assets 1.16% 1.19%(c) 1.30%(c)
Ratio of net investment income to average
net assets 1.59% 2.34%(c) 2.13%(c)
Ratio of expenses to average net assets* 1.33% 1.35%(c) 1.51%(c)
Portfolio Turnover(d) 133.74% 83.26% 27.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
81
<PAGE> 194
OTHER INFORMATION ABOUT THE FUNDS REGIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- ----------- --------- -------- --------
TRUST TRUST (a)
--------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.20 $ 27.95 $ 20.95 $ 18.94 $ 16.68
--------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.15 0.13 0.24 0.26 0.23
Net realized and unrealized gains (losses)
from investments (2.73) 0.17 7.77 2.20 2.26
--------------------------------------------------------------------------------------------------------
Total from Investment Activities (2.58) 0.30 8.01 2.46 2.49
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.14) (0.10) (0.24) (0.26) (0.23)
In excess of net investment income -- (0.01) -- -- --
Net realized gains from investment
transactions (1.53) (0.94) (0.49) (0.19) --
--------------------------------------------------------------------------------------------------------
Total Distributions (1.67) (1.05) (0.73) (0.45) (0.23)
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.95 $ 27.20 $ 28.23 $ 20.95 $ 18.94
--------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (9.57)% (0.12)%(b) 39.02% 13.10% 15.10%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 60,385 $ 94,909 $ 149,838 $ 93,584 $ 68,501
Ratio of expenses to average net assets 1.13% 1.12%(c) 1.06% 1.05% 1.07%
Ratio of net investment income to average
net assets 0.63% 0.45%(c) 0.99% 1.30% 1.35%
Ratio of expenses to average net assets* 1.17% 1.13%(c) 1.10% 1.13% 1.15%
Portfolio Turnover(d) 15.60% 8.17% 10.30% 8.22% 14.25%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 0.87%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
82
<PAGE> 195
OTHER INFORMATION ABOUT THE FUNDS SELECT EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
DECEMBER 3, 1998
TO JULY 31,
1999 (a)
------------------
TRUST
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.52
------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.04
Net realized and unrealized gains (losses) from
investments 0.38
------------------------------------------------------------------------------------------
Total from Investment Activities 0.42
------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.03)
In excess of net investment income (0.01)
Net realized gains from investment transactions (0.01)
------------------------------------------------------------------------------------------
Total Distributions (0.05)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.89
------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 3.63%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 10,420
Ratio of expenses to average net assets 0.99%(c)
Ratio of net investment income to average net assets 0.65%(c)
Ratio of expenses to average net assets* 1.58%(c)
Portfolio Turnover(d) 9.72%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
83
<PAGE> 196
OTHER INFORMATION ABOUT THE FUNDS SMALL CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED MARCH 2, 1998
JULY 31, TO JULY 31,
1999 1998 (a)
-------------- ---------------
TRUST TRUST
-------------- ---------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.15 $ 10.00
-----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) (0.03) (0.02)
Net realized and unrealized gains (losses) from
investments (0.68) (0.83)
-----------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.71) (0.85)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.44 $ 9.15
-----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (7.76)%(c) (8.48)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 21,777 $ 5,072
Ratio of expenses to average net assets 1.39%(c) 1.50%(c)
Ratio of net investment income to average net assets (0.82)%(c) (0.52)%(c)
Ratio of expenses to average net assets* 2.38%(c) 3.94%(c)
Portfolio Turnover(d) 208.13% 70.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
84
<PAGE> 197
OTHER INFORMATION ABOUT THE FUNDS BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- -------- ---------
TRUST TRUST (a)
-------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 10.72 $ 10.54 $ 10.83 $ 10.59
-----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.61 0.57 0.65 0.65 0.69
Net realized and unrealized gains (losses)
from investments (0.30) 0.38 0.42 (0.18) 0.28
-----------------------------------------------------------------------------------------------------
Total from Investment Activities 0.31 0.95 1.07 0.47 0.97
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.60) (0.59) (0.69) (0.65) (0.69)
Net realized gains from investment
transactions (0.13) (0.03) -- (0.11) (0.04)
-----------------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.62) (0.69) (0.76) (0.73)
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 11.05 $ 10.92 $ 10.54 $ 10.83
-----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.68% 7.54%(b) 10.48% 4.40% 9.70%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $380,226 $327,930 $311,881 $132,737 $94,671
Ratio of expenses to average net assets 0.71% 0.73%(c) 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets 5.57% 5.72%(c) 6.10% 6.12% 6.63%
Ratio of expenses to average net assets* 0.95% 0.97%(c) 0.98% 0.98% 0.98%
Portfolio Turnover(d) 18.26% 40.41% 34.62% 9.60% 17.70%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 9.03%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
85
<PAGE> 198
OTHER INFORMATION ABOUT THE FUNDS GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------
1999 1998 1997 1996 1995
------ --------- ------- ------- -------
TRUST TRUST (a)
------ ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.66 $ 9.40 $ 9.54 $ 9.48
-----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.54 0.59 0.58 0.66 0.68
Net realized and unrealized gains (losses)
from investments (0.26) 0.17 0.35 (0.20) 0.08
-----------------------------------------------------------------------------------------------
Total from Investment Activities 0.28 0.76 0.93 0.46 0.76
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.53) (0.49) (0.58) (0.59) (0.70)
In excess of net investment income -- (0.06) -- (0.01) --
-----------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.55) (0.58) (0.60) (0.70)
-----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.62 $ 9.87 $ 9.75 $ 9.40 $ 9.54
-----------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.72% 7.58%(b) 10.21% 4.91% 8.43%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $3,150 $ 2,521 $11,622 $15,752 $16,679
Ratio of expenses to average net assets 0.60% 0.63%(c) 0.69% 0.65% 0.58%
Ratio of net investment income to average
net assets 5.44% 5.72%(c) 5.98% 6.81% 7.18%
Ratio of expenses to average net assets* 1.65% 1.80%(c) 1.29% 1.10% 1.19%
Portfolio Turnover(d) 26.85% 34.89% 2.96% 78.31% 27.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 8.04%.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
86
<PAGE> 199
LIMITED TERM BOND FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY LIMITED MATURITY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- ----------- -------- ------- -------
TRUST TRUST(a)
-------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 10.34 $ 10.31 $ 10.41 $ 10.23
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.59 0.55 0.58 0.58 0.58
Net realized and unrealized gains (losses)
from investments (0.16) 0.10 0.14 (0.10) 0.17
----------------------------------------------------------------------------------------------------
Total from Investment Activities 0.43 0.65 0.72 0.48 0.75
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.57) (0.56) (0.61) (0.57) (0.57)
Net realized gains from investment
transactions -- -- -- (0.01) --
----------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.56) (0.61) (0.58) (0.57)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.29 $ 10.43 $ 10.42 $ 10.31 $ 10.41
----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.14% 6.04%(b) 7.25% 4.74% 7.65%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $109,554 $106,953 $138,675 $46,005 $59,798
Ratio of expenses to average net assets 0.71% 0.73%(c) 0.77% 0.76% 0.80%
Ratio of net investment income to average
net assets 5.60% 5.70%(c) 5.65% 5.48% 5.69%
Ratio of expenses to average net assets* 0.98% 0.98%(c) 1.02% 0.99% 1.03%
Portfolio Turnover(d) 39.15% 39.31% 64.89% 29.56% 38.11%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares.
(b) Represents total return based on activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Trust Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 6.37%.
(c) Annualized
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
87
<PAGE> 200
FLORIDA TAX-EXEMPT FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY FLORIDA TAX-FREE FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
Year Ended July 31, SEPTEMBER 30, 1994
-------------------------------------------- TO JULY 31,
1999 1998 1997 1996 1995 (f)
-------- ----------- -------- -------- ------------------
TRUST TRUST (a)
-------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.46 $ 10.39 $ 10.30 $ 10.32 $ 10.00
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.43 0.41 0.45 0.45 0.34
Net realized and unrealized gains (losses)
from investments (0.20) 0.14 0.24 (0.01) 0.30
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.23 0.55 0.69 0.44 0.64
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.41) (0.41) (0.48) (0.45) (0.32)
Net realized gains from investment
transactions (0.06) (0.07) (0.01) (0.01) --
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.48) (0.49) (0.46) (0.32)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.22 $ 10.46 $ 10.50 $ 10.30 $ 10.32
------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.16% 4.66%(b) 6.89% 4.24% 6.53%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 63,548 $ 55,369 $ 53,688 $ 48,869 $ 48,333
Ratio of expenses to average net assets 0.49% 0.49%(d) 0.57% 0.59% 0.70%(d)
Ratio of net investment income to average
net assets 4.10% 4.30%(d) 4.36% 4.33% 4.16%(d)
Ratio of expenses to average net assets* 1.01% 1.04%(d) 1.06% 1.04% 1.01%(d)
Portfolio Turnover(e) 34.33% 29.55% 24.05% 12.21% 2.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(b) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Florida Tax-Free Fund Trust Shares for the period from
September 2, 1997 (commencement of operations) through July 31, 1998 was
5.40%.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations.
88
<PAGE> 201
OTHER INFORMATION ABOUT THE FUNDS MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, JULY 1, 1997
---------------------- TO JULY 31,
1999 1998 1997 (a)
--------- ---------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.14 $ 10.04 $ 10.00
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.42 0.39 0.04
Net realized and unrealized gains (losses)
from investments (0.18) 0.14 0.15
---------------------------------------------------------------------------------------
Total from Investment Activities 0.24 0.53 0.19
---------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.40) (0.40) (0.04)
Net realized gains from investment
transactions (0.11) (0.03) --
---------------------------------------------------------------------------------------
Total Distributions (0.51) (0.43) (0.04)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 10.14 $ 10.15
---------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.30% 4.49%(d) 1.86%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 321,293 $ 326,464 $ 337,933
Ratio of expenses to average net assets 0.61% 0.64%(e) 0.71%(e)
Ratio of net investment income to average
net assets 4.11% 4.23%(e) 4.31%(e)
Ratio of expenses to average net assets* 0.95% 0.97%(e) 1.04%(e)
Portfolio Turnover(f) 20.74% 28.75% 1.59%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust
Shares. For reporting purposes, past performance numbers (prior to
September 2, 1997) are being reflected as A Shares.
(c) Not annualized.
(d) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998. Total
return for the Municipal Bond Fund Trust Shares for the period from
September 2, 1997 (commencement of operations) through July 31, 1998 was
5.27%.
(e) Annualized.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
89
<PAGE> 202
PRIME MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY PRIME OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- --------
TRUST TRUST TRUST TRUST (a)
-------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.045 0.050 0.049 0.050 0.050
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.045) (0.050) (0.049) (0.050) (0.050)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Total Return 4.59% 5.09% 5.00%(e) 5.10% 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $536,899 $479,974 $416,966 $478,542 $617,673
Ratio of expenses to average net assets 0.68% 0.69% 0.68%(b) 0.71% 0.69%
Ratio of net investment income to average
net assets 4.51% 4.98% 4.89%(b) 5.00% 5.04%
Ratio of expenses to average net assets* 0.69% 0.70% (c)(b) (c) (c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering A Shares.
(b) Annualized.
(c) There were no waivers during the period.
(d) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A
Shares for the period April 1, 1996 (commencement of operations) to July
31, 1996 was 1.55%.
90
<PAGE> 203
U.S. TREASURY MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY U.S. TREASURY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- --------
TRUST TRUST TRUST TRUST (a)
-------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.041 0.047 0.046 0.048 0.048
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.041) (0.047) (0.046) (0.048) (0.048)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Total Return 4.16% 4.77% 4.70% 4.93% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $320,847 $352,055 $309,361 $368,162 $322,939
Ratio of expenses to average net assets 0.69% 0.70% 0.69% 0.71% 0.70%
Ratio of net investment income to average
net assets 4.10% 4.67% 4.60% 4.82% 4.81%
Ratio of expenses to average net assets* 0.70% 0.70% (a) (a) (a)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) There were no waivers during the period.
91
<PAGE> 204
TAX-EXEMPT MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY TAX-EXEMPT FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- --------- -------
TRUST TRUST TRUST TRUST (a)
------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.027 0.031 0.031 0.031 0.032
------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.027) (0.031) (0.031) (0.031) (0.032)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------
Total Return 2.76% 3.13% 3.15% 3.15% 3.22%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $73,880 $62,084 $55,429 $43,611 $57,640
Ratio of expenses to average net assets 0.49% 0.50% 0.52% 0.54% 0.54%
Ratio of net investment income to average
net assets 2.71% 3.07% 3.10% 3.11% 3.15%
Ratio of expenses to average net assets* 0.73% 0.73% 0.72% 0.74% 0.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering A Shares.
92
<PAGE> 205
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OH 43219
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operational and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Reports and the SAI, prospectuses of other members of
the AmSouth Funds family, or request other information and discuss your
questions about the Funds by contacting a broker or bank that sells the Funds.
Or contact the Funds at:
|AMSOUTH FUNDS
|3435 STELZER ROAD
|COLUMBUS, OHIO 43219
|TELEPHONE: 1-800-451-8382
|INTERNET: http://www.amsouthfunds.com
-------------------------------------
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or by calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-5551. ASOP120199T
<PAGE> 206
AMSOUTH FUNDS
PROSPECTUS
INSTITUTIONAL MONEY MARKET FUNDS
DECEMBER 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these Fund shares or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is committing a crime.
[AmSouth Logo]
<PAGE> 207
AMSOUTH MUTUAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
[LOGO]
Carefully review this Important 2 Overview
section, which summarizes each INSTITUTIONAL MONEY MARKET FUNDS
Fund's investments, risks, past 4 Institutional Prime Obligations Money Market Fund
performance, and fees. 6 Institutional U.S. Treasury Money Market Fund
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
[LOGO]
Review this section for 8 Applicable to All Funds
information on investment
strategies and this risks.
FUND MANAGEMENT
[LOGO]
Review this section for details on 12 The Investment Adviser
the people and organization who 12 The Distributor and Administrator
oversee the Funds.
SHAREHOLDER INFORMATION
[LOGO]
Review this section for details on 13 Choosing a Share Class
how shares are valued, how to 14 Pricing of Fund Shares
purchase, sell and exchange 15 Purchasing and Adding to Your Shares
shares, related charges and 16 Selling Your Shares
payments of dividends and 17 General Policies on Selling Shares
distributions. 18 Exchanging Your Shares
18 Distribution (12b-1) Fees
19 Dividends, Distributions and Taxes
OTHER INFORMATION ABOUT THE FUNDS
[LOGO]
20 Financial Highlights
</TABLE>
<PAGE> 208
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
<TABLE>
<S> <C>
THE FUNDS AmSouth Funds is a mutual fund family that offers different
classes of shares in separate investment portfolios
("Funds"). The Funds have individual investment goals and
strategies. This prospectus gives you important information
about the Class I Shares, Class II Shares and Class III
Shares of the Institutional Money Market Funds that you
should know before investing. Please read this prospectus
and keep it for future reference.
Each of the Funds in this prospectus is a mutual fund. A
mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities
like stocks and bonds. Before you look at specific Funds,
you should know a few general basics about investing in
mutual funds.
The value of your investment in a Fund is based on the
market prices of the securities the Fund holds. These prices
change daily due to economic trends and other developments
that generally affect securities markets, as well as those
that affect particular companies or government units. These
price movements, also called volatility, will vary depending
on the types of securities a Fund owns and the markets where
these securities trade.
AS WITH OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR
INVESTMENT IN A FUND. YOUR INVESTMENT IN A FUND IS NOT A
DEPOSIT OR AN OBLIGATION OF AMSOUTH BANK, ITS AFFILIATES, OR
ANY BANK. IT IS NOT INSURED BY THE FDIC OR ANY GOVERNMENT
AGENCY.
Each Fund has its own investment goal and strategies for
reaching that goal. However, it cannot be guaranteed that a
Fund will achieve its goal. Before investing, make sure that
the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way
that the manager believes will help the Fund achieve its
goal. A manager's judgments about the stock markets, economy
and companies, or selecting investments may cause a Fund to
underperform other funds with similar objectives.
</TABLE>
2
<PAGE> 209
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
INSTITUTIONAL MONEY MARKET FUNDS
<TABLE>
<S> <C>
These Funds seek current income with liquidity and stability
of principal by investing primarily in short-term debt
securities. The Funds seek to maintain a stable price of
$1.00 per share.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for
a higher degree of safety
These Funds may not be appropriate if you are:
- seeking high total return
- pursuing a long-term goal or investing for retirement
</TABLE>
3
<PAGE> 210
AMSOUTH INSTITUTIONAL PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES OBLIGATIONS MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Institutional Prime
Obligations Fund) seeks current income with liquidity and
stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests 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
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 9 or consult the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 9.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
4
<PAGE> 211
AMSOUTH INSTITUTIONAL PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES OBLIGATIONS MONEY MARKET FUND
This section would normally include a bar chart and a table showing how the
Institutional Prime Obligations Money Market Fund has performed and how its
performance has varied from year to year. Because the Fund has not been in
operation for a full calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS I CLASS II CLASS III
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (load) on
Purchases None None None
Maximum Deferred Sales Charge
(load) None None None
Redemption Fee(2) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS I CLASS II CLASS III
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee(3) 0.20% 0.20% 0.20%
Distribution (12b-1) Fee 0.00% 0.25% 0.50%
Other Expenses(3) 0.27% 0.29% 0.29%
Total Fund Operating Expenses(3) 0.47% 0.74% 0.99%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge you account fees for
automatic investment and other cash management
services provided in connection with
investment in the Fund.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the period ended July 31, 1999,
management fees paid by the Fund were limited
to 0.07%. Other expenses are restated to
reflect current fees. Other expenses for each
class are being limited to 0.17%, 0.19%, and
0.19% for Class I, Class II and Class III
Shares, respectively. Total expenses after fee
waivers and expense reimbursements for each
class are: Class I Shares, 0.24%; Class II
Shares, 0.51%; and Class III Shares, 0.76%.
Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS I SHARES $ 48 $151 $263 $ 591
CLASS II SHARES $ 76 $237 $411 $ 918
CLASS III SHARES $101 $315 $547 $1,213
</TABLE>
As an investor in the
Institutional Prime Obligations
Money Market Fund, you will pay
the following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
5
<PAGE> 212
AMSOUTH INSTITUTIONAL
RISK/RETURN SUMMARY AND FUND EXPENSES U.S. TREASURY MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Institutional U.S. Treasury
Fund) seeks current income with liquidity and stability of
principal.
PRINCIPAL To pursue this goal, the Fund invests exclusively in
INVESTMENT STRATEGIES short-term U.S. dollar-denominated obligations issued by the
U.S. Treasury ("U.S. Treasury Securities"), separately
traded component parts of those securities called STRIPs,
and repurchase agreements collateralized by U.S. Treasury
Securities.
When selecting securities for the Fund's portfolio, the
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.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 9 or consult the SAI.
PRINCIPAL Your investment in the Fund may be subject to the following
INVESTMENT RISKS principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 9.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
6
<PAGE> 213
AMSOUTH INSTITUTIONAL
RISK/RETURN SUMMARY AND FUND EXPENSES U.S. TREASURY MONEY MARKET FUND
This section would normally include a bar chart and a table showing how the
Institutional U.S. Treasury Money Market Fund has performed and how its
performance has varied from year to year. Because the Fund had not commenced
operations prior to the date of this prospectus, the bar chart and table are
not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS I CLASS II CLASS III
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (load) on
Purchases None None None
Maximum Deferred Sales Charge
(load) None None None
Redemption Fee(2) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS I CLASS II CLASS III
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee(3) 0.20% 0.20% 0.20%
Distribution (12b-1) Fee 0.00% 0.25% 0.50%
Other Expenses(3) 0.20% 0.20% 0.20%
Total Fund Operating Expenses(3) 0.40% 0.65% 0.90%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge you account fees for
automatic investment and other cash management
services provided in connection with
investment in the Fund.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) We expect management fees to be limited to
0.07% for the current fiscal year.
Additionally, other expenses are based on
estimated amounts for the current fiscal year.
We expect other expenses for each class to be
limited to 0.20% for the current fiscal year.
Accordingly, we expect the Fund's total
operating expenses after fee waivers and
expense reimbursements for Class I Shares,
Class II Shares and Class III Shares to be
0.27%, 0.52% and 0.77%, respectively. Any fee
waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS I SHARES $ 41 $128
CLASS II SHARES $ 66 $208
CLASS III SHARES $ 92 $287
</TABLE>
As an investor in the U.S.
Treasury Money Market Fund, you
will pay the following fees and
expenses when you buy and hold
shares. Shareholder transaction
fees are paid from your
account. Annual Fund operating
expenses are paid out of Fund
assets, and are reflected in
the share price.
Use the table at right to
compare fees and expenses with
those of other Funds. It
illustrates the amount of fees
and expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
7
<PAGE> 214
[LOGO]
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. The following
table describes the securities and techniques the Fund uses, as well as the
main risks they pose. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be
subject to additional risks. You may also consult the Statement of Additional
Information for additional detail regarding these and other permissible
investments. Following the table is a more complete discussion of risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
Institutional Prime Obligations Money Market Fund 1
Institutional U.S. Treasury Money Market Fund 2
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
ASSET-BACKED SECURITIES: Securities secured by company 1 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Interest Rate
Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
Interest Rate
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1 Market
stated maturity. Credit
Liquidity
Interest Rate
COMMERCIAL PAPER: Secured and unsecured short-term 1 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
Interest Rate
DEMAND FEATURES: Securities that are subject to puts and 1 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
DERIVATIVES: Instruments whose value is derived from an 1 Management
underlying contract, index or security, or any combination Market
thereof, including futures, options (e.g., put and calls), Credit
options on futures, swap agreements, and some Interest Rate
mortgage-backed securities. Liquidity
Leverage
FOREIGN SECURITIES: Commercial paper of foreign issuers and 1 Market
obligations of foreign banks, overseas branches of U.S. Political
banks and supranational entities. Liquidity
Foreign Investment
FUNDING AGREEMENTS: Also known as guaranteed investment 1 Liquidity
contracts, an agreement where a Fund invests an amount of Credit
cash Credit with an insurance company and the insurance Market
company credits such investment on a monthly basis with Interest Rate
guaranteed interest which is based on an index. These
agreements provide that the guaranteed interest will not be
less than a certain minimum rate. These agreements also
provide for adjustment of the interest rate monthly and are
considered variable rate instruments. Funding Agreements are
considered illiquid investments, and, together with other
instruments in the Fund which are not readily marketable,
may not exceed 10% of the Fund's net assets.
</TABLE>
8
<PAGE> 215
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other registered 1,2 Market
investment companies with similar investment objectives. A
Fund may invest up to 5% of its assets in the shares of any
one registered investment company, but may not own more than
3% of the securities of any one registered investment
company or invest more than 10% of its assets in the
securities of other registered investment companies. As a
shareholder of an investment company, a Fund will indirectly
bear investment management fees of that investment company,
which are in addition to the management fees the Fund pays
its own Adviser.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate mortgage Credit
investment conduits. Regulatory
REPURCHASE AGREEMENTS: The purchase of a security and the 1,2 Market
simultaneous commitment to return the security to the seller Leverage
at an agreed upon price on an agreed upon date. This is
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1,2 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1 Market
Fund's total assets. In return the Fund will receive cash, Leverage
other securities, and/or letters of credit. Liquidity
Credit
TAX-EXEMPT COMMERCIAL PAPER: Commercial paper issued by 1 Credit
governments, and/or letters of credit. Liquidity
Market
Tax
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1 Liquidity
exchange for the deposit of funds. Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury investment 1 Market
growth receipts, and certificates of accrual of Treasury
securities.
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac. Interest Rate
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, separately 1,2 Market
traded registered interest and principal securities, and
coupons under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured demand notes 1 Credit
that permit the indebtedness to vary and provide Liquidity Liquidity
for periodic adjustments in the interest rate according to Interest Rate
the terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary
market in these notes, the Fund may demand payment of
principal and accrued interest at specified intervals.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand. Interest Rate
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
</TABLE>
9
<PAGE> 216
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "What are the main risks of investing in this Fund?". Because of
these risks, the value of the securities held by the Funds may fluctuate, as
will the value of your investment in the Funds. Certain investments and Funds
are more susceptible to these risks than others.
CREDIT RISK. The risk that the issuer of a security, or the counter party to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INTEREST RATE RISK. The risk that debt prices overall will decline over
short or even long periods due to rising interest rates. A rise in interest
rates typically causes a fall in values while a fall in rates typically
causes a rise in values. Interest rate risk should be modest for shorter-term
securities, moderate for intermediate-term securities, and high for
longer-term securities. Generally, an increase in the average maturity of the
Fund will make it more sensitive to interest rate risk. The market prices of
securities structured as zero coupon or pay-in-kind securities are generally
affected to a greater extent by interest rate changes. These securities tend
to be more volatile than securities which pay interest periodically.
LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may be
embedded directly in the characteristics of other securities.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. However, if held to maturity, the face value of the
security is recovered. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
10
<PAGE> 217
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
PRE-PAYMENT/CALL RISK. The risk that the principal repayment of a security
will occur at an unexpected time. Prepayment risk is the chance that the
repayment of a mortgage will occur sooner than expected. Call risk is the
possibility that, during times of declining interest rates, a bond issuer
will "call" -- or repay -- higher yielding bonds before their stated
maturity. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments and calls generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid or called, a Fund
may have to reinvest in securities with a lower yield. In this event, the
Fund would experience a decline in income -- and the potential for taxable
capital gains. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss. Prepayment/call risk
is generally low for securities with a short-term maturity, moderate for
securities with an intermediate-term maturity, and high for securities with a
long-term maturity.
REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
YEAR 2000 RISK. AmSouth Funds depends on the smooth functioning of computer
systems in almost every aspect of its business. Like other mutual funds,
businesses and individuals around the world, AmSouth Funds could be adversely
affected if the computer systems used by its service providers do not
properly process dates on and after January 1, 2000 and distinguish between
the year 2000 and the year 1900. AmSouth Funds has made inquiry of its
service providers to determine whether they expect to have their computer
systems adjusted for the year 2000 transition, and is seeking assurances from
each service provider that it expects its system to accommodate the year 2000
transition without material adverse consequences to AmSouth Funds. While it
is likely that such assurances will be obtained, AmSouth Funds and its
shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or custodians, banks, broker-dealers or others with
which AmSouth Funds does business.
11
<PAGE> 218
[LOGO]
FUND MANAGEMENT
THE INVESTMENT ADVISER
AmSouth Bank, (AmSouth or the "Adviser"), is the adviser for the Funds.
AmSouth is the bank affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of September 30, 1999 of $20 billion and
operated 276 banking offices in Alabama, Florida, Georgia and Tennessee.
AmSouth has provided investment management services through its Trust
Investment Department since 1915. As of June 30, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary management and
provided custody services for an additional $21 billion in securities.
AmSouth is the largest provider of trust services in Alabama and its Trust
Natural Resources and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real estate interests.
Through its portfolio management team, AmSouth makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 07/31/99
<S> <C>
-------------------------------
Institutional Prime Obligations Money Market Fund 0.20%
-------------------------------
Institutional U.S. Treasury Money Market Fund 0.20%
-------------------------------------------------------------------------------------
</TABLE>
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as each Fund's administrator. Management and
administrative services of ASC include providing office space, equipment and
clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services. ASC is a
wholly owned subsidiary of BISYS Fund Services ("BISYS").
BISYS, whose address is also 3435 Stelzer Road, Columbus, Ohio 43219-3035
serves as the distributor of each Fund's shares. BISYS may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
12
<PAGE> 219
[LOGO]
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
Class I Shares, Class II Shares and Class III Shares have different expenses
and other characteristics, allowing you to choose the class that best suits
your needs. You should consider the amount you want to invest, how long you
plan to have it invested, and whether you plan to make additional
investments. Your financial representative can help you decide which share
class is best for you.
CLASS I SHARES
- No sales charges.
- No Distribution and service (12b-1) fees.
- Minimum Initial Investment: $3 million
- Offered only to:
- Customers of AmSouth Bank for whom AmSouth Bank acts in a fiduciary,
advisory, custodial, agency, or similar capacity; and
- Fiduciary customers of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
CLASS II SHARES
- No sales charges.
- Distribution and service (12b-1) fees of 0.25% of average daily net assets.
- Offered as a cash sweep vehicle to institutional or corporate customers of
AmSouth Bank and of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
CLASS III SHARES
- No sales charges.
- Distribution and service (12b-1) fees of 0.50% of average daily net assets.
- Offered as a cash sweep vehicle to institutional or corporate customers of
AmSouth Bank and of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
For actual past expenses of each share class, see the fund-by-fund
information earlier in this prospectus.
13
<PAGE> 220
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of the
Fund's investments and other
assets, subtracting its
liabilities and then dividing
that figure by the number of
outstanding shares of the
Fund:
NAV =
Total Assets - Liabilities
------------------------------
Number of Shares
Outstanding
NAV is calculated separately
for each class of shares.
------------------------------
Per share net asset value (NAV) for each
Fund is determined and its shares are
priced twice a day at 2:00 p.m. Eastern
time and at the close of regular trading
on the New York Stock Exchange, normally
at 4:00 p.m. Eastern time on days the
Exchange and the Federal Reserve Bank of
Atlanta are open.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is accepted
by the Fund. This is what is known as the
offering price.
Each Fund uses the amortized cost method
of valuing its investments, which does
not take into account unrealized gains or
losses. For further information regarding
the methods used in valuing the Fund's
investments, please see the SAI.
14
<PAGE> 221
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Class I $3,000,000 $0
----------------------------------------------------------
Class II $N/A $N/A
----------------------------------------------------------
Class III $N/A $N/A
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that
do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement. The Distributor may reject
a purchase order if it considers it in
the best interest of the Fund and its
shareholders.
You may purchase Funds through
the Distributor or through
banks, brokers and other
investment representatives,
which may charge additional
fees and may require higher
minimum investments or impose
other limitations on buying
and selling shares. If you
purchase shares through an
investment representative,
that party is: responsible for
transmitting orders by close
of business and may have an
earlier cut-off time for
purchase and sale requests.
Consult your investment
representative or institution
for specific information.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with
IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
-----------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
You may purchase Institutional Money Market Fund Shares by following the
procedures established by the Distributor in connection with the requirements
of qualified accounts maintained by AmSouth Bank or other financial
institutions approved by the Distributor. These procedures may include sweep
arrangements where an account is "swept" automatically no less frequently
than weekly into an Institutional Money Market Fund.
When purchasing Institutional Money Market Fund Shares through AmSouth Bank
or an approved financial institution, simply tell AmSouth or your financial
institution that you wish to purchase shares of the Funds and they will take
care of the necessary documentation.
15
<PAGE> 222
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is received
by the Fund, its transfer
agent, or your investment
representative. Normally you
will receive your proceeds
within a week after your
request is received. See
section on "General Policies
on Selling Shares below."
If selling your shares through your financial adviser or broker, ask him or
her for redemption procedures. Your adviser and/or broker may have
transaction minimums and/or transaction times which will affect your
redemption. For all other sales transactions, follow the instructions below.
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
1. Call 1-800-451-8382 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on Selling
Shares -- "Verifying Telephone Redemptions" below).
BY MAIL
1. Call 1-800-451-8382 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: AmSouth Funds P.O. Box 182733 Columbus, OH 43218-2733
BY OVERNIGHT SERVICE (SEE "GENERAL POLICIES ON SELLING SHARES -- REDEMPTIONS
IN WRITING REQUIRED" BELOW)
1. See instruction 1 above.
2. Send to AmSouth Funds c/o BISYS Fund Services Attn: T.A. Operations
3435 Stelzer Road Columbus, OH 43219
WIRE TRANSFER
You must indicate this option on your application.
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
Call 1-800-451-8382 to request a wire transfer. If you call by 4 p.m. Eastern
time, your payment will normally be wired to your bank on the next business
day.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank. Your bank may charge for this service.
Call 1-800-451-8382 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 7 days.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request a
withdrawal in cash. This is also known as
redeeming shares or a redemption of shares.
16
<PAGE> 223
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing and obtain a signature guarantee if:
- The check is not being mailed to the address on your account; or
- The check is not being made payable to the owner of the account.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If the value of Class I shares in your account falls below $3 million, the
Fund may ask you to increase your balance. If its is still below $3 million
after 60 days, the Fund may convert, at net asset value, your Class I Shares
to Trust Shares.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the appropriate Fund.
17
<PAGE> 224
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares
in one Institutional Money
Market Fund for shares of
the same class of another
Institutional Money Market
Fund.
You must meet the minimum
investment requirements for
the Fund into which you are
exchanging. Exchanges from
one Fund to another are
taxable. Shares of an
Institutional Money Market
Fund may not be exchanged
for Trust Shares, Class A
Shares or Class B Shares of
the other AmSouth Funds. No
transaction fees are charged
for exchanges.
NOTES ON EXCHANGES
- The registration and tax
identification numbers of the two
accounts must be identical.
- The Exchange Privilege may be
changed or eliminated at any time
upon a 60-day notice to
shareholders.
- Be sure to read carefully the
Prospectus of any Fund into which
you wish to exchange shares.
DISTRIBUTION (12b-1) FEES -- CLASS II SHARES AND CLASS III SHARES ONLY
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Funds' Class II Shares and Class III Shares and/or for
providing shareholder services. 12b-1 fees are paid from Fund assets on an
ongoing basis, and will increase the cost of your investment.
- The 12b-1 fees vary by share class as follows:
1. Class II Shares pay a 12b-1 fee of up to 0.25% of the average daily
net assets of a Fund.
2. Class III Shares pay a 12b-1 fee of up to 0.50% of the average
daily net assets of the applicable Fund. This will cause expenses
for Class III Shares to be higher and dividends to be lower than
for Class II Shares.
Long-term holders of Class II Shares and Class III Shares may pay indirectly
more than the equivalent of the maximum permitted front-end sales charge
because of the recurring nature of 12b-1 distribution fees.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written
request to AmSouth Funds, P.O. Box 182733,
Columbus OH 43218-2733, or by calling 1-
800-451-8382. Please provide the following
information:
- Your name and telephone number
- The exact name on your account and
account number
- Taxpayer identification number (usually
your Social Security number)
- Dollar value or number of shares to be
exchanged
- The name of the Fund from which the
exchange is to be made
- The name of the Fund into which the
exchange is being made
See "Selling your Shares" for important
information about telephone transactions.
