<PAGE> 1
As filed with the Securities and Exchange Commission
on September 16, 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 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 29 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 30 [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)
[ ] on ___________, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on November 24, 1999 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE> 2
CROSS REFERENCE SHEET
Part A
Form N-1A Item No.
Prospectus Caption
PROSPECTUS FOR AMSOUTH CAPITAL APPRECIATION FUNDS,
AMSOUTH INCOME FUNDS AND
AMSOUTH MONEY MARKET FUNDS
<TABLE>
<CAPTION>
CLASSIC SHARES AND CLASS B SHARES
<S> <C>
1. Front and Back Cover Pages .................... Cover Page and Back Page
2. Risk/Return Summary:
Investments, Risks and Performance ........... Risk/Return Summary and Fund
Expenses
3. Risk/Return Summary: Fee Table ............... Risk/Return Summary and Fund
Expenses
4. Investment Objectives, Principal Investment
Strategies, and Related Risk ................. Risk/Return Summary and Fund
Expenses; Investment Objectives;
Policies and Risks
5. Management's Discussion of the Fund
Performance................................... Inapplicable
6. Management, Organization and Capital
Structure..................................... Fund Management
7. Shareholder Information ....................... Shareholder Information
8. Distribution Arrangements ..................... Shareholder Information
9. Financial Highlights Information .............. Financial Highlights
</TABLE>
MHODMA.Wash;7077961;1
<PAGE> 3
AMSOUTH MUTUAL FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
DECEMBER 1, 1999
CAPITAL APPRECIATION FUNDS
AMSOUTH BALANCED FUND
AMSOUTH CAPITAL GROWTH FUND
AMSOUTH ENHANCED MARKET FUND
AMSOUTH EQUITY FUND
AMSOUTH EQUITY INCOME FUND
AMSOUTH REGIONAL EQUITY FUND
AMSOUTH SELECT EQUITY FUND
AMSOUTH SMALL CAP FUND
INCOME FUNDS
TAXABLE FUNDS
AMSOUTH BOND FUND
AMSOUTH GOVERNMENT INCOME FUND
AMSOUTH LIMITED MATURITY FUND
TAX-FREE FUNDS
AMSOUTH FLORIDA TAX-FREE FUND
AMSOUTH MUNICIPAL BOND FUND
MONEY MARKET FUNDS
AMSOUTH PRIME OBLIGATIONS FUND
AMSOUTH U.S. TREASURY FUND
AMSOUTH TAX EXEMPT FUND
CLASSIC SHARES
CLASS B SHARES
QUESTIONS?
CALL 1-800-451-8382
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 4
TABLE OF CONTENTS
Carefully review this important section, which summarizes each Fund's
investments, risks, past performance, and fees.
Risk/Return Summary and Fund Expenses
Capital Appreciation Funds
0 Balanced Fund
0 Capital Growth Fund
0 Enhanced Market Fund
0 Equity Fund
0 Equity Income Fund
0 Regional Equity Fund
0 Select Equity Fund
0 Small Cap Fund
Income Funds
0 Bond Fund
0 Government Income Fund
0 Limited Maturity Fund
0 Florida Tax-Free Fund
0 Municipal Bond Fund
Money Market Funds
0 Prime Obligations Fund
0 U.S. Treasury Fund
0 Tax Exempt Fund
Review this section for information and on investment strategies and their
risks.
Investment Objectives, Policies and Risks
Capital Appreciation Funds
0 Balanced Fund
0 Capital Growth Fund
0 Enhanced Market Fund
0 Equity Fund
0 Equity Income Fund
0 Regional Equity Fund
0 Select Equity Fund
0 Small Cap Fund
Income Funds
0 Bond Fund
0 Government Income Fund
0 Limited Maturity Fund
0 Florida Tax-Free Fund
0 Municipal Bond Fund
<PAGE> 5
Money Market Funds
0 Prime Obligations Fund
0 U.S. Treasury Fund
0 Tax Exempt Fund
Review this section for details on the people and organizations who oversee the
Funds.
Fund Management
0 The Investment Adviser
0 The Investment Sub-Advisers
0 Portfolio Managers
0 The Distributor and Administrator
Review this section for details on how shares are valued, how to purchase, sell
and exchange shares, related charges and payments of dividends and
distributions.
Shareholder Information
0 Choosing a Share Class
0 Pricing of Fund Shares
0 Purchasing and Adding to Your Shares
0 Selling Your Shares
0 Exchanging Your Shares
0 General Policies on Selling Shares
0 Distribution Arrangements/Sales Charges
0 Distribution and Service (12b-1) Fees and Shareholder
Servicing Fees
0 Dividends, Distributions and Taxes
0 Financial Highlights
Back Cover
0 Where to learn more about this Fund
<PAGE> 6
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
The Funds 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
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
Premier 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.
2
<PAGE> 7
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUNDS
These Funds seek capital appreciation and invest
primarily in equity securities, principally common
stocks and, to a limited extent, preferred stocks and
convertible securities.
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
3
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH BALANCED FUND
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 Risk on
page X 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.
4
<PAGE> 9
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 Risk on page X.
5
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
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>
Classic Shares % % %
(with 4.50% sales charge)
- --------------------------------------------------------------------------------
Class B Shares(2) % % %
(with applicable Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
S&P 500(R) INDEX % % %
- --------------------------------------------------------------------------------
LEHMAN BROTHERS % % %
GOVERNMENT/CORPORATE BOND INDEX
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
6
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
7
<PAGE> 12
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
8
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
BALANCED FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH CAPITAL GROWTH FUND
INVESTMENT OBJECTIVE The 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 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 Risk on
page X 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 Risk on page X.
10
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Capital Growth Fund has performed
and how its performance has varied from year to year. The bar chart shows the
performance of the Fund's Classic 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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
ANNUAL TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
1 Year Since Inception
(8/3/97)
- --------------------------------------------------------------------------------
<S> <C> <C>
Classic Shares % %
(with 4.50% sales charge)
- --------------------------------------------------------------------------------
Class B Shares(2) % %
(with applicable Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
S&P 500 INDEX % %
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
11
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Capital 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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 for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
12
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH ENHANCED MARKET FUND
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 Risk on
page X 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 Risk on page X.
14
<PAGE> 19
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Enhanced Market Fund has performed and how
its performance has varied from year to year. The table compares the Fund's
performance over time to that of the S&P 500(R) Index, a widely recognized,
unmanaged index of common stocks. This section would also normally include a bar
chart showing changes in the Fund's performance from year to year. Because the
Fund has not been in operation for a full calendar year, this bar chart is not
shown. 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 Classic 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.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception (9/1/98)
- --------------------------------------------------------------------------------
<S> <C>
Classic Shares
(with 4.50% sales charge) %
- --------------------------------------------------------------------------------
Class B Shares
(with applicable Contingent Deferred Sales Charge) %
- --------------------------------------------------------------------------------
S&P 500(R) INDEX %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
15
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum sales
charge (load)
on purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
16
<PAGE> 21
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
17
<PAGE> 22
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
ENHANCED MARKET FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 23
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH EQUITY FUND
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 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 Risk on
page X 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 Risk on page X.
19
<PAGE> 24
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the 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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
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>
Classic Shares
(with 4.50% sales charge)
- --------------------------------------------------------------------------------
Class B Shares(2)
(with applicable Contingent
Deferred Sales Charge)
- --------------------------------------------------------------------------------
S&P 500(R) INDEX
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/services (12b-1) fees of Class B Shares.
20
<PAGE> 25
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
21
<PAGE> 26
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
22
<PAGE> 27
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
EQUITY FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 28
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
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 Risk on
page X 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 Risk on page X.
24
<PAGE> 29
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Classic 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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
ANNUAL TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception
1 Year (3/20/97)
- --------------------------------------------------------------------------------
<S> <C> <C>
Classic Shares
(with 4.50% sales charge) % %
- --------------------------------------------------------------------------------
Class B Shares(2)
(with applicable Contingent Deferred % %
Sales Charge)
- --------------------------------------------------------------------------------
S&P 500(R) INDEX % %
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/services (12b-1) fees of Class B Shares.
25
<PAGE> 30
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
26
<PAGE> 31
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
27
<PAGE> 32
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
EQUITY INCOME FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
</TABLE>
28
<PAGE> 33
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH REGIONAL EQUITY FUND
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 Risk on
page X 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 Risk on page X.
29
<PAGE> 34
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
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>
Classic Shares
(with 4.50% sales charge)
- --------------------------------------------------------------------------------
Class B Shares(2)
(with applicable Contingent
Deferred Sales Charge)
- --------------------------------------------------------------------------------
S&P 500(R) Index
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
30
<PAGE> 35
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
31
<PAGE> 36
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
32
<PAGE> 37
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
REGIONAL EQUITY FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 38
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH SELECT EQUITY FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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
34
<PAGE> 39
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
Risk on page X.
35
<PAGE> 40
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Select Equity Fund has performed and how
its performance has varied from year to year. The table compares the Fund's
performance over time to that of the S&P 500(R) Index, a widely recognized,
unmanaged index of common stocks. This section would also normally include a bar
chart showing changes in the Fund's performance from year to year. Because the
Fund has not been in operation for a full calendar year, this bar chart is not
shown. 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 Classic 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.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception
(9/1/98)
<S> <C>
- --------------------------------------------------------------------------------
Classic Shares
(with 4.50% sales charge) %
- --------------------------------------------------------------------------------
Class B Shares
(with applicable Contingent Deferred Sales %
Charge)
- --------------------------------------------------------------------------------
S&P 500(R) INDEX %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
36
<PAGE> 41
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
37
<PAGE> 42
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
38
<PAGE> 43
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
SELECT EQUITY FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 44
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH SMALL CAP FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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 Risk on page X.
40
<PAGE> 45
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Small Cap Fund has performed and how its
performance has varied from year to year. The table compares the Fund's
performance over time to that of the Russell 2000(R) Growth Index, an unmanaged
index generally representative of domestically funded common stocks of small to
mid-sized companies. This section would also normally include a bar chart
showing changes in the Fund's performance from year to year. Because the Fund
has not been in operation for a full calendar year, this bar chart is not shown.
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 Classic 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.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception
(3/2/98)
- --------------------------------------------------------------------------------
<S> <C>
Classic Shares
(with 4.50% sales charge) %
- --------------------------------------------------------------------------------
Class B Shares
(with applicable Contingent Deferred Sales Charge) %
- --------------------------------------------------------------------------------
RUSSELL 2000(R) Growth Index %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
41
<PAGE> 46
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.50%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
42
<PAGE> 47
(5) Other expenses for each class are being limited to ___%. Total expenses
after fee waivers and expense reimbursements for each class are: Classic shares,
___%; and Class B shares, ___%. Any fee waiver or expense reimbursement
arrangement is voluntary and may be discontinued at any time.
43
<PAGE> 48
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
SMALL CAP FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- --------------------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 49
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
INCOME FUNDS
TAXABLE FUNDS The Bond Fund, the Government Income Fund
and the Limited Maturity 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-Free 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-Free 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
45
<PAGE> 50
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH BOND FUND
INVESTMENT OBJECTIVES 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 X 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 X.
46
<PAGE> 51
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/31//88)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Classic Shares % % % %
(with 4.00% sales charge)
- --------------------------------------------------------------------------------
Class B Shares(2) % % % %
(with applicable Contingent
Deferred Sales Charge)
- --------------------------------------------------------------------------------
LEHMAN BROTHERS % % % %
GOVERNMENT/CORPORATE BOND INDEX
- --------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
47
<PAGE> 52
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.00%(2) None
- --------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASSIC SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
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) % %
- --------------------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- --------------------------------------------------------------------------------
</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.