To prevent disruption in the management of
the Funds, due to market timing strategies,
exchange activity may be limited to four
exchanges from a Fund during a calendar year.
18
<PAGE> 225
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Please consult your tax adviser regarding your specific questions about
federal, state and local income taxes. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.
Each Fund distributes any net investment income monthly (and net realized
capital gains, if any) at least once a year. All distributions will be
automatically reinvested in additional Fund Shares unless you request to
receive all distributions in cash.
Generally, for federal income tax purposes, Fund distributions are taxable as
ordinary income, (except that distributions of long-term capital gains, if
any, will be taxed as such regardless of how long you have held your shares).
Distributions are taxable whether you received them in cash or in additional
shares. Distributions are also taxable to you even if they are paid from
income or gains earned by the Fund before your investment (and thus were
included in the price you paid).
AmSouth Funds will send you a statement each year showing the tax status of
all your distributions.
- For each Fund, the dividends that you receive are considered ordinary
income for tax purposes.
- The Funds' adviser does not consider taxes when deciding to buy or sell
securities.
- Distributions of dividends (or capital gains, if any) may be subject to
state and local income taxes as well.
- Foreign governments may withhold taxes on dividends and interest paid,
while imposing taxes on other payments or gains, with respect to foreign
securities.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account
such as an IRA or a qualified employee benefit plan. (Non-U.S. investors may
be subject to U.S. withholding and estate tax.)
You should consult your tax adviser for more information on your own tax
situation, including possible state and local taxes.
More information about taxes is in our Statement of Additional
Information.
19
<PAGE> 226
[LOGO]
INSTITUTIONAL PRIME OBLIGATIONS MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY THE INSTITUTIONAL
PRIME OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or, if shorter, the period of the
Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the SAI, which is
available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1999
---------------------------------------------------------
CLASS I(A) CLASS II(B) Class III(c)
---------- ----------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.042 0.020 0.018
-------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.042) (0.020) (0.018)
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------------------------
Total Return (d) 4.31%(d) 1.96%(d) 1.84%(d)
RATIOS SUPPLEMENTAL DATA:
Net Assets at end of period (000) $69,458 $26,000 $13,575
Ratio of expenses to average net assets 0.22%(e) 0.49%(e) 0.74%(e)
Ratio of net investment income to average net assets 4.82%(e) 4.45%(e) 4.22%(e)
Ratio of expenses to average net assets* 0.45%(e) 0.72%(e) 0.97%(e)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 15, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from February 19, 1999 (commencement of operations)
through July 31, 1999.
(c) For the period from February 22, 1999 (commencement of operations)
through July 31, 1999.
(d) Not annualized.
(e) Annualized.
20
<PAGE> 227
AmSouth Funds
3435 Stelzer Road
Columbus, OH 43219
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operational and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Reports and the SAI, prospectuses of other members of
the AmSouth Funds family, or request other information and discuss your
questions about the Funds by contacting a broker or bank that sells the Funds.
Or contact the Funds at:
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
INTERNET: http://www.amsouthfunds.com
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or by calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-5551.
<PAGE> 228
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
December 1, 1999
-----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth Prime Money Market Fund, the
AmSouth U.S. Treasury Money Market Fund, the AmSouth Tax-Exempt Fund, the
AmSouth Government Income Fund, the AmSouth Bond Fund, the AmSouth Limited Term
Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth Florida Tax-Exempt Fund,
the AmSouth Value Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced
Fund, the AmSouth Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity
Income Fund, the AmSouth Select Equity Fund and the AmSouth Enhanced Market Fund
(each a "Fund" and collectively the "Funds"), each dated December 1, 1999. This
Statement of Additional Information is incorporated by reference in its entirety
into each Prospectus. A copy of each Fund's Prospectus may be obtained by
writing to AmSouth Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by
telephoning toll free (800) 451-8382.
<PAGE> 229
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
AMSOUTH MUTUAL FUNDS..............................................................................................1
INVESTMENT OBJECTIVES AND POLICIES................................................................................2
Additional Information on Portfolio Instruments..........................................................2
Investment Restrictions.................................................................................29
Additional Investment Restrictions......................................................................33
Portfolio Turnover......................................................................................33
VALUATION........................................................................................................34
Valuation of the Money Market Funds.....................................................................35
Valuation of the Capital Appreciation Funds and the Income Funds........................................36
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................36
Purchase of Shares......................................................................................36
Matters Affecting Redemption............................................................................39
Taxes ...............................................................................................39
Additional Tax Information..............................................................................43
Additional Tax Information Concerning the Tax-Exempt Fund and Tax-Free Funds............................45
MANAGEMENT OF THE TRUST..........................................................................................49
Officers ...............................................................................................50
Investment Adviser......................................................................................51
Portfolio Transactions..................................................................................55
Glass-Steagall Act......................................................................................57
Administrator...........................................................................................58
Expenses ...............................................................................................60
Sub-Administrators......................................................................................60
Distributor.............................................................................................61
Custodian...............................................................................................64
Transfer Agent and Fund Accounting Services.............................................................64
Auditors ...............................................................................................65
Legal Counsel...........................................................................................65
PERFORMANCE INFORMATION..........................................................................................65
Yields of the Money Market Funds........................................................................66
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds........................67
Calculation of Total Return.............................................................................69
Performance Comparisons.................................................................................72
</TABLE>
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<PAGE> 230
<TABLE>
<CAPTION>
<S> <C>
ADDITIONAL INFORMATION...........................................................................................73
Organization and Description of Shares..................................................................73
Shareholder Liability...................................................................................74
Miscellaneous...........................................................................................75
FINANCIAL STATEMENTS.............................................................................................78
APPENDIX ........................................................................................................79
</TABLE>
B-ii
<PAGE> 231
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"): the AmSouth Prime Money Market Fund (formerly the
AmSouth Prime Obligations Fund)(the "Prime Money Market Fund"), the AmSouth U.S.
Treasury Money Market Fund (formerly the AmSouth U.S. Treasury Fund)(the "U.S.
Treasury Fund"), the AmSouth Tax-Exempt Fund (the "Tax-Exempt Fund," and these
three Funds being collectively referred to as the "Money Market Funds"), the
AmSouth Value Fund (formerly the AmSouth Equity Fund)(the "Value Fund"), the
AmSouth Regional Equity Fund (the "Regional Equity Fund"), the AmSouth Balanced
Fund (the "Balanced Fund"), the AmSouth Growth Fund (formerly the AmSouth
Capital Growth Fund)(the "Growth Fund"), the AmSouth Small Cap Fund (the "Small
Cap Fund"), the AmSouth Equity Income Fund (the "Equity Income Fund"), the
AmSouth Select Equity Fund (the "Select Equity Fund"), and the AmSouth Enhanced
Market Fund (the "Enhanced Market Fund" and these eight Funds being collectively
referred to as the "Capital Appreciation Funds"), the AmSouth Bond Fund (the
"Bond Fund"), the AmSouth Limited Term Bond Fund (formerly the AmSouth Limited
Maturity Fund)(the "Limited Term Bond Fund"), the AmSouth Government Income Fund
(the "Government Income Fund") the AmSouth Municipal Bond Fund (the "Municipal
Bond Fund"), the AmSouth Florida Tax-Free Fund (formerly the AmSouth Florida
Tax-Free Fund)(the "Florida Fund" and these five Funds being collectively
referred to as the "Income Funds"), the AmSouth Institutional Prime Obligations
Money Market Fund (formerly the AmSouth Institutional Prime Obligations
Fund)(the "Institutional Prime Obligations Fund"), and the AmSouth Institutional
U.S. Treasury Money Market Fund (formerly the AmSouth Institutional U.S.
Treasury Fund)(the "Institutional U.S. Treasury Fund" and these two Funds being
collectively referred to as the "Institutional Money Market Funds"). The Florida
Fund and the Municipal Bond Fund are also collectively referred to herein as the
"Tax-Free Funds." The Funds, except for the U.S. Treasury Fund, the Tax-Exempt
Fund, the Institutional Prime Obligations Fund, and the Institutional U.S.
Treasury Fund, offer three classes of Shares: Trust Shares (formerly Premier
Shares), Class A Shares (formerly Classic Shares), and Class B Shares. The U.S.
Treasury Fund and the Tax-Exempt Fund offer two classes of Shares: Trust Shares
and Class A Shares. The Institutional Prime Obligations Fund and the
Institutional U.S. Treasury Fund offer three classes of Shares: Class I Shares,
Class II Shares, and Class III Shares. Much of the information contained in this
Statement of Additional Information expands on subjects discussed in the
Prospectuses. This Statement of Additional Information relates to all Funds
except the Institutional Money Market Funds. The Institutional Money Market
Funds have a separate Statement of Additional Information. Capitalized terms not
defined herein are defined in the Prospectuses. No investment in Shares of a
Fund should be made without first reading that Fund's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
<PAGE> 232
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objectives,
restrictions and policies of each Fund as set forth in the respective Prospectus
for that Fund.
HIGH QUALITY INVESTMENTS WITH REGARD TO THE MONEY MARKET FUNDS. As noted in the
Prospectuses for the Money Market Funds, each such Fund may invest only in
obligations determined by AmSouth Bank, Birmingham, Alabama ("AmSouth") the
investment adviser to the Trust ("Adviser") to present minimal credit risks
under guidelines adopted by the Trust's Trustees.
With regard to the 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 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 Tax-Exempt Fund, investments will be limited to
those obligations which, at the time of purchase, (i) possess one of the two
highest short-term ratings from an NRSRO; or (ii) possess, in the case of
multiple-rated securities, one of the two highest short-term ratings by at least
two NRSROs; or (iii) do not possess a rating, (I.E., are unrated) but are
determined by the 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 Prime Money
Market Fund and the Tax-Exempt Fund are hereinafter referred to as "Eligible
Securities.")
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, (I.E., are
unrated) but are determined by the 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
B-2
<PAGE> 233
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.
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,
except the U.S. Treasury Fund, may invest in bankers' acceptances, certificates
of deposit, and demand and time deposits. Bankers' acceptances are negotiable
drafts or bills of exchange typically drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. 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, except for the U.S. Treasury Fund, may
invest in commercial paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
B-3
<PAGE> 234
Each Fund except the U.S. Treasury Fund, the Tax-Exempt Fund, and the
Tax-Free Funds may invest in (i) Canadian Commercial Paper, which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial
paper of an issue located in Europe.
HIGH YIELD SECURITIES. The Equity Income Fund may invest in high yield
convertible securities. High yield securities are securities that are rated
below investment grade by an NRSRO (e.g., "BB" or lower by S&P and "Ba" or lower
by Moody's). Other terms used to describe such securities include "lower rated
bonds," "non-investment grade bonds" and "junk bonds." Generally, lower rated
debt securities provide a higher yield than higher rated debt securities of
similar maturity, but are subject to a greater degree of risk with respect to
the ability of the issuer to meet its principal and interest obligations.
Issuers of high yield securities may not be as strong financially as those
issuing higher rated securities. The securities are regarded as predominantly
speculative. The market value of high yield securities may fluctuate more than
the market value of higher rated securities, since high yield securities tend to
reflect short-term corporate and market developments to a greater extent than
higher rated securities, which fluctuate primarily in response to the general
level of interest rates, assuming that there has been no change in the
fundamental interest rates, assuming that there has been no change in the
fundamental quality of such securities. The market prices of fixed income
securities generally fall when interest rates rise. Conversely, the market
prices of fixed-income securities generally rise when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Equity Income Fund more difficult, at
least in the absence of price concessions. Reduced liquidity also could
adversely affect the Equity Income Fund's ability to accurately value high yield
securities. Issuers of high yield securities also are more vulnerable to real or
perceived economic changes (for instance, an economic downturn or prolonged
period of rising interest rates), political changes or adverse developments
specific to the issuer. Adverse economic, political or other developments may
impair the issuer's ability to service principal and interest obligations, to
meet projected business goals and to obtain additional financing, particularly
if the issuer is highly leveraged. In the event of a default, the Equity Income
Fund would experience a reduction of its income and could expect a decline in
the market value of the defaulted securities.
INSURANCE COMPANY FUNDING AGREEMENTS. The Bond Fund, the Limited Term
Bond Fund and the 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 Bond Fund, Limited Term
Bond Fund and the Prime Money Market Fund invest an amount of cash with an
insurance company and the insurance company credits such
B-4
<PAGE> 235
investment on a monthly basis with guaranteed interest which is based on an
index. The Funding Agreements provide that this guaranteed interest will not be
less than a certain minimum rate. The Bond Fund, the Limited Term Bond Fund and
the 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 Bond Fund, the Limited Term Bond Fund and the 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 Bond Fund and Limited Term Bond Fund, and 10% of
such Funds net assets in the case of the 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 Prime Money Market Fund, the Capital Appreciation Funds, and
the Income Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, a Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Funds to dispose of a
variable amount master demand note if the issuer defaulted on its payment
obligations or during periods when the Funds are not entitled to exercise their
demand rights, and the Funds could, for this or other reasons, suffer a loss to
the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes must satisfy the
same criteria as set forth above for commercial paper. The 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.
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<PAGE> 236
VARIABLE AND FLOATING RATE NOTES. The Tax-Exempt Fund, the Bond Fund,
the Limited Term Bond Fund and the Tax-Free Funds may acquire variable and
floating rate notes, subject to each Fund's investment objective, policies and
restrictions. A variable rate note is one whose terms provide "for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the 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, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may resell the note at any time to a third party.
The absence of an active secondary market, however, could make it difficult for
the Fund to dispose of a variable or floating rate note in the event the issuer
of the note defaulted on its payment obligations and the Fund could, as a result
or for other reasons, suffer a loss to the extent of the default. Variable or
floating rate notes may be secured by bank letters of credit or drafts.
For purposes of the Tax-Exempt Fund, the Bond Fund, the Limited Term
Bond Fund and the Tax-Free Funds, the maturities of the variable and floating
rate notes will be determined in accordance with Rule 2a-7 under the 1940 Act.
ZERO COUPON OBLIGATIONS. The Bond Fund, Limited Term Bond Fund and
Tax-Exempt 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 Bond Fund will only
purchase zero-coupon obligations if, at the time of purchase, such investments
do not exceed 15% of the value of the Bond Fund's total assets, and the Limited
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 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.
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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 U.S. Treasury Fund and
the Tax- Free Funds, may, subject to their investment objectives, restrictions
and policies, invest in certain obligations or securities of foreign issuers.
Permissible investments include Eurodollar Certificates of Deposit ("ECDs")
which are U.S. dollar denominated certificates of deposit issued by branches of
foreign and domestic banks located outside the United States, Yankee
Certificates of Deposit ("Yankee CTDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the
United States, Eurodollar Time Deposits ("ETD's") which are U.S. dollar
denominated deposits in a foreign branch of a U.S. bank or a foreign bank,
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
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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 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 Money Market Funds and the
Income Funds or other liquid, high-grade debt securities, in the case of the
Capital Appreciation Funds. Reverse repurchase agreements involve the risk that
the market value of the securities sold by a Fund may decline below the price at
which a Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by a Fund under the 1940 Act.
U.S. GOVERNMENT OBLIGATIONS. The U.S. Treasury Fund will invest
exclusively in bills, notes and bonds issued by the U.S. Treasury. Such
obligations are supported by the full faith and credit of the U.S. government.
Each of the other Funds may invest in such obligations and in other obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities.
Such other obligations may include those 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
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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. 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 Prime Money Market Fund and the U.S. Treasury Fund may purchase
securities on a when-issued basis (I.E., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a when-issued basis, the Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Securities purchased on a
"when-issued" basis are recorded as an asset and are subject to changes in value
based upon changes in the general level of interest rates. Each of the Capital
Appreciation Funds expects that commitments to purchase "when-issued" securities
will not exceed 25% of the value of its total assets under normal market
conditions, and that a commitment to purchase "when-issued" securities will not
exceed 60 days. In 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
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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.
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
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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.
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
Government Income Fund may invest in mortgage-related securities issued by
nongovernmental entities. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such nongovernmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Government Income
Fund's investment quality standards. There can be no assurance that the private
insurers can meet their obligations under the policies. The Government Income
Fund may buy mortgage-related securities without insurance or guarantees if
through an examination of the loan experience and practices of the poolers the
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
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readily marketable. The Government Income Fund will not purchase
mortgage-related securities or 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 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 (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
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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 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. Each of the Capital Appreciation Funds may
invest in convertible securities. Convertible securities are fixed-income
securities which may be exchanged or converted into a predetermined number of
the issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. Each Capital Appreciation Fund other than the Balanced Fund may
invest in convertible securities rated "BBB" or higher by an NRSRO at the time
of investment, or if unrated, of comparable quality. The Equity Income Fund may
invest in convertible securities rated "BB" or lower by an NRSRO at the time of
investment, or if unrated, of comparable quality. The Balanced Fund may invest
in convertible securities rated "A" or higher by an NRSRO or, if unrated, of
comparable quality. If a convertible security falls below these minimum ratings
after a Fund has purchased it, a Fund is not required to drop the convertible
bond from its portfolio, but will consider appropriate action. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives.
Securities which are rated "BB" or lower by Standard & Poor's or "Ba"
or lower by Moody's either have speculative characteristics or are speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligations. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information. There is
no lower limit with respect to rating categories for convertible securities in
which the Equity Income Fund may invest.
Corporate debt obligations that are not determined to be
investment-grade are high-yield, high-risk bonds, typically subject to greater
market fluctuations and greater risk of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade securities, lower
rated securities tend to reflect short-term corporate, economic and market
developments, as well as investor perceptions or the issuer's credit quality.
Because investments in lower rated
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securities involve greater investment risk, achievement of the Equity Income
Fund's investment objective may be more dependent on the Sub-Adviser's credit
analysis than would be the case if the 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 Capital Appreciation Funds will exchange or convert the convertible
securities held in portfolio into shares of the underlying common stock in
instances in which, in the opinion of the 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 security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.
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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 Capital Appreciation Funds, the Bond Fund, the Limited Term
Bond Fund and the Government Income Fund may write (sell) "covered" call options
and purchase options to close out options previously written by it. Such options
must be issued by the Options Clearing Corporation and may or may not be listed
on a National Securities Exchange. The purpose of writing covered call options
is to generate additional premium income for a Fund. This premium income will
serve to enhance the Fund's total return and will reduce the effect of any price
decline of the security involved in the option. Covered call options will
generally be written on securities which, in the 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
Bond Fund, the Limited Term Bond Fund and the Government Income Fund will write
only covered call options. This means that a Fund will only write a call option
on a security which it already owns.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Capital Appreciation Funds,
the Bond Fund, the Limited Term Bond Fund and the Government Income Fund will
not do), but capable of enhancing a Fund's total return. When writing a covered
call option, a Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the exercise
price, but retains the risk of loss should the price of the security decline.
Unlike when a Fund owns securities not subject to an option, the Capital
Appreciation Funds, the Bond Fund, the Limited Term Bond Fund and the Government
Income Fund will not have any control over when they may be required to sell the
underlying securities, since they may be assigned an exercise notice at any time
prior to the expiration of their obligation as a writer. If a call option which
the Fund has written expires, the Fund will realize a gain in the amount of the
premium; however, such gain may be offset by a decline in the market value of
the underlying security during the option period. If the call option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security. The security covering the call
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will be maintained in a segregated account of the Fund's custodian. The Capital
Appreciation Funds, the Bond Fund, the Limited Term Bond Fund and the 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 Capital Appreciation Funds, the Bond Fund,
the Limited Term Bond Fund and the Government Income Fund will normally have
expiration dates of less than nine months from the date written. The exercise
price of the options may be below, equal to, or above the current market values
of the underlying securities at the time the options are written. From time to
time, a Fund may purchase an underlying security for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
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A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
PUTS. The Tax-Exempt Fund and the Tax-Free Funds may acquire "puts"
with respect to Municipal Securities held in their portfolios, and the Balanced
Fund, the Bond Fund, and the Limited Term Bond Fund may acquire "puts" with
respect to debt securities held in their portfolios and the Enhanced Market Fund
and Select Equity Fund may acquire "puts" with respect to equity securities held
in their portfolios. A put is a right to sell a specified security (or
securities) within a specified period of time at a specified exercise price. The
Tax-Exempt Fund, the Tax-Free Funds, the Bond Fund, the Balanced Fund, the
Limited Term Bond Fund, the Enhanced Market Fund, and the Select Equity Fund may
sell, transfer, or assign a put only in conjunction with the sale, transfer, or
assignment of the underlying security or securities.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate the reinvestment of assets
at a rate of return more favorable than that of the underlying security. Puts
may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the Tax-Exempt Fund's assets pursuant to Rule 2a-7 under
the 1940 Act. See "Variable and Floating Rate Notes" and "Valuation of the Prime
Money Market Fund, the U.S. Treasury Fund and the Tax-Exempt Fund" in this
Statement of Additional Information.
The Limited Term Bond Fund will acquire puts solely to shorten the
maturity of the underlying debt security.
The Tax-Exempt Fund, the Tax-Free Funds, the Limited Term Bond Fund,
the Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, a Fund
may pay for puts either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the puts (thus reducing the
yield to maturity otherwise available for the same securities).
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The Tax-Exempt Fund, the Tax-Free Funds, the Limited Term Bond Fund,
the Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund intend
to enter into puts only with dealers, banks, and broker-dealers which, in the
Adviser's opinion, present minimal credit risks.
FUTURES CONTRACTS AND RELATED OPTIONS. The Enhanced Market Fund, the
Select Equity Fund and the 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 held by it
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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. Each Capital Appreciation and Income
Fund may invest up to 5% of the value of its total assets in the securities of
any one money market mutual fund including Shares of the AmSouth Prime Money
Market Fund, the AmSouth U.S. Treasury Fund (the "AmSouth Money Market Funds"),
the AmSouth Institutional Prime Obligations Fund, and
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the AmSouth Institutional U.S. Treasury Fund (the "AmSouth Institutional Money
Market Funds"), and the Prime Money Market Fund and Tax-Exempt 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 or the AmSouth Institutional 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 or the AmSouth Institutional 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. Each Capital Appreciation Fund and the Government
Income Fund may engage in the technique of short-term trading. Such trading
involves the selling of securities held for a short time, ranging from several
months to less than a day. The object of such short-term trading is to increase
the potential for capital appreciation and/or income of the 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 Tax-Exempt
Fund and the Municipal Bond Fund will be primarily invested in bonds (and in the
case of the Tax-Exempt Fund, notes) issued by or on behalf of states (including
the District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is exempt from federal income tax
("Municipal Securities"). Under normal market conditions, the Tax-Exempt Fund
will invest at least 80% of
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its total assets, the Municipal Bond Fund will invest at least 80% of its net
assets, and the Florida Fund may invest up to 20% of its net assets in Municipal
Securities, the interest on which is not treated as a preference item for
purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from both federal income tax and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. 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 Fund, the Municipal
Bond Fund and the Florida Fund (collectively, the "Tax-Free Funds"), the two
principal classifications of Municipal Securities consist of "general
obligation" and "revenue" issues. A Fund permitted to invest in Municipal
Securities may also acquire "moral obligation" issues, which are normally issued
by special purpose authorities. 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 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
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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 Tax-Exempt Fund may include rated
and unrated variable and floating rate tax-exempt notes, which may have a stated
maturity in excess of one year but which will, in such event, be subject to a
demand feature that will permit the Tax- Exempt Fund to demand payment of the
principal of the note either (i) at any time upon not more than thirty days'
notice or (ii) at specified intervals not exceeding one year and upon no more
than thirty days' notice. There may be no active secondary market with respect
to a particular variable or floating rate note. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to the
Tax-Exempt Fund will approximate their par value.
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
Tax-Free Funds nor the Adviser will review the proceedings relating to the
issuance of Eligible Municipal Securities or the basis for such opinions.
Although the Tax-Exempt Fund and 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 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.
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The Tax-Free Funds may acquire "puts" with respect to Eligible
Municipal Securities held in their portfolios. Under a put, the Funds would have
the right to sell a specified Eligible Municipal Security within a specified
period of time at a specified price to a third party. A put would be sold,
transferred, or assigned only with the underlying Eligible Municipal Security.
The Funds will acquire puts solely to facilitate portfolio liquidity, shorten
the maturity of the underlying Eligible Municipal Securities, or permit the
investment of the Funds' at a more favorable rate of return. The Funds expect
that they will generally acquire puts only where the puts are available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, the Funds may pay for a put separately in cash. The aggregate price
of a security subject to a 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 Tax-Free Funds may also invest in master demand
notes in order to satisfy short-term needs or, if warranted, as part of its
temporary defensive investment strategy. Such notes are demand obligations that
permit the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a U.S. commercial bank acting as
agent for the payees of such notes. Master demand notes are callable on demand
by the Funds, but are not marketable to third parties. Master demand notes are
direct lending arrangements between the Fund and the issuer of such notes. The
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 Tax-Free Funds may acquire rated and unrated variable and floating
rate notes. Variable and floating rate notes are frequently not rated by credit
rating agencies; however, unrated variable and floating rate notes purchased by
the Funds will be determined by the 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.
The Tax-Free Funds may acquire zero coupon obligations. Such
zero-coupon obligations pay no current interest and are typically sold at prices
greatly discounted from par value, with par value to be paid to the holder at
maturity. The return on a zero-coupon obligation, when held to maturity, equals
the difference between the par value and the original purchase price.
Zero-coupon obligations have greater price volatility than coupon obligations
and such obligations will be purchased when the yield spread, in light of the
obligation's duration, is considered advantageous. The Funds will only purchase
zero-coupon obligations if, at the time of purchase,
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such investments do not exceed 20% of the value of the Florida Fund's total
assets and 25% of the Municipal Bond Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the 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 MUNICIPAL BOND FUND -- CONCENTRATION IN ALABAMA ISSUERS. The
Municipal Bond Fund may invest 25% or more of its total assets in bonds, notes
and warrants generally issued by or on behalf of the State of Alabama and its
political subdivisions, the interest on which, in the opinion of the issuer's
bond counsel at the time of issuance, is exempt form both federal income tax and
Alabama personal income tax and is not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Alabama Municipal
Securities"). Because of the relatively small number of issuers of Alabama
Municipal Securities, the Fund is more likely to invest a higher percentage of
its assets in the securities of a single issuer. This concentration involves an
increased risk of loss if the issuer is unable to make interest or principal
payments or if the market value of such securities were to decline.
Concentration of this nature may cause greater fluctuation in the net asset
value of the Fund's Shares.
GENERAL ECONOMIC CHARACTERISTICS OF ALABAMA. Alabama ranks twenty-third
in the nation in total population, with over four million residents in 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 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
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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.
THE FLORIDA FUND -- DIVERSIFICATION AND CONCENTRATION. The Florida Fund
is a non-diversified fund under the 1940 Act and may concentrate its investments
in the securities of a limited number of issuers. Under the Internal Revenue
Code of 1986, as amended (the "Code"), the Florida Fund generally may not invest
in a manner such that at the end of each fiscal quarter (i) more than 25% of its
total assets are represented by securities of any one issuer (other than U.S.
government securities) and (ii) with respect to 50% of its total assets, more
than 5% of its total assets are represented by the securities of any one issuer
(other than U.S. government securities). Thus, the Florida Fund generally may
invest up to 25% of its total assets in the securities of each of any two
issuers. Because of the relatively small number of issuers of Florida Municipal
Securities, the Florida Fund is more likely to invest a higher percentage of its
assets in
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the securities of a single issuer than an investment company that invests in a
broad range of tax-exempt securities. This concentration involves an increased
risk of loss if the issuer is unable to make interest or principal payments or
if the market value of such securities were to decline. Concentration of this
nature may cause greater fluctuation in the net asset value of the Florida
Fund's shares.
GENERAL ECONOMIC CHARACTERISTICS OF FLORIDA. Florida ranks fourth in
the nation in total population, with over 12.9 million residents in 1990, and
has been one of the fastest growing states in the nation. Historically, tourism,
agriculture, construction and manufacturing have constituted the most important
sectors of the state's economy. Construction activity slows during periods of
high interest rates or cyclical downturns. The service sector employs the
largest number of people in Florida. While wages in the service sector tend to
be lower than in manufacturing and other sectors of the economy, the service
sector traditionally has been less sensitive to business cycles. Currently,
Florida's general obligations are rated Aa3 by Moody's and AA by Standard and
Poor's.
The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
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SOURCES OF STATE AND LOCAL REVENUES. Florida's Constitution
prohibits deficit spending by the state for governmental operations. Florida
does not have a personal income tax. An amendment to the state's Constitution
would be required in order to institute an income tax, and passage of such an
amendment is believed to be unlikely due to the relatively large number of
retirees living in the state as well as to the general unpopularity of tax
increases in the current political climate. A two-thirds approval of voters
voting in an election is now required for the addition of any new taxes to the
Florida Constitution. The principal sources of state revenues are a 6% sales
tax, state lottery, motor fuels tax, corporate income tax, and miscellaneous
other revenue sources, including beverage tax and licenses, cigarette tax,
documentary stamp taxes and an intangible tax. Dependence on the sales tax may
subject state revenues to more volatility than would be the case if Florida had
a personal income tax, with sales tax collections adversely affected during
recessions and periods when tourism declines.
Taxation by units of government other than the state is permitted only
to the extent that Florida's legislature enacts enabling legislation. The
principal sources of county and municipal government revenues are ad valorem
property taxes, state revenue sharing, and miscellaneous other revenue sources,
including utilities services fees and local option fees. The principal sources
of revenues for Florida's school districts are ad valorem property taxes and
state revenue sharing, including revenues from a state lottery. The state
Constitution imposes millage limits, including a 10-mill limit each on county,
municipal and school ad valorem taxes. Effective January 1, 1995, Florida's
voters amended the state Constitution to limit annual increases in the assessed
value of homestead property to the lesser of 3% of the prior year's assessment
or the percentage change in the Consumer Price Index during the preceding
calendar year. The limitation on increases in assessment of homestead property
could eventually lead to ratings revisions that could have a negative impact on
the prices of obligations funded with this source of taxation. However, the
effect of the limit will be tempered by reassessments of homestead property at
market value when sold.
Units of state and local government in Florida will continue to face
spending pressures due to infrastructure needs for an expanding population,
especially in view of growth management laws enacted by Florida's legislature.
These laws include concurrency requirements that impose building moratoriums
unless roads and other infrastructure are added concurrently with additional
commercial or residential developments.
TYPES OF INDEBTEDNESS. The two principal types of indebtedness
issued by state or local units of government in Florida are "general obligation
bonds" and "revenue bonds." General obligation bonds are secured by a pledge of
the full faith, credit and taxing power of the governmental entity issuing the
bonds. They can be issued in Florida only after a referendum in which the voters
in the jurisdictional limits of the jurisdiction issuing the bonds approve their
issuance. Revenue bonds are payable only from the revenues derived from a
facility or class of facilities or, in some cases, from the proceeds of a
special tax or other specific revenue source. Revenue bonds are not secured by
the full faith, credit and taxing power of the governmental issuer.
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MARKET RISK CAUSED BY INTANGIBLE TAX CONSIDERATIONS. As a
normal policy, on January 1 of each calendar year the Florida Fund intends to
own only assets which are exempt from the Florida Intangible Tax. Accordingly,
it is possible that the Florida Fund, in disposing of non-exempt assets to meet
this policy objective, might sustain losses which might not otherwise be
incurred absent this policy of avoiding the Florida Intangible Tax.
Investment Restrictions
- -----------------------
The following investment restrictions may be changed with respect to a
particular Fund only by a vote of a majority of the outstanding voting Shares of
that Fund (as defined under "ADDITIONAL INFORMATION - Miscellaneous" in this
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 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 U.S. TREASURY FUND MAY NOT:
1. Purchase securities other than bills, notes, and bonds issued by the
U.S. Treasury, certain of which securities may be subject to repurchase
agreements collateralized by the underlying U.S. Treasury obligation.
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THE TAX-EXEMPT FUND MAY NOT:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the
Tax-Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the
Tax-Exempt Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry; provided that this limitation shall not apply to Municipal
Securities; and provided, further, that for the purpose of this limitation only,
private activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax-Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax-Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax-Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax-Exempt Fund's assets.
THE BOND FUND, THE LIMITED TERM BOND FUND, THE GOVERNMENT INCOME FUND,
THE MUNICIPAL BOND FUND AND THE CAPITAL APPRECIATION FUNDS MAY NOT:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed
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by the U.S. government or its agencies or instrumentalities. This investment
restriction does not apply to the Select Equity Fund.
THE INCOME FUNDS AND THE CAPITAL APPRECIATION FUNDS MAY NOT:
1. Purchase any securities which would cause more than 25% of the value
of such Income Fund's or Capital Appreciation Fund's total assets at the time of
purchase to be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that (a) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and repurchase agreements
secured by obligations of the U.S. government or its agencies or
instrumentalities; (b) for the Bond Fund, the Limited Term Bond Fund, the
Florida Fund, and the Municipal Bond Fund there is no limitation with respect to
Municipal Securities, which, for purposes of this limitation only, do not
include private activity bonds that are backed only by the assets and revenues
of a non-governmental user; (c) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (d)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
THE TAX-FREE FUNDS MAY NOT:
1. Write or sell puts, calls, straddles, spreads, or combinations
thereof except that the Funds may acquire puts with respect to Eligible
Municipal Securities and sell those puts in conjunction with a sale of those
Eligible Municipal Securities.
THE MONEY MARKET FUNDS, THE INCOME FUNDS, AND THE CAPITAL APPRECIATION
FUNDS MAY NOT:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing (33 1/3% with respect to the Select Equity Fund); or
mortgage, pledge, or hypothecate any assets, except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of such Fund's total assets at the time of its
borrowing (33 1/3% with respect to the Select Equity Fund). A Fund will not
purchase securities while 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 FUNDS MAY:
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1. Purchase securities on margin, sell securities short, participate on
a joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that a Fund may
be deemed to be an underwriter under certain securities laws in the disposition
of "restricted securities" acquired in accordance with such Fund's investment
objectives, restrictions and policies;
2. Purchase or sell commodities, commodity contracts (including futures
contracts with respect to each Fund other than the Small Cap, Enhanced Market
and Select Equity Funds, which may purchase futures contracts), oil, gas or
mineral exploration or development programs, or real estate (although
investments by all of the Funds except the U.S. Treasury Fund in marketable
securities of companies engaged in such activities and in securities secured by
real estate or interests therein are not hereby precluded and investment in real
estate investment trusts are permitted for the Growth Fund, the Small Cap Fund,
the Equity Income Fund, the Enhanced Market Fund and the Select Equity Fund);
3. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; PROVIDED, HOWEVER, that the Capital Appreciation Funds
and the Income Funds may purchase securities of a money market fund, including
securities of both the Prime Money Market Fund and the U.S. Treasury Fund (and
in the case of the Tax-Free Funds, securities of the Tax-Exempt Fund) and the
Tax-Exempt Fund and the Prime 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 and the U.S. Treasury Fund may not buy
common stocks or voting securities, or state, municipal, or private activity
bonds. The Money Market Funds and the Tax-Free Funds may not write or purchase
call options. None of the Funds (except the Enhanced Market and Select Equity
Fund) may write put options. The Prime Money Market Fund, the U.S. Treasury
Fund, the Value Fund, the Regional Equity Fund, the Growth Fund and
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the Equity Income Fund may not purchase put options. The Tax-Exempt Fund and the
Tax-Free Funds may not invest in private activity bonds where the payment of
principal and interest are the responsibility of a company (including its
predecessors) with less than three years of continuous operation. As a
non-fundamental investment restriction with respect to the Small Cap Fund only,
the Small Cap Fund may not write or purchase put options.
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
Additional Investment Restrictions
- ----------------------------------
The following investment restriction is non-fundamental and may be
changed by a vote of the majority of the Board of Trustees: No Fund will invest
more than 15% of its net assets in securities that are restricted as to resale,
or for which no readily available market exists, including repurchase agreements
providing for settlement more than seven days after notice.
Portfolio Turnover
- ------------------
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose maturities at the time of acquisition were one year or
less. Portfolio turnover with respect to each of the Money Market Funds is
expected to be zero percent for regulatory purposes.
For the fiscal years ended July 31, 1999 and July 31, 1998, the
portfolio turnover rate for the Balanced Fund was 13.51% and 17.15%,
respectively, for the common stock portion of its portfolio and 23.01% and
11.99%, respectively, for the other portion of its portfolio.
For the other AmSouth Funds, each Fund's portfolio turnover rate for
the fiscal year ended July 31, 1999 and July 31, 1998 were as follows:
Fund 1999 1998
- ---- ---- ----
Balanced Fund 23.24% 25.40%
Growth Fund 79.30% 77.26%
Enhanced Market Fund 36.03% --
Value Fund 17.65% 16.95%
Equity Income Fund 133.74% 83.26%
Regional Equity Fund 15.60% 8.17%
Select Equity Fund 9.72% --
Small Cap Fund 208.13% 70.64%
Bond Fund 18.26% 40.41%
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Government Income Fund 26.85% 34.89%
Limited Term Bond Fund 39.15% 39.31%
Florida Tax-Exempt Fund 34.33% 29.55%
Municipal Bond Fund 20.74% 28.75%
The portfolio turnover rate may vary greatly from year to year as well
as within a particular year, and may also be affected by cash requirements for
redemptions of Shares and, in the case of the Tax-Exempt Fund and the Tax-Free
Funds, by requirements which enable these Funds to receive certain favorable tax
treatments. A higher portfolio turnover rate may lead to increased taxes and
transaction costs. Portfolio turnover will not be a limiting factor in making
investment decisions.
The Tax-Free Funds will not purchase securities solely for the purpose
of short-term trading. The turnover rates for the Funds will not be a factor
preventing either the sale or the purchase of securities when the Adviser
believes investment considerations warrant such sale or purchase. However, the
portfolio turnover rate for each of the Tax-Free Funds may vary greatly from
year to year as well as within a particular year. High turnover rates will
generally result in higher transaction costs to the Funds and may result in
higher levels of taxable realized gains to the Funds' Shareholders. To the
extent portfolio turnover results in the realization of short-term capital
gains, such gains will generally be taxed to shareholders at ordinary income tax
rates.
VALUATION
As indicated in the Prospectuses, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of 4:00 p.m., Eastern time
(the "Valuation Time") on each Business Day of the Fund. As used herein a
"Business Day" constitutes any day on which the New York Stock Exchange (the
"NYSE") is open for trading and the Federal Reserve Bank of Atlanta is open,
except days on which there are not sufficient changes in the value of the Fund's
portfolio securities that the Fund's net asset value might be materially
affected, or days during which no Shares are tendered for redemption and no
orders to purchase Shares are received. Currently, either the NYSE or the
Federal Reserve Bank of Atlanta is closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day,
Thanksgiving Day and Christmas Day.
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Valuation of the Money Market Funds
- -----------------------------------
The Money Market Funds have elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. The value of
securities in these Funds can be expected to vary inversely with changes in
prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that no Fund will
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Trust's Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires that the Board of Trustees promptly consider what action, if any,
should be initiated. If the Trustees believe that the extent of any deviation
from a Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the
dollar-weighted average portfolio maturity, withholding or reducing dividends,
reducing the number of a Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per Share determined by using
available market quotations.
Valuation of the Capital Appreciation Funds and the Income Funds
- ----------------------------------------------------------------
The value of the portfolio securities held by each of the Capital
Appreciation Funds and the Income Funds for purposes of determining such Fund's
net asset value per Share will be established on the basis of current valuations
provided by Muller Data Corporation or Kenny S&P Evaluation Services, whose
procedures shall be monitored by the Administrator, and which valuations shall
be the fair market value of such securities.
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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each Fund are sold on a continuous basis by BISYS Fund
Services Limited Partnership ("BISYS"), and BISYS has agreed to use appropriate
efforts to solicit all purchase orders. In addition to purchasing Shares
directly from BISYS, Shares may be purchased through procedures established by
BISYS in connection with the requirements of accounts at AmSouth or financial
institutions that provide certain support services for their customers or
account holders ("Financial Institutions"). Customers purchasing Shares may
include officers, directors, or employees of AmSouth or AmSouth's correspondent
banks.
Purchase of Shares
- ------------------
As stated in the relevant Prospectuses, the public offering price of
Class A Shares of the Capital Appreciation Funds and the Income Funds is their
net asset value computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of Class B and Trust
Shares is their net asset value computed after the sale. The public offering
price of such Shares is calculated by dividing net asset value by the difference
(expressed as a decimal) between 100% and the sales charge percentage of the
offering price applicable to the purchase (see "Shareholder Information -
Pricing of Fund Shares" in the relevant Prospectuses).
SALES CHARGES. The offering price is rounded to two decimal
places each time a computation is made. The sales charge scale set forth in a
Fund's Prospectus applies to purchases of Shares of such a Fund made at one time
by any purchaser (a "Purchaser"), which includes: (i) an individual, his or her
spouse and children under the age of 18; (ii) a trustee or other fiduciary of a
single trust estate or single fiduciary account; or (iii) any other organized
group of persons, whether incorporated or not, provided that such organization
has been in existence for at least six months and has some purpose other than
the purchase of redeemable securities of a registered investment company. In
order to qualify for a lower sales charge, all orders from a Purchaser will have
to be placed through a single investment dealer and identified at the time of
purchase as originating from the same Purchaser, although such orders may be
placed into more than one discrete account which identifies the Purchasers.
A Purchaser may qualify for a reduced sales charge by combining
concurrent purchases of Class A Shares of a Capital Appreciation Fund or Income
Fund and one or more of the other Class A Shares of a Fund or by combining a
current purchase of Class A Shares of a Fund with prior purchases of Class A
Shares of any Fund. The applicable sales charge is based on the sum of (i) the
Purchaser's current purchase of shares of any Fund sold with a sales charge plus
(ii) the dollar amount of purchases of the Purchaser's combined holdings of all
Class A Shares in any Fund. The "Purchaser's combined holdings" described in the
preceding sentence shall include the combined holdings of the Purchaser, the
Purchaser's spouse, children under the age of 18, the Purchaser's retirement
plan accounts and sole proprietorship accounts that the Purchaser may own. To
receive the applicable public offering
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<PAGE> 267
price pursuant to the right of accumulation, Shareholders must at the time of
purchase provide the Transfer Agent or the Distributor with sufficient
information to permit confirmation of qualification. Accumulation privileges may
be amended or terminated without notice at any time by the Distributor.
Class A Shares of the Money Market Funds are sold at their net asset
value per share, as next computed after an order is received. However, as
discussed in the Class A and Class B Shares Prospectus, the Class B Shares are
subject to a Contingent Deferred Sales Charge if they are redeemed prior to the
sixth anniversary of purchase. Class B Shares of the Prime Money Market Fund
only are available to Shareholders of Class B Shares of another Fund who wish to
exchange their Class B Shares of such other Fund for Class B Shares of the Prime
Money Market Fund.
Certain sales of Class A Shares are made without a sales charge, as
described in the relevant Prospectuses under the caption "Sales Charge Waivers",
to promote goodwill with employees and others with whom BISYS, AmSouth and/or
the Trust have business relationships, and because the sales effort, if any,
involved in making such sales is negligible.
ADDITIONAL INFORMATION REGARDING BROKER COMPENSATION. As the
Trust's principal underwriter, BISYS acts as principal in selling Class A Shares
and Class B Shares of the Trust to dealers. BISYS re-allows a portion of the
sales charge as dealer discounts and brokerage commissions. Dealer allowances
expressed as a percentage of the offering price for all offering prices are set
forth in the relevant Class A Shares and Class B Shares Prospectuses (see
"Shareholder Information - Pricing of Fund Shares"). From time to time, BISYS
may make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
In some instances, promotional incentives to dealers may be offered only to
certain dealers who have sold or may sell significant amounts of Group shares.
Neither BISYS nor dealers are permitted to delay the placement of orders to
benefit themselves by a price change.
From time to time dealers who receive dealer discounts and broker
commissions from the Distributor may reallow all or a portion of such dealer
discounts and broker commissions to other dealers or brokers.
The Distributor, at its expense, will also provide additional
compensation to dealers in connection with sales of Class A Shares and Class B
Shares of any of the Funds. Such compensation will include financial assistance
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Funds of the Trust, and/or other dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside the United States
for meetings or seminars of a business nature. Dealers may not use sales of a
Fund's Shares to qualify for this
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compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by any Fund or
its Shareholders.
PURCHASES THROUGH FINANCIAL INSTITUTIONS. Shares of the Funds
may be purchased through procedures established by the Distributor in connection
with requirements of qualified accounts maintained by or on behalf of certain
persons ("Customers") by AmSouth or financial institutions that provide certain
administrative support services for their customers or account holders
(collectively, "Financial Institutions"). These procedures may include
instructions under which a Customer's account is "swept" automatically no less
frequently than weekly and amounts in excess of a minimum amount agreed upon by
a Financial Institution and its Customer are invested by the Distributor in
Shares of a Money Market Fund. These procedures may also include transactions
whereby AmSouth as agent purchases Shares of the Funds in amounts that
correspond to the market value of securities sold to the Funds by AmSouth as
agent.
Shares of the Trust sold to Financial Institutions acting in a
fiduciary, advisory, custodial, agency, or other similar capacity on behalf of
Customers will normally be held of record by the Financial Institutions. With
respect to Shares so sold, it is the responsibility of the particular Financial
Institution to transmit purchase or redemption orders to the Distributor and to
deliver federal funds for purchase on a timely basis. Beneficial ownership of
the Shares will be recorded by the Financial Institutions and reflected in the
account statements provided by the Financial Institutions to Customers.
Depending upon the terms of a particular Customer account, the
Financial Institutions may charge a Customer's account fees for automatic
investment and other cash management services provided in connection with
investment in the Capital Appreciation Funds. Information concerning these
services and any charges can be obtained from the Financial Institutions.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Class A Shares and Class B Shares
either by telephone or by wiring funds to the Trust's custodian. Telephone
orders may be placed by calling the Trust at (800) 451-8382. Payment for Shares
ordered by telephone may be made by check and must be received by the Trust's
custodian within three days of the telephone order. If payment is not received
within three days or a check timely received does not clear, the purchase will
be canceled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Shares effected by wiring funds to the Trust's
custodian, investors must call the Trust at (800) 451-8382 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Automatic Investment Plan
- -------------------------
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To change the frequency or amount invested, written instructions must
be received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
"REDEMPTION BY MAIL" below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
Matters Affecting Redemption
- ----------------------------
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists as
determined by the Securities and Exchange Commission.
The Trust may redeem any class of Shares involuntarily if redemption
appears appropriate in light of the Trust's responsibilities under the 1940 Act.
See "Valuation of the Money Market Funds" above.
Taxes
- -----
THE MONEY MARKET FUNDS
The net income of each Money Market Fund is declared daily as a
dividend to Shareholders of record at the close of business on the day of
declaration. Dividends will generally be paid monthly. Distributable net capital
gains (if any) will be distributed at least annually. A Shareholder will
automatically receive all income dividends and capital gains distributions in
additional full and fractional Shares of the same class at net asset value as of
the date of payment unless the Shareholder elects to receive such dividends or
distributions in cash. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to the Transfer Agent at P.O. Box 182733, Columbus, Ohio 43218-2733,
and will become effective with respect to dividends and distributions having
record dates after its receipt by the Transfer Agent. Dividends are paid in cash
not later than seven Business Days after a Shareholder's complete redemption of
his or her Shares. Dividends are generally taxable when received. However,
dividends declared in October, November, or December to Shareholders of record
during those months and paid during
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the following January are treated for tax purposes as if they were received by
each Shareholder on December 31 of the prior year.
INFORMATION SPECIFIC TO THE PRIME MONEY MARKET FUND AND THE U.S.
TREASURY FUND. Dividends will generally be taxable to a Shareholder as ordinary
income to the extent of the Shareholder's ratable share of each Fund's earnings
and profits as determined for tax purposes. Because all of the net investment
income of the Prime Money Market Fund and the U.S. Treasury Fund is expected to
be interest income, it is anticipated that no distributions will qualify for the
dividends-received deduction for corporate shareholders. The Prime Money Market
Fund and the U.S. Treasury Fund do not expect to realize any long-term capital
gains and, therefore, do not foresee paying any "capital gains dividends" as
described in the Code. Dividends received by a Shareholder that are derived from
the U.S. Treasury Fund's investments in U.S. government obligations may not be
eligible for exemption from state and local taxes even though the income on such
investments would have been exempt from state and local taxes if the Shareholder
directly held such investments. In addition, the state and local tax exemption
for interest earned on U.S. government obligations may not extend to income
earned on U.S. government obligations that are subject to a repurchase
agreement. Shareholders are advised to consult their own tax Advisers concerning
their own tax situation and the application of state and local taxes.
THE INCOME FUNDS
A dividend for each Income Fund will be declared monthly at the close
of business on the day of declaration consisting of an amount of accumulated
undistributed net income of the Fund as determined to be necessary or
appropriate by the appropriate officers of the Trust. Dividends will generally
be paid monthly. Distributable net realized capital gains are distributed
annually to Shareholders of record. A Shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional Shares unless the Shareholder elects to receive such dividends or
distributions in cash. Dividends and distributions are reinvested without a
sales charge as of the ex-dividend date using the net asset value determined on
that date and are credited to a Shareholder's account on the payment date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash. Dividends are generally taxable when
received. However, dividends declared in October, November, or December to
Shareholders of record during those months and paid during the following January
are treated for tax purposes as if they were received by each Shareholder on
December 31 of the prior year. Elections to receive dividends or distributions
in cash, or any revocation thereof, must be made in writing to the Transfer
Agent at P.O. Box 182733, Columbus, Ohio 43218-2733, and will become effective
with respect to dividends and distributions having record dates after its
receipt by the Transfer Agent.
INFORMATION SPECIFIC TO THE BOND FUND, THE LIMITED TERM BOND FUND AND
THE GOVERNMENT INCOME FUND. Distributions by the Bond Fund, the Limited Term
Bond Fund and the Government Income Fund of ordinary income and/or an excess of
net short-term capital gain
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over net long-term loss are taxable to shareholders as ordinary income. It is
not expected that the dividends-received deduction for corporations will apply
to these distributions.
Distributions designated by the Bond Fund, the Limited Term Bond Fund
and the Government Income Fund as derived from net gains on securities held for
more than one year are taxable to Shareholders as such regardless of how long
the Shareholder has held Shares in such Fund. Such distributions are not
eligible for the dividends-received deduction.
Prior to purchasing Shares of the Bond Fund, the Limited Term Bond Fund
or the Government Income Fund, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Dividends or capital gains distributions
paid after a purchase of Shares are subject to federal income taxes, although in
some circumstances the dividends or distributions may be, as an economic matter,
a return of capital. A Shareholder should consult his or her own Adviser for any
special advice.
Dividends received by a Shareholder that are derived from the Bond
Fund's, the Limited Term Bond Fund's or the Government Income Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly.
A Shareholder will generally recognize long-term capital gain or loss
on the sale or exchange of shares in an Income Fund held by the Shareholder for
more than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Term Bond Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
The holder of a security issued with "original issue discount"
(including a zero-coupon U.S. Treasury security) is required to accrue as income
each year a portion of the discount at which the security was purchased, even
though the holder does not currently receive the interest payment in cash. A
security has original issue discount if its redemption price exceeds its issue
price by more than a de minimis amount. Accordingly, the Bond Fund, the Limited
Term Bond Fund and the Government Income Fund may be required to distribute each
year an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions may be made from the cash assets of the
Fund or by liquidation of its portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution than they would have in the absence of such
transactions.
INFORMATION SPECIFIC TO THE TAX-EXEMPT FUND, THE FLORIDA FUND AND THE
MUNICIPAL BOND FUND. Shareholders of the Tax-Exempt Fund and the Tax-Free Funds
may treat as exempt-interest and exclude from gross income for federal income
tax purposes dividends
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derived from net exempt-interest income and designated by the Funds as
exempt-interest dividends. However, such dividends may be taxable to
shareholders under state or local law as ordinary income even though all or a
portion of the amounts may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such taxes.
Dividends from the Tax-Exempt and Tax-Free Funds attributable to
exempt-interest dividends may cause the social security and railroad retirement
benefits of individual Shareholders to become taxable, or increase the amount
that is taxable. Interest on indebtedness incurred by a Shareholder to purchase
or carry Shares is not deductible for federal income tax purposes to the extent
the Funds distribute exempt-interest dividends during the Shareholder's taxable
year. The amount of the disallowed interest deduction is the total amount of
interest paid or accrued on the indebtedness multiplied by a fraction, the
numerator of which is the amount of exempt-interest dividends received by the
Shareholder and the denominator of which is the sum of the exempt-interest
dividends and taxable dividends received by the Shareholder (excluding capital
gain dividends received by the Shareholder and capital gains required to be
included in the Shareholder's computation of long-term capital gains under
Section 852(b)(3)(D) of the Code). It is anticipated that distributions from the
Tax- Exempt and Tax-Free Funds will not be eligible for the dividends-received
deduction for corporate shareholders.
Gains on the sale of Shares in the Tax-Exempt and Tax-Free Funds will
be subject to federal, state, and local taxes. If a Shareholder receives an
exempt-interest dividend with respect to any Share of the Fund and such Share is
held for six months or less, any loss on the sale or exchange of such Share will
be disallowed to the extent of the amount of such exempt-interest dividend.
The Tax-Exempt Fund and the Tax-Free Funds may at times purchase
Municipal Securities at a discount from the price at which they were originally
issued. For federal income tax purposes, some or all of this market discount
will be included in a Fund's ordinary income and will be taxable to Shareholders
as such when it is distributed to them.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit, market discount
or repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax Adviser for any
special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in the alternative minimum taxable
income of individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate Shareholders.
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Additional Tax Information
- --------------------------
It is the policy of each Fund to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By following such
policy, the Trust's Funds expect to eliminate or reduce to a nominal amount the
federal income taxes to which such Fund may be subject.
In order to qualify for the special tax treatment accorded regulated
investment companies and their Shareholders, a Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, securities, and foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; (b) each year distribute at least 90% of the sum of its taxable net
investment company income, its net tax-exempt income, and the excess, if any, of
its net short-term capital gains over its net long-term capital losses; and (c)
diversify its holdings so that, at the end of each fiscal quarter (i) at least
50% of the market value of its total assets is represented by cash, cash items
(including receivables), U.S. Government securities, securities of other
regulated investment companies, and other securities, limited in respect of any
one issuer to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities
(other than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the Fund controls
and which are engaged in the same, similar, or related trades or businesses.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they have a non-calendar taxable year) an amount at least equal to the sum of
98% of their "ordinary income" (as defined) for the calendar year, 98% of their
capital gain net income for the 1-year period ending on October 31 of such
calendar year, and any undistributed amounts from the previous year. For the
foregoing purposes, a Fund is treated as having distributed the sum of (i) the
deduction for dividends paid (defined in Section 561 of the Code) during such
calendar year, and (ii) any amount on which it is subject to income tax for any
taxable year ending in such calendar year. If distributions during a calendar
year by a Fund did not meet the excise tax threshold, the Fund would be subject
to the
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4% excise tax on the undistributed amounts. Each Fund intends generally to make
distributions sufficient to avoid imposition of this 4% excise tax.
Each Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends and other distributions paid
to any Shareholder who has provided either an incorrect taxpayer identification
number or no number at all, who is subject to withholding by the Internal
Revenue Service for failure properly to report payments of interest or
dividends, or who fails to provide a certified statement that he or she is not
subject to "backup withholding."
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 2000. In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign investors
in order to qualify for exemption from the 31% back-up withholding tax and for
reduced withholding tax rates under income tax treaties. Foreign investors in a
Fund should consult their tax advisers with respect to the potential application
of these new regulations.
A Fund's transactions in options, foreign-currency-denominated
securities, and certain other investment and hedging activities of the Fund,
will be subject to special tax rules (including "mark-to-market," "straddle,"
"wash sale," "constructive sale" and "short sale" rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, convert short-term
capital losses into long-term capital losses, convert long-term capital gains
into short-term capital gains, and otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing, and character of
distributions to Shareholders. Income earned as a result of these transactions
would, in general, not be eligible for the dividends-received deduction or for
treatment as exempt-interest dividends when distributed to Shareholders. The
Funds will endeavor to make any available elections pertaining to these
transactions in a manner believed to be in the best interest of the Funds.
The Funds each expect to qualify to be taxed as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes.
Depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or independent contractors
are located, or in which they are otherwise deemed to be conducting business,
the Funds may be subject to the tax laws of such states or localities.
However, if for any taxable year the Funds do not qualify for the
special federal tax treatment afforded regulated investment companies, all of
their taxable income will be subject to federal income tax at regular corporate
rates at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders may be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
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Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Trust's Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectuses and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the Prospectuses and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
Additional Tax Information Concerning the Tax-Exempt Fund and Tax-Free Funds
- ----------------------------------------------------------------------------
As indicated in the Prospectuses of the Tax-Exempt Fund and the
Tax-Free Funds, these Funds are designed to provide Shareholders with current
tax-exempt interest income. The Funds are not intended to constitute a balanced
investment program and are not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tax-Exempt Fund and the Tax-Free Funds would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, so-called Keogh or H.R. 10 plans,
and individual retirement accounts. Such plans and accounts are generally
tax-exempt and, therefore, would not gain any additional benefit from the
dividends of the Tax-Exempt Fund and the Tax-Free Funds, being tax-exempt, and
such dividends would be ultimately taxable to the beneficiaries when distributed
to them.
In addition, the Tax-Exempt Fund and the Tax-Free Funds may not be
appropriate investments for Shareholders that may be "substantial users" of
facilities financed by private activity bonds or "related persons" thereof.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business, and whose gross revenues derived with respect to the facilities
financed by the issuance of bonds represent more than 5% of the total revenues
derived by all users of such facilities, or who occupies more than 5% of the
usable area of such facilities, or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related person"
includes certain related natural persons, affiliated corporations, a partnership
and its partners and an S Corporation and its shareholders. Each Shareholder
that may be considered a "substantial user" should consult a tax adviser with
respect to whether exempt-interest dividends would retain the exclusion under
Section 103 of the Code if the Shareholder were treated as a "substantial user"
or a "related person."
The Code permits a regulated investment company which invests at least
50% of its assets in tax-free Municipal Securities to pass through to its
investors, tax-free, net Municipal Securities interest income. The policy of the
Tax-Exempt Fund and the Tax-Free Funds is to pay each year as dividends
substantially all such Fund's Municipal Securities interest income net of
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certain deductions. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Tax-Exempt Fund and the
Tax-Free Funds and designated as an exempt-interest dividend in a written notice
mailed to Shareholders after the close of such Fund's taxable year, but not to
exceed in the aggregate the net Municipal Securities interest received by the
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from the Tax-Exempt Fund and the
Tax-Free Funds during such year, regardless of the period for which the Shares
were held.
While the Tax-Exempt Fund and the Tax-Free Funds do not expect to
realize any significant amount of long-term capital gains, any net realized
long-term capital gains will be distributed annually. The Tax-Exempt Fund and
the Tax-Free Funds will have no tax liability with respect to such gains and the
distributions will be taxable to Shareholders as net gains on securities held
for more than one year, regardless of how long a Shareholder has held the Shares
of the Funds. Such distributions will be designated as a capital gains dividend
in a written notice mailed by the Tax-Exempt Fund and the Tax-Free Funds to
Shareholders after the close of the Fund's taxable year.
While the Tax-Exempt Fund and the Tax-Free Funds do not expect to earn
any significant amount of investment company taxable income, taxable income
earned by the Funds will be distributed to Shareholders. In general, the
investment company taxable income will be the taxable income of the Fund
(including, the excess of short-term capital gains for such year over net
long-term capital losses for such year) subject to certain adjustments and
excluding the excess, if any, of any net long-term capital gains for the taxable
year over any net short-term capital loss for such year. Any such income will be
taxable to Shareholders as ordinary income (whether paid in cash or additional
Shares).
As indicated in the Prospectuses of the Tax-Exempt Fund and the
Tax-Free Funds, the Funds may acquire puts with respect to Municipal Securities
(and in the case of the Florida Fund, Florida Municipal Securities) held in
their portfolios. See "INVESTMENT OBJECTIVES AND POLICIES - Additional
Information on Portfolio Instruments - Puts" in this Statement of Additional
Information. The policy of the Tax-Exempt Fund and the Tax- Free Funds is to
limit their acquisition of puts to those under which the Fund will be treated
for federal income tax purposes as the owner of the Municipal Securities
acquired subject to the put and the interest on the Municipal Securities will be
tax-exempt to such Fund. Although the Internal Revenue Service has issued a
published ruling that provides some guidance regarding the tax consequences of
the purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Tax-Exempt Fund and the Tax-Free Funds could acquire
under the 1940 Act. Therefore, although the Tax-Exempt Fund and the Tax-Free
Funds will only acquire a put after concluding that it will have the tax
consequences described above, the Internal Revenue Service could reach a
different conclusion from that of the Funds. If the Tax-Exempt Fund and the
Tax-Free Funds
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were not treated as the owner of the Municipal Securities, income from such
securities would probably not be tax-exempt.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of Shares of the Tax-Exempt Fund
and the Tax-Free Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Tax-Exempt Fund and the
Tax-Free Funds or their Shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential purchasers of Shares
of the Tax-Exempt Fund and the Tax-Free Funds are urged to consult their tax
advisers with specific reference to their own tax situation. In addition, the
foregoing discussion is based on tax laws and regulations which are in effect on
the date of this Statement of Additional Information; such laws and regulations
may be changed by legislative or administrative action.
Alabama Taxes
- -------------
Section 40-18-14(3)f of the Alabama Code specifies that interest on
obligations of the State of Alabama and any county, municipality or other
political subdivision thereof is exempt from personal income tax. Section
40-18-14(3)d provides similar tax-exempt treatment for interest on obligations
of the United States or its Possessions (including Puerto Rico, Guam and the
Virgin Islands). Regulation Section 810-3-14-.02(4)(a) extends the exclusion to
agencies of the United States or corporations owned by the United States and
lists as examples of exempt obligations, U.S. savings bonds, U.S. Treasury notes
or bills, obligations of the Bank for Cooperation, Federal Land Bank, Federal
Intermediate Credit Bank, Federal Home Loan Bank, Production Credit
Associations, Federal Financing Bank, and the Tennessee Valley Authority. In
addition, Regulation Section 810-3-14-.02(4)(b)2 and an Administrative ruling of
the Alabama Department of Revenue dated March 1, 1990 extend these exemptions
for interest to distributions from a regulated investment company to the extent
that they are paid out of interest earned on such exempt obligations. Tax-exempt
treatment is not available on distributions from income earned on securities
that are merely guaranteed by the federal government (GNMAs, FNMAs, etc.), for
repurchase agreements collateralized by U.S. government obligations or for
obligations of other states to the extent such investments are made by the Fund
for temporary or defensive purposes. Such interest will be taxable on a pro rata
basis.
Any distributions of net short-term and net long-term capital gain
earned by the Fund are fully includable in each Shareholder's Alabama taxable
income as dividend income and long-term capital gain, respectively. Both types
of income are currently taxed at ordinary rates.
The foregoing discussion is based on tax laws and regulations which are
in effect as of the date of this Statement of Additional Information; such laws
and regulations may be changed by legislative or administrative actions. The
foregoing is also intended only as a brief summary of some of the important
Alabama tax considerations generally affecting the Municipal Fund and its
Shareholders. Potential investors are urged to consult their tax Advisers
concerning their own tax situation and concerning the application of state and
local (as well as federal) taxes.
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Florida Taxes
- -------------
The State of Florida does not impose an income tax on individuals.
Therefore, distributions of the Florida Fund to individuals will not be subject
to personal income taxation in Florida. Corporations and other entities subject
to the Florida income tax will be subject to tax on distributions of investment
income and capital gains by the Fund. Distributions attributable to interest on
obligations of any state (including Florida), the District of Columbia, U.S.
possessions, or any political subdivision thereof, will be taxable to
corporations and other entities for Florida income tax purposes even though such
interest income is exempt from federal income tax. Similarly, distributions
attributable to interest on obligations of the United States and its territories
will be taxable to corporations and other entities under the Florida income tax.
For individuals and other entities subject to taxation in states and localities
other than Florida, distributions of the Fund will be subject to applicable
taxes imposed by such other states and localities.
In the opinion of special Florida tax counsel to the Fund, shareholders
of the Florida Fund who are subject to the Florida Intangible Personal Property
Tax (the "Intangible Tax") will not be subject to the Intangible Tax on shares
of the Florida Fund if, on the first day of the applicable calendar year, the
assets of the Florida Fund consist solely of obligations of Florida or its
political subdivisions; obligations of the United States, Puerto Rico, the
Virgin Islands or Guam; or bank deposits, cash or other assets which would be
exempt from the Intangible Tax if directly held by the shareholder. A Technical
Assistance Advisement confirming this tax treatment has been obtained from the
Florida Department of Revenue. As described above, it is the Florida Fund's
policy to invest at least 80% of its net assets in Florida Municipal Securities
exempt from the Intangible Tax under normal market conditions. The Florida Fund
intends to insure that, absent abnormal market conditions, all of its assets
held on January 1 of each year are exempt from the Intangible Tax. Accordingly,
the value of the Florida Fund shares held by a shareholder should ordinarily be
exempt from the Intangible Tax. However, if on any January 1 the Florida Fund
holds investments that are not exempt from the Intangible Tax, the Florida
Fund's shares could be wholly or partially subject to the Intangible Tax for
that year.
The foregoing discussion is intended only as a brief summary of the
Florida tax laws currently in effect which would generally affect the Florida
Fund and its shareholders. Potential investors are urged to consult with their
Florida tax counsel concerning their own tax situation.
MANAGEMENT OF THE TRUST
Trustees
- --------
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust, who are elected by the Shareholders of the Trust.
There are currently five Trustees, one of
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whom is an "interested person" of the Trust within the meaning of that term
under the Investment Company Act of 1940. The Trustees, in turn, elect the
officers of the Trust to supervise actively its day-to-day operations. The
Trustees of the Trust, their current addresses, and principal occupations during
the past five years are as follows (if no address is listed, the address is 3435
Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During the Past 5 Years
- ---------------- --- -------------- -----------------------
<S> <C> <C> <C>
J. David Huber* 53 Chairman From June 1987 to present, employee of
3435 Stelzer Road BISYS Fund Services Limited
Columbus, Ohio 43219 Partnership
Dick D. Briggs, Jr., M.D. 65 Trustee
459 DER Building
1808 7th Avenue South
UAB Medical Center
Birmingham, Alabama 35294
From September 1989 to present, Trustee From September 3, 1993 to present,
Emeritus Professor and Eminent Scholar retired; from December 1988 to August,
Chair, Univ. of Alabama at Birmingham; 1993, Executive Vice President, Chief
from October 1979 to present, Physician, Operating Officer and Director, Mobile
University of Alabama Health Services Gas Service Corporation
Foundation; from 1981 to 1995,
Professor and Vice Chairman, Dept. of
Medicine, Univ. of Alabama at
Birmingham School of Medicine; from
1988 to 1992, President, CEO and
Medical Director, Univ. of Alabama
Health Services Foundation
Wendell D. Cleaver 64
209 Lakewood Drive, West
Mobile, Alabama 36608
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired; until
751 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830-2505 Division, Alabama Power Company
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The
The University of North Sessions Group; from July 1989 to
Carolina at Charlotte present, Chancellor, The University of
Charlotte, North Carolina 28223 North Carolina at Charlotte; from April
1997 to present, Trustee, BISYS Variable
Insurance Funds; from August 1984 to
July 1989, Senior Vice President, University
College, University of Alabama at
Birmingham
</TABLE>
- --------------------------
B-49
<PAGE> 280
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services, Inc. receives any
compensation from the Trust for acting as a Trustee.
Officers
- --------
The officers of each Fund, their current addresses, their age, and
principal occupation during the past five years are as follows (if no address is
listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During Past 5 Years
- ---------------- --- ---------------- --------------------
<S> <C> <C> <C>
John F. Calvano 39 President From September 1999 to present, Senior Vice
President, AmSouth Bank; from October 1994 to
September 1999, employee of BISYS Fund
Services Limited Partnership; from July 1992 to
August 1994, investment representative, BA
Investment Services; and from October 1986 to
July 1994, Marketing Manager, Great Western
Investment Management.