48
<PAGE> 53
(5) During the last fiscal year, management fees paid by the Fund were limited
to __%. Additionally, shareholders servicing fees for Classic shares were
limited to __% and other expenses for each class were limited to __%. Total
expenses after fee waivers and expense reimbursements for each class are:
Classic shares, ___%; and Class B shares, ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
49
<PAGE> 54
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
BOND FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
</TABLE>
50
<PAGE> 55
RISK/RETURN SUMMARY AND FUND EXPENSES
AMSOUTH GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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 Risk on page X.
51
<PAGE> 56
RISK/RETURN SUMMARY AND FUND EXPENSES
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 ever one year 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.
PERFORMANCE BAR CHART AND TABLE
YEAR TO YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was ___%.
The returns for Class B shares will differ from the Classic 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.
Best quarter:
Worst quarter:
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>
Classic Shares % % %
(with 4.00% sales charge)
Class B Shares(2) % % %
(with applicable Contingent Deferred
Sales Charge)
LEHMAN BROTHERS MORTGAGE INDEX % % %
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
52
<PAGE> 57
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.00%(2) None
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES CLASS B SHARES
Fund assets)
<S> <C> <C>
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) % %
Total Fund
Operating Expenses(5) % %
</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.
53
<PAGE> 58
(5) During the last fiscal year, management fees paid by the Fund were limited
to __%. Additionally, shareholder servicing fees for Classic shares were limited
to __% and other expenses for each class were limited to %. Total expenses after
fee waivers and expense reimbursements for each class are: Classic shares, ___%;
and Class B shares, ___%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
54
<PAGE> 59
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
GOVERNMENT INCOME FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
</TABLE>
55
<PAGE> 60
RISK/RETURN SUMMARY AND FUND EXPENSES
AMSOUTH LIMITED MATURITY FUND
INVESTMENT OBJECTIVES The 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 Risk on
page X 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 Risk on page X.
56
<PAGE> 61
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Limited Maturity 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.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
The returns for Class B shares will differ from the Classic 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.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
YEAR 5 YEARS (10/01/93)
---- ------- ---------------
<S> <C> <C> <C>
Classic Shares % % %
(with 4.00% sales charge)
Class B Shares(2) % % %
(with applicable Contingent Deferred
Sales Charge)
MERRILL LYNCH 1-5 YEAR % % %
GOVERNMENT/CORPORATE BOND INDEX
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
57
<PAGE> 62
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Limited Maturity 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.00%(2) None
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES CLASS B SHARES
Fund assets)
<S> <C> <C>
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) % %
Total Fund
Operating Expenses(5) % %
</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.
58
<PAGE> 63
(5) During the last fiscal year, management fees paid by the Fund were limited
to __%. Additionally, shareholder servicing fees for Classic shares were limited
to __% and other expenses for each class were limited to %. Total expenses after
fee waivers and expense reimbursements for each class are: Classic shares, ___%;
and Class B shares, ___%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
59
<PAGE> 64
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
LIMITED MATURITY FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
--------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
--------------------------------------------------------------------
</TABLE>
60
<PAGE> 65
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH FLORIDA TAX-FREE FUND
INVESTMENT OBJECTIVES The 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 Risk on page X 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
61
<PAGE> 66
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 Risk on page X.
62
<PAGE> 67
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Florida Tax-Free Fund has
performed and how its performance has varied from year to year. The bar chart
shows the performance of the Fund's Classic 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.
PERFORMANCE BAR CHART AND TABLE
ANNUAL TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
The returns for Class B shares will differ from the Classic 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.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (09/30/94)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Classic Shares % %
(with 4.00% sales charge)
- ----------------------------------------------------------------------------------------
Class B Shares(2) % %
(with applicable Contingent Deferred
Sales Charge)
- ----------------------------------------------------------------------------------------
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND % %
INDEX
- ----------------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
63
<PAGE> 68
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Florida Tax-Free 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.00%(2) None
- ----------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES CLASS B SHARES
Fund assets)
- ----------------------------------------------------------------------
<S> <C> <C>
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) % %
- ----------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- ----------------------------------------------------------------------
</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.
64
<PAGE> 69
(5) During the last fiscal year, management fees paid by the Fund were limited
to ___%. Additionally, shareholder servicing fees for Classic shares were
limited to ___% and other expenses for each class were limited to ___%. Total
expenses after fee waivers and expense reimbursements for each class are:
Classic shares, ___%; and Class B shares, ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
65
<PAGE> 70
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
FLORIDA TAX-FREE FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
---------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
---------------------------------------------------------------------
</TABLE>
66
<PAGE> 71
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH MUNICIPAL BOND FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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.
67
<PAGE> 72
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 Risk on page X.
68
<PAGE> 73
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Classic 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.
PERFORMANCE BAR CHART AND TABLE
ANNUAL TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
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 7/31/99 was %.
The returns for Class B shares will differ from the Classic 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.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (07/01//97)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Classic Shares % %
(with 4.00% sales charge)
- ----------------------------------------------------------------------------------------
Class B Shares(2) % %
(with applicable Contingent Deferred
Sales Charge)
- ----------------------------------------------------------------------------------------
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND % %
INDEX
- ----------------------------------------------------------------------------------------
</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 Classic Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
69
<PAGE> 74
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases 4.00%(2) None
- ----------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(3)
Redemption Fee(4) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES CLASS B SHARES
Fund assets)
- ----------------------------------------------------------------------
<S> <C> <C>
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) % %
- ----------------------------------------------------------------------
Total Fund
Operating Expenses(5) % %
- ----------------------------------------------------------------------
</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.
70
<PAGE> 75
(5) During the last fiscal year, management fees paid by the Fund were limited
to ___%. Additionally, shareholder servicing fees for Classic shares were
limited to ___% and other expenses for each class were limited to ___%. Total
expenses after fee waivers and expense reimbursements for each class are:
Classic shares, ___%; and Class B shares, ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
71
<PAGE> 76
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
--------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
--------------------------------------------------------------------
</TABLE>
72
<PAGE> 77
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
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 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
73
<PAGE> 78
AMSOUTH PRIME OBLIGATIONS FUND
INVESTMENT OBJECTIVES The 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 Risk on page X or consult the
SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject
to the following principal risks:
74
<PAGE> 79
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 Risk on page X.
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.
75
<PAGE> 80
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Prime Obligations 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.
Of course, past performance does not indicate how the Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
The returns for Class B shares will differ from the Classic 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.
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was %.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Classic Shares % % %
- --------------------------------------------------------------------------------------------------------------
Class B Shares(2) % % %
(with applicable Contingent
Deferred Sales Charge)
- --------------------------------------------------------------------------------------------------------------
</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 Classic 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 Classic Shares and Class B
Shares was % and %, respectively. Without fee waivers and expense
reimbursements, the Fund's yield would have been % and %, 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.
76
<PAGE> 81
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Prime Obligations 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES CLASS B SHARES
<S> <C> <C>
Maximum Sales
Charge (load)
on Purchases None None
- ----------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None 5.00%(2)
Redemption Fee(3) 0% 0%
</TABLE>
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.
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES CLASS B SHARES
Fund assets)
- ----------------------------------------------------------------------
<S> <C> <C>
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) % %
- ----------------------------------------------------------------------
Total Fund
Operating Expenses(4) % %
- ----------------------------------------------------------------------
</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) Other expenses for each class are being limited to __%. Total expenses after
fee waivers and expense reimbursements for each class are: Classic shares, __%;
and Class B shares, __%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
77
<PAGE> 82
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
--------------------------------------------------------------------
CLASS B SHARES
Assuming Redemption $ $ $ $
Assuming no Redemption $ $ $ $
--------------------------------------------------------------------
</TABLE>
78
<PAGE> 83
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH U.S. TREASURY FUND
INVESTMENT OBJECTIVES The 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 Risk on page X 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 Risk on page X.
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.
79
<PAGE> 84
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the U.S. Treasury 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. Of course, past
performance does not indicate how the Fund will perform in the future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was %.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Classic Shares % % %
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Classic Shares was %.
Without fee waivers and expense reimbursements, the Fund's yield would have been
% 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.
80
<PAGE> 85
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the U.S. Treasury 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES
<S> <C>
Maximum Sales
Charge (load)
on Purchases None
- ----------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
</TABLE>
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES
Fund assets)
- ----------------------------------------
<S> <C>
Management Fee 0.40%
- ----------------------------------------
Distribution and
Service (12b-1) Fee 0.00%
Shareholder
Servicing Fee 0.25%
- ----------------------------------------
Other Expenses(3) %
- ----------------------------------------
Total Fund
Operating Expenses(3) %
- ----------------------------------------
</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) Other expenses are being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Classic shares is ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
81
<PAGE> 86
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
U.S. TREASURY FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
- ---------------------------------------------------------------------
</TABLE>
82
<PAGE> 87
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH TAX-EXEMPT FUND
INVESTMENT OBJECTIVES The 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 Risk on
page X or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject
to the following principal risks:
83
<PAGE> 88
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 Risk on page X.
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.
84
<PAGE> 89
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Tax-Exempt 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. Of course, past
performance does not indicate how the Fund will perform in the future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR CLASSIC SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was %.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Classic Shares % % %
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Classic Shares was %.
Without fee waivers and expense reimbursements, the Fund's yield would have been
% 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.
85
<PAGE> 90
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly) (1) CLASSIC SHARES
<S> <C>
Maximum Sales
Charge (load)
on Purchases None
- ----------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
</TABLE>
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from CLASSIC SHARES
Fund assets)
- ----------------------------------------
<S> <C>
Management Fee 0.40%
- ----------------------------------------
Distribution and 0.00%
Service (12b-1) Fee
Shareholder 0.25%
Servicing Fee
- ----------------------------------------
Other Expenses(3) %
- ----------------------------------------
Total Fund
Operating Expenses(3) %
- ----------------------------------------
</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) Other expenses are being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Classic shares is ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
86
<PAGE> 91
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
TAX-EXEMPT FUND 1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
CLASSIC SHARES $ $ $ $
--------------------------------------------------------------------
</TABLE>
87
<PAGE> 92
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 or conducting
substantial business.
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.
CAPITAL 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.
EQUITY 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
88
<PAGE> 93
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" 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.
ALL FUNDS: TEMPORARY DEFENSIVE MEASURES - If deemed appropriate under the
circumstances, the Capital 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, Equity 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.
FLORIDA TAX-FREE 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 below) for tax-exempt
commercial paper.
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.
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
89
<PAGE> 94
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 issuedby 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 MATURITY 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.
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 below) 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 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
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<PAGE> 95
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.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
- --------- ---------
<S> <C>
Balanced Fund 1
Capital Growth Fund 2
Enhanced Market Fund 3
Equity 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 Maturity Fund 11
Florida Tax-Free Fund 12
Municipal Bond Fund 13
Prime Obligations Fund 14
U.S. Treasury Fund 15
Tax-Exempt Fund 16
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRS): ADRs are 1-8 Market
foreign shares of a company held by a U.S. bank that Political
issues a receipt evidencing ownership. Foreign
Investment
ASSET-BACKED SECURITIES: Securities secured by 9, 14 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets. Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time 2, 4, 6, 9, 14, 16 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
BONDS: Interest-bearing or discounted government or 1, 9-13 Market
corporate securities that obligate the issuer to pay Credit
the bondholder a specified sum of money, usually at
specific 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 1, 3, 5, 7, 9 Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
CERTIFICATES OF DEPOSIT: Negotiable instruments with 2, 9, 12, 14, 16 Market
a stated maturity. Credit
Liquidity
COMMERCIAL PAPER: Secured and unsecured short-term 1-14, 16 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days Market
to nine months.
COMMON STOCK: Shares of ownership of a company. 1-8 Market
</TABLE>
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<PAGE> 97
<TABLE>
<S> <C> <C>
CONVERTIBLE SECURITIES: Bonds or preferred stock 1-8 Market
that convert to common stock. Credit
DEMAND FEATURES: Securities that are subject to puts 1, 2, 9-14, 16 Market
and standby commitments to purchase the securities Liquidity
at a fixed price (usually with accrued interest) Management
within a fixed period of time following demand by a
Fund.
DERIVATIVES: Instruments whose value is derived 1-14, 16 Management
from an underlying contract, index or security, or Market
any combination thereof, including futures, Credit
options (e.g., put and calls), options on futures, Liquidity
swap agreements, and some mortgage-backed securities. Leverage
FOREIGN SECURITIES: Stocks issued by foreign 1-8, 11 Market
companies, as well as commercial paper of foreign Political
issuers and obligations of foreign banks, overseas Liquidity
branches of U.S. banks and supranational entities. Foreign
Investment
FUNDING AGREEMENTS. Also known as guaranteed 14 Liquidity
investment contracts, an agreement where a Fund Credit
invests an amount of cash with an insurance company Market
and the insurance company credits such investment on
a monthly basis with 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.
FUTURES AND RELATED OPTIONS: A contract providing 3, 7, 9, 11 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and at Liquidity
a specified price. Leverage
HIGH-YIELD/HIGH-RISK/DEBT SECURITIES: High-yield/ 5 Credit
High-risk/debt securities are securities that are Market
rated below investment grade by the primary rating Liquidity
agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower by Moody's).
</TABLE>
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<PAGE> 98
<TABLE>
<S> <C> <C>
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 1-16 Market
Investment 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 1, 9, 10, 14 Pre-payment
by real estate loans and pools of loans. These Market
include collateralized mortgage obligations and real Credit
estate mortgage investment conduits. Regulatory
MUNICIPAL SECURITIES: Securities issued by a state 12, 13, 16 Market
or political subdivision to obtain funds for various Credit
public purposes Municipal securities include private Political
activity bonds and industrial development bonds, as Tax
well as general obligation bonds, tax anticipation Regulatory
notes, bond anticipation notes, revenue anticipation
notes, project notes, other short-
</TABLE>
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<PAGE> 99
<TABLE>
<S> <C> <C>
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 1-8 Market
securities 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 1-9, 14, 16 Market
and the simultaneous commitment to return the Leverage
security to the seller at an agreed upon price on an
agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security 2, 3, 7, 8, 9, Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon 14-16
date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of 1-14, 16 Market
the Fund's total assets. In return the Fund will Leverage
receive cash, other securities, and/or letters of Liquidity
credit. Credit
TIME DEPOSITS: Non-negotiable receipts issued by a 12-14, 16 Liquidity
bank in exchange for the deposit of funds. Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury 9-14, 16 Market
investment growth receipts, and certificates of
accrual of Treasury securities.
</TABLE>
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<PAGE> 100
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 1-3, 7-14, 16 Market
by agencies and instrumentalities of the U.S. Credit
government. These include Ginnie Mae, Fannie Mae,
and Freddie Mac.
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, 1-3, 7-16 Market
separately traded registered interest and principal
securities, and coupons under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured 14, 16 Credit
demand notes that permit the indebtedness to vary Liquidity
and provide for periodic adjustments in the interest
rate according to 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 2, 9, 14, 16 Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with 1-8 Market
preferred stock or bonds, that give the holder the Credit
right to buy a proportionate amount of common stock
at a specified price.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-14, 16 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
ZERO-COUPON DEBT OBLIGATIONS: Bonds and other debt 1-14, 16 Credit
that pay no interest, but are issued at a discount Market
from their value at maturity. When held to Zero Coupon
maturity, their entire return equals the difference
between their issue price and their maturity value.
</TABLE>
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<PAGE> 101
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. 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.
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
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<PAGE> 102
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 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. Changes in pre-payment rates can
result in greater price and yield volatility. Pre-payments generally accelerate
when interest rates decline. When mortgage and other obligations are pre-paid, 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 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.
ZERO COUPON 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.
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<PAGE> 103
YEAR 2000 RISK. AmSouth Mutual 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 Mutual 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 Mutual 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 Mutual Funds. While
it is likely that such assurances will be obtained, AmSouth Mutual 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 Mutual Funds does business.
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<PAGE> 104
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 July 31, 1999 of $____ 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 $___
billion in assets under discretionary management and provided custody services
for an additional $___ 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 .80%
- ------------------------------------------------------------------------------------------------------------
Capital Growth Fund .80%
- ------------------------------------------------------------------------------------------------------------
Enhanced Market Fund .45%
- ------------------------------------------------------------------------------------------------------------
Equity Fund .80%
- ------------------------------------------------------------------------------------------------------------
Equity Income Fund .80%
- ------------------------------------------------------------------------------------------------------------
Regional Equity Fund .80%
- ------------------------------------------------------------------------------------------------------------
Select Equity Fund .80%
- ------------------------------------------------------------------------------------------------------------
Small Cap Fund 1.20%
- ------------------------------------------------------------------------------------------------------------
Bond Fund .50%
- ------------------------------------------------------------------------------------------------------------
Florida Tax-Free Fund .30%
- ------------------------------------------------------------------------------------------------------------
Government Income Fund .30%
- ------------------------------------------------------------------------------------------------------------
Limited Maturity Fund .50%
- ------------------------------------------------------------------------------------------------------------
Municipal Bond Fund .40%
- ------------------------------------------------------------------------------------------------------------
Prime Obligations Fund .40%
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Fund .40%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
100
<PAGE> 105
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PERCENTAGE OF AVERAGE
NET ASSETS AS OF 07/31/99
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Tax Exempt Fund .20%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
THE INVESTMENT SUB-ADVISERS
CAPITAL GROWTH FUND. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
serves as investment sub-advisor to the Capital Growth Fund, pursuant to a
Sub-Advisory Agreement with AmSouth. Under the Sub-Advisory Agreement, Peachtree
manages the Fund, selects investments, and places all orders for purchases and
sales of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objectives,
policies and restrictions.
Peachtree is a division of Mutual Management Corp., a wholly-owned subsidiary of
SSBC Fund Management LLC, which in turn is a wholly-owned subsidiary of
Travelers Group, Inc. Peachtree has performed advisory services since 1994 for
institutional clients, and has its principal offices at 303 Peachtree Street,
N.E., Atlanta, GA 30308. Mutual Management Corp. and its predecessors have been
providing investment advisory services to mutual funds since 1968. As of July
31, 1999, Mutual Management Corp. had aggregate assets under management of
approximately $___ billion.
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
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<PAGE> 106
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
LargeCap 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 0.50%, 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.
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% - 0.30%
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.
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<PAGE> 107
(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.
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>
Federated Lipper
Equity S&P 500 Equity Income
Income Fund+* Index @ Fund Index #
------------- ------- --------------
<S> <C> <C> <C>
CLASS A SHARES (absent imposition
of sales charge)
One Year 23.26% 26.34% 19.48%
</TABLE>
103
<PAGE> 108
<TABLE>
<CAPTION>
Federated Lipper
Equity S&P 500 Equity Income
Income Fund+* Index @ Fund Index #
------------- ------- --------------
<S> <C> <C> <C>
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 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 Classic Shares of the AmSouth Equity Income Fund) of the
Federated Equity Income Fund ranged from 0.95% to 1.05% of the fund's
average daily net assets. During the period from September 27, 1994
through January 31, 1997 the operating expense ratio for the Class B
Shares of the Federated Equity Income Fund ranged from 1.80% to 1.87%
of the fund's average daily net assets. The operating expenses of the
Class A Shares and Class B Shares of the Federated Equity Income Fund
were lower than the projected operating expenses of the Classic Shares
and Class B Shares, respectively, of the AmSouth Equity Income Fund. If
the actual operating expenses of the AmSouth Equity Fund are higher
than the historical operating expenses of the Federated Equity Income
Fund, this could negatively affect performance.
@ The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock
market. The Index is adjusted to reflect reinvestment of dividends.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The Federated
Equity Income Fund is a separate fund and its historical performance is not
indicative of the potential performance of the AmSouth Equity Income Fund. Share
prices and investment returns will fluctuate reflecting market conditions, as
well as changes in company-specific fundamentals of portfolio securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager from
August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors in 1990
and served as a Vice President of the
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<PAGE> 109
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
105
<PAGE> 110
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.
All information set forth in the tables below relies on data supplied by
Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
<TABLE>
<CAPTION>
Sawgrass Small Cap Russell 2000(R)
Year Composite Growth Index(1)
---- ------------------ ---------------
<S> <C> <C>
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years (2) 16.38% 12.76%
Last 10 Years (2) 16.09% 13.50%
</TABLE>
- ---------------
(1) The Russell 2000(R) Growth Index is an unmanaged index which
measures the performance of the 2,000 smallest companies in the Russell 3000(R)
Index with higher price-to-book ratios and higher forecasted growth values.
(2) Through December 31, 1997.
PRIOR PERFORMANCE OF RETAIL SHARES AND CLASS B SHARES
OF THE EMERALD SMALL CAPITALIZATION FUND
The cumulative total return for the Retail Shares of the Emerald Small
Capitalization Fund from March 1, 1994 through December 31, 1997 was 56.78%
absent the imposition of a sales charge and was 49.72% including the imposition
of a sales charge. The cumulative total return for the same period for the
Russell 2000" Growth Index was 57.31%. The cumulative total return for the Class
B Shares of the Emerald Small Capitalization Fund from March 1, 1994 through
March 11, 1996 was 39.85% absent the
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<PAGE> 111
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%
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.
107
<PAGE> 112
During the period from March 1, 1994 through December 31, 1997, the operating
expense ratio of the Retail Shares (the shares most similar to the Classic
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization Fund
ranged from 1.73% to 2.50% of the Fund's average daily net assets. During the
period from March 1, 1994 through March 11, 1996, the operating expense ratio of
the Class B Shares (the shares most similar to the Class B Shares of the AmSouth
Small Cap Fund) of the Emerald Small Capitalization Fund ranged from 2.50% to
3.29% of the Fund's average daily net assets. If the actual operating expenses
of the AmSouth Small Cap Fund are higher than the historical operating expenses
of the Emerald Small Capitalization Fund, this could negatively affect
performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The Emerald
Small Capitalization Fund is a separate fund and its historical performance is
not indicative of the potential performance of the AmSouth Small Cap Fund, Share
prices and investment returns will fluctuate reflecting market conditions, as
well as change in company-specific fundamentals of portfolio securities.
PORTFOLIO MANAGERS
The primary portfolio manager for each Fund is as follows:
BALANCED FUND, EQUITY FUND, AND REGIONAL EQUITY FUND -- Pedro Verdu, CFA, has
been the portfolio manager for the Equity 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.
CAPITAL 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 CAPITAL 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.