Walter B. Grimm 53 Vice President From June 1992 to present, employee of BISYS
Fund Services Limited Partnership; from 1990
to 1992, President and CEO, Security
Bancshares; from July 1981 to 1990,
President of Leigh Investments Consulting
(investments firm).
Charles L. Booth 39 Treasurer From 1988 to present, employee of BISYS Fund
Services Limited Partnership.
Jeffrey C. Cusick 38 Assistant Secretary An employee of BISYS Fund Services, Inc.
since July 1995, and an officer of other
investment companies administered by the
Administrator or its affiliates. From September
1993 to July 1995, he was Assistant Vice
President of Federated Administrative Services.
Alaina V. Metz 32 Assistant Secretary From June 1995 to present, Chief
Administrator, Administrative and Regulatory
Services, BISYS Fund Services Limited
Partnership; from May 1989 to June 1995,
Supervisor, Mutual Fund Legal Department,
Alliance Capital Management.
</TABLE>
The officers of the Trust receive no compensation directly from the
Trust for performing the duties of their offices. BISYS receives fees from the
Trust for acting as Administrator and BISYS Fund Services, Inc. receives fees
from the Trust for acting as Transfer Agent for and for
B-50
<PAGE> 281
providing fund accounting services to the Trust. Messrs. Cusick, Grimm and Booth
and Ms. Metz are employees of BISYS Fund Services Limited Partnership.
COMPENSATION TABLE (1)
----------------------
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from AmSouth
Name of from AmSouth As Part of Benefits Upon Mutual Funds
Position Fund Expenses Fund Expenses Retirement Paid to Trustee
- -------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
J. David Huber None None None None
James H. $14,000 None None $14,000
Woodward, Jr.
Homer H. Turner $14,000 None None $14,000
Wendell D. Cleaver $14,000 None None $14,000
Dick D. Briggs, Jr., $14,000 None None $14,000
M.D.
</TABLE>
(1) Figures are for the Trust's fiscal year ended July 31, 1999.
Investment Adviser
- ------------------
Investment advisory and management services are provided to the Money
Market Funds, the Capital Appreciation Funds and the Income Funds (except the
Limited Term Bond Fund) by the Adviser pursuant to the Investment Advisory
Agreement dated as of August 1, 1988, as amended (the "First Investment Advisory
Agreement"). Investment advisory and management services are provided to the
Limited Term Bond Fund by the Adviser pursuant to the Investment Advisory
Agreement dated as of January 20, 1989, as amended (the "Second Investment
Advisory Agreement"). The First Investment Advisory Agreement and the Second
Investment Advisory Agreement are collectively referred to as the "Advisory
Agreements."
In selecting investments for the Value Fund, the Balanced Fund and the
Regional Equity Fund, the Adviser employs the "value investing" method. A
primary theory of value investing is that many investors tend to exaggerate both
prosperity and problems in market valuations. This method, which may conflict
with the prevailing mood of the market, involves the use of independent judgment
backed by careful analysis of market data. The Adviser's approach when selecting
investments for each of these Funds is to attempt to buy and sell securities
that are temporarily mispriced relative to long-term value.
In selecting investments for each of the Income Funds and the Balanced
Fund, the Adviser attempts to anticipate interest rates, thereby capitalizing on
cyclical movements in the bond markets. The Adviser seeks to achieve this goal
through active management of the buying and selling of fixed-income securities
in anticipation of changes in yields.
B-51
<PAGE> 282
Under the Advisory Agreements, the fee payable to the Adviser by the
Funds for investment advisory services is the lesser of (a) such fee as may from
time to time be agreed upon in writing by the Trust and the Adviser or (b) a fee
computed daily and paid monthly based on the average daily net assets of each
Fund as follows: the Prime Money Market Fund - forty one-hundredths of one
percent (0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one
percent (0.40%) annually; the Institutional Prime Obligations Fund twenty
one-hundredths of one percent (0.20%); the Institutional U.S. Treasury Fund -
twenty one-hundredths of one percent (0.20%); the Value Fund - eighty
one-hundredths of one percent (0.80%) annually; the Regional Equity Fund -
eighty one-hundredths of one percent (0.80%) annually; the Tax-Exempt Fund -
forty one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Term Bond Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Growth Fund - eighty one-hundredths of one percent (0.80%) annually; the Small
Cap Fund - one hundred twenty one-hundredths of one percent (1.20%) annually;
the Select Equity Fund - eighty one hundredths of one percent (.80%) annually;
and the Enhanced Market Fund forty-five hundredths of one percent (.45%)
annually. A fee agreed to in writing from time to time by the Trust and the
Adviser may be significantly lower than the fee calculated at the annual rate
and the effect of such lower fee would be to lower a Fund's expenses and
increase the net income of such Fund during the period when such lower fee is in
effect.
For the fiscal years ended July 31, 1999, July 31, 1998, and July 31,
1997, the Adviser received the following investment advisory fees:
B-52
<PAGE> 283
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------------- ---------------------- -------------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $3,046,371 -- $3,005,940 -- $2,855,190 --
Growth Fund 207,326 -- 70,873 -- -- --
Enhanced Market Fund 78,331 -- -- -- -- --
Value Fund 8,292,490 -- 7,981,703 -- 3,733,019 --
Equity Income Fund 324,890 -- 267,522 -- 36,130 --
Regional Equity Fund 856,308 -- 1,263,837 $ 1,000 953,375 --
Select Equity Fund 129,762 -- -- -- -- --
Small Cap Fund 127,255 -- 33,202 -- -- --
Bond Fund 2,319,255 $ 535,215 2,056,000 475,000 969,000 $ 224,000
Government Income Fund 61,967 33,367 69,000 37,000 90,000 48,000
Limited Term Bond Fund 734,542 169,510 774,000 179,000 322,000 74,000
Florida Tax-Exempt Fund 460,845 248,147 369,000 199,000 340,000 183,000
Municipal Bond Fund 2,120,841 815,707 2,170,000 835,000 181,117 70,000
Prime Money Market Fund 2,765,375 -- 2,515,690 -- 2,366,707 --
U.S. Treasury Fund 1,261,718 -- 1,256,351 -- 1,325,127 --
Tax-Exempt Fund 383,340 191,672 354,000 176,963 321,570 160,785
Institutional Prime
Obligations Fund 198,365 128,935 -- -- -- --
Institutional U.S. Treasury
Fund -- -- -- -- -- --
</TABLE>
Each of the Advisory Agreements provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of such Advisory Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Adviser in the performance of its
duties, or from reckless disregard by the Adviser of its duties and obligations
thereunder.
Unless sooner terminated, the First Investment Advisory Agreement will
continue in effect until January 31, 2000 as to each of the Money Market Funds,
the Capital Appreciation Funds, the Tax-Free Funds, the Bond Fund and the
Government Income Fund and for successive one-year periods if such continuance
is approved at least annually by the Trust's Board of Trustees or by vote of the
holders of a majority of the outstanding voting Shares of that Fund, and a
majority of the Trustees who are not parties to the First Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
First Investment Advisory Agreement by votes cast in person at a meeting called
for such purpose.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Term Bond Fund until January 31, 2000 and
for successive one-year periods thereafter if such continuance is approved at
least annually by the Trust's Board of Trustees or by vote of the holders of a
majority of the outstanding voting Shares of the Limited Term Bond Fund, and a
majority of the Trustees who are not parties to the Second Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Second Investment Advisory Agreement by votes cast in person at a meeting called
for such purpose.
B-53
<PAGE> 284
The Advisory Agreements are terminable as to a particular Fund at any time on 60
days' written notice without penalty by the Trustees, by vote of the holders of
a majority of the outstanding voting Shares of that Fund, or by the Adviser. The
Advisory Agreements also terminate automatically in the event of any assignment,
as defined in the 1940 Act.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective shareholders of the Funds may
include descriptions of the investment adviser including, but not limited to,
(i) descriptions of the adviser's operations; and (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings related to the
adviser's operations.
AmSouth also serves as Sub-Administrator for the Trust. See
"Sub-Administrator" below.
Investment Sub-Advisers
- -----------------------
Investment sub-advisory services are provided to the Equity Income Fund
by Rockhaven Asset Management, LLC ("Rockhaven" or "Sub-Adviser") pursuant to a
Sub- Advisory Agreement dated as of March 12, 1997 between the Adviser and
Rockhaven ("Sub-Advisory Agreement"). Investment sub-advisory services are
provided to the Growth Fund by Peachtree Asset Management ("Peachtree" or
"Sub-Adviser") pursuant to a Sub-Advisory Agreement dated July 31, 1997 between
the Adviser and Peachtree. Investment sub-advisory services are provided to the
Small Cap Fund by Sawgrass Asset Management, LLC ("Sawgrass" or "Sub-Adviser")
pursuant to a Sub-Advisory Agreement dated as of March 2, 1998 between the
Adviser and Sub-Adviser (a "Sub-Advisory Agreement"). Investment sub- advisory
services are provided to the Select Equity Fund and the Enhanced Market Fund
pursuant to a Sub-Advisory Agreement dated as of September 1, 1998 between the
Adviser and OakBrook Investments, LLC ("OakBrook" or "Sub-Adviser").
The Sub-Advisers shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Adviser, the Trust or the Fund in
connection with the matters to which Agreement relates, except that a
Sub-Adviser shall be liable to the Adviser for a loss resulting from a breach of
fiduciary duty by the Sub-Adviser under the 1940 Act with respect to the receipt
of compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations or duties
thereunder.
Unless sooner terminated, the Sub-Advisory Agreement shall continue
with respect to the Equity Income Fund until January 31, 2000, with respect to
the Growth Fund until July 31, 2000, with respect to the Small Cap Fund until
January 31, 2000, and with respect to the Select Equity Fund and Enhanced Market
Fund until January 31, 2000, and each Sub-Advisory Agreement shall continue in
effect for successive one-year periods if such continuance is approved at least
annually by the Board of Trustees or by vote of the holders of a majority of the
outstanding
B-54
<PAGE> 285
voting Shares of the respective Fund and a majority of the Trustees who are not
parties to the Sub-Advisory Agreement or interested persons (as defined in the
1940 Act) of any party to the Sub-Advisory Agreement by vote cast in person at a
meeting called for such purpose. Each Sub-Advisory Agreement may be terminated
with respect to a Fund by the Trust at any time without the payment of any
penalty by the Board of Trustees, by vote of the holders of a majority of the
outstanding voting securities of the Fund, or by the Adviser or Sub-Adviser on
60 days written notice. Each Sub-Advisory Agreement will also immediately
terminate in the event of its assignment.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective Shareholders of the Trust may
include descriptions of a Sub-Adviser including, but not limited to, (i)
descriptions of the Sub-Adviser's operations; (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings relating to the
Sub-Adviser's operations.
Portfolio Transactions
- ----------------------
Pursuant to the Advisory Agreements, the Adviser or Sub-Adviser
determines, subject to the general supervision of the Board of Trustees and in
accordance with each Fund's investment objective, policies and restrictions,
which securities are to be purchased and sold by a Fund, and which brokers are
to be eligible to execute such Fund's portfolio transactions. Purchases and
sales of portfolio securities with respect to the Money Market Funds, the Income
Funds and the Balanced Fund (with respect to its debt securities) usually are
principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. Transactions in over-the-counter market are generally
principal transactions with dealers. With respect to over-the-counter market,
the Trust, where possible, will deal directly with dealers who make a market in
the securities involved except in those circumstances where better price and
execution are available elsewhere. While the Adviser and Sub-Adviser generally
seek competitive spreads or commissions, the Trust may not necessarily pay the
lowest spread or commission available on each transaction, for reasons discussed
below.
Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser and the Sub-Adviser in their best judgment
and in a manner deemed fair and reasonable to Shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, dealers who provide supplemental
investment research to the Adviser or Sub-Adviser may receive orders for
transactions on behalf of the Trust. Information so received is in addition to
and not in lieu of services required to be performed by the Adviser or
Sub-Adviser and does not reduce the advisory fees payable to the Adviser or the
Sub-Adviser. Such information may be useful to the
B-55
<PAGE> 286
Adviser or Sub-Adviser in serving both the Trust and other clients and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Adviser or Sub-Adviser in carrying out their
obligations to the Trust.
To the extent permitted by applicable rules and regulations, either
AmSouth or the Sub-Advisers may execute portfolio transactions on behalf of the
Funds through an affiliate of AmSouth. As required by Rule 17e-1 under the 1940
Act, the Funds have adopted procedures which provide that commissions paid to
such affiliate must be fair and reasonable compared to the commission, fees or
other remuneration paid to other brokers in connection with comparable
transactions. The procedures also provide that the Board will review reports of
such affiliated brokerage transactions in connection with the foregoing
standard.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by the
Adviser or Sub-Adviser. Any such other investment company or account may also
invest in the same securities as the Trust. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Fund and another
Fund, investment company or account, the transaction will be averaged as to
price and available investments will be allocated as to amount in a manner which
the Adviser or Sub-Adviser believe to be equitable to the Fund(s) and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained by a Fund. To the extent permitted by law, the Adviser or
Sub-Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for the other Funds or for other investment
companies or accounts in order to obtain best execution. As provided by each of
the Advisory Agreements and the Sub-Advisory Agreement, in making investment
recommendations for the Trust, the Adviser or Sub-Adviser will not inquire or
take into consideration whether an issuer of securities proposed for purchase or
sale by the Trust is a customer of the Adviser or Sub-Adviser, its parent or its
subsidiaries or affiliates and, in dealing with its customers, the Adviser or
Sub-Adviser, its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Trust.
During the following fiscal years, the Funds listed below paid the
following aggregate brokerage commissions:
B-56
<PAGE> 287
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
Balanced Fund $132,669 $365,522 $145,513
Growth Fund 34,442 -- --
Enhanced Market Fund 20,125** -- --
Value Fund 534,115 592,269 397,221
Equity Income Fund 119,234 615,317 28,462*
Regional Equity Fund 128,351 182,346 98,747
Select Equity Fund 13,150** -- --
Small Cap Fund 108,710 -- --
*For the period March 30, 1997 to July 31, 1997.
** For the period September 1, 1998 to July 31, 1999.
During the period from September 1, 1998 to July 31, 1999, the Select
Equity Fund paid aggregate brokerage commissions of $30 to AmSouth Brokerage
Services, an affiliate of AmSouth. The aggregate brokerage commission paid to
AmSouth Brokerage Services was less than 1% of the aggregate commissions paid to
brokers by the Fund for the period ended July 31, 1999. Additionally, the
aggregate dollar amount of transactions involving the payment of commissions
effected through AmSouth Brokerage Services was less than 1% of the aggregate
dollar amount of such transactions for the Fund for the period ended July 31,
1999.
Glass-Steagall Act
- ------------------
In 1971, the United States Supreme Court held in INVESTMENT COMPANY
INSTITUTE V. CAMP that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V.
INVESTMENT COMPANY INSTITUTE that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the BOARD
OF GOVERNORS case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
B-57
<PAGE> 288
AmSouth believes that it possesses the legal authority to perform the
services for each Fund contemplated by the Advisory Agreements regarding that
Fund and described in the Prospectus of that Fund and this Statement of
Additional Information and has so represented in the Advisory Agreement
regarding that Fund. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent or restrict AmSouth from
continuing to perform such services for the Trust. Depending upon the nature of
any changes in the services which could be provided by AmSouth, the Board of
Trustees would review the Trust's relationship with AmSouth and consider taking
all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of AmSouth in connection with customer
purchases of Shares of the Trust, AmSouth might be required to alter materially
or discontinue the services offered by them to customers. It is not anticipated,
however, that any change in the Trust's method of operations would affect its
net asset value per Share or result in financial losses to any customer.
Administrator
- -------------
ASO Services Company ("ASO") serves as administrator (the
"Administrator") to each Fund of the Trust pursuant to the Management and
Administration Agreement dated as of April 1, 1996 (the "Administration
Agreement"). ASO is a wholly-owned subsidiary of BISYS which is a wholly-owned
subsidiary of BISYS Group, Inc., a publicly held company which is a provider of
information processing, loan servicing and 401(k) administration and
record-keeping services to and through banking and other financial
organizations. The Administrator assists in supervising all operations of each
Fund (other than those performed by the Adviser under the Advisory Agreements,
the Sub-Advisers under the Sub-Advisory Agreements, those performed by AmSouth
under its custodial services agreement with the Trust and those performed by
BISYS Fund Services, Inc. under its transfer agency and fund accounting
agreements with the Trust).
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value per Share of the Money Market Funds, to maintain
office facilities for the Trust, to maintain the Trust's financial accounts and
records, and to furnish the Trust statistical and research data and certain
bookkeeping services, and certain other services required by the Trust. The
Administrator prepares annual and semi-annual reports to the Securities and
Exchange Commission, prepares federal and state tax returns, prepares filings
with state securities commissions, and generally assists in supervising all
aspects of the Trust's operations (other than those performed by the Adviser
under the Advisory Agreements, the Sub-Advisers under the Sub-Advisory
Agreements, those by AmSouth under its custodial services agreement with the
Trust and those performed by BISYS Fund Services, Inc. under its fund accounting
agreement and BISYS Fund Services Ohio, Inc. under its transfer agency agreement
with the Trust). Under
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<PAGE> 289
the Administration Agreement, the Administrator may delegate all or any part of
its responsibilities thereunder.
Under the Administration Agreement for expenses assumed and services
provided as manager and administrator, the Administrator receives a fee from
each Fund (except the Institutional Money Market Funds) equal to the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(0.20%) of such Fund's average daily net assets; or (b) such fee as may from
time to time be agreed upon in writing by the Trust and the Administrator. Under
the Administration Agreement for expenses assumed and services provided as
manager and administrator, the Administrator receives a fee from each
Institutional Money Market Fund equal to the lesser of (a) a fee computed at the
annual rate of (0.10%) of an Institutional Money Market Fund's average daily net
assets; or (b) such fee as may from time to time be agreed upon in writing by
the Trust and the Administrator. A fee agreed to from time to time by the Trust
and the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower a Fund's expenses
and increase the net income of such Fund during the period when such lower fee
is in effect. Each Fund also bears expenses incurred in pricing securities owned
by the Fund.
For its services as administrator and expenses assumed pursuant to the
Administration Agreement, the Administrator received the following fees:
Fiscal Year or Period Ended
<TABLE>
<CAPTION>
July 31, 1999 July 31, 1998 July 31, 1997
-------------------------- -------------------------- ----------------------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $761,600 -- $751,492 -- $714,000 $165,000
Growth Fund 51,832 $51,832 18,000 $16,000 -- --
Enhanced Market Fund 35,097 35,097 -- -- -- --
Value Fund 2,073,141 -- 1,995,442 -- 934,000 188,000
Equity Income Fund 81,223 -- 66,881 -- 9,033 --
Regional Equity Fund 214,079 -- 316,102 -- 239,000 51,000
Select Equity Fund 32,564 32,564 -- -- -- --
Small Cap Fund 21,209 21,209 6,000 6,000 -- --
Bond Fund 713,624 285,450 633,000 475,000 298,000 119,000
Government Income Fund 19,067 9,450 21,000 10,000 28,000 14,000
Limited Term Bond Fund 226,015 90,406 238,000 95,000 99,000 40,000
Florida Tax-Exempt Fund 141,800 70,899 114,000 57,000 104,000 53,000
Municipal Bond Fund 652,573 261,029 668,000 267,000 55,000 22,000
Prime Money Market Fund 1,382,700 -- 1,257,853 -- 1,183,357 --
U.S. Treasury Fund 630,865 -- 628,179 -- 662,565 --
Tax-Exempt Fund 191,672 -- 176,963 -- 160,785 --
Institutional Prime
Obligations Fund 99,181 69,427 -- -- -- --
Institutional U.S. Treasury Fund -- -- -- -- -- --
</TABLE>
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the
B-59
<PAGE> 290
Administration Agreement shall be renewed automatically for successive five-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days' prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Trust's Board of Trustees or by
the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
Expenses
- --------
Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Trustees of the
Trust, Securities and Exchange Commission fees, state securities qualification
fees, costs of preparing and printing Prospectuses for regulatory purposes and
for distribution to current Shareholders, outside auditing and legal expenses,
advisory and administration fees, fees and out-of-pocket expenses of the
custodian and the transfer agent, dividend disbursing agents fees, fees and
out-of-pocket expenses for fund accounting services, expenses incurred for
pricing securities owned by it, certain insurance premiums, costs of maintenance
of its existence, costs of Shareholders' and Trustees' reports and meetings, and
any extraordinary expenses incurred in its operation.
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Adviser and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for a Fund. No Fund will bear, directly or indirectly, the cost of any
activity primarily intended to result in the distribution of Shares of such
Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Trust, Class A,
Class B, Class I, Class II and Class III Shares of a Fund on the basis of the
relative net asset value of each class. At present, the only expenses that will
be borne solely by Class A, Class B Shares, Class II and Class III, other than
in accordance with the relative net asset value of the class, are expenses under
the Servicing Plan which relates only to the Class A Shares and the Distribution
Plan which relates only to the Class B Shares.
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<PAGE> 291
Sub-Administrators
- ------------------
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO as the Sub-Administrator of the
Trust. Pursuant to this agreement, AmSouth has assumed certain of the
Administrator's duties, for which AmSouth receives a fee, paid by the
Administrator, calculated at an annual rate of up to (0.10%) ten one-hundredths
of one percent of each Fund's average net assets. For the fiscal years ended
July 31, 1999 and July 31, 1998, AmSouth received $2,184,291 and $1,924,684,
respectively, with respect to the Trust.
BISYS is retained by the Administrator as a Sub-Administrator to the
Trust. Pursuant to its agreement with the Administrator, BISYS Fund Services is
entitled to compensation as mutually agreed upon from time to time by it and the
Administrator.
Distributor
- -----------
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, and from year to year thereafter if
such continuance is approved at least annually (i) by the Trust's Board of
Trustees or by the vote of a majority of the outstanding Shares of the Funds or
Fund subject to such Distribution Agreement, and (ii) by the vote of a majority
of the Trustees of the Trust who are not parties to such Distribution Agreement
or interested persons (as defined in the 1940 Act) of any party to such
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
Class A Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Class A Shares of each Fund.
The Servicing Plan was initially approved on December 6, 1995 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Servicing Plan (the "Independent
Trustees"). The Servicing Plan reflects the creation of the Class A Shares, and
provides for fees only upon that Class.
B-61
<PAGE> 292
The Servicing Plan may be terminated with respect to any Fund by a vote
of a majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class A Shares of that Fund. The Servicing Plan may be amended by
vote of the Trust's Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for such purpose, except that any
change in the Servicing Plan that would materially increase the shareholder
servicing fee with respect to a Fund requires the approval of the holders of
that Fund's Class A Class. The Trust's Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the Servicing Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Servicing Plan) indicating the purposes for which such expenditures
were made.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class B Shares of a Fund will pay a monthly distribution
fee to the Distributor as compensation for its services in connection with the
Distribution Plan at an annual rate equal to one percent (1.00%) of the average
daily net assets of the Class B Shares of each Fund which includes a Shareholder
Servicing fee of 0.25% of the average daily net assets of the Class B Shares of
each Fund; Class II Shares of a Fund will pay a monthly distribution fee to the
Distributor as compensation for its services in connection with the Distribution
Plan at an annual rate equal to twenty-five one-hundredths of one percent
(0.25%) of the average daily net assets of Class II Shares of each Fund; Class
III Shares of a Fund will pay a monthly distribution fee to the Distributor as
compensation for its services in connection with the Distribution Plan at an
annual rate equal to fifty one-hundredths of one percent (0.50%) of the average
daily net assets of the Class III Shares of each Fund. The Distributor may
periodically waive all or a portion of the fee with respect to a Fund in order
to increase the net investment income of the Fund available for distribution as
dividends. The Distributor may apply the Class B, Class II or Class III Share
Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's Class B,
Class II or Class III Shares; (ii) payments to financial institutions and
intermediaries (such as banks, savings and loan associations, insurance
companies, and investment counselors) as brokerage commissions in connection
with the sale of such Fund's Class B, Class II or Class III Shares; and (iii)
payments to financial institutions and intermediaries (such as banks, savings
and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
Class B, Class II or Class III Shares.
The Distribution Plan was initially approved on March 12, 1997 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees").
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to the Class B, Class II or Class III Shares of
any Fund by a vote of a
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majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class B, Class II or Class III Shares of that Fund. The Distribution
Plan may be amended by vote of the Fund's Board of Trustees, including a
majority of the Independent Trustees, cast in person at a meeting called for
such purpose, except that any change in the Distribution Plan that would
materially increase the distribution fee with respect to the Class B, Class II
or Class III Shares of a Fund requires the approval of the holders of that
Fund's Class B, Class II or Class III Shares. The Trust's Board of Trustees will
review on a quarterly and annual basis written reports of the amounts received
and expended under the Distribution Plan (including amounts expended by the
Distributor to Participating Organizations pursuant to the Servicing Agreements
entered into under the Distribution Plan) indicating the purposes for which such
expenditures were made.
For the fiscal year ended July 31, 1999, July 31, 1998 and July 31,
1997 the Distributor received the following servicing fees with respect to the
Class A Shares and the following distribution fees with respect to the Class B,
Class II and Class III Shares from the following Funds:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------------------ ------------------------------ ---------------------------
Class A Shares Class A Shares Class A Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $113,423 -- $113,853 $341 -- --
Growth Fund 28,262 -- 12,190 37 -- --
Enhanced Market Fund 27,092 $9,055 -- -- -- --
Value Fund 178,812 -- 145,774 437 -- --
Equity Income Fund 58,845 -- 55,674 167 -- --
Regional Equity Fund 76,403 -- 114,873 344 -- --
Select Equity Fund 28,366 10,391 -- -- --
Small Cap Fund 3,080 -- 1,091 7 -- --
Bond Fund 7,330 -- 15,851 9,530 -- --
Government Income Fund 6,909 -- 21,290 12,799 -- --
Limited Term Bond Fund 7,521 4,513 8,171 4,912 -- --
Florida Tax-Exempt Fund 9,991 -- 13,848 8,325 -- --
Municipal Bond Fund 5,843 -- 4,831 2,904 -- --
Prime Money Market Fund 336,424 201,863 305,250 183,129 $305,882 $182,913
U.S. Treasury Fund 16,054 9,633 19,155 11,498 27,598 16,307
Tax-Exempt Fund 62,542 137,562 58,152 34,888 50,267 31,033
</TABLE>
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<PAGE> 294
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
--------------------------- --------------------------- ----------------------------
Class B Shares Class B Shares Class B Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $78,669 -- $21,204 -- -- --
Growth Fund 51,893 -- 15,982 -- -- --
Enhanced Market Fund 20,045 -- -- -- -- --
Value Fund 102,305 -- 33,233 -- -- --
Equity Income Fund 77,644 -- 35,433 -- -- --
Regional Equity Fund 15,114 -- 11,461 -- -- --
Select Equity Fund 8,018 -- -- -- -- --
Small Cap Fund 8,620 -- 2,093 -- -- --
Bond Fund 16,859 -- 1,542 -- -- --
Government Income Fund -- -- -- -- -- --
Limited Term Bond Fund 4,053 -- -- -- -- --
Florida Tax-Exempt Fund 1,086 -- -- -- -- --
Municipal Bond Fund -- -- -- -- -- --
Prime Money Market Fund 1,468 -- -- -- -- --
U.S. Treasury Fund -- -- -- -- -- --
Tax-Exempt Fund -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
----------------------------- --------------------------- -----------------------------
Class II Shares Class II Shares Class II Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $17,200 -- -- -- -- --
Institutional U.S. Treasury
Fund -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
----------------------------- --------------------------- -----------------------------
Class III Shares Class III Shares Class III Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $15,473 -- -- -- -- --
Institutional U.S. Treasury
Fund -- -- -- -- -- --
</TABLE>
All payments by the Distributor for distribution assistance or
shareholder services under the Distribution Plan will be made pursuant to an
agreement (a "Servicing Agreement") between the Distributor and such bank, other
financial institution or intermediary, broker-dealer, or affiliate or subsidiary
of the Distributor (hereinafter referred to individually as "Participating
B-64
<PAGE> 295
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares, Class II Shares or Class III Shares to the Participating Organization's
customers on whose behalf the investment in such Shares is made and/or to the
provision of shareholder services to the Participating Organization's customers
owning a Fund's Class B Shares, Class II Shares or Class III Shares. Under the
Distribution Plan, a Participating Organization may include AmSouth or a
subsidiary bank or nonbank affiliates, or the subsidiaries or affiliates of
those banks. A Servicing Agreement entered into with a bank (or any of its
subsidiaries or affiliates) will contain a representation that the bank (or
subsidiary or affiliate) believes that it possesses the legal authority to
perform the services contemplated by the Servicing Agreement without violation
of applicable banking laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks
generally from engaging in the business of underwriting securities, but in
general do not prohibit banks from purchasing securities as agent for and upon
the order of customers. Accordingly, the Trust will require banks acting as
Participating Organizations to provide only those services which, in the banks'
opinion, are consistent with the then current legal requirements. It is
possible, however, that future legislative, judicial or administrative action
affecting the securities activities of banks will cause the Trust to alter or
discontinue its arrangements with banks that act as Participating Organizations,
or change its method of operations. It is not anticipated, however, that any
change in a Fund's method of operations would affect its net asset value per
share or result in financial loss to any customer.
Custodian
- ---------
AmSouth serves as custodian of the Trust pursuant to a Custodial
Services Agreement with the Trust (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments.
B-65
<PAGE> 296
Transfer Agent and Fund Accounting Services.
- --------------------------------------------
BISYS Fund Services Ohio, Inc. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each Tax-Exempt Fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
Independent Accountants
- -----------------------
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
incorporated by reference into this Statement of Additional Information which
have been audited by PricewaterhouseCoopers, former independent accountants for
the Trust, as set forth in their report incorporated by reference herein, and
are included in reliance upon such report and on the authority of such firm as
experts in auditing and accounting. For the fiscal year ending July 31, 2000,
Ernst & Young has been selected as the independent accountants for the Trust.
Ernst & Young's address is 10 West Broad Street, Columbus, OH 43215.
Legal Counsel
- -------------
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
PERFORMANCE INFORMATION
General
- -------
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry
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<PAGE> 297
indices or other appropriate benchmarks; and (8) discussions of fund rankings or
ratings by recognized rating organizations.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. and Donoghue's Money
Fund Report. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, Ibbotson
Associates, Inc., Morning Star, Inc., CDA/Wiesenberger, Pensions and
Investments, U.S.A. Today, and local newspapers and periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and in reports to Shareholders. Additional performance
information is contained in the Trust's Annual Report, which is available free
of charge by calling the number on the front page of the Prospectus.
Information about the performance of a Fund is based on the Fund's
record up to a certain date and is not intended to indicate future performance.
Yield and total return are functions of the type and quality of instruments held
in a Fund, operating expenses, and marketing conditions. Any fees charged by a
Financial Institution with respect to customer accounts investing in Shares of a
Fund will not be included in performance calculations.
Yields of the Money Market Funds
- --------------------------------
The "yield" of each of Money Market Funds for a seven-day period (a
"base period") will be computed by determining the "net change in value"
(calculated as set forth below) of a hypothetical account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield") which assumes that net income is reinvested in Fund shares at the same
rate as net income is earned for the base period.
The Tax-Exempt Fund may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of the Tax-Exempt Fund's yield which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent effective yield for the Tax-Exempt Fund is computed by dividing that
portion of the effective yield of the Tax-Exempt Fund which is tax-exempt by the
difference between one
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<PAGE> 298
and a stated income tax rate and adding the product to that portion, if any, of
the effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax-Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1999, the yield, effective
yield, the tax equivalent yield and the tax equivalent effective yield of the
Trust Shares and Class A Shares of each Money Market Fund, calculated as
described, above was as follows:
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
<S> <C> <C> <C> <C> <C>
Prime
Money Market Fund Trust 4.39% 4.48% -- --
U.S. Treasury Fund Trust 4.05% 4.13% -- --
Tax-Exempt Fund Trust 2.57% 2.60% 4.25% 4.30%
Prime
Money Market Fund Class A 4.29% 4.37% -- --
U.S. Treasury Fund Class A 3.96% 4.02% -- --
Tax-Exempt Fund Class A 2.47% 2.50% 4.09% 4.14%
Institutional
Prime Obligations Fund Class I 4.83% 4.94% -- --
Institutional
U.S. Treasury Fund Class I -- -- -- --
Institutional
Prime Obligations Fund Class II 4.58% 4.68% -- --
Institutional
U.S. Treasury Fund Class II -- -- -- --
Institutional
Prime Obligations Fund Class III 4.33% 4.42% -- --
Institutional
U.S. Treasury Fund Class III -- -- -- --
</TABLE>
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds
- --------------------------------------------------------------------------------
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<PAGE> 299
The yield of each of the Capital Appreciation Funds, the Income Funds
and the Tax-Free Funds will be computed by annualizing net investment income
per share for a recent 30-day period and dividing that amount by the maximum
offering price per share (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed-income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The yield of each of the
Capital Appreciation Funds and the Income Funds will vary from time to time
depending upon market conditions, the composition of the Fund's portfolios and
operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of the
Capital Appreciation Funds and the Income Funds.
The Tax-Free Funds may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of each Fund's yield which is tax-exempt by the difference
between one and a stated income tax rate and adding the product to that portion,
if any, of the yield of the Fund that is not tax-exempt. The tax equivalent
effective yield for the Tax-Free Funds is computed by dividing that portion of
the effective yield of the Fund which is tax-exempt by the difference between
one and a stated income tax rate and adding the product to that portion, if any,
of the effective yield of the Fund that is not tax-exempt.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.
Investors in the Capital Appreciation Funds and the Income Funds are
specifically advised that share prices, expressed as the net asset values per
share, will vary just as yields will vary.