108
<PAGE> 113
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-FREE FUND - Steven L. Cass is the portfolio manager for the Florida
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 MATURITY FUND - John P. Boston, CFA, has been
the portfolio manager for the Limited Maturity Fund since August, 1995, and of
the Government Income Fund since inception. 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 the 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 the 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.
109
<PAGE> 114
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
Classic 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.
CLASSIC 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%.
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%.
- - A deferred sales charge, as described on page X.
- - Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
- - Maximum investment for all Class B purchases: $250,000.
- - Prime Obligation Fund: Only available through exchange of Class B
shares of another AmSouth Fund.
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 Premier 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).
110
<PAGE> 115
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, 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 Obligations Fund and the U.S. Treasury
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 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.
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<PAGE> 116
SHAREHOLDER INFORMATION
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.
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT
<S> <C> <C>
CLASSIC 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.
- --------------------------------------------------------------------------------
112
<PAGE> 117
SHAREHOLDER INFORMATION
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 Mutual
Funds."
3. Mail to: AmSouth Mutual 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 Mutual Funds/Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: AmSouth Mutual Funds
P.O. Box 182733
Columbus, OH 43218-2733
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
4. Send to: The AmSouth Mutual 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.
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<PAGE> 118
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
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.
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:
[NAME OF BANK]
Routing Number: ABA #000000
DDA#
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call 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.
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<PAGE> 119
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES - CONTINUED
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.
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 Mutual 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.
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 Classic shares than for Class B shares, because Classic
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.
115
<PAGE> 120
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."
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.
By telephone 1. Call 1-800-451-8382 with instructions as
(unless you have declined to how you wish to receive your funds (mail,
telephone sales privileges) 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 Mutual Funds
P.O. Box 182733
Columbus, OH 43218-2733
By overnight service See instruction 1 above.
(See "General Policies on 2. Send to:
Selling Shares--Redemptions in AmSouth Mutual Funds
Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
116
<PAGE> 121
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
Wire transfer Call 1-800-451-8382 to request a wire
transfer.
You must indicate this option on
your application. If you call by 4 p.m. Eastern time, your
payment will normally be wired to your
bank on the next business day.
The Fund will charge a $7 wire
transfer fee for each wire
transfer request. Note: Your
financial institution may also
charge a separate fee.
Electronic Redemptions Call 1-800-451-8382 to request an
electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. bank. determined on the same day and the
proceeds credited within 7 days.
Your bank may charge for this
service.
REDEMPTION BY CHECK WRITING - Prime Obligations Fund Only
You may write checks in amounts of $1,000 or more on your account in the Prime
Obligations 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 Obligations Fund of $1,000 and you may not close your Fund account
by writing a check.
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.
117
<PAGE> 122
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
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.
118
<PAGE> 123
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
- --------------------------------------------------------------------------------
Classic Shares
- --------------------------------------------------------------------------------
Classic 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
AS A % OF AS A % OF
YOUR 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
AS A % OF AS A % OF
YOUR 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 Classic 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.
119
<PAGE> 124
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
- --------------------------------------------------------------------------------
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.
CLASS B SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT 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 Classic 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 Classic 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 Classic shares you receive will equal the dollar
value of the Class B shares converted.
120
<PAGE> 125
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges for Classic 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 Fund) or accounts of immediate family household
members (spouse and children under 21) to achieve reduced sales
charges.
SALES CHARGE WAIVERS
CLASSIC 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.
The Distribution 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 Classic 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.
- --------------------------------------------------------------------------------
121
<PAGE> 126
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:
- Classic 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 Classic 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.
122
<PAGE> 127
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of the same class of another
AmSouth Mutual 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.
Classic Shares may also be exchanged for Premier Shares of the same Fund if you
become eligible to purchase Premier Shares. Please consult the Premier Share
prospectus for more information. No transaction fees are currently charged for
exchanges.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to AmSouth Mutual 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.
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 Obligations 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 Obligations 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 Mutual Funds, P.O. Box 182733, Columbus,
Ohio 43218-2733.
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.
123
<PAGE> 128
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-Free Fund, Municipal Bond Fund, and Tax-Exempt Fund, the
income dividends that you receive are expected to be exempt from federal income
taxes and, in the case of the Florida Tax-Free 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 -Free Fund, Municipal Bond Fund, or Tax-Exempt Fund may have
on the federal taxation of your benefits. In addition, an investment in the
Florida Tax Free Fund, Municipal Bond Fund, or Tax-Exempt 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 Mutual Funds will send you a statement each year showing the tax status
of all your distributions.
- - For each Fund, other than the Florida Tax-Free Fund, Municipal Bond
Fund, and Tax-Exempt Fund, the dividends and short-term capital gains
that you receive are considered ordinary income for tax purposes. For
the Florida Tax-Free Fund, Municipal Bond Fund, and Tax-Exempt 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.
124
<PAGE> 129
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.
125
<PAGE> 130
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
_____________________, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS,
ARE INCLUDED IN THE SAI, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
126
<PAGE> 131
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including its operations 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 MUTUAL FUND FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR
QUESTIONS ABOUT THE FUND BY CONTACTING A BROKER OR BANK THAT SELLS THE FUND. OR
CONTACT THE FUND AT:
AMSOUTH MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
E-MAIL: _________
INTERNET: http://www.amsouthfunds.com
- --------------------------------------------------------------------------------
You can review the Fund's 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 calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-00000.
127
<PAGE> 132
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
PROSPECTUS FOR AMSOUTH CAPITAL APPRECIATION FUNDS,
AMSOUTH INCOME FUNDS AND
AMSOUTH MONEY MARKET FUNDS
<TABLE>
<CAPTION>
PREMIER SHARES
<S> <C>
1. Front and Back Cover Pages .................... Cover Page and Back Page
2. Risk/Return Summary:
Investments, Risks and Performance............ Risk/Return Summary and Fund
Expenses
3. Risk/Return Summary: Fee Table................ Risk/Return Summary and Fund
Expenses
4. Investment Objectives, Principal Investment
Strategies, and Related Risk.................. Risk/Return Summary and Fund
Expenses; Investment Objectives;
Policies and Risks
5. Management's Discussion of the Fund
Performance................................... Inapplicable
6. Management, Organization and Capital
Structure..................................... Fund Management
7. Shareholder Information ....................... Shareholder Information
8. Distribution Arrangements ..................... Shareholder Information
9. Financial Highlights Information .............. Financial Highlights
</TABLE>
MHODMA.Wash;7077961;1
<PAGE> 133
AMSOUTH MUTUAL FUNDS
- --------------------------------------------------------------------------------
----------
PROSPECTUS
----------
DECEMBER 1, 1999
CAPITAL APPRECIATION FUNDS
AMSOUTH BALANCED FUND
AMSOUTH CAPITAL GROWTH FUND
AMSOUTH ENHANCED MARKET FUND
AMSOUTH EQUITY FUND
AMSOUTH EQUITY INCOME FUND
AMSOUTH REGIONAL EQUITY FUND
AMSOUTH SELECT EQUITY FUND
AMSOUTH SMALL CAP FUND
INCOME FUNDS
TAXABLE FUNDS
AMSOUTH BOND FUND
AMSOUTH GOVERNMENT INCOME FUND
AMSOUTH LIMITED MATURITY FUND
TAX-FREE FUNDS
AMSOUTH FLORIDA TAX-FREE FUND
AMSOUTH MUNICIPAL BOND FUND
MONEY MARKET FUNDS
AMSOUTH PRIME OBLIGATIONS FUND
AMSOUTH U.S. TREASURY FUND
AMSOUTH TAX EXEMPT FUND
PREMIER SHARES
----------------------------------
QUESTIONS?
CALL 1-800-451-8382
OR YOUR INVESTMENT REPRESENTATIVE.
----------------------------------
The Securities and Exchange Commission has not approved the shares described in
this prospectus or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
2
<PAGE> 134
TABLE OF CONTENTS
Carefully review this Risk/Return Summary and Fund Expenses
important section, which Capital Appreciation Funds
summarizes each Fund's 0 Balanced Fund
investments, risks, past 0 Capital Growth Fund
performance, and fees. 0 Enhanced Market Fund
0 Equity Fund
0 Equity Income Fund
0 Regional Equity Fund
0 Select Equity Fund
0 Small Cap Fund
Income Funds
0 Bond Fund
0 Government Income Fund
0 Limited Maturity Fund
0 Florida Tax-Free Fund
0 Municipal Bond Fund
Money Market Funds
0 Prime Obligations Fund
0 U.S. Treasury Fund
0 Tax Exempt Fund
Review this section for Investment Objectives, Policies and Risks
information and on investment Capital Appreciation Funds
strategies and their risks. 0 Balanced Fund
0 Capital Growth Fund
0 Enhanced Market Fund
0 Equity Fund
0 Equity Income Fund
0 Regional Equity Fund
0 Select Equity Fund
0 Small Cap Fund
Income Funds
0 Bond Fund
0 Government Income Fund
0 Limited Maturity Fund
0 Florida Tax-Free Fund
0 Municipal Bond Fund
3
<PAGE> 135
Money Market Funds
0 Prime Obligations Fund
0 U.S. Treasury Fund
0 Tax Exempt Fund
Review this section for Fund Management
details on the people and 0 The Investment Adviser
organizations who oversee the 0 The Investment Sub-Advisers
Funds. 0 Portfolio Managers
0 The Distributor and Administrator
Review this section for Shareholder Information
details on how shares are 0 Choosing a Share Class
valued, how to purchase, sell 0 Pricing of Fund Shares
and exchange shares, related 0 Purchasing and Adding to Your Shares
charges and payments of 0 Selling Your Shares
dividends and distributions. 0 Exchanging Your Shares
0 General Policies on Selling Shares
0 Dividends, Distributions and Taxes
0 Financial Highlights
Back Cover
0 Where to learn more about this Fund
4
<PAGE> 136
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
The Funds 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 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
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.
5
<PAGE> 137
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUNDS
These Funds seek capital appreciation and invest
primarily in equity securities, principally common
stocks and, to a limited extent, preferred stocks
and convertible securities.
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
6
<PAGE> 138
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH BALANCED FUND
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 Risk on
page X 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.
4
<PAGE> 139
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
Risk on page X.
5
<PAGE> 140
RISK/RETURN SUMMARY AND FUND EXPENSES
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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ____%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- --------------------------------------------------------------------------------
S&P 500(R) INDEX % % %
- --------------------------------------------------------------------------------
LEHMAN BROTHERS % % %
GOVERNMENT/CORPORATE BOND INDEX
- --------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
6
<PAGE> 141
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee 0.80%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
7
<PAGE> 142
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
BALANCED FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 143
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH CAPITAL GROWTH FUND
INVESTMENT OBJECTIVE The 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
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 Risk on
page X 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
Risk on page X.
9
<PAGE> 144
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Capital Growth Fund has performed
and how its performance has varied from year to year. The bar chart shows the
performance of the Fund's Premier 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
ANNUAL TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
1 Year Since Inception
(8/3/97)
- ----------------------------------------------------------------
<S> <C> <C>
Premier Shares % %
- ----------------------------------------------------------------
S&P 500 INDEX % %
- ----------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
10
<PAGE> 145
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the Capital 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ---------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ---------------------------------------------------------------
Management Fee 0.80%
- ---------------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ---------------------------------------------------------------
Other Expenses(3) %
- ---------------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ---------------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
11
<PAGE> 146
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL GROWTH FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 147
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH ENHANCED MARKET FUND
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 Risk on
page X 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
Risk on page X.
13
<PAGE> 148
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Enhanced Market Fund has performed and how
its performance has varied from year to year. The table compares the Fund's
performance over time to that of the S&P 500(R) Index, a widely recognized,
unmanaged index of common stocks. This section would also normally include a bar
chart showing changes in the Fund's performance from year to year. Because the
Fund has not been in operation for a full calendar year, this bar chart is not
shown. Of course, past performance does not indicate how the Fund will perform
in the future.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception
(9/1/98)
- --------------------------------------------------------------------------------
<S> <C>
Premier Shares %
- --------------------------------------------------------------------------------
S&P 500(R) INDEX %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
14
<PAGE> 149
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ------------------------------------------------------------------------
Management Fee 0.45%
- ------------------------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
15
<PAGE> 150
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
ENHANCED MARKET FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
------------------------------------------------------------------
</TABLE>
16
<PAGE> 151
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH EQUITY FUND
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 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 Risk on
page X 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
Risk on page X.
17
<PAGE> 152
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Since Inception
(12/1/88)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Shares % % % %
- -------------------------------------------------------------------------------
S&P 500(R) INDEX % % % %
- -------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
- ----------
(1) Both charts assume reinvestment of dividends and distributions.
18
<PAGE> 153
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- -------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- -------------------------------------------------------------
Management Fee 0.80%
- -------------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- -------------------------------------------------------------
Other Expenses(3) %
- -------------------------------------------------------------
Total Fund
Operating Expenses(3) %
- -------------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
19
<PAGE> 154
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
EQUITY FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
20
<PAGE> 155
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH EQUITY INCOME FUND
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 Risk on
page X 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
Risk on page X.
21
<PAGE> 156
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Premier 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
ANNUAL TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
1 Year Since Inception
(3/20/97)
- --------------------------------------------------------------------------------
<S> <C> <C>
Premier Shares % %
- --------------------------------------------------------------------------------
S&P 500(R) INDEX % %
- --------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
22
<PAGE> 157
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ---------------------------- ------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ---------------------------- ------------------------
Management Fee 0.80%
- ---------------------------- ------------------------
Distribution (12b-1) Fee 0.00%
- ---------------------------- ------------------------
Other Expenses(3) %
- ---------------------------- ------------------------
Total Fund
Operating Expenses(3) %
- ---------------------------- ------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
23
<PAGE> 158
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
EQUITY INCOME FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
24
<PAGE> 159
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH REGIONAL EQUITY FUND
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 Risk on
page X 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
Risk on page X.
25
<PAGE> 160
RISK/RETURN SUMMARY AND FUND EXPENSES
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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Since Inception
(12/1/88)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Shares % % % %
- -------------------------------------------------------------------------------
S&P 500(R) INDEX % % % %
- -------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
26
<PAGE> 161
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ---------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ---------------------------------------------------
Management Fee 0.80%
- ---------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ---------------------------------------------------
Other Expenses(3) %
- ---------------------------------------------------
Total Fund
Operating Expenses(3) %
- ---------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
27
<PAGE> 162
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
REGIONAL EQUITY FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
28
<PAGE> 163
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH SELECT EQUITY FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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
29
<PAGE> 164
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 Risk on page X.
30
<PAGE> 165
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Select Equity Fund has performed and how
its performance has varied from year to year. The table compares the Fund's
performance over time to that of the S&P 500(R) Index, a widely recognized,
unmanaged index of common stocks. This section would also normally include a bar
chart showing changes in the Fund's performance from year to year. Because the
Fund has not been in operation for a full calendar year, this bar chart is not
shown. Of course, past performance does not indicate how the Fund will perform
in the future.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception (9/1/98)
- --------------------------------------------------------------------------------
<S> <C>
Premier Shares %
- --------------------------------------------------------------------------------
S&P 500(R) INDEX %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
31
<PAGE> 166
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ----------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ----------------------------------------------------
Management Fee 0.45%
- ----------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ----------------------------------------------------
Other Expenses(3) %
- ----------------------------------------------------
Total Fund
Operating Expenses(3) %
- ----------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
32
<PAGE> 167
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
SELECT EQUITY FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
33
<PAGE> 168
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH SMALL CAP FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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
Risk on page X.
34
<PAGE> 169
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Small Cap Fund has performed and how its
performance has varied from year to year. The table compares the Fund's
performance over time to that of the Russell 2000(R) Growth Index, an unmanaged
index generally representative of domestically funded common stocks of small to
mid-sized companies. This section would also normally include a bar chart
showing changes in the Fund's performance from year to year. Because the Fund
has not been in operation for a full calendar year, this bar chart is not shown.
Of course, past performance does not indicate how the Fund will perform in the
future.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
Since Inception
(3/2/98)
- --------------------------------------------------------------------------------
<S> <C>
Premier Shares %
- --------------------------------------------------------------------------------
RUSSELL 2000(R) GROWTH INDEX %
- --------------------------------------------------------------------------------
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
35
<PAGE> 170
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ------------------------------------------------------
Management Fee 1.20%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
36
<PAGE> 171
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
SMALL CAP FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
37
<PAGE> 172
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
INCOME FUNDS
TAXABLE FUNDS The Bond Fund, the Government Income Fund and
the Limited Maturity 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-Free 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-Free 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
38
<PAGE> 173
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH BOND FUND
INVESTMENT OBJECTIVES 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 X 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 X.
39
<PAGE> 174
RISK/RETURN SUMMARY AND FUND EXPENSES
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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/31//88)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premier Shares % % % %
- -------------------------------------------------------------------------------------
LEHMAN BROTHERS % % % %
GOVERNMENT/CORPORATE BOND INDEX
- -------------------------------------------------------------------------------------
</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.
40
<PAGE> 175
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee(3) 0.65%
- ------------------------------------------------------
Distribution
(12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 ___%. Additionally, other expenses were limited to ___%. Total expenses after
fee waivers and expense reimbursements for Premier shares are ____%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
41
<PAGE> 176
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
BOND FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
42
<PAGE> 177
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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 Risk on page X.
43
<PAGE> 178
RISK/RETURN SUMMARY AND FUND EXPENSES
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 ever one year 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR TO YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- --------------------------------------------------------------------------------
LEHMAN BROTHERS MORTGAGE INDEX % % %
- --------------------------------------------------------------------------------
</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.
44
<PAGE> 179
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ------------------------------------------------------
Management Fee(3) 0.65%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 ___%. Additionally, other expenses were limited to ___%. Total expenses after
fee waivers and expense reimbursements for Premier shares are ___%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
45
<PAGE> 180
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
GOVERNMENT INCOME FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
46
<PAGE> 181
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH LIMITED MATURITY FUND
INVESTMENT OBJECTIVES The 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 Risk on
page X 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 Risk on page X.
47
<PAGE> 182
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Limited Maturity 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- ------------------------------------------------------------------------------
MERRILL LYNCH 1-5 YEAR % % %
GOVERNMENT/CORPORATE BOND INDEX
- ------------------------------------------------------------------------------
</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.
48
<PAGE> 183
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the Limited Maturity 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee(3) 0.65%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 ___%. Additionally, other expenses were limited to ___%. Total expenses after
fee waivers and expense reimbursements for Premier shares are ___%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
49
<PAGE> 184
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
LIMITED MATURITY FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
50
<PAGE> 185
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH FLORIDA TAX-FREE FUND
INVESTMENT OBJECTIVES The 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 Risk on
page X 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.
51
<PAGE> 186
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 Risk on page X.
52
<PAGE> 187
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Florida Tax-Free Fund has
performed and how its performance has varied from year to year. The bar chart
shows the performance of the Fund's Premier 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
ANNUAL TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (09/30/94)
- --------------------------------------------------------------------------------
<S> <C> <C>
Premier Shares % %
- --------------------------------------------------------------------------------
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND % %
INDEX
- --------------------------------------------------------------------------------
</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.
53
<PAGE> 188
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the Florida Tax-Free 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee(3) 0.65%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 ___%. Additionally, other expenses were limited to ___%. Total expenses after
fee waivers and expense reimbursements for Premier shares are ___%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
54
<PAGE> 189
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
FLORIDA TAX-FREE FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
-----------------------------------------------------------
</TABLE>
55
<PAGE> 190
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH MUNICIPAL BOND FUND
INVESTMENT OBJECTIVES 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 Risk on
page X 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.
56
<PAGE> 191
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 Risk on page X.
57
<PAGE> 192
RISK/RETURN SUMMARY AND FUND EXPENSES
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 Premier 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.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
ANNUAL TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (07/01//97)
- --------------------------------------------------------------------------------
<S> <C> <C>
Premier Shares % %
- --------------------------------------------------------------------------------
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND % %
INDEX
- --------------------------------------------------------------------------------
</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.
58
<PAGE> 193
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ------------------------------------------------------
Management Fee(3) 0.65%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 ___%. Additionally, other expenses were limited to ___%. Total expenses after
fee waivers and expense reimbursements for Premier shares are ___%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
59
<PAGE> 194
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
MUNICIPAL BOND FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
60
<PAGE> 195
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
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 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
61
<PAGE> 196
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH PRIME OBLIGATIONS FUND
INVESTMENT OBJECTIVES The 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 Risk on page X or consult the
SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to
the following principal risks:
62
<PAGE> 197
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 Risk on page X.
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.
63
<PAGE> 198
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Prime Obligations 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.
Of course, past performance does not indicate how the Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- ------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Premier Shares was __%.
Without fee waivers and expense reimbursements, the Fund's yield would have been
__% 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.
64
<PAGE> 199
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the Prime Obligations 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
Paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from PREMIER SHARES
Fund assets)
- ------------------------------------------------------
Management Fee 0.40%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares are ___%. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
65
<PAGE> 200
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
PRIME OBLIGATIONS FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
66
<PAGE> 201
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH U.S. TREASURY FUND
INVESTMENT OBJECTIVES The 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 Risk on page X 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 Risk on page X.
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.
67
<PAGE> 202
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the U.S. Treasury 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. Of course, past
performance does not indicate how the Fund will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- --------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Premier Shares was %.
Without fee waivers and expense reimbursements, the Fund's yield would have been
% 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.
68
<PAGE> 203
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the U.S Treasury 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee 0.40%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares is ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
69
<PAGE> 204
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
U.S. TREASURY FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
70
<PAGE> 205
RISK/RETURN SUMMARY AND FUND EXPENSES
- --------------------------------------------------------------------------------
AMSOUTH TAX-EXEMPT FUND
INVESTMENT OBJECTIVES The 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 Risk on
page X or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to
the following principal risks:
71
<PAGE> 206
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 Risk on page X.
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.
72
<PAGE> 207
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this page show how the Tax-Exempt 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. Of course, past
performance does not indicate how the Fund will perform in the future.
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR PREMIER SHARES(1)
The performance information shown above is based on a calendar year. The Fund's
total return from 1/1/99 to 7/31/99 was ___%.
- --------------------------------------------------------------------------------
Best quarter:
Worst quarter:
- --------------------------------------------------------------------------------
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>
Premier Shares % % %
- -------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Premier Shares was %.
Without fee waivers and expense reimbursements, the Fund's yield would have been
% 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.
73
<PAGE> 208
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
- -----------------
As an investor in the 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.