For the 30-day period ending July 31, 1999, the yield and the tax
equivalent yield of the Income Funds was:
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- -----
Florida Tax-Exempt Fund Class A 3.88% 6.42%
Trust 3.96% 6.56%
Municipal Bond Fund Class A 4.01% 6.64%
Trust 4.10% 6.79%
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<PAGE> 300
Bond Fund Class A 5.43% --
Trust 5.53% --
Class B 4.60% --
Government Income Fund Class A 6.11% --
Trust 6.22% --
Limited Term Bond Fund Class A 5.29% --
Trust 5.38% --
For the 30-day period ending July 31, 1999, the yield of the Capital
Appreciation Funds was:
Fund Class Yield
---- ----- -----
Value Fund Trust 0.63%
Regional Equity Fund Trust 0.28%
Balanced Fund Trust 2.84%
Equity Income Fund Trust 0.79%
Growth Fund Trust -0.38%
Small Cap Fund Trust -0.99%
Enhanced Market Fund Trust 0.31%
Select Equity Fund Trust -0.84%
Value Fund Class A 0.38%
Regional Equity Fund Class A 0.03%
Balanced Fund Class A 2.59%
Equity Income Fund Class A 0.54%
Growth Fund Class A -0.63%
Small Cap Fund Class A -1.24%
Enhanced Market Fund Class A 0.56%
Select Equity Fund Class A -1.10%
Value Fund Class B -0.36%
Regional Equity Fund Class B -0.73%
Balanced Fund Class B 1.84%
Equity Income Fund Class B -0.21%
Growth Fund Class B -1.39%
Small Cap Fund Class B -1.99%
Enhanced Market Fund Class B -0.44%
Select Equity Fund Class B -1.85%
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<PAGE> 301
Calculation of Total Return
- ---------------------------
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
Fund Class One-Year Five-Year
---- ----- -------- ---------
Prime Money Market Fund Trust 4.59% 4.99%
U.S. Treasury Fund Trust 4.16% 4.70%
Tax-Exempt Fund Trust 2.76% 3.08%
Prime Money Market Fund Class A 4.48% 4.92%
U.S. Treasury Fund Class A 4.06% 4.63%
Tax-Exempt Fund Class A 2.66% 3.01%
Florida Tax-Exempt Fund Class A 2.06% --
Bond Fund Class A 2.58% 6.00%
Limited Term Bond Fund Class A 4.01% 5.03%
Government Income Fund Class A 2.62% 5.86%
Municipal Bond Class A 2.31% 3.71%
Institutional
Prime Obligations Fund Class I -- --
Institutional
U.S. Treasury Fund Class I -- --
Institutional
Prime Obligations Fund Class II -- --
Institutional
U.S. Treasury Fund Class II -- --
Institutional
Prime Obligations Fund Class III -- --
Institutional
U.S. Treasury Fund Class III -- --
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
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<PAGE> 302
Fund Class One-Year Five-Year
---- ----- -------- ---------
Value Fund Trust 15.43% 19.61%
Regional Equity Fund Trust -9.57% 10.32%
Balanced Fund Trust 9.74% 13.71%
Growth Fund Trust 22.05% --
Equity Income Fund Trust 14.43% --
Small Cap Fund Trust
Value Fund Class A 14.92% 18.38%
Regional Equity Fund Class A -9.85% 9.20%
Balanced Fund Class A 9.40% 12.55%
Growth Fund Class A 21.76% --
Equity Income Fund Class A 9.03% --
Small Cap Fund Class A -8.10% --
Value Fund Class B 14.03% 18.95%
Regional Equity Fund Class B -9.85% 9.63%
Balanced Fund Class B 9.74% 13.04%
Growth Fund Class B 20.96% --
Equity Income Fund Class B 13.34% --
Small Cap Fund Class B -8.28% --
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1999 of Operations Date
---- ----- -------------------------- ------------------
<S> <C> <C> <C>
Prime Money Market Fund Trust 5.33% August 8, 1988
U.S. Treasury Fund Trust 5.08% September 8, 1988
Tax-Exempt Fund Trust 3.06% June 27, 1988
Florida Tax-Exempt Fund Trust 5.05% September 2, 1997
Municipal Bond Fund Trust 5.90% September 2, 1997
Bond Fund Trust 7.94% September 2, 1997
Limited Term Bond Fund Trust 6.78% September 2, 1997
Government Income Fund Trust 5.69% September 2, 1997
Prime Money Market Fund Class A 5.30% April 1, 1996
U.S. Treasury Fund Class A 5.05% April 1, 1996
Tax-Exempt Fund Class A 3.03% April 1, 1996
Florida Fund Class A 4.10% September 30, 1994
Municipal Bond Fund Class A 5.72% July 1, 1997
Bond Fund Class A 7.51% December 1, 1988
Limited Term Bond Fund Class A 6.34% February 1, 1988
Government Income Fund Class A 4.94% October 1, 1993
Bond Fund Class B 7.75% September 2, 1997
Prime Money Market Fund Class B 3.62% June 15, 1998
Institutional
Prime Obligations Fund Class I 4.31% September 15, 1998
Institutional
U.S. Treasury Fund Class I -- Not Funded
Institutional
Prime Obligations Fund Class II 1.96% February 19, 1999
Institutional
</TABLE>
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<PAGE> 303
U.S. Treasury Fund Class II -- Not Funded
Institutional
Prime Obligations Fund Class III 1.84% February 22, 1999
Institutional
U.S. Treasury Fund Class III -- Not Funded
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1999 of Operations Date
---- ----- -------------------------- ------------------
<S> <C> <C> <C>
Value Fund Trust 15.49% December 1, 1988
Regional Equity Fund Trust 12.36% December 1, 1988
Balanced Fund Trust 12.97% December 19, 1991
Equity Income Fund Trust 17.01% March 20, 1997
Growth Fund Trust 19.36% July 31, 1997
Small Cap Fund Trust -11.30% March 2, 1998
Enhanced Market Fund Trust 40.10% September 1, 1998
Select Equity Fund Trust 19.62% September 1, 1998
Value Fund Class B 15.28% December 1, 1988
Regional Equity Fund Class B 12.16% December 1, 1988
Balanced Fund Class B 12.70% December 19, 1991
Equity Income Fund Class B 15.00% March 20, 1997
Growth Fund Class B 16.54% August 3, 1997
Small Cap Fund Class B -14.77% March 2, 1998
Enhanced Market Fund Class B 33.90% September 1, 1998
Select Equity Fund Class B 13.59% September 1, 1998
Value Fund Class A 14.93% December 1, 1988
Regional Equity Fund Class A 11.83% December 1, 1988
Balanced Fund Class A 12.22% December 19, 1991
Equity Income Fund Class A 14.54% March 20, 1997
Growth Fund Class A 16.34% August 3, 1997
Small Cap Fund Class A -14.27% March 2, 1998
Enhanced Market Fund Class A 33.65% September 1, 1998
Select Equity Fund Class A 14.08% September 1, 1998
</TABLE>
Performance Comparisons
- -----------------------
YIELD AND TOTAL RETURN. From time to time, performance information for
the Funds showing their average annual total return and/or yield may be included
in advertisements or in information furnished to present or prospective
Shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value
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of 500 Stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
ALL FUNDS. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by Financial
Institutions for cash management services will reduce a Fund's effective yield
to Customers.
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ADDITIONAL INFORMATION
Organization and Description of Shares
- --------------------------------------
The Trust was organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988, to "AmSouth Mutual Funds" as of August 19, 1993 and to
"AmSouth Funds" as of November 30, 1999 by amendments to the Agreement and
Declaration of Trust. A copy of the Trust's Agreement and Declaration of Trust,
as amended (the "Declaration of Trust") is on file with the Secretary of State
of The Commonwealth of Massachusetts. The Declaration of Trust authorizes the
Board of Trustees to issue an unlimited number of Shares, which are units of
beneficial interest. The Trust presently has eighteen series of Shares which
represent interests in the Prime Money Market Fund, the U.S. Treasury Fund, the
Tax-Exempt Fund, the Value Fund, the Regional Equity Fund, the Bond Fund, the
Limited Term Bond Fund, the Balanced Fund, the Municipal Bond Fund, the
Government Income Fund, the Florida Fund, the Growth Fund, the Small Cap Fund,
the Equity Income Fund, the Select Equity Fund, the Enhanced Market Fund, the
Institutional Prime Obligations Fund, and the Institutional U.S. Treasury Fund.
The Trust's Declaration of Trust authorizes the Board of Trustees to divide or
redivide any unissued Shares of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
Shares of the Trust are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as Shareholders are
entitled to vote. Shareholders vote in the aggregate and not by series or class
on all matters except (i) when required by the 1940 Act, shares shall be voted
by individual series, (ii) when the Trustees have determined that the matter
affects only the interests of one or more series or class, then only
Shareholders of such series or class shall be entitled to vote thereon, (iii)
when pertaining to the Shareholder Servicing Plan, and (iv) when pertaining to
the Distribution Plan. There will normally be no meetings of Shareholders for
the purposes of electing Trustees unless and until such time as less than a
majority of the Trustees have been elected by the Shareholders, at which time
the Trustees then in office will call a Shareholders' meeting for the election
of Trustees. In addition, Trustees may be removed from office by a written
consent signed by the holders of two-thirds of the outstanding voting Shares of
the Trust and filed with the Trust's custodian or by vote of the holders of
two-thirds of the outstanding voting Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of not less than
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<PAGE> 306
10% of the outstanding voting Shares of any Fund. Except as set forth above, the
Trustees shall continue to hold office and may appoint their successors.
Shareholder Liability
- ---------------------
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in every agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any Shareholder of such
Fund held liable on account of being or having been a Shareholder. Thus, the
risk of a Shareholder incurring financial loss on account of Shareholder
liability is limited to circumstances in which a Fund would be unable to meet
its obligations.
Miscellaneous
- -------------
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Trust.
As used in this Statement of Additional Information, "assets belonging
to a Fund" means the consideration received by the Fund upon the issuance or
sale of Shares in that Group, together with all income, earnings, profits, and
proceeds derived from the investment thereof, including any proceeds from the
sale, exchange, or liquidation of such investments, and any funds or payments
derived from any reinvestment of such proceeds, and any general assets of the
Trust not readily identified as belonging to a particular Fund that are
allocated to that Fund by the Trust's Board of Trustees. The Board of Trustees
may allocate such general assets in any manner it deems fair and equitable. It
is anticipated that the factor that will be used by the Board of Trustees in
making allocations of general assets to particular Funds will be the relative
net assets of the respective Funds at the time of allocation. Assets belonging
to a particular Fund are charged with the direct liabilities and expenses in
respect of that Fund, and with a share of the general liabilities and expenses
of the Trust not readily identified as belonging to a particular Fund that are
allocated to that Fund in proportion to the relative net assets of the
respective Funds at the time of allocation. The timing of allocations of general
assets and general liabilities and expenses of the Trust to particular Funds
will be determined by the Board of Trustees of the Trust and will be in
accordance with generally accepted accounting principles. Determinations by the
Board of Trustees of the Trust as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
As used in this Statement of Additional Information, a "vote of a
majority of the outstanding Shares" of the Trust or a particular Fund means the
affirmative vote, at a meeting of
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<PAGE> 307
Shareholders duly called, of the lesser of (a) 67% or more of the votes of
Shareholders of the Trust or such Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the Shareholders of record
of the Trust or such Fund are represented in person or by proxy, or (b) the
holders of more than 50% of the outstanding votes of Shareholders of the Trust
or such Fund.
As of August 10, 1999, the trustees and officers of the Trust, as a
group, owned less than 1% of the Trust Shares, of the Class A Shares and of the
Class B Shares of any of the AmSouth Funds.
As of August 10, 1999, AmSouth, 1901 Sixth Avenue-North, Birmingham,
Alabama 35203 was the Shareholder of record of the outstanding voting shares of
the Trust Shares of the Funds as follows: 92.68% of the Prime Money Market Fund,
46.91% of the U.S. Treasury Fund, 99.99% of the Tax-Exempt Fund, 97.49% of the
Value Fund, 98.90% of the Regional Equity Fund, 98.19% of the Bond Fund, 99.09%
of the Limited Term Bond Fund, 96.80% of the Balanced Fund, 98.67% of the
Florida Fund, 100% of the Government Income Fund, 98.49% of the Municipal Bond
Fund, 100% of the Equity Income Fund, 96.76% of the Growth Fund, 100% of the
Small Cap Fund, 99.95% of the Enhanced Market Fund, and 100% of the Select
Equity Fund. AmSouth was the Shareholder of record of 6.64% of the Class A
Shares of the Select Equity Fund and 100% of the Class I, Class II and Class III
Shares of the Institutional Prime Obligations Fund. Under the 1940 Act, AmSouth
may be deemed to be a controlling person of the Trust Class of each of the
above-mentioned Funds. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of August 10, 1999, National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of the outstanding voting Shares of the Class A Shares of
the Funds as follows: 99.54% of the Prime Money Market Fund, 97.86% of the
Treasury Fund, 95.84% of the Tax-Exempt Fund, 7.44% of the Government Income
Fund, 20.45% of the Bond Fund, 5.30% of the Limited Term Bond Fund, 36.55% of
the Municipal Bond Fund, 68.22% of the Florida Fund, 13.75% of the Growth Fund,
54.19% of the Small Cap Fund, 5.57% of the Select Equity Fund, 5.23% of the
Regional Equity Fund, and 12.41% of the Enhanced Market Fund. As of August 10,
1999 National Financial Services Corporation, One World Financial Center, 200
Liberty Street, New York, New York 10281, was the Shareholder of record of the
outstanding voting Shares of the Class B Shares of the Funds as follows: 82.16%
of the Prime Money Market Fund, 7.56% of the Bond Fund, 7.98% of the Regional
Equity Fund, 5.62% of the Small Cap Fund, 24.71% of the Limited Term Bond Fund,
99.38% of the Municipal Bond Fund, and 92.10% of the Florida Fund. National
Financial Services Corporation under the 1940 Act may be deemed to be a
controlling person of the Class A Shares of the Prime Money Market Fund,
Treasury Fund, Tax-Exempt Fund, Municipal Bond Fund, Florida Fund and Small Cap
Fund and the Class B Shares of the Prime Money Market Fund, Select Equity Fund,
Municipal Bond Fund and Florida Fund.
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<PAGE> 308
The following table indicates each additional person known by the group
to own beneficially 5% or more of the Shares of a Fund of the Trust as of August
10, 1999:
U.S. Treasury Fund -- Trust Shares
----------------------------------
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
Hare & Co. 160,484,114 51.83%
One Wall Street
New York, NY 10286
Limited Term Bond Fund -- Class A Shares
----------------------------------------
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
Morgan Keegan, Inc. 14,229 5.32%
Robert P. Hall, IRA
19493 Scenic Hwy. 98
Fairhope, AL 36532
Municipal Bond Fund -- Class A Shares
-------------------------------------
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
Sterne Agee Leach Inc. 60,586 21.09%
Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
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<PAGE> 309
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1999,
Financial Statements for the AmSouth Funds for the period ended July 31, 1999,
will be incorporated by reference to the Annual Report of the AmSouth Funds,
dated as of such dates, which has been previously sent to Shareholders of each
Fund pursuant to the 1940 Act and previously filed with the Securities and
Exchange Commission by subsequent amendment prior to the effectiveness of their
registration statements. A copy of each such report may be obtained without
charge by contacting the Distributor, BISYS Fund Services at 3435 Stelzer Road,
Columbus, Ohio 43219 or by telephone toll-free at 800-451-8382.
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<PAGE> 310
APPENDIX
SHORT-TERM RATINGS. Short-term credit ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt having an original maturity of no more than 365 days. Short-term credit
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
extremely strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation. Short-term credit
rated A-2 by S&P indicates that capacity for timely payment on issues is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1. Short-term credit rated A-3 indicates adequate capacity
for timely payment. It is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Short-term credit rated B is regarded as having only speculative capacity for
timely payment. Short-term credit rated C is assigned to short-term debt
obligations with a doubtful capacity for payment. Short-term credit rated D
represents an issue in default or when interest payments or principal payments
are not made on the date due, even if the applicable grace period has not
expired unless Standard & Poor's believes such payments will be made during such
grace period.
The rating Prime-1 is the highest short-term rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or supporting
institutions) are considered to have a superior ability for repayment of senior
short-term debt obligations. Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics of Prime-1 rated
issuers, but to a lesser degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained. Issuers rated Prime-3 (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market composition may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained. Issuers
rated Not Prime do not fall within any of the Prime rating categories.
Short-term credit rated F-1 by Fitch IBCA is regarded as having the
strongest capacity for timely payments. Short-term credit rated F-2 by Fitch
IBCA is regarded as having a satisfactory capacity for timely payment, but that
margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Short-term credit rated F-3 has an adequate capacity for timely payment but
near-term adverse changes could cause these securities to be rated below
investment grade. Issues rated B have characteristics suggesting a minimal
capacity for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions. Issues related C have characteristics
suggesting default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment. Issues rated D denotes actual or imminent payment default. The plus
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
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<PAGE> 311
Corporate Debt and State and Municipal Bond Ratings.
- ----------------------------------------------------
STANDARD & POOR'S CORPORATION. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B -- Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
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<PAGE> 312
MOODY'S INVESTOR SERVICES. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium-grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
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<PAGE> 313
Other Ratings of Municipal Obligations
- --------------------------------------
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. Obligations rated "MIG-2" or
"VMIG-2" denote high quality with ample margins of protection although not so
large as in the preceding rating group.
Preferred Stock Ratings
- -----------------------
The following summarizes the ratings used by Moody's for preferred
stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
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<PAGE> 314
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
The following summarizes the ratings used by Standard & Poor's for
preferred stock:
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a
high-quality, fixed income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than for issues
in the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates
the lowest degree of speculation and "CCC" the highest. While such
issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
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"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of
preferred stock quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
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AMSOUTH MUTUAL FUNDS
INSTITUTIONAL MONEY MARKET FUNDS
Statement of Additional Information
December 1, 1999
-----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth Institutional Prime
Obligations Money Market Fund (formerly the AmSouth Institutional Prime
Obligations Fund) and the AmSouth Institutional U.S. Treasury Money Market Fund
(formerly the AmSouth Institutional U.S. Treasury Money Market Fund)(each a
"Fund" and collectively the "Funds"), dated December 1, 1999. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. A copy of the Funds' Prospectus may be obtained by writing to
AmSouth Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by telephoning
toll free (800) 451-8382.
<PAGE> 317
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
AMSOUTH INSTITUTIONAL MONEY MARKET FUNDS..........................................................................1
INVESTMENT OBJECTIVES AND POLICIES................................................................................2
Additional Information on Portfolio Instruments...............................................................2
Investment Restrictions.......................................................................................9
Additional Investment Restrictions...........................................................................11
Portfolio Turnover...........................................................................................11
VALUATION........................................................................................................12
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................13
Purchase of Shares...........................................................................................13
Matters Affecting Redemption.................................................................................14
Additional Tax Information...................................................................................15
MANAGEMENT OF THE TRUST..........................................................................................17
Officers ....................................................................................................19
Investment Adviser...........................................................................................20
Portfolio Transactions.......................................................................................24
Glass-Steagall Act...........................................................................................26
Administrator................................................................................................27
Expenses ....................................................................................................29
Sub-Administrators...........................................................................................30
Distributor..................................................................................................30
Custodian....................................................................................................34
Transfer Agent and Fund Accounting Services..................................................................34
Auditors ....................................................................................................35
Legal Counsel................................................................................................35
PERFORMANCE INFORMATION..........................................................................................35
Yields of the Money Market Funds.............................................................................36
Yield of the Capital Appreciation Funds, the Income Funds and
the Tax-Free Funds..................................................................................38
Calculation of Total Return..................................................................................40
Performance Comparisons......................................................................................43
ADDITIONAL INFORMATION...........................................................................................44
Organization and Description of Shares.......................................................................44
</TABLE>
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<TABLE>
<S> <C>
Shareholder Liability........................................................................................45
Miscellaneous................................................................................................46
FINANCIAL STATEMENTS.............................................................................................49
APPENDIX.........................................................................................................50
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH INSTITUTIONAL MONEY MARKET FUNDS
AmSouth Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"). This Statement of Additional Information relates to
two of these Funds: the AmSouth Institutional Prime Obligations Money Market
Fund (the "Institutional Prime Obligations Fund") and the AmSouth Institutional
U.S. Treasury Money Market Fund (the "Institutional U.S. Treasury Fund," and
these two Funds being collectively referred to as the "Institutional Money
Market Funds"). The Trust's other sixteen Funds, which are offered through
separate prospectuses and have a separate Statement of Additional Information,
are: the AmSouth Prime Money Market Fund (formerly the AmSouth Prime Obligations
Fund)(the "Prime Money Market Fund"), the AmSouth U.S. Treasury Money Market
Fund (the "U.S. Treasury Fund"), the AmSouth Tax-Exempt Fund (the "Tax-Exempt
Fund" and, collectively, with the Prime Money Market Fund and the U.S. Treasury
Fund, the "Money Market Funds"), the AmSouth Value Fund (formerly the AmSouth
Equity Fund)(the "Value Fund"), the AmSouth Regional Equity Fund (the "Regional
Equity Fund"), the AmSouth Balanced Fund (the "Balanced Fund"), the AmSouth
Growth Fund(formerly the AmSouth Capital Growth Fund)(the "Growth Fund"), the
AmSouth Small Cap Fund (the "Small Cap Fund"), the AmSouth Equity Income Fund
(the "Equity Income Fund"), the AmSouth Select Equity Fund (the "Select Equity
Fund"), the AmSouth Enhanced Market Fund (the "Enhanced Market Fund" and,
collectively with the Value Fund, the Regional Equity Fund, the Balanced Fund,
the Growth Fund, the Small Cap Fund, the Equity Income Fund, the Select Equity
Fund and the Enhanced Market Fund, the "Capital Appreciation Funds"), the
AmSouth Bond Fund (the "Bond Fund"), the AmSouth Limited Term Bond Fund
(formerly the AmSouth Limited Maturity Fund)(the "Limited Term Bond Fund"), the
AmSouth Government Income Fund (the "Government Income Fund"), the AmSouth
Municipal Bond Fund (the "Municipal Bond Fund"), and the AmSouth Florida Tax-
Exempt Fund (formerly the Florida Tax-Free Fund) (the "Florida Fund" and,
collectively with the Bond Fund, the Limited Term Bond Fund, the Government
Income Fund and the Municipal Bond Fund, the "Income Funds," and the Florida
Fund and the Municipal Bond Fund sometimes collectively referred to herein as
the "Tax-Free Funds").
The Institutional Prime Obligations Fund and the Institutional U.S.
Treasury Fund offer three classes of Shares: Class I Shares, Class II Shares and
Class III Shares. Some of the information contained in this Statement of
Additional Information expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of a Fund should be made without first reading that Fund's
Prospectus.
<PAGE> 320
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objectives,
restrictions and policies of each Fund of the Trust as set forth in the
respective Prospectus for that Fund.
HIGH QUALITY INVESTMENTS WITH REGARD TO INSTITUTIONAL MONEY MARKET
FUNDS. As noted in the Prospectus for the Institutional Money Market Funds, each
Fund may invest only in obligations determined by AmSouth Bank, Birmingham,
Alabama ("AmSouth") the investment Adviser to the Trust ("Adviser") to present
minimal credit risks under guidelines adopted by the Trust's Board of Trustees.
With regard to the Institutional Prime Obligations Fund, investments
will be limited to those obligations which, at the time of purchase, (i) possess
the highest short-term ratings from at least two national organizations
recognized statistical ratings NRSROs"); or (ii) 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 guidelines adopted
by the Trustees. For purposes of this investment limitation, a security that has
not received a rating will be deemed to possess the rating assigned to an
outstanding class of the issuer's short-term debt obligations if determined by
the 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 Institutional Prime Obligations Fund are hereinafter referred to as
"Eligible Securities.")
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, (I.E., are
unrated) but are determined by the 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 Institutional Prime Obligations Fund will not invest more than 5%
of its total assets in the securities of any one issuer, except that the Fund
may invest up to 25% of its total assets in the securities of a single issuer
for a period of up to three business days. If a percentage limitation is
satisfied at the time of purchase, a later increase in such percentage resulting
from a change in the Fund's net asset value or a subsequent change in a
security's qualification as an
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Eligible Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, and instrumentalities and repurchase agreements fully collateralized
by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), the
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.
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. The Institutional
Prime Obligations Fund may invest in bankers' acceptances, certificates of
deposit, and demand and time deposits. Bankers' acceptances are negotiable
drafts or bills of exchange typically drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. The 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. The Institutional Prime Obligations Fund may invest
in commercial paper. Commercial paper consists of unsecured promissory notes
issued by corporations. Issues of commercial paper normally have maturities of
less than nine months and fixed rates of return.
The Institutional Prime Obligations Fund may invest in (i) Canadian
Commercial Paper, which is commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S.
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corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial
paper of an issue located in Europe.
INSURANCE COMPANY FUNDING AGREEMENTS. The Institutional Prime
Obligations Fund may invest in funding agreements ("Funding Agreements"), also
known as guaranteed investment contracts, issued by insurance companies.
Pursuant to such agreements, the Fund invests an amount of cash with an
insurance company and the insurance company credits such investment on a monthly
basis with guaranteed interest which is based on an index. The Funding
Agreements provide that this guaranteed interest will not be less than a certain
minimum rate. The 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 Fund may not receive the principal amount of a
Funding Agreement from the insurance company on seven days' notice or less, the
Funding Agreement is considered an illiquid investment, and, together with other
instruments in the Fund which are not readily marketable, will not exceed 10% of
the Fund's net assets. In determining average weighted portfolio maturity, a
Funding Agreement will be deemed to have a maturity equal to 30 days,
representing the period of time remaining until the principal amount can be
recovered through demand.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Institutional Prime Obligations Fund may invest, are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic readjustments in the interest rate according to the terms
of the instrument. They are also referred to as variable rate demand notes.
Because these notes are direct lending arrangements between a Fund and the
issuer, they are not normally traded. Although there may be no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time or during specified periods not exceeding one year, depending upon the
instrument involved, and may resell the note at any time to a third party. The
absence of such an active secondary market, however, could make it difficult for
the Fund to dispose of a variable amount master demand note if the issuer
defaulted on its payment obligations or during periods when the Fund is not
entitled to exercise its demand rights, and the Fund could, for this or other
reasons, suffer a loss to the extent of the default. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes must satisfy the same criteria as set forth above for commercial
paper. The 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
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equal to the period of time remaining until the principal amount can be
recovered from the issuer through demand.
FOREIGN INVESTMENT. The Institutional Prime Obligations Fund may,
subject to its investment objectives, restrictions and policies, invest in
certain obligations or securities of foreign issuers. Permissible investments
include Eurodollar Certificates of Deposit ("ECDs") which are U.S.
dollar-denominated certificates of deposit issued by branches of foreign and
domestic banks located outside the United States, Yankee Certificates of Deposit
("Yankee CTDs") which are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States,
Eurodollar Time Deposits ("ETD's") which are U.S. dollar-denominated deposits in
a foreign branch of a U.S. bank or a foreign bank, and Canadian Time Deposits
("CTD's") which are U.S. dollar-denominated certificates of deposit issued by
Canadian offices of major Canadian Banks. Investments in securities issued by
foreign branches of U.S. banks, foreign banks, or other foreign issuers,
including American Depository Receipts ("ADRs") and securities purchased on
foreign securities exchanges, may subject the Funds to investment risks that
differ in some respects from those related to investment in obligations of U.S.
domestic issuers or in U.S. securities markets. Such risks include future
adverse political and economic developments, possible seizure, currency
blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, and the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore many securities traded in these markets may be less liquid and
their prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations are
often subject to accounting treatment and engage in business practices different
from those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks. The Fund will acquire such securities only when the 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 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 will
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monitor the collateral's value to ensure that it equals or exceeds the
repurchase price (including accrued interest). In addition, securities subject
to repurchase agreements will be held in a segregated account. If the seller
were to default on its repurchase obligation or become insolvent, the Fund
holding such obligation would suffer a loss to the extent that the proceeds from
a sale of the underlying portfolio securities were less than the repurchase
price under the agreement, or to the extent that the disposition of such
securities by the Fund were delayed pending court action. Additionally, if the
seller should be involved in bankruptcy or insolvency proceedings, a Fund may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate. Securities
subject to repurchase agreements will be held by the Trust's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the Fund's investment restrictions.
Pursuant to such an agreement, a Fund would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
the securities at a mutually agreed-upon date and price. Each Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Fund enters into a reverse repurchase agreement, it will place assets
consisting of U.S. government securities or other liquid high quality debt
securities having a value equal to the repurchase price (including accrued
interest), in a segregated custodial account and will subsequently monitor the
account to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which a Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by a
Fund under the 1940 Act.
U.S. GOVERNMENT OBLIGATIONS. The Institutional U.S. Treasury Fund will
invest exclusively in bills, notes and bonds issued by the U.S. Treasury. Such
obligations are supported by the full faith and credit of the U.S. government.
The Institutional Prime Obligations Fund may invest in such obligations and in
other obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities. Such other obligations may include those 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 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 believes that the credit
risk with respect thereto is minimal.
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The principal governmental (i.e., backed by the full faith and credit
of the U.S. government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned U.S. government corporation within the Department of Housing
and Urban Development. GNMA is authorized to guarantee, with the full faith and
credit of the U.S. government, the timely payment of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of
the U.S. government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
government-sponsored corporations owned entirely by private stockholders.
Pass-through securities issued by FNMA and FHLMC are guaranteed as to timely
payment of principal and interest by FNMA and FHLMC but are not backed by the
full faith and credit of the U.S. government.
ASSET-BACKED SECURITIES. The Institutional Prime Obligations Fund may
invest in securities backed by automobile receivables and credit-card
receivables and other securities backed by other types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, 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
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participation is based on the ratio of the CARDS' balance to the total credit
card portfolio balance. This ratio can be adjusted monthly or can be based on
the balances at the beginning of the amortization period. In some issues,
investors are allocated most of the repayments, regardless of the CARDS'
balance. This method results in especially fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization. Asset-backed securities purchased by the Institutional Prime
Obligations Fund will be subject to the same quality requirements as other
securities purchased by the Fund.
INVESTMENT COMPANY SECURITIES. The Institutional Prime Obligations Fund
may invest in the securities of other money market funds that have similar
policies and objectives provided that no more than 10% of the Fund's total
assets may be invested in the securities of money market mutual funds in the
aggregate. 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 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 has determined are creditworthy under guidelines established by the
Trust's Board of Trustees.
Investment Restrictions
- -----------------------
The following investment restrictions may be changed with respect to a
particular Fund only by a vote of a majority of the outstanding voting Shares of
that Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Prospectuses).
INSTITUTIONAL PRIME OBLIGATIONS FUND
The Institutional Prime Obligations Fund may not:
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1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Institutional
Prime Obligations Fund's total assets would be invested in such issuer, except
that 25% or less of the value of the Institutional Prime Obligations Fund's
total assets may be invested without regard to such 5% limitation. There is no
limit to the percentage of assets that may be invested in U.S. Treasury bills,
notes, or other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the value
of the Institutional Prime Obligations Fund's total assets at the time of
purchase to be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that (a) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, bank certificates of deposit or
bankers' acceptances issued by a domestic bank or by a U.S. branch of a foreign
bank provided that such U.S. branch is subject to the same regulation as U.S.
banks, and repurchase agreements secured by bank instruments or obligations of
the U.S. government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services. For
example, gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry.
INSTITUTIONAL U.S. TREASURY FUND
The Institutional U.S. Treasury Fund may not purchase securities other
than bills, notes, and bonds issued by the U.S. Treasury, certain of which
securities may be subject to repurchase agreements collateralized by the
underlying U.S. Treasury obligation.
INSTITUTIONAL PRIME OBLIGATIONS FUND AND INSTITUTIONAL U.S. TREASURY FUND
The Institutional Prime Obligations Fund and the Institutional U.S.
Treasury Fund may not:
1. Borrow money or issue senior securities, except that each
Institutional Money Market Fund may borrow from banks or enter into reverse
repurchase agreements for temporary purposes in amounts up to 10% of the value
of its total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of its borrowing. An Institutional
Money Market Fund will not purchase securities while its borrowings (including
reverse repurchase agreements) exceed 5% of its total assets.
2. Make loans, except that each Institutional Money Market Fund may
purchase or hold debt instruments in accordance with its investment objective
and policies, may lend portfolio
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securities in accordance with its investment objective and policies, and may
enter into repurchase agreements.
3. 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;
4. Purchase or sell commodities, commodity contracts (including futures
contracts), oil, gas or mineral exploration or development programs, or real
estate (although investments by the Institutional Prime Obligations Fund, in
marketable securities of companies engaged in such activities and in securities
secured by real estate or interests therein are not hereby precluded);
5. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; PROVIDED, HOWEVER, that the Institutional Prime
Obligations Fund may purchase securities of a money market fund which invests
primarily in high quality short-term obligations exempt from federal income tax,
if, with respect to each such Fund, immediately after such purchase, the
Institutional Prime Obligations Fund, does not own in the aggregate (i) more
than 3% of the acquired company's outstanding voting securities, (ii) securities
issued by the acquired company having an aggregate value in excess of 5% of the
value of the total assets of the Institutional Prime Obligations Fund, or (iii)
securities issued by the acquired company and all other investment companies
(other than Treasury stock of the Institutional Prime Obligations Fund) having
an aggregate value in excess of 10% of the value of the Institutional Prime
Obligations Fund's total assets;
6. Invest in any issuer for purposes of exercising control or
management;
7. 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
8. Invest more than 10% of total assets in the securities of issuers
which together with any predecessors have a record of less than three years of
continuous operation.
The Institutional Money Market Funds may not buy common stocks or
voting securities, or state, municipal, or private activity bonds. The
Institutional Money Market Funds may not write or purchase put or call options.
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
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Additional Investment Restrictions
- ----------------------------------
The following investment restriction is non-fundamental and may be
changed by a vote of the majority of the Board of Trustees: No Fund will invest
more than 15% of its net assets in securities that are restricted as to resale,
or for which no readily available market exists, including repurchase agreements
providing for settlement more than seven days after notice.
Portfolio Turnover
- ------------------
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose maturities at the time of acquisition were one year or
less. Portfolio turnover with respect to each of the Institutional Money Market
Funds is expected to be zero percent for regulatory purposes.