<TABLE>
<S> <C>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) PREMIER SHARES
Maximum Sales
Charge (load)
on Purchases None
- ------------------------------------------------------
Maximum Deferred
Sales Charge (load) None
Redemption Fee(2) 0%
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) PREMIER SHARES
- ------------------------------------------------------
Management Fee 0.40%
- ------------------------------------------------------
Distribution (12b-1) Fee 0.00%
- ------------------------------------------------------
Other Expenses(3) %
- ------------------------------------------------------
Total Fund
Operating Expenses(3) %
- ------------------------------------------------------
</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 being limited to ___%. Total expenses after fee waivers
and expense reimbursements for Premier shares is ___%. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
74
<PAGE> 209
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<S> <C> <C> <C> <C>
TAX-EXEMPT FUND 1 3 5 10
Year Years Years Years
PREMIER SHARES $ $ $ $
--------------------------------------------------------------
</TABLE>
75
<PAGE> 210
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 or conducting
substantial business.
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.
CAPITAL 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.
EQUITY 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
76
<PAGE> 211
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.
ALL FUNDS: Temporary Defensive Measures - If deemed appropriate under the
circumstances, the Capital 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, Equity 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.
FLORIDA TAX-FREE 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 below) for tax-exempt
commercial paper.
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.
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
77
<PAGE> 212
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 MATURITY 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.
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 below) 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 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
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<PAGE> 213
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.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
- --------- ---------
<S> <C>
Balanced Fund 1
Capital Growth Fund 2
Enhanced Market Fund 3
Equity 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 Maturity Fund 11
Florida Tax-Free Fund 12
Municipal Bond Fund 13
Prime Obligations Fund 14
U.S. Treasury Fund 15
Tax-Exempt Fund 16
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRs): ADRs 1-8 Market
are foreign shares of a company held by a Political
U.S. bank that issues a receipt evidencing Foreign
ownership. Dividends are paid in U.S. Investment
dollars.
ASSET-BACKED SECURITIES: Securities secured 9, 14 Pre-payment
by company receivables, home equity loans, Market
truck and auto loans, leases, credit card Credit
receivables and other securities backed by Regulatory
other types of receivables or other assets. Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or 2, 4, 6, 9, Credit
time drafts drawn on and accepted by a 14, 16 Liquidity
commercial bank. Maturities are generally Market
six months or less.
BONDS: Interest-bearing or discounted 1, 9-13 Market
government or corporate securities that Credit
obligate the issuer to pay the bondholder a
specified sum of money, usually at specific
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 1, 3, 5, 7, 9 Management
the buyer the right to buy, and obligates Liquidity
the seller of the option to sell, a security Credit
at a specified price. A put option gives the Market
buyer the right to sell, and obligates the Leverage
seller of the option to buy a security at a
specified price. The Funds will sell only
covered call and secured put options.
CERTIFICATES OF DEPOSIT: Negotiable 2, 9, 12, 14, 16 Market
instruments with a stated maturity. Credit
Liquidity
COMMERCIAL PAPER: Secured and unsecured 1-14, 16 Credit
short-term promissory notes issued by Liquidity
corporations and other entities. Maturities Market
generally vary
</TABLE>
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<PAGE> 215
<TABLE>
<S> <C> <C>
from a few days to nine months.
COMMON STOCK: Shares of ownership of a 1-8 Market
company.
CONVERTIBLE SECURITIES: Bonds or preferred 1-8 Market
stock that convert to common stock. Credit
DEMAND FEATURES: Securities that are subject 1, 2, 9-14, 16 Market
to puts and standby commitments to purchase Liquidity
the securities at a fixed price (usually Management
with accrued interest) within a fixed
period of time following demand by a Fund.
DERIVATIVES: Instruments whose value is 1-14, 16 Management
derived from an underlying contract, index Market
or security, or any combination thereof, Credit
including futures, options (e.g., put and Liquidity
calls), options on futures, swap agreements, Leverage
and some mortgage-backed securities.
FOREIGN SECURITIES: Stocks issued by foreign 1-8, 11 Market
companies, as well as commercial paper of Political
foreign issuers and obligations of foreign Liquidity
banks, overseas branches of U.S. banks and Foreign
supranational entities. Investment
FUTURES AND RELATED OPTIONS: A contract 3, 7, 9, 11 Management
providing for the future sale and purchase Market
of a specified amount of a specified Credit
security, class of securities, or an index Liquidity
at a specified time in the future and at a Leverage
specified price.
</TABLE>
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<PAGE> 216
<TABLE>
<S> <C> <C>
FUNDING AGREEMENTS: Also known as 14 Liquidity
guaranteed investment contracts, an Credit
agreement where a Fund invests an amount of Market
cash Credit with an insurance company and the
insurance company credits such investment on a
monthly basis with 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 Market
securities that are rated below investment Liquidity
grade by the primary rating agencies (e.g., BB
or lower by Standard & Poor's and Ba or lower by
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 1-16 Market
other investment 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
</TABLE>
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<PAGE> 217
<TABLE>
<S> <C> <C>
distributor. The Money Market Funds may only
invest in shares of other investment companies
with similar objectives.
MONEY MARKET INSTRUMENTS: Investment-grade, 1-14, 16 Market
U.S. dollar-denominated debt securities that Credit
have remaining 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 1, 9, 10, 14 Pre-payment
secured by real estate loans and pools of Market
loans. These include collateralized Credit
mortgage obligations and real estate Regulatory
mortgage investment conduits.
MUNICIPAL SECURITIES: Securities issued by a 12, 13, 16 Market
state or political subdivision to obtain Credit
funds for various public purposes Municipal Political
securities include private activity bonds Tax
and industrial development bonds, as well as Regulatory
general obligation bonds, tax anticipation
notes, bond anticipation notes, revenue
anticipation notes, project notes, other
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
</TABLE>
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<PAGE> 218
<TABLE>
<S> <C> <C>
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 1-8 Market
equity securities 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 1-9, 14, 16 Market
security and the simultaneous commitment to Leverage
return the security to the seller at an
agreed upon price on an agreed upon date.
This is treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a 2, 3, 7, 8, 9, Market
security and the simultaneous commitment to 14-16 Leverage
buy the security back at an 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 1-14, 16 Market
1/3% of the Fund's total assets. In return Leverage
the Fund will receive cash, other Liquidity
securities, and/or letters of credit. Credit
TIME DEPOSITS: Non-negotiable receipts 12-14, Liquidity
issued by a bank in exchange for the deposit 16 Credit
of funds. Market
TREASURY RECEIPTS: Treasury receipts, 9-14, 16 Market
Treasury investment growth receipts, and
certificates of accrual of Treasury
securities.
U.S. GOVERNMENT AGENCY SECURITIES: 1-3, 7-14, 16 Market
Securities issued by agencies and Credit
instrumentalities of the U.S. government.
These include Ginnie Mae, Fannie Mae, and
Freddie Mac.
U.S. TREASURY OBLIGATIONS: Bills, 1-3, 7-16 Market
</TABLE>
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<PAGE> 219
<TABLE>
<S> <C> <C>
notes, bonds, separately traded registered
interest and principal securities, and coupons
under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: 14, 16 Credit
Unsecured demand notes that permit the Liquidity
indebtedness to vary and provide Liquidity
for periodic adjustments in the interest
rate according to 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: 2, 9, 14, 16 Credit
Obligations with interest rates which are Liquidity
reset daily, weekly, quarterly or some other Market
period and which may be payable to the Fund
on demand.
WARRANTS: Securities, typically issued with 1-8 Market
preferred stock or bonds, that give the Credit
holder the right to buy a proportionate
amount of common stock at a specified price.
WHEN-ISSUED SECURITIES AND FORWARD 1-14, 16 Market
COMMITMENTS: Purchase or contract to Leverage
purchase securities at a fixed price for Liquidity
delivery at a future date. Credit
ZERO-COUPON DEBT OBLIGATIONS: Bonds and 1-14, 16 Credit
other debt that pay no interest, but are
issued at a discount from their value at
maturity. When held to maturity, their
entire return equals the difference between
their issue price and their 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
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<PAGE> 220
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. 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.
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.
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<PAGE> 221
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 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. Changes in pre-payment rates can
result in greater price and yield volatility. Pre-payments generally accelerate
when interest rates decline. When mortgage and other obligations are pre-paid, 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 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.
ZERO COUPON 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.
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<PAGE> 222
YEAR 2000 RISK. AmSouth Mutual 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 Mutual 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 Mutual 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 Mutual Funds. While
it is likely that such assurances will be obtained, AmSouth Mutual 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 Mutual Funds does business.
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<PAGE> 223
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 July 31, 1999 of $____ 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 $___
billion in assets under discretionary management and provided custody services
for an additional $___ 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 .80%
- -------------------------------------------------------------------------------
Capital Growth Fund .80%
- -------------------------------------------------------------------------------
Enhanced Market Fund .45%
- -------------------------------------------------------------------------------
Equity Fund .80%
- -------------------------------------------------------------------------------
Equity Income Fund .80%
- -------------------------------------------------------------------------------
Regional Equity Fund .80%
- -------------------------------------------------------------------------------
Select Equity Fund .80%
- -------------------------------------------------------------------------------
Small Cap Fund 1.20%
- -------------------------------------------------------------------------------
Bond Fund .50%
- -------------------------------------------------------------------------------
Florida Tax-Free Fund .30%
- -------------------------------------------------------------------------------
Government Income Fund .30%
- -------------------------------------------------------------------------------
Limited Maturity Fund .50%
- -------------------------------------------------------------------------------
Municipal Bond Fund .40%
- -------------------------------------------------------------------------------
Prime Obligations Fund .40%
- -------------------------------------------------------------------------------
U.S. Treasury Fund .40%
- -------------------------------------------------------------------------------
</TABLE>
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<PAGE> 224
- -------------------------------------------------------------------------------
Tax Exempt Fund .20%
- -------------------------------------------------------------------------------
THE INVESTMENT SUB-ADVISERS
CAPITAL GROWTH FUND. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
serves as investment sub-advisor to the Capital Growth Fund, pursuant to a
Sub-Advisory Agreement with AmSouth. Under the Sub-Advisory Agreement, Peachtree
manages the Fund, selects investments, and places all orders for purchases and
sales of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objectives,
policies and restrictions.
Peachtree is a division of Mutual Management Corp., a wholly-owned subsidiary of
SSBC Fund Management LLC, which in turn is a wholly-owned subsidiary of
Travelers Group, Inc. Peachtree has performed advisory services since 1994 for
institutional clients, and has its principal offices at 303 Peachtree Street,
N.E., Atlanta, GA 30308. Mutual Management Corp. and its predecessors have been
providing investment advisory services to mutual funds since 1968. As of July
31, 1999, Mutual Management Corp. had aggregate assets under management of
approximately $___ billion.
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
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<PAGE> 225
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.
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) % - %
1994 % - %
1994(3) - % %
1995 % % %
1996 % % %
1997 % % %
1998(4) % % %
Since inception(5) % - %
Since inception(6) - % %
</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.
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(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.
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>
Federated Lipper
Equity S&P 500 Equity Income
Income Fund+* Index @ Fund Index #
------------- ------- ------------
<S> <C> <C> <C>
CLASS A SHARES (absent imposition
of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through
January 31, 1997 17.25% 16.78% 14.99%
CLASS A SHARES (assuming
</TABLE>
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<PAGE> 227
<TABLE>
<S> <C> <C> <C>
imposition of the Federated Equity
Income Fund's maximum sales charge)
One Year 16.48%
Three Years 14.85%
Five Years 15.20%
August 1, 1991 through
January 31, 1997 16.05%
CLASS B SHARES (absent imposition of
contingent deferred sales charge)
One Year 22.26% 26.34% 19.48%
September 27, 1994 through
January 31, 1997
23.15% 28.44% 20.65%
CLASS B Shares (assuming imposition
of the Federated Equity Income Fund's
maximum contingent deferred sales charge)
One Year 16.76%
September 27, 1994 through
January 31, 1997 22.79%
</TABLE>
+ Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
* During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares (the shares most similar
to the Classic Shares of the AmSouth Equity Income Fund) of the
Federated Equity Income Fund ranged from 0.95% to 1.05% of the fund's
average daily net assets. During the period from September 27, 1994
through January 31, 1997 the operating expense ratio for the Class B
Shares of the Federated Equity Income Fund ranged from 1.80% to 1.87% of
the fund's average daily net assets. The operating expenses of the Class
A Shares and Class B Shares of the Federated Equity Income Fund were
lower than the projected operating expenses of the Classic Shares and
Class B Shares, respectively, of the AmSouth Equity Income Fund. If the
actual operating expenses of the AmSouth Equity Fund are higher than the
historical operating expenses of the Federated Equity Income Fund, this
could negatively affect performance.
@ The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock
market. The Index is adjusted to reflect reinvestment of dividends.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The Federated
Equity Income Fund is a separate fund and its historical performance is not
indicative of the potential performance of the AmSouth Equity Income Fund. Share
prices and investment returns will fluctuate reflecting market conditions, as
well as changes in company-specific fundamentals of portfolio securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager from
August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors in 1990
and served as a Vice President of the fund's investment advisor from 1992 and
Senior Vice President from October, 1996 to January 31, 1997. Mr. Wiles served
as Assistant Vice President of the Fund's investment advisor in 1991. Mr. Wiles
is a Chartered Financial Analyst and received his M.B.A. in Finance from
Cleveland State University.
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<PAGE> 228
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
- ----------
(1) AIMR is a non-profit membership and education organization with more than
30,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.
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<PAGE> 229
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.
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
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<PAGE> 230
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 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 Classic
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization Fund
ranged from 1.73% to 2.50% of the Fund's average daily net assets. During the
period from March 1, 1994 through March 11, 1996, the operating expense ratio of
the Class B Shares (the shares most similar to the Class B Shares of the AmSouth
Small Cap Fund) of the Emerald Small Capitalization Fund ranged from 2.50% to
3.29% of the Fund's average daily net assets. If the actual operating expenses
of the AmSouth Small Cap Fund are higher than the historical operating expenses
of the Emerald Small Capitalization Fund, this could negatively affect
performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. The Emerald
Small Capitalization Fund is a separate fund and its historical performance is
not indicative of the potential performance of the AmSouth Small Cap Fund, Share
prices and investment returns will fluctuate reflecting market conditions, as
well as change in company-specific fundamentals of portfolio securities.
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<PAGE> 231
PORTFOLIO MANAGERS
The primary portfolio manager for each Fund is as follows:
BALANCED FUND, EQUITY FUND, AND REGIONAL EQUITY FUND -- Pedro Verdu, CFA, has
been the portfolio manager for the Equity 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.
CAPITAL 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 CAPITAL 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-FREE FUND - Steven L. Cass is the portfolio manager for the Florida
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 MATURITY FUND - John P. Boston, CFA, has been
the portfolio manager for the Limited Maturity Fund since August 1995, and of
the Government Income Fund since inception. Mr. Boston has been associated with
AmSouth's Trust Investment Group for over five years
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<PAGE> 232
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 the 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 the 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.
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<PAGE> 233
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
AmSouth Mutual Funds offers different classes of Fund shares, which have
different expenses and other characteristics. Only one class of Fund shares,
Premier Shares, are 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 Premier
shares:
PREMIER 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 Classic
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 Classic Shares and Class B Shares, each of which has its
own expense structure. Classic Shares and Class B Shares are available to
investors who are not fiduciary clients of AmSouth Bank and who are not
otherwise eligible for Premier Shares. Call the Distributor for more information
(see back cover of this prospectus).
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<PAGE> 234
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, 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 Obligations Fund and the U.S. Treasury
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 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 was 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.
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<PAGE> 235
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
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.
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT
<S> <C> <C>
PREMIER
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.
- --------------------------------------------------------------------------------
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<PAGE> 236
SHAREHOLDER INFORMATION
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
You may purchase Premier 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 Premier Shares of a Money
Market Fund.
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 Mutual 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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<PAGE> 237
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."
- --------------------------------------------------------------------------------
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.
By telephone 1. Call 1-800-451-8382 with instructions as
(unless you have declined to how you wish to receive your funds (mail,
telephone sales privileges) 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 Mutual Funds
P.O. Box 182733
Columbus, OH 43218-2733
- --------------------------------------------------------------------------------
By overnight service See instruction 1 above.
(See "General Policies on 2. Send to:
Selling Shares -- Redemptions in AmSouth Mutual Funds
Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
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<PAGE> 238
SHAREHOLDER INFORMATION
- -----------------------
SELLING YOUR SHARES - CONTINUED
Wire transfer Call 1-800-451-8382 to request a wire
transfer.
You must indicate this option on
your application. If you call by 4 p.m. Eastern time, your
payment will normally be wired to your
bank on the next business day.
The Fund will charge a $7 wire
transfer fee for each wire
transfer request. Note: Your
financial institution may also
charge a separate fee.
- --------------------------------------------------------------------------------
Electronic Redemptions Call 1-800-451-8382 to request an
electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. bank. determined on the same day and the
proceeds credited within 7 days.
Your bank may charge for this
service.
REDEMPTION BY CHECK WRITING - Prime Obligations Fund Only
You may write checks in amounts of $1,000 or more on your account in the Prime
Obligations 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 Obligations Fund of $1,000 and you may not close your Fund account
by writing a check.
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.
104
<PAGE> 239
SHAREHOLDER INFORMATION
- -----------------------
SELLING YOUR SHARES - CONTINUED
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.
105
<PAGE> 240
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your Premier shares in one Fund for Premier shares of another
AmSouth Mutual Fund provided that you are eligible on the date of the exchange
to purchase Premier shares. You must meet the minimum investment requirements
for the Fund into which you are exchanging. Exchanges from one Fund to another
are taxable. Premier Shares may also be exchanged for Classic Shares of another
Fund if you are no longer eligible to purchase Premier Shares. Please consult
the Premier Share prospectus for more information. No transaction fees are
currently charged for exchanges.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to AmSouth Mutual 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 Premier Shares of a Fund for Classic Shares of a Fund, you
will be exempt from the 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.
106
<PAGE> 241
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-Free Fund, Municipal Bond Fund, and Tax-Exempt Fund, the
income dividends that you receive are expected to be exempt from federal income
taxes and, in the case of the Florida Tax-Free 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-Free Fund, Municipal Bond Fund, or Tax-Exempt Fund may have
on the federal taxation of your benefits. In addition, an investment in the
Florida Tax Free Fund, Municipal Bond Fund, or Tax-Exempt 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 Mutual Funds will send you a statement each year showing the tax status
of all your distributions.
- - For each Fund, other than the Florida Tax-Free Fund, Municipal Bond Fund,
and Tax-Exempt Fund, the dividends and short-term capital gains that you
receive are considered ordinary income for tax purposes. For the Florida
Tax-Free Fund, Municipal Bond Fund, and Tax-Exempt 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.
107
<PAGE> 242
- - 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.
108
<PAGE> 243
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
_____________________, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS,
ARE INCLUDED IN THE SAI, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
109
<PAGE> 244
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including its operations 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 MUTUAL FUND FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR
QUESTIONS ABOUT THE FUND BY CONTACTING A BROKER OR BANK THAT SELLS THE FUND. OR
CONTACT THE FUND AT:
AMSOUTH MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
E-MAIL: _________
INTERNET: http://www.amsouthfunds.com
- --------------------------------------------------------------------------------
You can review the Fund's 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 calling 1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-00000.
110
<PAGE> 245
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
PROSPECTUS FOR AMSOUTH INSTITUTIONAL PRIME OBLIGATIONS
FUND AND AMSOUTH INSTITUTIONAL U.S. TREASURY FUND
<TABLE>
<CAPTION>
<S> <C>
1. Front and Back Cover Pages ..................... Cover Page and Back Page
2. Risk/Return Summary:
Investments, Risks and Performance............. Risk/Return Summary and Fund
Expenses
3. Risk/Return Summary: Fee Table................. Risk/Return Summary and Fund
Expenses
4. Investment Objectives, Principal Investment
Strategies, and Related Risk................... Risk/Return Summary and Fund
Expenses; Investment Objectives;
Policies and Risks
5. Management's Discussion of the Fund
Performance.................................... Inapplicable
6. Management, Organization and Capital
Structure...................................... Fund Management
7. Shareholder Information ........................ Shareholder Information
8. Distribution Arrangements ...................... Shareholder Information
9. Financial Highlights Information ............... Financial Highlights
</TABLE>
MHODMA.Wash;7077961;1
<PAGE> 246
AMSOUTH MUTUAL FUNDS
PROSPECTUS
DECEMBER 1, 1999
INSTITUTIONAL MONEY MARKET FUNDS
AMSOUTH INSTITUTIONAL PRIME OBLIGATIONS FUND
AMSOUTH INSTITUTIONAL U.S. TREASURY FUND
CLASS I SHARES
CLASS II SHARES
CLASS III SHARES
QUESTIONS?
CALL 1-800-451-8382
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
<PAGE> 247
TABLE OF CONTENTS
Carefully review this Important section, which summarizes each Fund's
investments, risks, past performance, and fees.
Risk/Return Summary and Fund Expenses
0 Institutional Prime Obligations Fund
0 Institutional U.S. Treasury Fund
Review this section for information on investment strategies and this risks.
Investment Objectives, Policies and Risks
0 Institutional Prime Obligations Fund
0 Institutional U.S. Treasury Fund
Review this section for details on the people and organization who oversee the
Funds.
Fund Management
0 The Investment Adviser
0 The Distributor and Administrator
Review this section for details on how shares are valued, how to purchase, sell
and exchange shares, related charges and payments of dividends and
distributions.
Shareholder Information
0 Choosing a Share Class
0 Pricing of Fund Shares
0 Purchasing and Adding to Your Shares
0 Selling Your Shares
0 Exchanging Your Shares
0 General Policies on Selling Shares
0 Distribution (12b-1) Fees
0 Dividends, Distributions and Taxes
0 Financial Highlights
Back Cover
0 Where to learn more about this Fund
3
<PAGE> 248
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
The Funds 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 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.
4
<PAGE> 249
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
INSTITUTIONAL MONEY MARKET FUNDS
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
5
<PAGE> 250
RISK/RETURN SUMMARY AND FUND EXPENSES
AMSOUTH INSTITUTIONAL PRIME OBLIGATIONS FUND
INVESTMENT OBJECTIVES The 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 Risk on page X or consult the
SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject
to the following principal risks:
6
<PAGE> 251
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 Risk on page X.
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.
7
<PAGE> 252
RISK/RETURN SUMMARY AND FUND EXPENSES
The table on this page shows how the Institutional Prime Obligations Fund has
performed and how its performance has varied. The table shows the Fund's
performance over time. This section would also normally include a bar chart
showing changes in the Fund's performance from year to year. Because the Fund
has not been in operation for a full calendar year, this bar chart is not shown.
Of course, past performance does not indicate how the Fund will perform in the
future.
The returns for Class II Shares and Class III Shares will differ from Class I
Share returns because of differences in expenses of each class.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)(1)
<TABLE>
<CAPTION>
SINCE INCEPTION
(9/15/98)
---------
<S> <C>
Class I Shares %
Class II Shares %
Class III Shares %
</TABLE>
(1) The table assumes reinvestment of dividends and distributions.