The portfolio turnover rate may vary greatly from year to year as well
as within a particular year, and may also be affected by cash requirements for
redemptions of Shares. The turnover rates for the Funds will not be a factor
preventing either the sale or the purchase of securities when the Adviser
believes investment considerations warrant such sale or purchase. High turnover
rates will generally result in higher transaction costs to the Funds and may
result in higher levels of taxable realized gains to the Funds' Shareholders.
VALUATION
As indicated in the Prospectus, the net asset value of each
Institutional Money Market Fund is determined and the Shares of each Fund are
priced as of 2:00 p.m. and 4:00 p.m., Eastern time (the "Valuation Times") on
each Business Day of the Fund. As used herein a "Business Day" constitutes any
day on which the New York Stock Exchange (the "NYSE") is open for trading and
the Federal Reserve Bank of Atlanta is open, except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected, or days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, either the NYSE or the Federal Reserve Bank of Atlanta is
closed on the customary national business holidays of New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
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The Institutional Money Market Funds have elected to use the amortized
cost method of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. This method
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
The value of securities in these Funds can be expected to vary inversely with
changes in prevailing interest rates.
Pursuant to Rule 2a-7, each Institutional Money Market Fund will
maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value per Share, provided that no
Fund will purchase any security with a remaining maturity of more than thirteen
months (securities subject to repurchase agreements may bear longer maturities)
nor maintain a dollar-weighted average portfolio maturity which exceeds 90 days.
The Trust's Board of Trustees has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objective, to stabilize the net asset value per Share of the
Institutional Money Market Funds for purposes of sales and redemptions at $1.00.
These procedures include review by the Trustees, at such intervals as they deem
appropriate, to determine the extent, if any, to which the net asset value per
Share of each Fund calculated by using available market quotations deviates from
$1.00 per Share. In the event such deviation exceeds one-half of one percent,
Rule 2a-7 requires that the Board of Trustees promptly consider what action, if
any, should be initiated. If the Trustees believe that the extent of any
deviation from a Fund's $1.00 amortized cost price per Share may result in
material dilution or other unfair results to new or existing investors, they
will take such steps as they consider appropriate to eliminate or reduce to the
extent reasonably practicable any such dilution or unfair results. These steps
may include selling portfolio instruments prior to maturity, shortening the
dollar-weighted average portfolio maturity, withholding or reducing dividends,
reducing the number of a Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per Share determined by using
available market quotations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each of the Trust's Funds are sold on a continuous basis by
BISYS Fund Services Limited Partnership ("BISYS"), and BISYS has agreed to use
appropriate efforts to solicit all purchase orders. In addition to purchasing
Shares directly from BISYS, Shares may be purchased through procedures
established by BISYS in connection with the requirements of accounts at or
AmSouth or financial institutions that provide certain support services for
their customers or account holders ("Financial Institutions"). Customers
purchasing Shares of the Trust may include officers, directors, or employees of
AmSouth or AmSouth's correspondent banks.
Purchase of Shares
- ------------------
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<PAGE> 331
As stated in the Prospectus, the public offering price of the Class I,
Class II, and Class III Shares is their net asset value per Share, as next
computed after an order is received.
Shares of the Institutional Money Market Funds may be purchased through
procedures established by the Distributor in connection with requirements of
qualified accounts maintained by or on behalf of certain persons ("Customers")
by AmSouth or by a financial institution that provides certain administrative
support services for their customers or accountholders (collectively, "Financial
Institutions"). These procedures may include instructions under which a
Customer's account is "swept" automatically no less frequently than weekly and
amounts in excess of a minimum amount agreed upon by Financial Institutions and
their Customers are invested by the Distributor in Shares of an Institutional
Money Market Fund. This Prospectus should be read in conjunction with
information received from the Financial Institutions.
Shares of the Institutional Money Market Funds sold to Financial
Institutions acting in a fiduciary, advisory, custodial, agency, or similar
capacity on behalf of Customers will normally be held of record by Financial
Institutions. With respect to Shares so sold, it is the responsibility of the
particular Financial Institution to transmit purchase or redemption orders to
the Distributor and to deliver federal funds for purchase on a timely basis.
Beneficial ownership of the Shares will be recorded by the Financial Institution
and reflected in the account statements provided by Financial Institutions to
Customers.
There is no sales charge imposed by the Trust in connection with the
purchase of Shares of an Institutional Money Market Fund.
Shares of the Institutional Money Market Funds are purchased at the
appropriate net asset value per Share next determined after receipt by the
Distributor of an order in good form to purchase Shares. An order to purchase
Shares will be deemed to have been received by the Distributor only when federal
funds with respect thereto are available to the Trust's custodian for
investment. Federal funds are monies credited to a bank's account within a
Federal Reserve Bank. Payment for an order to purchase Shares which is
transmitted by federal funds wire will be available the same day for investment
by the Trust's custodian, if received prior to the last Valuation Time. Payments
transmitted by other means (such as by check drawn on a member of the Federal
Reserve System) will normally be converted into federal funds within two banking
days after receipt. The Trust strongly recommends that investors use federal
funds to purchase Shares.
Every Shareholder will receive a confirmation of each new transaction
in his or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. In the case of Shares held of record
by Financial Institutions but beneficially owned by a Customer, confirmations of
purchases, exchanges, and redemptions of Shares by a Financial Institution will
be sent to the Customer by the Financial Institution. Shareholders may rely on
these statements in lieu of certificates. Certificates representing Shares will
not be issued.
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<PAGE> 332
Matters Affecting Redemption
- ----------------------------
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists as
determined by the Securities and Exchange Commission.
The Trust may redeem any class of Shares involuntarily if redemption
appears appropriate in light of the Trust's responsibilities under the 1940 Act.
See "Valuation" above. The Trust reserves the right to convert, at net asset
value, Class I Shares of any Shareholder to Trust Shares if, because of
redemptions of Shares by or on behalf of the Shareholder, the account of such
Shareholder in Class I Shares of an Institutional Money Market Fund has a value
of less than $3 million. Accordingly, an investor purchasing Class I Shares of
an Institutional Money Market Fund in only the minimum investment amount may be
subject to such involuntary conversion to Trust Shares of a Money Market Fund if
he or she thereafter redeems some of his or her Shares. Before the Trust
exercises its right to convert Class I Shares to Trust Shares, the Shareholder
will be given notice that the value of the Class I Shares in his or her account
is less than the minimum amount and the Shareholder will be allowed 60 days to
make an additional investment in an amount which will increase the value of the
account to at least $3 million.
Additional Tax Information
- --------------------------
Dividends are paid in cash not later than seven Business Days after a
Shareholder's complete redemption of his or her Shares. Dividends are generally
taxable when received. However, dividends declared in October, November, or
December to Shareholders of record during those months and paid during the
following January are treated for tax purposes as if they were received by each
Shareholder on December 31 of the prior year.
Dividends will generally be taxable to a Shareholder as ordinary income
to the extent of the Shareholder's ratable share of each Fund's earnings and
profits as determined for tax purposes. Because all of the net investment income
of each Institutional Money Market Fund is expected to be interest income, it is
anticipated that no distributions will qualify for the dividends received
deduction for corporate shareholders. The Institutional Money Market Funds do
not expect to realize any long-term capital gains and, therefore, do not foresee
paying any "capital gains dividends" as described in the Code. Dividends
received by a Shareholder that are derived from the Institutional U.S. Treasury
Fund's investments in U.S. government obligations may not be eligible for
exemption from state and local taxes even though the income on such investments
would have been exempt from state and local taxes if the Shareholder directly
held such investments. In addition, the state and local tax exemption for
interest earned on U.S. government obligations may not extend to income earned
on U.S. government obligations that
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<PAGE> 333
are subject to a repurchase agreement. Shareholders are advised to consult their
own tax advisers concerning their own tax situation and the application of state
and local taxes.
It is the policy of each Fund to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended. By following such policy, the Funds
expect to eliminate or reduce to a nominal amount the federal income taxes to
which such Fund may be subject.
In order to qualify for the special tax treatment accorded regulated
investment companies and their Shareholders, a Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, securities, and foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; (b) each year distribute at least 90% of the sum of its taxable net
investment company income, its net tax-exempt income, and the excess, if any, of
its net short-term capital gains over its net long-term capital losses; and (c)
diversify its holdings so that, at the end of each fiscal quarter (i) at least
50% of the market value of its total assets is represented by cash, cash items
(including receivables), U.S. government securities, securities of other
regulated investment companies, and other securities, limited in respect of any
one issuer to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities
(other than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the Fund controls
and which are engaged in the same, similar, or related trades or businesses.
A non-deductible 4% excise tax is imposed on a regulated investment
company that does not distribute in each calendar year (regardless of whether it
has a non-calendar taxable year) an amount at least equal to the sum of 98% of
its "ordinary income" (as defined) for the calendar year, 98% of its capital
gain net income for the 1-year period ending on October 31 of such calendar
year, and any undistributed amounts from the previous year. For the foregoing
purposes, a Fund is treated as having distributed the sum of (i) the deduction
for dividends paid (defined in Section 561 of the Code) during such calendar
year, and (ii) any amount on which it is subject to income tax for any taxable
year ending in such calendar year. If distributions during a calendar year by a
Fund did not meet the excise tax threshold, the Fund would be subject to the 4%
excise tax on the undistributed amounts. Each Fund intends generally to make
distributions sufficient to avoid imposition of this 4% excise tax.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends and other distributions paid to any
Shareholder who has provided either an incorrect taxpayer identification number
or no number at all, who is subject to withholding by the Internal Revenue
Service for failure properly to report payments of interest or
B-15
<PAGE> 334
dividends, or who fails to provide a certified statement that he or she is not
subject to "backup withholding."
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 2000. In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign investors
in order to qualify for exemption from the 31% back-up withholding tax and for
reduced withholding tax rates under income tax treaties. Foreign investors in a
Fund should consult their tax advisers with respect to the potential application
of these new regulations.
A Fund's transactions in options, foreign-currency-denominated
securities, and certain other investment and hedging activities of the Fund,
will be subject to special tax rules (including "mark-to-market," "straddle,"
"wash sale," "constructive sale" and "short sale" rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, convert short-term
capital losses into long-term capital losses, convert long-term capital gains
into short-term capital gains and otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing, and character of
distributions to Shareholders. Income earned as a result of these transactions
would, in general, not be eligible for the dividends received deduction or for
treatment as exempt-interest dividends when distributed to Shareholders. The
Funds will endeavor to make any available elections pertaining to these
transactions in a manner believed to be in the best interest of the Funds.
The Funds each expect to qualify to be taxed as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes.
Depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or independent contractors
are located, or in which they are otherwise deemed to be conducting business,
the Funds may be subject to the tax laws of such states or localities.
However, if for any taxable year the Funds do not qualify for the
special federal tax treatment afforded regulated investment companies, all of
their taxable income will be subject to federal income tax at regular corporate
rates at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders will be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
Information set forth in the Prospectus and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers with specific reference to
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<PAGE> 335
their own tax situation. In addition, the tax discussion in the Prospectus and
this Statement of Additional Information is based on tax laws and regulations
which are in effect on the date of the Prospectus and this Statement of
Additional Information; such laws and regulations may be changed by legislative
or administrative action.
MANAGEMENT OF THE TRUST
Trustees
- --------
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust, who are elected by the Shareholders of the Trust.
There are currently five Trustees, one of whom is an "interested person" of the
Trust within the meaning of that term under the Investment Company Act of 1940.
The Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
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<PAGE> 336
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During the Past 5 Years
- ---------------- --- -------------- -----------------------
<S> <C> <C> <C>
J. David Huber* 53 Chairman From June 1987 to present, employee of
3435 Stelzer Road 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 Scholar
1808 7th Avenue South Chair, Univ. of Alabama at Birmingham;
UAB Medical Center from October 1979 to present, Physician,
Birmingham, Alabama 35294 University of Alabama Health Services
Foundation; from 1981 to 1995,
Professor and Vice Chairman, Dept. of
Medicine, Univ. of Alabama at
Birmingham School of Medicine; from
1988 to 1992, President, CEO and
Medical Director, Univ. of Alabama
Health Services Foundation
Wendell D. Cleaver 64 Trustee From September 3, 1993 to present,
209 Lakewood Drive, West retired; from December 1988 to August,
Mobile, Alabama 36608 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; until
751 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830-2505 Division, Alabama Power Company
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The
The University of North Sessions Group; from July 1989 to
Carolina at Charlotte Charlotte, present, Chancellor, The
North Carolina 28223 University of North Carolina at
Charlotte; from April 1997 to
present, Trustee, BISYS Variable
Insurance Funds; from August 1984
to July 1989, Senior Vice
President, University College,
University of Alabama at Birmingham
</TABLE>
- --------------------------
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
The Trustees receive fees and are reimbursed for expenses in connection
with each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services, Inc. receives any
compensation from the Trust for acting as a Trustee.
OFFICERS
B-18
<PAGE> 337
The officers of each Fund, their current addresses, their age, and
principal occupation during the past five years are as follows (if no address is
listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During Past 5 Years
- ---------------- --- ---------------- --------------------
<S> <C> <C> <C>
John F. Calvano 39 President From September 1999 to present, Senior Vice
President, AmSouth Bank; from October 1994 to
September 1999, employee of BISYS Fund
Services Limited Partnership; from July 1992 to
August 1994, investment representative, BA
Investment Services; and from October 1986 to
July 1994, Marketing Manager, Great Western
Investment Management.
Walter B. Grimm 53 Vice President From June 1992 to present, employee of BISYS
Fund Services Limited Partnership; from 1990
to 1992, President and CEO, Security
Bancshares; from July 1981 to 1990, President
of Leigh Investments Consulting (investments
firm).
Charles L. Booth 39 Treasurer From 1988 to present, employee of BISYS Fund
Services Limited Partnership.
Jeffrey C. Cusick 38 Assistant Secretary An employee of BISYS Fund Services, Inc.
since July 1995, and an officer of other
investment companies administered by the
Administrator or its affiliates. From September
1993 to July 1995, he was Assistant Vice
President of Federated Administrative Services.
Alaina V. Metz 32 Assistant Secretary From June 1995 to present, Chief
Administrator, Administrative and Regulatory
Services, BISYS Fund Services Limited
Partnership; from May 1989 to June 1995,
Supervisor, Mutual Fund Legal Department,
Alliance Capital Management.
</TABLE>
The officers of the Trust receive no compensation directly from the
Trust for performing the duties of their offices. BISYS receives fees from the
Trust for acting as Administrator and BISYS Fund Services, Inc. receives fees
from the Trust for acting as Transfer Agent for and for providing fund
accounting services to the Trust. Messrs. Cusick, Grimm and Booth and Ms. Metz
are employees of BISYS Fund Services Limited Partnership.
COMPENSATION TABLE (1)
------------------
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<PAGE> 338
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from AmSouth
Name of from AmSouth As Part of Benefits Upon Mutual Funds
Position Fund Expenses Fund Expenses Retirement Paid to Trustee
- -------- ------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
J. David Huber None None None None
James H. $14,000 None None $14,000
Woodward, Jr.
Homer H. Turner $14,000 None None $14,000
Wendell D. Cleaver $14,000 None None $14,000
Dick D. Briggs, Jr., $14,000 None None $14,000
M.D.
</TABLE>
(1) Figures are for the Trust's fiscal year ended July 31, 1999.
Investment Adviser
- ------------------
Investment advisory and management services are provided to the Money
Market Funds, the Capital Appreciation Funds and the Income Funds (except the
Limited Term Bond Fund) by the Adviser pursuant to the Investment Advisory
Agreement dated as of August 1, 1988, as amended (the "First Investment Advisory
Agreement"). Investment advisory and management services are provided to the
Limited Term Bond Fund by the Adviser pursuant to the Investment Advisory
Agreement dated as of January 20, 1989, as amended (the "Second Investment
Advisory Agreement"). The First Investment Advisory Agreement and the Second
Investment Advisory Agreement are collectively referred to as the "Advisory
Agreements."
In selecting investments for the Value Fund, the Balanced Fund and the
Regional Equity Fund, the Adviser employs the "value investing" method. A
primary theory of value investing is that many investors tend to exaggerate both
prosperity and problems in market valuations. This method, which may conflict
with the prevailing mood of the market, involves the use of independent judgment
backed by careful analysis of market data. The Adviser's approach when selecting
investments for each of these Funds is to attempt to buy and sell securities
that are temporarily mispriced relative to long-term value.
In selecting investments for each of the Income Funds and the Balanced
Fund, the Adviser attempts to anticipate interest rates, thereby capitalizing on
cyclical movements in the bond markets. The Adviser seeks to achieve this goal
through active management of the buying and selling of fixed-income securities
in anticipation of changes in yields.
Under the Advisory Agreements, the fee payable to the Adviser by the
Funds for investment advisory services is the lesser of (a) such fee as may from
time to time be agreed upon in writing by the Trust and the Adviser or (b) a fee
computed daily and paid monthly based on the average daily net assets of each
Fund as follows: the Prime Money Market Fund - forty
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<PAGE> 339
one-hundredths of one percent (0.40%) annually; the U.S. Treasury Fund -
forty one-hundredths of one percent (0.40%) annually; the Institutional
Prime Obligations Fund twenty one-hundredths of one percent (0.20%); the
Institutional U.S. Treasury Fund - twenty one-hundredths of one percent
(0.20%); the Value Fund - eighty one-hundredths of one percent (0.80%)
annually; the Regional Equity Fund - eighty one-hundredths of one percent
(0.80%) annually; the Tax-Exempt Fund - forty one-hundredths of one percent
(0.40%) annually; the Bond Fund - sixty-five one-hundredths of one percent
(0.65%) annually; the Limited Term Bond Fund - sixty-five one-hundredths of
one percent (0.65%) annually; the Balanced Fund eighty one-hundredths of
one percent (0.80%) annually; the Government Income Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Florida Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually;
the Growth Fund - eighty one-hundredths of one percent (0.80%) annually;
the Small Cap Fund - one hundred twenty one-hundredths of one percent
(1.20%) annually; the Select Equity Fund - eighty one hundredths of one
percent (.80%) annually; and the Enhanced Market Fund forty-five hundredths
of one percent (.45%) annually. A fee agreed to in writing from time to
time by the Trust and the Adviser may be significantly lower than the fee
calculated at the annual rate and the effect of such lower fee would be to
lower a Fund's expenses and increase the net income of such Fund during the
period when such lower fee is in effect.
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<PAGE> 340
For the fiscal years ended July 31, 1999, July 31, 1998, and July 31,
1997, the Adviser received the following investment advisory fees:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
-------------- --------------- --------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $3,046,371 -- $3,005,940 -- $2,855,190 --
Growth Fund 207,326 -- 70,873 -- -- --
Enhanced Market Fund 78,331 -- -- -- -- --
Value Fund 8,292,490 -- 7,981,703 -- 3,733,019 --
Equity Income Fund 324,890 -- 267,522 -- 36,130 --
Regional Equity Fund 856,308 -- 1,263,837 $1,000 953,375 --
Select Equity Fund 129,762 -- -- -- -- --
Small Cap Fund 127,255 -- 33,202 -- -- --
Bond Fund 2,319,255 $535,215 2,056,000 475,000 969,000 $224,000
Government Income Fund 61,967 33,367 69,000 37,000 90,000 48,000
Limited Term Bond Fund 734,542 169,510 774,000 179,000 322,000 74,000
Florida Tax-Exempt Fund 460,845 248,147 369,000 199,000 340,000 183,000
Municipal Bond Fund 2,120,841 815,707 2,170,000 835,000 181,117 70,000
Prime Money Market Fund 2,765,375 -- 2,515,690 -- 2,366,707 --
U.S. Treasury Fund 1,261,718 -- 1,256,351 -- 1,325,127 --
Tax-Exempt Fund 383,340 191,672 354,000 176,963 321,570 160,785
Institutional Prime
Obligations Fund 198,365 128,935 -- -- -- --
Institutional U.S. Treasury
Fund -- -- -- -- -- --
</TABLE>
Each of the Advisory Agreements provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of such Advisory Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Adviser in the performance of its
duties, or from reckless disregard by the Adviser of its duties and obligations
thereunder.
Unless sooner terminated, the First Investment Advisory Agreement will
continue in effect until January 31, 2000 as to each of the Money Market Funds,
the Capital Appreciation Funds, the Tax-Free Funds, the Bond Fund and the
Government Income Fund and for successive one-year periods if such continuance
is approved at least annually by the Trust's Board of Trustees or by vote of the
holders of a majority of the outstanding voting Shares of that Fund, and a
majority of the Trustees who are not parties to the First Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
First Investment Advisory Agreement by votes cast in person at a meeting called
for such purpose.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Term Bond Fund until January 31, 2000 and
for successive one-year
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<PAGE> 341
periods thereafter if such continuance is approved at least annually by the
Trust's Board of Trustees or by vote of the holders of a majority of the
outstanding voting Shares of the Limited Term Bond Fund, and a majority of the
Trustees who are not parties to the Second Investment Advisory Agreement or
interested persons (as defined in the 1940 Act) of any party to the Second
Investment Advisory Agreement by votes cast in person at a meeting called for
such purpose. The Advisory Agreements are terminable as to a particular Fund at
any time on 60 days' written notice without penalty by the Trustees, by vote of
the holders of a majority of the outstanding voting Shares of that Fund, or by
the Adviser. The Advisory Agreements also terminate automatically in the event
of any assignment, as defined in the 1940 Act.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective shareholders of the Funds may
include descriptions of the investment adviser including, but not limited to,
(i) descriptions of the adviser's operations; and (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings related to the
adviser's operations.
AmSouth also serves as Sub-Administrator for the Trust. See
"SUB-ADMINISTRATOR" below.
Investment Sub-Advisers
- -----------------------
Investment sub-advisory services are provided to the Equity Income Fund
by Rockhaven Asset Management, LLC ("Rockhaven" or "Sub-Adviser") pursuant to a
Sub- Advisory Agreement dated as of March 12, 1997 between the Adviser and
Rockhaven ("Sub- Advisory Agreement"). Investment sub-advisory services are
provided to the Growth Fund by Peachtree Asset Management ("Peachtree" or
"Sub-Adviser") pursuant to a Sub-Advisory Agreement dated July 31, 1997 between
the Adviser and Peachtree. Investment sub-advisory services are provided to the
Small Cap Fund by Sawgrass Asset Management, LLC ("Sawgrass" or "Sub-Adviser")
pursuant to a Sub-Advisory Agreement dated as of March 2, 1998 between the
Adviser and Sub-Adviser (a "Sub-Advisory Agreement"). Investment sub- advisory
services are provided to the Select Equity Fund and the Enhanced Market Fund
pursuant to a Sub-Advisory Agreement dated as of September 1, 1998 between the
Adviser and OakBrook Investments, LLC ("OakBrook" or "Sub-Adviser").
The Sub-Advisers shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Adviser, the Trust or the Fund in
connection with the matters to which Agreement relates, except that a
Sub-Adviser shall be liable to the Adviser for a loss resulting from a breach of
fiduciary duty by the Sub-Adviser under the 1940 Act with respect to the receipt
of compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations or duties
thereunder.
B-23
<PAGE> 342
Unless sooner terminated, the Sub-Advisory Agreement shall continue
with respect to the Equity Income Fund until January 31, 2000, with respect to
the Growth Fund until July 31, 2000, with respect to the Small Cap Fund until
January 31, 2000, and with respect to the Select Equity Fund and Enhanced Market
Fund until January 31, 2000, and each Sub-Advisory Agreement shall continue in
effect for successive one-year periods if such continuance is approved at least
annually by the Board of Trustees or by vote of the holders of a majority of the
outstanding voting Shares of the respective Fund and a majority of the Trustees
who are not parties to the Sub-Advisory Agreement or interested persons (as
defined in the 1940 Act) of any party to the Sub-Advisory Agreement by vote cast
in person at a meeting called for such purpose. Each Sub-Advisory Agreement may
be terminated with respect to a Fund by the Trust at any time without the
payment of any penalty by the Board of Trustees, by vote of the holders of a
majority of the outstanding voting securities of the Fund, or by the Adviser or
Sub-Adviser on 60 days written notice. Each Sub-Advisory Agreement will also
immediately terminate in the event of its assignment.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective Shareholders of the Trust may
include descriptions of a Sub-Adviser including, but not limited to, (i)
descriptions of the Sub-Adviser's operations; (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings relating to the
Sub-Adviser's operations.
Portfolio Transactions
- ----------------------
Pursuant to the Advisory Agreements, the Adviser or Sub-Adviser
determines, subject to the general supervision of the Board of Trustees and in
accordance with each Fund's investment objective, policies and restrictions,
which securities are to be purchased and sold by a Fund, and which brokers are
to be eligible to execute such Fund's portfolio transactions. Purchases and
sales of portfolio securities with respect to the Money Market Funds, the Income
Funds and the Balanced Fund (with respect to its debt securities) usually are
principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. Transactions in over-the-counter market are generally
principal transactions with dealers. With respect to over-the-counter market,
the Trust, where possible, will deal directly with dealers who make a market in
the securities involved except in those circumstances where better price and
execution are available elsewhere. While the Adviser and Sub-Adviser generally
seek competitive spreads or commissions, the Trust may not necessarily pay the
lowest spread or commission available on each transaction, for reasons discussed
below.
Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser and the Sub-Adviser in their best judgment
and in a manner deemed fair and
B-24
<PAGE> 343
reasonable to Shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, dealers who provide supplemental investment research to the
Adviser or Sub-Adviser may receive orders for transactions on behalf of the
Trust. Information so received is in addition to and not in lieu of services
required to be performed by the Adviser or Sub-Adviser and does not reduce the
advisory fees payable to the Adviser or the Sub-Adviser. Such information may be
useful to the Adviser or Sub-Adviser in serving both the Trust and other clients
and, conversely, supplemental information obtained by the placement of business
of other clients may be useful to the Adviser or Sub-Adviser in carrying out
their obligations to the Trust.
To the extent permitted by applicable rules and regulations, either
AmSouth or the Sub-Advisers may execute portfolio transactions on behalf of the
Funds through an affiliate of AmSouth. As required by Rule 17e-1 under the 1940
Act, the Funds have adopted procedures which provide that commissions paid to
such affiliate must be fair and reasonable compared to the commission, fees or
other remuneration paid to other brokers in connection with comparable
transactions. The procedures also provide that the Board will review reports of
such affiliated brokerage transactions in connection with the foregoing
standard.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by the
Adviser or Sub-Adviser. Any such other investment company or account may also
invest in the same securities as the Trust. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Fund and another
Fund, investment company or account, the transaction will be averaged as to
price and available investments will be allocated as to amount in a manner which
the Adviser or Sub-Adviser believe to be equitable to the Fund(s) and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained by a Fund. To the extent permitted by law, the Adviser or
Sub-Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for the other Funds or for other investment
companies or accounts in order to obtain best execution. As provided by each of
the Advisory Agreements and the Sub-Advisory Agreement, in making investment
recommendations for the Trust, the Adviser or Sub-Adviser will not inquire or
take into consideration whether an issuer of securities proposed for purchase or
sale by the Trust is a customer of the Adviser or Sub-Adviser, its parent or its
subsidiaries or affiliates and, in dealing with its customers, the Adviser or
Sub-Adviser, its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Trust.
B-25
<PAGE> 344
During the following fiscal years, the Funds listed below paid the
following aggregate brokerage commissions:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Balanced Fund $132,669 $365,522 $145,513
Growth Fund 34,442 NA NA
Enhanced Market Fund 20,125** NA NA
Value Fund 534,115 592,269 397,221
Equity Income Fund 119,234 615,317 28,462*
Regional Equity Fund 128,351 182,346 98,747
Select Equity Fund 13,150** NA NA
Small Cap Fund 108,710 NA NA
</TABLE>
*For the period March 30, 1997 to July 31, 1997.
** For the period September 1, 1998 to July 31, 1999.
During the period from September 1, 1998 to July 31, 1999, the Select
Equity Fund paid aggregate brokerage commissions of $30 to AmSouth Brokerage
Services, an affiliate of AmSouth. The aggregate brokerage commission paid to
AmSouth Brokerage Services was less than 1% of the aggregate commissions paid to
brokers by the Fund for the period ended July 31, 1999. Additionally, the
aggregate dollar amount of transactions involving the payment of commissions
effected through AmSouth Brokerage Services was less than 1% of the aggregate
dollar amount of such transactions for the Fund for the period ended July 31,
1999.
Glass-Steagall Act
- ------------------
B-26
<PAGE> 345
In 1971, the United States Supreme Court held in INVESTMENT COMPANY
INSTITUTE V. CAMP that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V.
INVESTMENT COMPANY INSTITUTE that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the BOARD
OF GOVERNORS case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
AmSouth believes that it possesses the legal authority to perform the
services for each Fund contemplated by the Advisory Agreements regarding that
Fund and described in the Prospectus of that Fund and this Statement of
Additional Information and has so represented in the Advisory Agreement
regarding that Fund. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent or restrict AmSouth from
continuing to perform such services for the Trust. Depending upon the nature of
any changes in the services which could be provided by AmSouth, the Board of
Trustees would review the Trust's relationship with AmSouth and consider taking
all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of AmSouth in connection with customer
purchases of Shares of the Trust, AmSouth might be required to alter materially
or discontinue the services offered by them to customers. It is not anticipated,
however, that any change in the Trust's method of operations would affect its
net asset value per Share or result in financial losses to any customer.
B-27
<PAGE> 346
Administrator
- -------------
ASO Services Company ("ASO") serves as administrator (the
"Administrator") to each Fund of the Trust pursuant to the Management and
Administration Agreement dated as of April 1, 1996 (the "Administration
Agreement"). ASO is a wholly-owned subsidiary of BISYS which is a wholly-owned
subsidiary of BISYS Group, Inc., a publicly held company which is a provider of
information processing, loan servicing and 401(k) administration and
record-keeping services to and through banking and other financial
organizations. The Administrator assists in supervising all operations of each
Fund (other than those performed by the Adviser under the Advisory Agreements,
the Sub-Advisers under the Sub-Advisory Agreements, those performed by AmSouth
under its custodial services agreement with the Trust and those performed by
BISYS Fund Services, Inc. under its transfer agency and fund accounting
agreements with the Trust).
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value per Share of the Money Market Funds, to maintain
office facilities for the Trust, to maintain the Trust's financial accounts and
records, and to furnish the Trust statistical and research data and certain
bookkeeping services, and certain other services required by the Trust. The
Administrator prepares annual and semi-annual reports to the Securities and
Exchange Commission, prepares federal and state tax returns, prepares filings
with state securities commissions, and generally assists in supervising all
aspects of the Trust's operations (other than those performed by the Adviser
under the Advisory Agreements, the Sub-Advisers under the Sub-Advisory
Agreements, those by AmSouth under its custodial services agreement with the
Trust and those performed by BISYS Fund Services, Inc. under its fund accounting
agreement and BISYS Fund Services Ohio, Inc. under its transfer agency agreement
with the Trust). Under the Administration Agreement, the Administrator may
delegate all or any part of its responsibilities thereunder.
Under the Administration Agreement for expenses assumed and services
provided as manager and administrator, the Administrator receives a fee from
each Fund (except the Institutional Money Market Funds) equal to the lesser of
(a) a fee computed at the annual rate of twenty one-hundredths of one percent
(0.20%) of such Fund's average daily net assets; or (b) such fee as may from
time to time be agreed upon in writing by the Trust and the Administrator. Under
the Administration Agreement for expenses assumed and services provided as
manager and administrator, the Administrator receives a fee from each
Institutional Money Market Fund equal to the lesser of (a) a fee computed at the
annual rate of (0.10%) of an Institutional Money Market Fund's average daily net
assets; or (b) such fee as may from time to time be agreed upon in writing by
the Trust and the Administrator. A fee agreed to from time to time by the Trust
and the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower a Fund's expenses
and increase the net income of such Fund during the period when such lower fee
is in effect. Each Fund also bears expenses incurred in pricing securities owned
by the Fund.
B-28
<PAGE> 347
For its services as administrator and expenses assumed pursuant to the
Administration Agreement, the Administrator received the following fees:
<TABLE>
<CAPTION>
Fiscal Year or Period Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $761,600 -- $751,492 -- $714,000 $165,000
Growth Fund 51,832 $51,832 18,000 $16,000 -- --
Enhanced Market Fund 35,097 35,097 -- -- -- --
Value Fund 2,073,141 -- 1,995,442 -- 934,000 188,000
Equity Income Fund 81,223 -- 66,881 -- 9,033 --
Regional Equity Fund 214,079 -- 316,102 -- 239,000 51,000
Select Equity Fund 32,564 32,564 -- -- -- --
Small Cap Fund 21,209 21,209 6,000 6,000 -- --
Bond Fund 713,624 285,450 633,000 475,000 298,000 119,000
Government Income Fund 19,067 9,450 21,000 10,000 28,000 14,000
Limited Term Bond Fund 226,015 90,406 238,000 95,000 99,000 40,000
Florida Tax-Exempt Fund 141,800 70,899 114,000 57,000 104,000 53,000
Municipal Bond Fund 652,573 261,029 668,000 267,000 55,000 22,000
Prime Money Market Fund 1,382,700 -- 1,257,853 -- 1,183,357 --
U.S. Treasury Fund 630,865 -- 628,179 -- 662,565 --
Tax-Exempt Fund 191,672 -- 176,963 -- 160,785 --
Institutional Prime
Obligations Fund 99,181 69,427 -- -- -- --
Institutional U.S. Treasury Fund -- -- -- -- -- -- --
</TABLE>
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the Administration Agreement shall be renewed
automatically for successive five-year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days' prior to
the expiration of the then-current term. The Administration Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Trust's Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
B-29
<PAGE> 348
Expenses
- --------
Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Trustees of the
Trust, Securities and Exchange Commission fees, state securities qualification
fees, costs of preparing and printing Prospectuses for regulatory purposes and
for distribution to current Shareholders, outside auditing and legal expenses,
advisory and administration fees, fees and out-of-pocket expenses of the
custodian and the transfer agent, dividend disbursing agents fees, fees and
out-of-pocket expenses for fund accounting services, expenses incurred for
pricing securities owned by it, certain insurance premiums, costs of maintenance
of its existence, costs of Shareholders' and Trustees' reports and meetings, and
any extraordinary expenses incurred in its operation.
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Adviser and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for a Fund. No Fund will bear, directly or indirectly, the cost of any
activity primarily intended to result in the distribution of Shares of such
Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Trust, Class A,
Class B, Class I, Class II and Class III Shares of a Fund on the basis of the
relative net asset value of each class. At present, the only expenses that will
be borne solely by Class A, Class B Shares, Class II and Class III, other than
in accordance with the relative net asset value of the class, are expenses under
the Servicing Plan which relates only to the Class A Shares and the Distribution
Plan which relates only to the Class B Shares.
Sub-Administrators
- ------------------
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO as the Sub-Administrator of the
Trust. Pursuant to this agreement, AmSouth has assumed certain of the
Administrator's duties, for which AmSouth receives a fee, paid by the
Administrator, calculated at an annual rate of up to (0.10%) ten one-hundredths
of one percent of each Fund's average net assets. For the fiscal years ended
July 31, 1999 and July 31, 1998, AmSouth received $2,184,291 and $1,924,684,
respectively, with respect to the Trust.
BISYS is retained by the Administrator as a Sub-Administrator to the
Trust. Pursuant to its agreement with the Administrator, BISYS Fund Services is
entitled to compensation as mutually agreed upon from time to time by it and the
Administrator.
B-30
<PAGE> 349
Distributor
- -----------
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, and from year to year thereafter if
such continuance is approved at least annually (i) by the Trust's Board of
Trustees or by the vote of a majority of the outstanding Shares of the Funds or
Fund subject to such Distribution Agreement, and (ii) by the vote of a majority
of the Trustees of the Trust who are not parties to such Distribution Agreement
or interested persons (as defined in the 1940 Act) of any party to such
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
Class A Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Class A Shares of each Fund.
The Servicing Plan was initially approved on December 6, 1995 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Servicing Plan (the "Independent
Trustees"). The Servicing Plan reflects the creation of the Class A Shares, and
provides for fees only upon that Class.
The Servicing Plan may be terminated with respect to any Fund by a vote
of a majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class A Shares of that Fund. The Servicing Plan may be amended by
vote of the Trust's Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for such purpose, except that any
change in the Servicing Plan that would materially increase the shareholder
servicing fee with respect to a Fund requires the approval of the holders of
that Fund's Class A Class. The Trust's Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the Servicing Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Servicing Plan) indicating the purposes for which such expenditures
were made.
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), Class B Shares of a Fund will pay a monthly distribution
fee to the Distributor as compensation for its services in connection with the
Distribution Plan at an annual rate equal to one percent (1.00%) of the average
daily net assets of the Class B Shares of each Fund which includes a Shareholder
Servicing fee of 0.25% of the average daily net assets of the Class B Shares of
each
B-31
<PAGE> 350
Fund; Class II Shares of a Fund will pay a monthly distribution fee to the
Distributor as compensation for its services in connection with the Distribution
Plan at an annual rate equal to twenty-five one-hundredths of one percent
(0.25%) of the average daily net assets of Class II Shares of each Fund; Class
III Shares of a Fund will pay a monthly distribution fee to the Distributor as
compensation for its services in connection with the Distribution Plan at an
annual rate equal to fifty one-hundredths of one percent (0.50%) of the average
daily net assets of the Class III Shares of each Fund. The Distributor may
periodically waive all or a portion of the fee with respect to a Fund in order
to increase the net investment income of the Fund available for distribution as
dividends. The Distributor may apply the Class B, Class II or Class III Share
Fee toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's Class B,
Class II or Class III Shares; (ii) payments to financial institutions and
intermediaries (such as banks, savings and loan associations, insurance
companies, and investment counselors) as brokerage commissions in connection
with the sale of such Fund's Class B, Class II or Class III Shares; and (iii)
payments to financial institutions and intermediaries (such as banks, savings
and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
Class B, Class II or Class III Shares.
The Distribution Plan was initially approved on March 12, 1997 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees").
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to the Class B, Class II or Class III Shares of
any Fund by a vote of a majority of the Independent Trustees, or by a vote of a
majority of the outstanding Class B, Class II or Class III Shares of that Fund.
The Distribution Plan may be amended by vote of the Fund's Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for such purpose, except that any change in the Distribution Plan that
would materially increase the distribution fee with respect to the Class B,
Class II or Class III Shares of a Fund requires the approval of the holders of
that Fund's Class B, Class II or Class III Shares. The Trust's Board of Trustees
will review on a quarterly and annual basis written reports of the amounts
received and expended under the Distribution Plan (including amounts expended by
the Distributor to Participating Organizations pursuant to the Servicing
Agreements entered into under the Distribution Plan) indicating the purposes for
which such expenditures were made.
For the fiscal years ended July 31, 1999, July 31, 1998 and July 31,
1997, the Distributor received the following servicing fees with respect to the
Class A Shares and the following distribution fees with respect to the Class B,
Class II and Class III Shares from the following Funds:
B-32
<PAGE> 351
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------ ------------------ --------------------
Class A Shares Class A Shares Class A Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $113,423 -- $113,853 $341 -- --
Growth Fund 28,262 -- 12,190 37 -- --
Enhanced Market Fund 27,092 $9,055 -- -- -- --
Value Fund 178,812 -- 145,774 437 -- --
Equity Income Fund 58,845 -- 55,674 167 -- --
Regional Equity Fund 76,403 -- 114,873 344 -- --
Select Equity Fund 28,366 10,391 -- -- --
Small Cap Fund 3,080 -- 1,091 7 -- --
Bond Fund 7,330 -- 15,851 9,530 -- --
Government Income Fund 6,909 -- 21,290 12,799 -- --
Limited Term Bond Fund 7,521 4,513 8,171 4,912 -- --
Florida Tax-Exempt Fund 9,991 -- 13,848 8,325 -- --
Municipal Bond Fund 5,843 -- 4,831 2,904 -- --
Prime Money Market Fund 336,424 201,863 305,250 183,129 $305,882 $182,913
U.S. Treasury Fund 16,054 9,633 19,155 11,498 27,598 16,307
Tax-Exempt Fund 62,542 137,562 58,152 34,888 50,267 31,033
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------ ------------------ --------------------
Class B Shares Class B Shares Class B Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $78,669 -- $21,204 -- -- --
Growth Fund 51,893 -- 15,982 -- -- --
Enhanced Market Fund 20,045 -- -- -- -- --
Value Fund 102,305 -- 33,233 -- -- --
Equity Income Fund 77,644 -- 35,433 -- -- --
Regional Equity Fund 15,114 -- 11,461 -- -- --
Select Equity Fund 8,018 -- -- -- -- --
Small Cap Fund 8,620 -- 2,093 -- -- --
Bond Fund 16,859 -- 1,542 -- -- --
Government Income Fund -- -- -- -- -- --
Limited Term Bond Fund 4,053 -- -- -- -- --
Florida Tax-Exempt Fund 1,086 -- -- -- -- --
Municipal Bond Fund -- -- -- -- -- --
Prime Money Market Fund 1,468 -- -- -- -- --
U.S. Treasury Fund -- -- -- -- -- --
Tax-Exempt Fund -- -- -- -- -- --
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------ ------------------ --------------------
Class II Shares Class II Shares Class II Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $17,200 -- -- -- -- --
</TABLE>
B-33
<PAGE> 352
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Institutional U.S. Treasury
Fund -- -- -- -- -- --
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------ ------------------ --------------------
Class III Shares Class III Shares Class III Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $15,473 -- -- -- -- --
Institutional U.S.
Treasury Fund -- -- -- -- -- --
</TABLE>
All payments by the Distributor for distribution assistance or
shareholder services under the Distribution Plan will be made pursuant to an
agreement (a "Servicing Agreement") between the Distributor and such bank, other
financial institution or intermediary, broker-dealer, or affiliate or subsidiary
of the Distributor (hereinafter referred to individually as "Participating
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares, Class II Shares or Class III Shares to the Participating Organization's
customers on whose behalf the investment in such Shares is made and/or to the
provision of shareholder services to the Participating Organization's customers
owning a Fund's Class B Shares, Class II Shares or Class III Shares. Under the
Distribution Plan, a Participating Organization may include AmSouth or a
subsidiary bank or nonbank affiliates, or the subsidiaries or affiliates of
those banks. A Servicing Agreement entered into with a bank (or any of its
subsidiaries or affiliates) will contain a representation that the bank (or
subsidiary or affiliate) believes that it possesses the legal authority to
perform the services contemplated by the Servicing Agreement without violation
of applicable banking laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks
generally from engaging in the business of underwriting securities, but in
general do not prohibit banks from purchasing
B-34
<PAGE> 353
securities as agent for and upon the order of customers. Accordingly, the Trust
will require banks acting as Participating Organizations to provide only those
services which, in the banks' opinion, are consistent with the then current
legal requirements. It is possible, however, that future legislative, judicial
or administrative action affecting the securities activities of banks will cause
the Trust to alter or discontinue its arrangements with banks that act as
Participating Organizations, or change its method of operations. It is not
anticipated, however, that any change in a Fund's method of operations would
affect its net asset value per share or result in financial loss to any
customer.
Custodian
- ---------
AmSouth serves as custodian of the Trust pursuant to a Custodial
Services Agreement with the Trust (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments.
Transfer Agent and Fund Accounting Services.
- -------------------------------------------
BISYS Fund Services Ohio, Inc. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each tax exempt fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
Independent Accountants
- -----------------------
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
incorporated by reference into this Statement of Additional Information which
have been audited by PricewaterhouseCoopers LLP, former independent accountants
for the Trust, as set forth in their report incorporated by reference herein,
and are included in reliance upon such report and on the authority of such firm
as experts in auditing and accounting. For the fiscal year ending July 31, 2000,
Ernst & Young has been selected as the independent accountants for the Trust.
Ernst & Young's address is 10 West Broad Street, Columbus, OH 43215.
B-35
<PAGE> 354
Legal Counsel
- -------------
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
PERFORMANCE INFORMATION
General
- -------
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry indices or other
appropriate benchmarks; and (8) discussions of fund rankings or ratings by
recognized rating organizations.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. and Donoghue's Money
Fund Report. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, Ibbotson
Associates, Inc., Morning Star, Inc., CDA/Wiesenberger, Pensions and
Investments, U.S.A. Today, and local newspapers and periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and in reports to Shareholders. Additional performance
information is contained in the Trust's Annual Report, which is available free
of charge by calling the number on the front page of the Prospectus.
Information about the performance of a Fund is based on the Fund's
record up to a certain date and is not intended to indicate future performance.
Yield and total return are functions of the type and quality of instruments held
in a Fund, operating expenses, and marketing conditions. Any fees charged by a
Financial Institution with respect to customer accounts investing in Shares of a
Fund will not be included in performance calculations.
Yields of The Money Market Funds
- --------------------------------
B-36
<PAGE> 355
The "yield" of each of Money Market Funds for a seven-day period (a
"base period") will be computed by determining the "net change in value"
(calculated as set forth below) of a hypothetical account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield") which assumes that net income is reinvested in Fund shares at the same
rate as net income is earned for the base period.
The Tax-Exempt Fund may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of the Tax-Exempt Fund's yield which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent effective yield for the Tax-Exempt Fund is computed by dividing that
portion of the effective yield of the Tax-Exempt Fund which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax-Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1999, the yield, effective
yield, the tax equivalent yield and the tax equivalent effective yield of the
Trust Shares and Class A Shares of each Money Market Fund, calculated as
described, above was as follows:
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
Prime
<S> <C> <C> <C> <C>
Money Market Fund Trust 4.39 % 4.48 % -- --
U.S. Treasury Fund Trust 4.05 % 4.13 % -- --
Tax-Exempt Fund Trust 2.57 % 2.60 % 4.25 % 4.30 %
Prime
Money Market Fund Class A 4.29 % 4.37 % -- --
U.S. Treasury Fund Class A 3.96 % 4.02 % -- --
</TABLE>
B-37
<PAGE> 356
<TABLE>
<S> <C> <C> <C> <C>
Tax-Exempt Fund Class A 2.47 % 2.50 % 4.09 % 4.14 %
Institutional
Prime Obligations Fund Class I 4.83 % 4.94 % -- --
Institutional
U.S. Treasury Fund Class I -- -- -- --
Institutional
Prime Obligations Fund Class II 4.58 % 4.68 % -- --
Institutional
U.S. Treasury Fund Class II -- -- -- --
Institutional
Prime Obligations Fund Class III 4.33 % 4.42 % -- --
Institutional
U.S. Treasury Fund Class III -- -- -- --
</TABLE>
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds
- --------------------------------------------------------------------------------
The yield of each of the Capital Appreciation Funds, the Income Funds
and the Tax- Free Funds will be computed by annualizing net investment income
per share for a recent 30- day period and dividing that amount by the maximum
offering price per share (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed-income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The yield of each of the
Capital Appreciation Funds and the Income Funds will vary from time to time
depending upon market conditions, the composition of the Fund's portfolios and
operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of the
Capital Appreciation Funds and the Income Funds.
B-38
<PAGE> 357
The Tax-Free Funds may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of each Fund's yield which is tax-exempt by the difference
between one and a stated income tax rate and adding the product to that portion,
if any, of the yield of the Fund that is not tax-exempt. The tax equivalent
effective yield for the Tax-Free Funds is computed by dividing that portion of
the effective yield of the Fund which is tax-exempt by the difference between
one and a stated income tax rate and adding the product to that portion, if any,
of the effective yield of the Fund that is not tax-exempt.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.
Investors in the Capital Appreciation Funds and the Income Funds are
specifically advised that share prices, expressed as the net asset values per
share, will vary just as yields will vary.
For the 30-day period ending July 31, 1999, the yield and the tax
equivalent yield of the Income Funds was:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- --------------
<S> <C> <C> <C>
Florida Tax-Exempt Fund Class A 3.88% 6.42%
Trust 3.96% 6.56%
Municipal Bond Fund Class A 4.01% 6.64%
Trust 4.10% 6.79%
Bond Fund Class A 5.43% --
Trust 5.53% --
Class B 4.60% --
Government Income Fund Class A 6.11% --
Trust 6.22% --
Limited Term Bond Fund Class A 5.29% --
Trust 5.38% --
</TABLE>
For the 30-day period ending July 31, 1999, the yield of the Capital
Appreciation Funds was:
<TABLE>
<CAPTION>
Fund Class Yield
---- ----- -----
<S> <C> <C>
Value Fund Trust 0.63 %
Regional Equity Fund Trust 0.28 %
Balanced Fund Trust 2.84 %
Equity Income Fund Trust 0.79 %
Growth Fund Trust -0.38 %
</TABLE>
B-39
<PAGE> 358
<TABLE>
<S> <C> <C>
Small Cap Fund Trust -0.99%
Enhanced Market Fund Trust 0.31%
Select Equity Fund Trust -0.84%
Value Fund Class A 0.38%
Regional Equity Fund Class A 0.03%
Balanced Fund Class A 2.59%
Equity Income Fund Class A 0.54%
Growth Fund Class A -0.63%
Small Cap Fund Class A -1.24%
Enhanced Market Fund Class A 0.56%
Select Equity Fund Class A -1.10%
Value Fund Class B -0.36%
Regional Equity Fund Class B -0.73%
Balanced Fund Class B 1.84%
Equity Income Fund Class B -0.21%
Growth Fund Class B -1.39%
Small Cap Fund Class B -1.99%
Enhanced Market Fund Class B -0.44%
Select Equity Fund Class B -1.85%
</TABLE>
Calculation of Total Return
- ---------------------------
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
B-40
<PAGE> 359
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-year Five-year
---- ----- -------- ---------
<S> <C> <C> <C>
Prime Money Market Fund Trust 4.59% 4.99%
U.S. Treasury Fund Trust 4.16% 4.70%
Tax-Exempt Fund Trust 2.76% 3.08%
Prime Money Market Fund Class A 4.48% 4.92%
U.S. Treasury Fund Class A 4.06% 4.63%
Tax-Exempt Fund Class A 2.66% 3.01%
Florida Tax-Exempt Fund Class A 2.06% --
Bond Fund Class A 2.58% 6.00%
Limited Term Bond Fund Class A 4.01% 5.03%
Government Income Fund Class A 2.62% 5.86%
Municipal Bond Class A 2.31% 3.71%
Institutional
Prime Obligations Fund Class I -- --
Institutional
U.S. Treasury Fund Class I -- --
Institutional
Prime Obligations Fund Class II -- --
Institutional
U.S. Treasury Fund Class II -- --
Institutional
Prime Obligations Fund Class III -- --
Institutional
U.S. Treasury Fund Class III -- --
</TABLE>
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-year Five-year
---- ----- -------- ---------
<S> <C> <C> <C>
Value Fund Trust 15.43% 19.61%
Regional Equity Fund Trust -9.57% 10.32%
Balanced Fund Trust 9.74% 13.71%
Growth Fund Trust 22.05% --
Equity Income Fund Trust 14.43% --
Small Cap Fund Trust --
Value Fund Class A 14.92% 18.38%
Regional Equity Fund Class A -9.85% 9.20%
Balanced Fund Class A 9.40% 12.55%
Growth Fund Class A 21.76% --
Equity Income Fund Class A 9.03% --
Small Cap Fund Class A -8.10% --
Value Fund Class B 14.03% 18.95%
Regional Equity Fund Class B -9.85% 9.63%
Balanced Fund Class B 9.74% 13.04%
Growth Fund Class B 20.96% --
Equity Income Fund Class B 13.34% --
Small Cap Fund Class B -8.78% --
</TABLE>
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<PAGE> 360
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class Through July 31, 1999 of Operations Date
---- ----- --------------------- ------------------
<S> <C> <C> <C>
Prime Money Market Fund Trust 5.33% August 8, 1988
U.S. Treasury Fund Trust 5.08% September 8, 1988
Tax-Exempt Fund Trust 3.06% June 27, 1988
Florida Tax-Exempt Fund Trust 5.05% September 2, 1997
Municipal Bond Fund Trust 5.90% September 2, 1997
Bond Fund Trust 7.94% September 2, 1997
Limited Term Bond Fund Trust 6.78% September 2, 1997
Government Income Fund Trust 5.69% September 2, 1997
Prime Money Market Fund Class A 5.30% April 1, 1996
U.S. Treasury Fund Class A 5.05% April 1, 1996
Tax-Exempt Fund Class A 3.03% April 1, 1996
Florida Tax-Exempt Fund Class A 4.10% September 30, 1994
Municipal Bond Fund Class A 5.72% July 1, 1997
Bond Fund Class A 7.51% December 1, 1988
Limited Term Bond Fund Class A 6.34% February 1, 1988
Government Income Fund Class A 4.94% October 1, 1993
Bond Fund Class B 7.75% September 2, 1997
Prime Money Market Fund Class B 3.62% June 15, 1998
Institutional
Prime Obligations Fund Class I 4.31% September 15, 1998
Institutional
U.S. Treasury Fund Class I -- Not Funded
Institutional
Prime Obligations Fund Class II 1.96% February 19, 1999
Institutional
U.S. Treasury Fund Class II -- Not Funded
Institutional
Prime Obligations Fund Class III 1.84% February 22, 1999
Institutional
U.S. Treasury Fund Class III -- Not Funded
</TABLE>
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class Through July 31, 1999 of Operations Date
---- ----- --------------------- ------------------
<S> <C> <C> <C>
Value Fund Trust 15.49% December 1, 1988
Regional Equity Fund Trust 12.36% December 1, 1988
Balanced Fund Trust 12.97% December 19, 1991
Equity Income Fund Trust 17.01% March 20, 1997
Growth Fund Trust 19.36% July 31, 1997
Small Cap Fund Trust -11.30% March 2, 1998
Enhanced Market Fund Trust 40.10% September 1, 1998
</TABLE>
B-42
<PAGE> 361
<TABLE>
<S> <C> <C> <C>
Select Equity Fund Trust 19.62% September 1, 1998
Value Fund Class B 15.28% December 1, 1988
Regional Equity Fund Class B 12.16% December 1, 1988
Balanced Fund Class B 12.70% December 19, 1991
Equity Income Fund Class B 15.00% March 20, 1997
Growth Fund Class B 16.54% August 3, 1997
Small Cap Fund Class B -14.77% March 2, 1998
Enhanced Market Fund Class B 33.90% September 1, 1998
Select Equity Fund Class B 13.59% September 1, 1998
Value Fund Class A 14.93% December 1, 1988
Regional Equity Fund Class A 11.83% December 1, 1988
Balanced Fund Class A 12.22% December 19, 1991
Equity Income Fund Class A 14.54% March 20, 1997
Growth Fund Class A 16.34% August 3, 1997
Small Cap Fund Class A -14.27% March 2, 1998
Enhanced Market Fund Class A 33.66% September 1, 1998
Select Equity Fund Class A 14.08% September 1, 1998
</TABLE>
Performance Comparisons
- -----------------------
YIELD AND TOTAL RETURN. From time to time, performance information for
the Funds showing their average annual total return and/or yield may be included
in advertisements or in information furnished to present or prospective
Shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
B-43
<PAGE> 362
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/ Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
ALL FUNDS. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by Financial
Institutions for cash management services will reduce a Fund's effective yield
to Customers.
ADDITIONAL INFORMATION
Organization and Description of Shares
- --------------------------------------
The Trust was organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988, to "AmSouth Mutual Funds" as of August 19, 1993 and to
"AmSouth Funds" as of November 30, 1999 by amendments to the Agreement and
Declaration of Trust. A copy of the Trust's Agreement and Declaration of Trust,
as amended (the "Declaration of Trust") is on file with the Secretary of State
of The Commonwealth of Massachusetts. The Declaration of Trust authorizes the
Board of Trustees to issue an unlimited number of Shares, which are units of
beneficial interest. The Trust presently has eighteen series of Shares which
represent interests in the Prime Money Market Fund, the U.S. Treasury Fund, the
Tax-Exempt Fund, the Value Fund, the Regional Equity Fund, the Bond Fund, the
Limited Term Bond Fund, the Balanced Fund, the Municipal Bond Fund, the
Government Income Fund, the Florida Fund, the Growth Fund, the Small Cap Fund,
the Equity Income Fund, the Select Equity Fund, the Enhanced Market Fund, the
Institutional Prime Obligations Fund, and the Institutional U.S. Treasury Fund.
The Trust's Declaration of Trust authorizes the Board of Trustees to divide or
redivide any unissued Shares of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described
B-44
<PAGE> 363
in the Prospectuses and this Statement of Additional Information, the Trust's
Shares will be fully paid and non-assessable. In the event of a liquidation or
dissolution of the Trust, Shareholders of a Fund are entitled to receive the
assets available for distribution belonging to that Fund, and a proportionate
distribution, based upon the relative asset values of the respective Funds, of
any general assets not belonging to any particular Fund which are available for
distribution.
Shares of the Trust are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as Shareholders are
entitled to vote. Shareholders vote in the aggregate and not by series or class
on all matters except (i) when required by the 1940 Act, shares shall be voted
by individual series, (ii) when the Trustees have determined that the matter
affects only the interests of one or more series or class, then only
Shareholders of such series or class shall be entitled to vote thereon, (iii)
when pertaining to the Shareholder Servicing Plan, and (iv) when pertaining to
the Distribution Plan. There will normally be no meetings of Shareholders for
the purposes of electing Trustees unless and until such time as less than a
majority of the Trustees have been elected by the Shareholders, at which time
the Trustees then in office will call a Shareholders' meeting for the election
of Trustees. In addition, Trustees may be removed from office by a written
consent signed by the holders of two-thirds of the outstanding voting Shares of
the Trust and filed with the Trust's custodian or by vote of the holders of
two-thirds of the outstanding voting Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of not less than 10% of the outstanding voting Shares of any Fund.
Except as set forth above, the Trustees shall continue to hold office and may
appoint their successors.
Shareholder Liability
- ---------------------
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in every agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any Shareholder of such
Fund held liable on account of being or having been a Shareholder. Thus, the
risk of a Shareholder incurring financial loss on account of Shareholder
liability is limited to circumstances in which a Fund would be unable to meet
its obligations.
Miscellaneous
- -------------
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Trust.
As used in this Statement of Additional Information, "assets belonging
to a Fund" means the consideration received by the Fund upon the issuance or
sale of Shares in that Group,
B-45
<PAGE> 364
together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange, or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds, and any general assets of the Trust not readily
identified as belonging to a particular Fund that are allocated to that Fund by
the Trust's Board of Trustees. The Board of Trustees may allocate such general
assets in any manner it deems fair and equitable. It is anticipated that the
factor that will be used by the Board of Trustees in making allocations of
general assets to particular Funds will be the relative net assets of the
respective Funds at the time of allocation. Assets belonging to a particular
Fund are charged with the direct liabilities and expenses in respect of that
Fund, and with a share of the general liabilities and expenses of the Trust not
readily identified as belonging to a particular Fund that are allocated to that
Fund in proportion to the relative net assets of the respective Funds at the
time of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Trust to particular Funds will be determined by
the Board of Trustees of the Trust and will be in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Trust as to the timing of the allocation of general liabilities and expenses and
as to the timing and allocable portion of any general assets with respect to a
particular Fund are conclusive.
As used in this Statement of Additional Information, a "vote of a
majority of the outstanding Shares" of the Trust or a particular Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Trust or such Fund present at
such meeting at which the holders of more than 50% of the votes attributable to
the Shareholders of record of the Trust or such Fund are represented in person
or by proxy, or (b) the holders of more than 50% of the outstanding votes of
Shareholders of the Trust or such Fund.
As of August 10, 1999, the trustees and officers of the Trust, as a
group, owned less than 1% of the Trust Shares, of the Class A Shares and of the
Class B Shares of any of the AmSouth Funds.
As of August 10, 1999, AmSouth, 1901 Sixth Avenue-North, Birmingham,
Alabama 35203 was the Shareholder of record of the outstanding voting shares of
the Trust Shares of the Funds as follows: 92.68% of the Prime Money Market Fund,
46.91% of the U.S. Treasury Fund, 99.99% of the Tax-Exempt Fund, 97.49% of the
Value Fund, 98.90% of the Regional Equity Fund, 98.19% of the Bond Fund, 99.09%
of the Limited Term Bond Fund, 96.80% of the Balanced Fund, 98.67% of the
Florida Fund, 100% of the Government Income Fund, 98.49% of the Municipal Bond
Fund, 100% of the Equity Income Fund, 96.76% of the Growth Fund, 100% of the
Small Cap Fund, 99.95% of the Enhanced Market Fund, and 100% of the Select
Equity Fund. AmSouth was the Shareholder of record of 6.64% of the Class A
Shares of the Select Equity Fund and 100% of the Class I, Class II and Class III
Shares of the Institutional Prime Obligations Fund. Under the 1940 Act, AmSouth
may be deemed to be a controlling person of the Trust Class of each of the
above-mentioned Funds. The ultimate parent of AmSouth is AmSouth Bancorporation.
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<PAGE> 365
As of August 10, 1999, National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of the outstanding voting Shares of the Class A Shares of
the Funds as follows: 99.54% of the Prime Money Market Fund, 97.86% of the
Treasury Fund, 95.84% of the Tax-Exempt Fund, 7.44% of the Government Income
Fund, 20.45% of the Bond Fund, 5.30% of the Limited Term Bond Fund, 36.55% of
the Municipal Bond Fund, 68.22% of the Florida Fund, 13.75% of the Growth Fund,
54.19% of the Small Cap Fund, 5.57% of the Select Equity Fund, 5.23% of the
Regional Equity Fund, and 12.41% of the Enhanced Market Fund. As of August 10,
1999 National Financial Services Corporation, One World Financial Center, 200
Liberty Street, New York, New York 10281, was the Shareholder of record of the
outstanding voting Shares of the Class B Shares of the Funds as follows: 82.16%
of the Prime Money Market Fund, 7.56% of the Bond Fund, 7.98% of the Regional
Equity Fund, 5.62% of the Small Cap Fund, 24.71% of the Limited Term Bond Fund,
99.38% of the Municipal Bond Fund, and 92.10% of the Florida Fund. National
Financial Services Corporation under the 1940 Act may be deemed to be a
controlling person of the Class A Shares of the Prime Money Market Fund,
Treasury Fund, Tax-Exempt Fund, Municipal Bond Fund, Florida Fund and Small Cap
Fund and the Class B Shares of the Prime Money Market Fund, Select Equity Fund,
Municipal Bond Fund and Florida Fund.
The following table indicates each additional person known by the group
to own beneficially 5% or more of the Shares of a Fund of the Trust as of August
10, 1999:
<TABLE>
U.S. Treasury Fund -- Trust Shares
----------------------------------
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Hare & Co. 160,484,114 51.83%
One Wall Street
New York, NY 10286
<CAPTION>
Limited Term Bond Fund -- Class A Shares
----------------------------------------
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Morgan Keegan, Inc. 14,229 5.32%
Robert P. Hall, IRA
19493 Scenic Hwy. 98
Fairhope, AL 36532
</TABLE>
B-47
<PAGE> 366
<TABLE>
Municipal Bond Fund -- Class A Shares
-------------------------------------
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Sterne Agee Leach Inc. 60,586 21.09%
Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
</TABLE>
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
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<PAGE> 367
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1999,
Financial Statements for the AmSouth Funds for the period ended July 31, 1999,
are all incorporated by reference to the Annual Report of the AmSouth Funds,
dated as of such dates, which has been previously sent to Shareholders of each
Fund pursuant to the 1940 Act and previously filed with the Securities and
Exchange Commission. A copy of each such report may be obtained without charge
by contacting the Distributor, BISYS Fund Services at 3435 Stelzer Road,
Columbus, Ohio 43219 or by telephone toll-free at 800-451-8382.
B-49
<PAGE> 368
APPENDIX
SHORT-TERM RATINGS. Short-term credit ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt having an original maturity of no more than 365 days. Short-term credit
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
extremely strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation. Short-term credit
rated A-2 by S&P indicates that capacity for timely payment on issues is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1. Short-term credit rated A-3 indicates adequate capacity
for timely payment. It is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Short-term credit rated B is regarded as having only speculative capacity for
timely payment. Short-term credit rated C is assigned to short-term debt
obligations with a doubtful capacity for payment. Short-term credit rated D
represents an issue in default or when interest payments or principal payments
are not made on the date due, even if the applicable grace period has not
expired unless Standard & Poor's believes such payments will be made during such
grace period.
The rating Prime-1 is the highest short-term rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or supporting
institutions) are considered to have a superior ability for repayment of senior
short-term debt obligations. Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics of Prime-1 rated
issuers, but to a lesser degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained. Issuers rated Prime-3 (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market composition may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained. Issuers
rated Not Prime do not fall within any of the Prime rating categories.
Short-term credit rated F-1 by Fitch IBCA is regarded as having the
strongest capacity for timely payments. Short-term credit rated F-2 by Fitch
IBCA is regarded as having a satisfactory capacity for timely payment, but that
margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Short-term credit rated F-3 has an adequate capacity for timely payment but
near-term adverse changes could cause these securities to be rated below
investment grade. Issues rated B have characteristics suggesting a minimal
capacity for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions. Issues related C have characteristics
suggesting default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment. Issues rated D denotes actual or imminent payment default. The plus
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
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<PAGE> 369
Corporate Debt and State and Municipal Bond Ratings.
- ---------------------------------------------------
STANDARD & POOR'S CORPORATION. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B -- Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
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MOODY'S INVESTOR SERVICES. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium-grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
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<PAGE> 371
Other Ratings of Municipal Obligations
- --------------------------------------
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. Obligations rated "MIG-2" or
"VMIG-2" denote high quality with ample margins of protection although not so
large as in the preceding rating group.
Preferred Stock Ratings
- -----------------------
The following summarizes the ratings used by Moody's for preferred
stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
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<PAGE> 372
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
The following summarizes the ratings used by Standard & Poor's for
preferred stock:
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a
high-quality, fixed income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than for issues
in the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates
the lowest degree of speculation and "CCC" the highest. While such
issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
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<PAGE> 373
"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of
preferred stock quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
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<PAGE> 374
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(a) Amended Declaration of Trust, dated as of June
25, 1993 and filed on August 19, 1993 --
incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on
Form N-1A (File No. 33-21660).
(b) (1) By-laws -- incorporated by reference to
the Registrant's initial Registration
Statement on Form N-1A (File No.
33-21660).
(2) Amendment No. 1 to By-laws --
incorporated by reference to
Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(c) Rights of Shareholders
----------------------
The following portions of Registrant's Declaration of
Trust incorporated as Exhibit (a) hereto, define the
rights of shareholders:
ARTICLE III
No Preemptive Rights
--------------------
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other
securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
-----------------------------------------------------
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Shareholder by virtue of having become a Shareholder shall
be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not
operate to terminate the same nor entitle the
representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights
of said decedent
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<PAGE> 375
under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a
partition or division of the same or for an accounting,
nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees,
nor any officer, employee or agent of the Trust shall have
any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
ARTICLE IV
The Trustees
Election
--------
Section 1. There shall initially be one Trustee who shall
be Stephen G. Mintos. The number of Trustees shall be as
provided in the Bylaws or as fixed from to time by the
Trustees. The shareholders may elect Trustees at any
meeting of Shareholders called by the Trustees for that
purpose. Each Trustee shall serve during the continued
lifetime of the Trust until he dies, resigns or is
removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees
and the election and qualification of his successor. Any
Trustee may resign at any time by written instrument
signed by him and delivered to any officer of the Trust,
to each other Trustee or to a meeting of the Trustees.
Such resignation shall be effective upon receipt unless
specified to be effective at some other time. Except to
the extent expressly provided in a written agreement with
the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period
following his resignation or removal, or any right to
damages on account of such removal.
Advisory, Management and Distribution
-------------------------------------
Section 6. The Trustees may, at any time and from time to
time, contract for exclusive or nonexclusive advisory
and/or: management services with any corporation, trust,
association or other organization (the "Manager"), every
such contract to
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<PAGE> 376
comply with such requirements and restrictions as may be
set forth in the Bylaws; and any such contract may provide
for one or more Sub- advisers who shall perform all or
part of the obligations of the Manager under such Contract
and may contain such other terms interpretive of or in
addition to said requirements and restrictions as the
Trustees may determine, including, without limitation,
authority to determine from time to time what investments
shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments.
The Trustees may also, at any time and from time to time,
contract with the Manager or any other corporation, trust,
association or other organization, appointing it exclusive
or nonexclusive distributor or principal underwriter for
the Shares, every such contract to comply with such
requirements and restrictions as may be set forth in the
Bylaws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter
or distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any
parent or affiliate of any organization, with which an
advisory or management contract, or principal
underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have
been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract
or principal underwriter's or distributor's contract, or
transfer, shareholder servicing or other agency contract
may have been or may hereafter be made also has an
advisory or management contract, or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract with one or
more other corporations, trusts, associations, or other
organizations,
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<PAGE> 377
or has other business or interests shall not affect the
validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting
upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Shareholders shall have such power to vote as is provided
for in, and may hold meetings and take actions pursuant to
the provisions of the Bylaws.
ARTICLE VIII
Indemnification
Shareholders
------------
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of
his or her being or having been a Shareholder and not
because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or
her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against
all loss and expense, arising from such liability, but
only out of the assets, of the particular series of Shares
of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable;
----------------------------------------------------
Notice
------
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular
series of Shares shall look only to the assets of the
Trust or the assets of that particular series of Shares
for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past,
present or future, shall be personally liable
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<PAGE> 378
therefor. Nothing in this Declaration of Trust shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any
officer or officers shall give notice that this
Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite that the
same was executed or made by or on behalf of the Trust or
by them as Trustee or Trustees or as officers or officer
and not individually and that the obligations of such
instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such
further recital as he or she or they may deem appropriate,
but the omission thereof shall not operate to bind any
Trustee or Trustees or officer or officers or Shareholder
or Shareholders individually.
Duration and Termination of Trust
---------------------------------
Section 4. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may
be terminated at any time by the vote of Shareholders
holding at least a majority of the Shares of each series
entitled to vote or by the Trustees by written notice to
the Shareholders. Any series of Shares may be terminated
at any time by vote of Shareholders holding at least a
majority of the Shares of such series entitled to vote or
by the Trustees by written notice to the Shareholders of
such series.
Upon termination of the Trust or of any one or more series
of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated, of the Trust or of the particular
series as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities,
or any combination thereof, and distribute the proceeds to
the Shareholders of the series involved, ratably
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<PAGE> 379
according to the number of Shares of such series held by
the several Shareholders of such series on the date of
termination.
Amendments
----------
Section 7. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of
the then Trustees when authorized to do so by vote of
Shareholders holding a majority of the Shares of each
series entitled to vote, except that an amendment which
shall affect the holders of one or more series of Shares
but not the holders of all outstanding series shall be
authorized by vote of the Shareholders holding a majority
of the Shares entitled to vote of each series affected and
no vote of Shareholders of a series not affected shall be
required. Amendments having the purpose of changing the
name of the Trust, of establishing, changing, or
eliminating the par value of the shares or of supplying
any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision
contained herein shall not require authorization by
Shareholder vote.
The following portions of Registrant's Bylaws incorporated
as Exhibit (b) hereto, define the rights of Shareholders:
ARTICLE 11
Shareholders' Voting Powers and Meetings
11.1 VOTING POWERS. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in
Article IV, Section 1 of the Declaration of Trust,
PROVIDED, HOWEVER, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees
unless and until such time as less than a majority of the
Trustees have been elected by the Shareholders, (ii) with
respect to any Manager or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the
extent required by the 1940 Act, (iii) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4 of the Declaration of Trust, (iv)
with respect to any amendment of the Declaration of Trust
to the extent and as provided in Article IX, Section 7 of
the Declaration of Trust, (v) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should
or should not be brought or maintained
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<PAGE> 380
derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such
additional matters relating to the Trust as may be
required by law, the Declaration of Trust , these Bylaws
or any registration of the Trust with the Commission (or
any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. The
Shareholders of any particular series shall not be
entitled to vote on any matters as to which such series is
not affected. Except with respect to matters as to which
the Trustees have determined that only the interests of
one or more particular series are affected or as required
by law, all of the Shares of each series shall, on matters
as to which it is entitled to vote, vote with other series
so entitled as a single class. Notwithstanding the
foregoing, with respect to matters which would otherwise
be voted on by two or more series as a single class, the
Trustees may, in their sole discretion, submit such
matters to the Shareholders of any or all such series,
separately. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by
proxy. A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one
of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary
from any one of them. A proxy purporting to be executed by
or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until
Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, the
Declaration of Trust or these Bylaws to be taken by
shareholders.
11.2 VOTING AND MEETINGS. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing
Trustees as provided in Article IV, Section 1 of the
Declaration of Trust and for such other purposes as may be
prescribed by law, by the Declaration of Trust or by these
Bylaws. Meetings of the Shareholders may also be called by
the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be
necessary or desirable. A meeting of Shareholders may be
held at any place designated by the
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<PAGE> 381
Trustees. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such
meeting, postage prepaid, stating the time and place of
the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust.
Whenever notice of a meeting is required to be given to a
Shareholder under the Declaration of Trust or these
Bylaws, a written waiver thereof, executed before or after
the meeting by such Shareholder or his attorney thereunto
authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice.
11.3 QUORUM AND REQUIRED VOTE. A majority of Shares
entitled to vote shall be a quorum for the transaction of
business at a Shareholders' meeting, except that where any
provision of law or of the Declaration of Trust or these
Bylaws permits or requires that holders of any series
shall vote as a series, then a majority of the aggregate
number of Shares of that series entitled to vote shall be
necessary to constitute a quorum for the transaction of
business by that series. Any lesser number shall be
sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity
of further notice. Except when a larger vote is required
by any provision of law or the Declaration of Trust or
these Bylaws, a majority of the Shares voted shall decide
any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of the
Declaration of Trust or these Bylaws permits or requires
that the holders of any series shall vote as a series,
then a majority of the Shares of that series voted on the
matter (or a plurality with respect to the election of a
Trustee) shall decide that matter insofar as that series
is concerned.
11.4 ACTION BY WRITTEN CONSENT. Any action taken by
Shareholders may be taken without a meeting if a majority
of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by any
express provision of law or the Declaration of Trust or
these Bylaws) consent to the action in writing and such
written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of
Shareholders.
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11.5 RECORD DATES. For the purposes of determining the
shareholders who are entitled to vote or act at any
meeting or any adjournment thereof, or who are entitled to
receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a
time, which shall be not more than 90 days before the date
of any meeting of shareholders or the date for the payment
of any dividend or of any other distributions, as the
record date for determining the shareholders having the
right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of
record on such record date shall have such right
notwithstanding any transfer of shares on the books of the
Trust after the record date; or without fixing such record
date the Trustees may for any of such purposes close the
register or transfer books for all of any part of such
period.
(d) (1) Investment Advisory Agreement dated as of
August 1, 1988 between the Registrant and
AmSouth Bank N.A. -- incorporated by
reference to Post-Effective Amendment No. 1
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(2) Amendment No. 1 dated as of December 5, 1989
to Investment Advisory Agreement dated as of
August 1, 1988 between the Registrant and
AmSouth Bank N.A. -- incorporated by
reference to Post-Effective Amendment No. 4
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(3) Form of Amended Schedule A dated September
15, 1998 to the Investment Advisory
Agreement dated as of August 1, 1988 between
the Registrant and AmSouth Bank, N.A. is
incorporated by reference to Exhibit 5(c) of
Post-Effective Amendment No. 28 to the
Registrant's Registration Statement filed on
September 24, 1998 on Form N-1A (File No.
33-21660).
(4) Investment Advisory Agreement between the
Group and AmSouth Bank N.A. dated as of
January 20, 1989 with respect to The ASO
Outlook Group Limited Maturity Fund --
incorporated by reference to Post-Effective
Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
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(5) Amendment No. 1 dated as of December 5, 1989
to the Investment Advisory Agreement dated
as of January 20, 1989 between the
Registrant and AmSouth Bank, N.A. --
incorporated by reference to Post-Effective
Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(6) Investment Sub-Advisory Agreement dated as
of March 12, 1997 between AmSouth Bank and
Rockhaven Asset Management -- incorporated
by reference to Exhibit 5(f) to
Post-Effective Amendment No. 23 to the
Registrant's Registration Statement filed on
July 3, 1997 on Form N-1A (File No.
33-21660).
(7) Investment Sub-Advisory Agreement dated July
31, 1997 between AmSouth Bank and Peachtree
Asset Management -- incorporated by
reference to Exhibit 5(g) to Post-Effective
Amendment No. 25 to the Registrant's
Registration Statement filed on November 26,
1997 on Form N-1A (File No. 33-21660).
(8) Investment Sub-Advisory Agreement dated as
of March 2, 1998 between AmSouth Bank and
Sawgrass Asset Management, LLC --
incorporated by reference to Exhibit 5(h) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement filed on
May 22, 1998 on Form N-1A (File No.
33-21660).
(9) Investment Sub-Advisory Agreement dated
September 1, 1998 between AmSouth Bank and
OakBrook Investments, LLC is incorporated by
reference to Exhibit 5(i) of Post-Effective
Amendment No. 28 to the Registrant's
Registration Statement filed on September
24, 1998 on Form N-1A (File No. 33-21660).
(e) (1) Distribution Agreement dated as of July 16,
1997 between the Registrant and BISYS Fund
Services, Limited Partnership is
incorporated by reference to Exhibit 6(a) of
Post-Effective Amendment No. 24 to the
Registrant's Registration Statement filed on
August 27, 1997 on Form N-1A (File No.
33-21660).
(2) Form of Amended Schedules A, B, C and D
dated September 15, 1998 to the Distribution
Agreement between the Registrant and BISYS
Fund Services Limited Partnership are
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incorporated by reference to Exhibit 6(b) of
Post-Effective Amendment No. 28 to the
Registrant's Registration Statement filed on
September 24, 1998 on Form N-1A (File No.
33-21660).
(3) Dealer Agreement between The Winsbury
Company and AmSouth Investment Services,
Inc. -- incorporated by reference to
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(4) Dealer Agreement between The Winsbury
Company and National Financial Services
Corporation -- incorporated by reference to
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(5) Dealer Agreement between The Winsbury
Company and AmSouth Bank N.A. --
incorporated by reference to Post- Effective
Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(f) None.
(g) (1) Custodian Agreement dated as of April
17, 1997 between the Registrant and AmSouth
Bank -- incorporated by reference to Exhibit
8(a) to Post-Effective Amendment No. 23 to
the Registrant's Registration Statement
filed on July 3, 1997 on Form N-1A (File No.
33-21660).
(2) Form of Amended Schedule A dated September
15, 1998 to the Custodian Agreement between
the Registrant and AmSouth Bank is
incorporated by reference to Exhibit 8(b) of
Post- Effective Amendment No. 28 to the
Registrant's Registration Statement filed on
September 24, 1998 on Form N-1A (File No.
33-21660).
(h) (1) Management and Administration Agreement
dated as of April 1, 1996 between the
Registrant and ASO Services Company --
incorporated by reference to Post-Effective
Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(2) Form of Amended Schedule A dated September
15, 1998 to the Management and
Administration Agreement between the
Registrant and ASO Services Company is
incorporated by
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reference to Exhibit 9(b) of Post-Effective
Amendment No. 28 to the Registrant's
Registration Statement filed on September
24, 1998 on Form N-1A (File No. 33-21660).
(3) Sub-Administration Agreement between ASO
Services Company and AmSouth Bank --
incorporated by reference to Post-Effective
Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(4) Form of Amended Schedules A and B dated
September 15, 1998 to the Sub-Administration
Agreement between ASO Services Company and
AmSouth Bank are incorporated by reference
to Exhibit 9(d) of Post-Effective Amendment
No. 28 to the Registrant's Registration
Statement filed on September 24, 1998 on
Form N-1A (File No. 33-21660).
(5) Sub-Administration Agreement between ASO
Services Company and BISYS Fund Services, LP
-- incorporated by reference to
Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(6) Form of Amended Schedules A and B dated
September 15, 1998 to the Sub-Administration
Agreement between ASO Services Company and
BISYS Fund Services Limited Partnership are
incorporated by reference to Exhibit 9(f) of
Post-Effective Amendment No. 28 to the
Registrant's Registration Statement on filed
on September 24, 1998 Form N-1A (File No.
33-21660).
(7) Transfer Agency and Shareholder Service
Agreement dated as of July 16, 1989, as
amended October 3, 1997, between the
Registrant and BISYS Fund Services, Inc.--
incorporated by reference to Exhibit 9(g) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement filed on
May 22, 1998 on Form N-1A (File No.
33-21660).
(8) Form of Amended Schedule A dated September
15, 1998 to the Transfer Agency and
Shareholder Services Agreement between the
Registrant and BISYS Fund Services Ohio,
Inc. is incorporated by reference to Exhibit
9(h) of Post-Effective Amendment No. 28 to
the Registrant's Registration Statement
filed on September 24, 1998 on Form N-1A
(File No. 33-21660).
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(9) Fund Accounting Agreement dated as of April
1, 1996 between the Registrant and BISYS
Fund Services, Inc. is incorporated by
reference to Post-Effective Amendment No. 19
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(10) Shareholder Servicing Plan for AmSouth
Mutual Funds adopted by the Board of
Trustees on December 6, 1995 is incorporated
by reference to Exhibit 18(b) to
Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(11) Amended Schedule I to the Shareholder
Servicing Plan -- incorporated by reference
to Exhibit 18(d) to Post-Effective Amendment
No. 23 to the Registrant's Registration
Statement filed on July 3, 1997 on Form N-1A
(File No. 33-21660).
(12) Amended Schedule I dated September 15, 1998
to the Shareholder Servicing Plan is
incorporated by reference to Exhibit 18(e)
of Post-Effective Amendment No. 28 to the
Registrant's Registration Statement filed on
September 24, 1998 on Form N-1A (File No.
33-21660).
(13) Model Shareholder Servicing Agreement for
AmSouth Mutual Funds adopted by the Board of
Trustees on December 6, 1995 is incorporated
by reference to Exhibit 18(c) to
Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(i) Opinion of Ropes & Gray is filed herewith.
(j) (1) Consent of Ropes & Gray is filed herewith.
(2) Consent of PricewaterhouseCoopers LLP is
filed herewith.
(k) None.
(l) (1) Purchase Agreement between the
Registrant and Winsbury Associates
incorporated by reference to
Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
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(2) Purchase Agreement between the Registrant
and Winsbury Associates dated October 31,
1991 incorporated by reference to
Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(3) Purchase Agreement between the Registrant
and Winsbury Associates relating to the
Alabama Tax-Free Fund and the Government
Income Fund is incorporated by reference
to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(4) Purchase Agreement between the Registrant
and Winsbury Service Corporation relating
to the Florida Tax-Free Fund is
incorporated by reference to
Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(m) (1) Distribution and Shareholder Services
Plan between the Registrant and BISYS
Fund Services, LP, dated as of March 12,
1997, as amended and restated as of March
18, 1998 -- incorporated by reference to
Exhibit 18(e) to Post- Effective
Amendment No. 26 to the Registrant's
Registration Statement filed on May 22,
1998 on Form N-1A (File No.
33-21660).
(2) Form of Amended Schedule A dated
September 15, 1998 to the Distribution
and Shareholder Services Plan is
incorporated by reference to Exhibit
18(h) to Post-Effective Amendment No. 27
to the Registrant's Registration
Statement filed on June 17, 1998 on Form
N-1A (File No. 33-21660).
(n) (1) Multiple Class Plan for AmSouth
Mutual Funds adopted by the Board of
Trustees on December 6, 1995, as amended
and restated as of July 16, 1997 and as
of March 17, 1998 -- incorporated by
reference to Exhibit 18(a) to
Post-Effective Amendment No. 26 to the
Registrant's Registration Statement filed
on May 22, 1998 on Form N-1A (File No.
33-21660).
(2) Amended Schedule I dated September 15,
1998 to the Multiple Class Plan is
incorporated by reference to Exhibit
18(b) to Post-Effective Amendment No. 28
to the Registrant's Registration
Statement filed on September 24, 1998 on
Form N-1A (File No. 33-21660).
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Item 24. Persons Controlled By or Under Common Control with
--------------------------------------------------
Registrant
----------
As of the effective date of this Registration Statement,
there are no persons controlled by or under common control
with the Registrant's Prime Obligations Fund, Equity Fund,
Regional Equity Fund, AmSouth U.S. Treasury Fund, Tax
Exempt Fund, Bond Fund, Limited Maturity Fund, Municipal
Bond Fund, Government Income Fund, Florida Tax-Free Fund,
Balanced Fund, Equity Income Fund, Capital Growth Fund and
Small Cap Fund.
Item 25. Indemnification
---------------
Article VIII, Sections 1 and 2 of the Registrant's
Declaration of Trust provides as follows:
"Trustees, Officers, etc.
-------------------------
Section 1. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred
to as a "Covered Person") against all liabilities and
expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any
Covered Person in connection with the defense or
disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may
have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person
except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office. Expenses, including counsel fees so incurred by
any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust
in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on
behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that
indemnification of such expenses is not authorized under
this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security
for such undertaking,
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(b) the Trust shall be insured against losses arising from
any such advance payments or (c) either a majority of the
disinterested Trustees acting on the matter (provided that
a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a
written opinion, shall have determined, based upon a
review of readily available facts (as opposed to a full
trial type inquiry) that there is reason to believe that
such Covered Person will be found entitled to
indemnification under this Article.
Compromise Payment
------------------
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or
otherwise) without an adjudication by a court, or by any
other body before which the proceeding was brought, that
such Covered Person either (a) did not act in good faith
in the reasonable belief that his action was in the best
interests of the Trust or (b) is liable to the Trust or
its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office,
indemnification shall be provided if (a) approved as in
the best interests of the Trust, after notice that it
involves such indemnification, by at least a majority of
the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon
a review of readily available facts (as opposed to a full
trial type inquiry) that such Covered Person acted in good
faith in the reasonable belief that his action was in the
best interests of the Trust and is not liable to the Trust
or its Shareholders by reasons of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, or
(b) there has been obtained an opinion in writing of
independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry)
to the effect that such Covered Person appears to have
acted in good faith in the reasonable belief that his
action was in the best interests of the Trust and that
such indemnification would not protect such Person against
any liability to the Trust to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of his office. Any approval pursuant to this
Section shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in
the reasonable belief that such Covered Person's action
was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of such Covered Person's office."
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Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees,
officers, and controlling persons of Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in
the successful defense of any action, suit, or proceeding)
is asserted by such trustee, officer, or controlling
person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Indemnification for the Group's principal underwriter is
provided for in the Distribution Agreement incorporated
herein by reference as Exhibits 6(a).
In addition, the Trust maintains a directors and officer
liability insurance policy with a maximum coverage of
$3,000,000.
Item 26. Business and Other Connections of Investment Advisor and
--------------------------------------------------------
Investment Sub-Advisors.
------------------------
AmSouth Bank
------------
AmSouth Bank ("AmSouth") is the investment advisor of each
Fund of the Trust. AmSouth is the bank affiliate of
AmSouth Bancorporation, one of the largest banking
institutions headquartered in the mid-south region.
AmSouth Bancorporation reported assets as of June 30, 1999
of $20 billion and operated 276 banking offices and over
600 ATM locations in Alabama, Florida, Georgia and
Tennessee. AmSouth has provided investment management
services through its Trust Investment Department since
1915. As of March 31, 1999, AmSouth and its affiliates had
over $8 billion in assets under discretionary management
and provided custody services for an additional $21
billion in securities. AmSouth is the largest provider of
trust services in Alabama, and its Trust Natural Resources
and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real
estate interests.
There is set forth below information as to any other
business, vocation or employment of a substantial nature
(other than service in wholly-owned subsidiaries or the
parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's investment advisor
is, or at any
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time during the past two fiscal years has been, engaged
for his own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Position with Other business, profession,
AmSouth Bank AmSouth Bank vocation, or employment
- ------------ ------------------------------------
J. Harold Chandler Chairman, President & CEO
Director Provident Companies, Inc.
One Fountain Square
Chattanooga, Tennessee 37402
James E. Dalton, Jr. President and CEO
Director Quorum Health Group, Inc.
103 Continental Place
Brentwood, Tennessee 37027
Rodney C. Gilbert Chairman of the Board & CEO
Director Enfinity Corporation
3700 Old Leeds Road
Birmingham, Alabama 35213
Elmer B. Harris President and CEO
Director Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Victoria Jackson Gregorious President and CEO
Director DSS/ProDiesel, Inc.
922 Main Street
Nashville, Tennessee 37206
Ronald L. Kuehn, Jr. Chairman of the Board, President and
Director CEO
Sonat Inc.
1900 Fifth Avenue North
Birmingham, Alabama 35203
James R. Malone Chairman and CEO
Director HMI Industries, Inc./Intok Capital,
Inc.
8889 Pelican Bay Boulevard
Naples, Florida 34108
Claude B. Nielson President and CEO
Director Coca-Cola Bottling Company United,
Inc.
4600 East Lake Boulevard
Birmingham, Alabama 35217
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Dr. Benjamin F. Payton President
Director Tuskegee University
399 Montgomery Road
Tuskegee, Alabama 36083
C. Dowd Ritter
Chairman, President and CEO AmSouth Bancorporation
AmSouth Bank
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
Herbert A. Sklenar Chairman Emeritus
Director Vulcan Materials Company
Two Metroplex Drive
Birmingham, Alabama 35209
Michael C. Baker None
Senior Executive Vice President
O.B. Grayson Hall, Jr. None
Executive Vice President
David B. Edmonds None
Executive Vice President
Sloan D. Gibson, IV None
Senior Executive Vice President
and Chief Financial Officer
W. Charles Mayer, III None
Senior Executive Vice President
Candice W. Rogers None
Senior Executive Vice President
E.W. Stephenson, Jr. None
Senior Executive Vice President
Alfred W. Swan, Jr. None
Senior Executive Vice President
Stephen A. Yoder None
Executive Vice President
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and General Counsel
Rockhaven
- ---------
Rockhaven Asset Management, LLC ("Rockhaven") is the sub-advisor of the
AmSouth Equity Income Fund. Rockhaven is jointly owned by Christopher H. Wiles
(50%) and AmSouth Bank (50%), and is headquartered in Pittsburgh, Pennsylvania.
As of March 1, 1999, the AmSouth Equity Income Fund is by far the predominate
client of Rockhaven. In the future, Rockhaven intends to advise on other mutual
funds and separate accounts.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's sub-advisor is, or at any time during the
past two fiscal years has been, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
Name and Position with Other business, profession,
Rockhaven Asset Management vocation, or employment
- -------------------------- -----------------------
Christopher H. Wiles Prior to February 7, 1997, Senior
President and Chief Investment Vice President, Federated
Officer and Managing Partner Investors, Pittsburgh, PA
Michael C. Baker Senior Executive Vice President,
Managing Partner AmSouth Bank, Birmingham, Alabama
Peachtree
- ---------
Peachtree Asset Management ("Peachtree") is the sub-adviser of the
AmSouth Capital Growth Fund. Peachtree is a division of SSBC Fund Management LLC
("SSBCFM"), a wholly-owned subsidiary of Smith Barney Holdings, Inc., which in
turn is a wholly-owned subsidiary of Travelers Group Inc. Peachtree has
performed advisory services since 1994 for institutional clients, and has its
principal offices at 303 Peachtree Street, N.E., Atlanta, GA 30308. SSBCFM and
its predecessors have been providing investment advisory services to mutual
funds since 1968. As of February 28, 1999, SSBCFM had aggregate assets under
management of approximately $___ billion.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation) in which each director or senior officer
of the Registrant's sub-advisor is, or at any time during the past two fiscal
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years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Position with Other business, profession,
Peachtree Asset Management vocation, or employment
- -------------------------- -----------------------
Lamond Godwin N/A
Chairman & CEO
Dennis A. Johnson N/A
President & Chief Investment Officer
Sawgrass
- --------
Sawgrass Asset Management, LLC ("Sawgrass") serves as the investment
sub-advisor to the AmSouth Small Cap Fund. Sawgrass is 50% owned by AmSouth and
50% owned by Sawgrass Asset Management, Inc. Sawgrass Asset Management, Inc. is
controlled by Mr. Dean McQuiddy, Mr. Brian Monroe and Mr. Andrew Cantor.
Sawgrass was organized in January, 1998 to perform advisory services for
investment companies and other institutional clients and has its principal
offices at 4337 Pablo Oaks Court, Jacksonville, FL 32224.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's sub- advisor is, or at any time during the
past two fiscal years has been, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
Name and Position with Other business, profession,
Sawgrass Asset Management, LLC vocation or employment
- ------------------------------ ----------------------
Dean E. McQuiddy, Principal Barnett Capital Advisors
Andrew M. Cantor, Principal Barnett Capital Advisors
Brian K. Monroe, Principal Barnett Asset Management
OakBrook
- --------
OakBrook Investments, LLC ("OakBrook") serves as the investment
sub-advisor to the AmSouth Enhanced Market Fund and the AmSouth Select Equity
Fund. OakBrook is 50% owned by AmSouth Bank and 50% jointly owned by Neil
Wright, Janna Sampson and Peter Jankovskis. OakBrook was organized in February,
1998 to perform advisory services for
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investment companies and other institutional clients and has its principal
offices at 701 Warrenville Road, Suite 135, Lisle, IL 60532.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's sub-advisor is, or at any time during the
past two fiscal years has been, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
Name and Position with Other business, profession,
OakBrook Investments, LLC vocation or employment
- ------------------------- ----------------------
Neil R. Wright Prior to 1/1/98, Chief Investment
Officer, ANB Investment Management
& Trust Co.; 1/1/98 - 2/25/98,
Northern Trust Quantitative
Advisors, Inc.
Janna L. Sampson Prior to 1/1/98, Senior Portfolio
Manager, ANB Investment Management
& Trust Co.; 1/1/98 - 2/25/98,
Northern Trust Quantitative
Advisors, Inc.
Peter M. Jankovskis Prior to 1/1/98, Manager of
Research, ANB Investment Management
& Trust Co.; 1/1/98 - 2/25/98,
Northern Trust Quantitative
Advisors, Inc.
Item 27. Principal Underwriter.
----------------------
(a) BISYS Fund Services Limited Partnership ("BISYS Fund Services")
acts as distributor for the Registrant. BISYS Fund Services also
distributes the securities of American Performance Funds, Mercentile
Mutual Funds, Inc., The BB&T Mutual Funds Group, The Coventry Group,
The Empire Builder Tax Free Bond Fund, ESC Strategic Funds, Inc., The
Eureka Funds, Fifth Third Funds, Hirtle Callaghan Trust, HSBC Family of
Funds, The Infinity Mutual Funds, Inc., INTRUST Funds Trust, The Kent
Funds, Magna Funds, Meyers Investment Trust, MMA Praxis Mutual Funds,
M.S.D.&T. Funds, Pacific Capital Funds, The Republic Funds Trust, The
Republic Advisors Funds Trust, SBSF Funds, Inc. dba Key Mutual Funds,
Sefton Funds, The Sessions Group, Summit Investment Trust, Variable
Insurance Funds, The Victory Portfolios, The Victory Variable Funds,
and Vintage Mutual Funds, Inc. each of which is a management investment
company. The parent of BISYS Fund Services is The BISYS Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this filing are
as follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and
Name and Principal BISYS Fund Services, Offices with
Business Addresses Limited Partnership The Registrant
- ------------------ ------------------- --------------
<S> <C> <C>
</TABLE>
C-22
<PAGE> 396
<TABLE>
<CAPTION>
<S> <C> <C>
BISYS Fund Services Sole General None
Limited Partnership Partner
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Sole Limited None
Corporation Partner
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
Item 28. Location of Accounts and Records
--------------------------------
Persons maintaining physical possession of accounts, books and
other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated
thereunder are as follows:
(1) AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Attention: Secretary
(Registrant)
(2) AmSouth Bank
1901 Sixth Avenue - North
Birmingham, Alabama 35203
Attention: Trust Investments
(Investment Advisor and Custodian)
(3) BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
(Distributor)
(4) ASO Services Company
3435 Stelzer Road
Columbus, Ohio 43219
(Administrator)
(5) Rockhaven Asset Management, LLC
C-23
<PAGE> 397
100 First Avenue, Suite 1050
Pittsburgh, Pennsylvania 15222
(Sub-Advisor to the Equity Income Fund)
(6) BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
(Transfer and Shareholder Servicing Agent, Provider
of Fund Accounting Services)
(7) Peachtree Asset Management
A Division of Smith Barney Mutual Funds Management
Inc.
One Peachtree Center
Atlanta, Georgia 30308
(Sub-Advisor to the Capital Growth Fund)
(8) Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, Florida 32224
(Sub-Advisor to the Small Cap Fund)
(9) OakBrook Investments, LLC
701 Warrenville Road, Suite 135
Lisle, Illinois 60532
(Sub-Advisor to the Enhanced Market Fund
and the Select Equity Fund)
Item 29. Management Services
-------------------
None.
Item 30. Undertakings
------------
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question
of removal of one or more trustees when requested to do so
by the holders of at least 10% of the outstanding voting
shares of any series of the Trust and will assist in
shareholder communication in connection with calling a
meeting for the purpose of removing one or more trustees.
The Registrant undertakes to furnish to each person to
whom a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders upon request and
without charge.
C-24
<PAGE> 398
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 31 to
the Registrant's Registration Statement on Form N-1A pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Washington, District of Columbia on the 23rd day
of November, 1999.
AMSOUTH MUTUAL FUNDS,
Registrant
*
---------------------------------
J. David Huber
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
31 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the 23rd day of
November, 1999.
Signature Title Date
- --------- ----- ----
* Chairman November 23, 1999
- ------------------------------
J. David Huber
* Treasurer November 23, 1999
- ------------------------------
Charles L. Booth
* Trustee November 23, 1999
- ------------------------------
James H. Woodward, Jr.
* Trustee November 23, 1999
- ------------------------------
Homer H. Turner, Jr.
* Trustee November 23, 1999
- ------------------------------
Wendell D. Cleaver
* Trustee November 23, 1999
- ------------------------------
Dick D. Briggs, Jr.
* By November 23, 1999
--------------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
C-25
<PAGE> 399
POWER OF ATTORNEY
Dick D. Briggs, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Dick D. Briggs, Jr. and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 12 October 1993 /s/ Dick D. Briggs, Jr.
------------------------------- ------------------------------
Dick D. Briggs, Jr.
<PAGE> 400
POWER OF ATTORNEY
Wendell D. Cleaver whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Wendell D. Cleaver and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: October 7, 1993 /s/ Wendell Cleaver
--------------------------- ---------------------------------
Wendell D. Cleaver
<PAGE> 401
POWER OF ATTORNEY
J. David Huber whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee J. David Huber and/or officer of the Trust any and all
such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ J. David Huber
---------------------------- ------------------------------
J. David Huber
<PAGE> 402
POWER OF ATTORNEY
James H. Woodward, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee James H. Woodward, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ James H. Woodward, Jr.
---------------------------- -----------------------------------
James H. Woodward, Jr.
<PAGE> 403
POWER OF ATTORNEY
Homer H. Turner, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Homer H. Turner, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 25, 1992 /s/ Homer H. Turner, Jr.
----------------------------- ------------------------------
Homer H. Turner, Jr.
<PAGE> 404
POWER OF ATTORNEY
Charles L. Booth, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Maryellen M. Lundquist, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
Dated: February 26, 1998 /s/ Charles Booth
------------------------- -------------------------------
Charles Booth
<PAGE> 405
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
(i) Opinion of Ropes & Gray
(j)(1) Consent of Ropes & Gray
(j)(2) Consent of PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT (I)
OPINION OF ROPES & GRAY
<PAGE> 2
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005
(202) 626-3900
Fax: (202) 626-3961
November 22, 1999
AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest of the AmSouth
Mutual Funds ("Trust"), as permitted by Rule 24f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). You propose to file a post-effective
amendment on Form N-1A (the "Post-Effective Amendment") to your Registration
Statement as required by Section 10(a)(3) with respect to certain units of
beneficial interest of the Trust ("Shares").
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale
of the Shares have been duly authorized under Massachusetts law. Upon the
original issue and sale of the Shares and upon receipt of the authorized
consideration therefor in an amount not less than the net asset value of the
Shares established and in force at the time of their sale, the Shares will be
validly issued, fully paid and non-assessable.
The AmSouth Mutual Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a
<PAGE> 3
AmSouth Mutual Funds
November 22, 1999
Page 2
particular series of Shares for all loss and expenses of any shareholder of that
series held personally liable solely by reason of his being or having been a
shareholder. Thus, the risk of shareholder liability is limited to circumstances
in which that series of Shares itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with the
filing of the Post- Effective Amendment. We consent to the filing of this
opinion with and as part of your Post-Effective Amendment.
Sincerely,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
EXHIBIT j(1)
CONSENT OF ROPES & GRAY
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption "Legal Counsel" included in or made a part of the
Post-Effective Amendment No. 31 to the Registration Statement of AmSouth Mutual
Funds on Form N-1A under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
November 22, 1999
<PAGE> 1
EXHIBIT J(2)
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 31 to the Registration Statement on Form N-1A (File No. 33-21660) of our
report dated September 21, 1999 on our audits of the financial statements and
financial highlights of AmSouth Equity Income Fund, AmSouth Equity Fund, AmSouth
Enhanced Market Fund, AmSouth Capital Growth Fund, AmSouth Select Equity Fund,
AmSouth Regional Equity Fund, AmSouth Small Cap Fund, AmSouth Balanced Fund,
AmSouth Limited Maturity Fund, AmSouth Government Income Fund, AmSouth Bond
Fund, AmSouth Municipal Bond Fund, AmSouth Florida Tax-Free Fund, AmSouth U.S.
Treasury Fund, AmSouth Prime Obligations Fund, AmSouth Institutional Prime
Obligations Fund and AmSouth Tax-Exempt Fund (separate portfolios constituting
the AmSouth Mutual Funds) which report is included in the Annual Report to
Shareholders for the year ended July 31, 1999. We also consent to references to
our Firm under the caption "Financial Highlights" in the Prospectuses and under
the caption "Independent Accountants" in the Statements of Additional
Information in this Post-Effective Amendment No. 31 to the Registration
Statement on Form N-1A (File No. 33-21660).
Columbus, Ohio
November 22, 1999