As of December 31, 1998, the Fund's 7-day yield for Class I Shares, Class II
Shares and Class III Shares were ____%, ____% and ____%, respectively. Without
fee waivers and expense reimbursements, the Fund's yield would have been ____%,
____% and ____%, respectively, for this time period. For current yield
information on the Fund, call 1-800-451-8382.
8
<PAGE> 253
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the Institutional Prime Obligations 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASS I SHARES CLASS II SHARES CLASS III SHARES
<S> <C> <C> <C>
Maximum Sales
Charge (load) None None None
on Purchases
- ---------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None None None
Redemption Fee(2) 0% 0% 0%
</TABLE>
<TABLE>
<CAPTION>
Annual Fund
Operating Expenses
(fees paid from Fund
assets) CLASS I SHARES CLASS II SHARES CLASS III SHARES
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Management Fee(3) 0.20% 0.20% 0.20%
- ---------------------------------------------------------------------------------
Distribution
(12b-1) Fee 0.00% 0.25% 0.50%
- ---------------------------------------------------------------------------------
Other Expenses(3) % % %
- ---------------------------------------------------------------------------------
Total Fund
Operating Expenses(3) % % %
- ---------------------------------------------------------------------------------
</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%. Additionally, other expenses for each class were limited to
___%. Total expenses after fee waivers and expense reimbursements for each class
are: Class I Shares, ___%; Class II Shares, _____%; and Class III Shares, ___%.
Any fee waiver or expense reimbursement arrangement is voluntary and may be
discontinued at any time.
9
<PAGE> 254
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
INSTITUTIONAL PRIME 1 3 5 10
OBLIGATIONS FUND Year Years Years Years
<S> <C> <C> <C> <C>
CLASS I SHARES $ $ $ $
- -------------------------------------------------------------------------
CLASS II SHARES $ $ $ $
- -------------------------------------------------------------------------
CLASS III SHARES $ $ $ $
- -------------------------------------------------------------------------
</TABLE>
10
<PAGE> 255
RISK/RETURN SUMMARY AND FUND EXPENSES
AMSOUTH INSTITUTIONAL U.S. TREASURY FUND
INVESTMENT OBJECTIVES The 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 Risk on page X 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.
For more information about these risks,
please see the Additional Investment
Strategies and Risk on page X.
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.
11
<PAGE> 256
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES
As an investor in the U.S Treasury 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.
<TABLE>
<CAPTION>
Shareholder
Transaction
Expenses (fees
paid by you
directly)(1) CLASS I SHARES CLASS II SHARES CLASS III SHARES
<S> <C> <C> <C>
Maximum Sales
Charge (load)
on Purchases None None None
- -----------------------------------------------------------------------------------
Maximum Deferred
Sales Charge (load) None None None
Redemption Fee(2) 0% 0% 0%
</TABLE>
<TABLE>
<CAPTION>
Annual Fund
Operating
Expenses
(fees paid from
Fund assets) CLASS I SHARES CLASS II SHARES CLASS III SHARES
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fee(3) 0.20% 0.20% 0.20%
- -----------------------------------------------------------------------------------
Distribution
(12b-1) Fee 0.00% 0.25% 0.50%
- -----------------------------------------------------------------------------------
Other Expenses(3) % % %
- -----------------------------------------------------------------------------------
Total Fund
Operating Expenses(3) % % %
- -----------------------------------------------------------------------------------
</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
___% 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 ___%, ___% and ____%,
respectively. Any fee waiver or expense reimbursement arrangement is voluntary
and may be discontinued at any time.
12
<PAGE> 257
RISK/RETURN SUMMARY AND FUND EXPENSES
EXPENSE EXAMPLE
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.
<TABLE>
<CAPTION>
INSTITUTIONAL U.S. TREASURY 1 3
FUND Year Years
<S> <C> <C>
CLASS I SHARES $ $
CLASS II SHARES $ $
CLASS III SHARES $ $
</TABLE>
13
<PAGE> 258
ADDITIONAL INVESTMENT STRATEGIES AND RISK
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 Fund 1
Institutional U.S. Treasury Fund 2
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE 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. Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts 1 Credit
drawn on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
CERTIFICATES OF DEPOSIT: Negotiable instruments 1 Market
with a stated maturity. Credit
Liquidity
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
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 1 Management
an underlying contract, index or security, or any Market
combination thereof, including swap agreements Liquidity
and some mortgage-backed securities Leverage
FOREIGN SECURITIES: Commercial paper of foreign issuers 1 Market
and obligations of foreign banks, overseas branches of Political
U.S. 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 cash Credit
with an insurance company and the insurance company credits Market
</TABLE>
14
<PAGE> 259
<TABLE>
<S> <C> <C>
such investment on a monthly basis with 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.
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 1 Pre-payment
real estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate Credit
mortgage investment conduits. Regulatory
REPURCHASE AGREEMENTS: The purchase of a security 1, 2 Market
and the simultaneous commitment to return the security Leverage
to the seller at an agreed upon price on an agreed upon
date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security 1, 2 Market
and the simultaneous commitment to buy the security back Leverage
at an 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 Leverage
cash, other securities, and/or letters of credit. Liquidity
Credit
TAX-EXEMPT COMMERCIAL PAPER: Commercial paper 1 Credit
issued by governments and political sub-divisions. Liquidity
Market
Tax
TIME DEPOSITS: Non-negotiable receipts issued by a 1 Liquidity
bank in 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 1 Market
by agencies and instrumentalities of the U.S. government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
</TABLE>
15
<PAGE> 260
<TABLE>
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, 1-2 Market
bonds, separately traded registered interest and
principal securities, and coupons under book entry
safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured 1 Credit
demand notes that permit the indebtedness to vary and provide Liquidity
for periodic adjustments in the interest rate according to 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 Market
on demand.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1 Market
Purchase or contract to purchase securities at a fixed Leverage
price for delivery at a future date. Liquidity
Credit
</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 "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. 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.
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.
16
<PAGE> 261
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.
PRE-PAYMENT RISK. The risk that the principal repayment of a security will occur
at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than expected.
Changes in pre-payment rates can result in greater price and yield volatility.
Pre-payments generally accelerate when interest rates decline. When mortgage and
other obligations are pre-paid, a Fund may have to reinvest in securities with a
lower yield. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss.
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 Mutual 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 Mutual 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 Mutual 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 Mutual Funds. While
it is likely that such assurances will be obtained, AmSouth Mutual 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 Mutual Funds does business.
17
<PAGE> 262
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 July 31, 1999 of $____ 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 $___
billion in assets under discretionary management and provided custody services
for an additional $___ 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 Fund .20%
- ------------------------------------------------------------------------------------------------------------
Institutional U.S. Treasury Fund .20%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus, Ohio
43219-3035, serves as the 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 the 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.
18
<PAGE> 263
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%.
- - 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%.
- - 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.
19
<PAGE> 264
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
<TABLE>
HOW NAV IS CALCULATED
<S> <C>
Per share net asset value (NAV) for each Fund is determined and
The NAV is calculated by adding the total its shares are priced twice a day at 2:00 p.m. Eastern time and at
value of the Fund's investments and other the close of regular trading on the New York Stock Exchange,
assets, subtracting its liabilities and then normally at 4:00 p.m. Eastern time on days the Exchange and the
dividing that figure by the number of Federal Reserve Bank of Atlanta are open.
outstanding shares of the Fund:
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.
NAV =
Each Fund uses the amortized cost method of valuing its
TOTAL ASSETS - LIABILITIES investments, which does not take into account unrealized gains or
Number of Shares losses. For further information regarding the methods used in
Outstanding valuing the Fund's investments, please see the SAI.
</TABLE>
NAV is calculated separately for each class of shares.
20
<PAGE> 265
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
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.
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM MINIMUM
INITIAL 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.
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.
21
<PAGE> 266
SHAREHOLDER INFORMATION
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.
22
<PAGE> 267
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."
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.
<TABLE>
<S> <C>
By telephone 1. Call 1-800-451-8382 with instructions as to how you wish to
(unless you have declined receive your funds (mail, wire, electronic transfer). (See
telephone sales privileges) "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 Mutual Funds
P.O. Box 182733
Columbus, OH 43218-2733
- ------------------------------------------------------------------------------------------------------
By overnight service See instruction 1 above.
(See "General Policies on 2. Send to
Selling Shares -- Redemptions in AmSouth Mutual Funds
Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
23
<PAGE> 268
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
<TABLE>
Wire transfer Call 1-800-451-8382 to request a wire transfer.
<S> <C>
You must indicate this option on If you call by 4 p.m. Eastern time, your payment will normally
your application. be wired to your bank on the next business day.
</TABLE>
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
<TABLE>
<S> <C>
Electronic Redemptions Call 1-800-451-8382 to request an electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the NAV of your shares
the Automated Clearing House will normally be determined on the same day and the proceeds
(ACH) and must be a U.S. bank. credited within 7 days.
</TABLE>
Your bank may charge for this service.
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.
24
<PAGE> 269
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
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 Premier
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.
25
<PAGE> 270
SHAREHOLDER INFORMATION
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:
- Class II Shares pay a 12b-1 fee of up to .25% of the average daily
net assets of a Fund.
- 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.
26
<PAGE> 271
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 Premier Shares, Classic
Shares or Class B Shares of the other AmSouth Mutual Funds. No transaction fees
are charged for exchanges.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to AmSouth Mutual 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
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.
27
<PAGE> 272
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 Mutual Funds will send you a statement each year showing the tax status
of all your distributions.
- - For each Fund, other than the Tax-Exempt 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.
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
_________________________, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL
STATEMENTS, ARE INCLUDED IN THE SAI, WHICH IS AVAILABLE UPON REQUEST.
INSERT PAST 5 YEARS'
FINANCIAL HIGHLIGHTS
FROM ANNUAL REPORT.
28
<PAGE> 273
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including its operations 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 MUTUAL FUND FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR
QUESTIONS ABOUT THE FUND BY CONTACTING A BROKER OR BANK THAT SELLS THE FUND. OR
CONTACT THE FUND AT:
AMSOUTH MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
E-MAIL: _________
INTERNET: http://www.amsouthfunds.com
You can review the Fund's 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 calling 1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-00000.
29
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CROSS REFERENCE SHEET
Part B
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Form N-1A Item No. Caption
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10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Additional Information Organization - and Description of Shares
12. Description of the Fund and its
Investments and Risks Investment Objectives and Policies
13. Management of the Trust Management of the Trust
14. Control Persons and Principal
Holders of Securities Additional Information - Miscellaneous
15. Investment Advisory and
Other Services Management of the Trust
16. Brokerage Allocation Management of the Trust
17. Capital Stock and Other
Securities Valuation; Additional Purchase and Redemption
Information; Management of the Trust;
Additional Information
18. Purchase, Redemption and Pricing
of Shares Valuation; Additional Purchase and Redemption
Information; Management of the Trust
19. Taxation of the Trust Additional Purchase and Redemption Information
20. Underwriters Management of the Trust
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
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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 Obligations Fund, the
AmSouth U.S. Treasury Fund, the AmSouth Tax Exempt Fund, the AmSouth Government
Income Fund, the AmSouth Bond Fund, the AmSouth Limited Maturity Fund, the
AmSouth Municipal Bond Fund, the AmSouth Florida Tax-Free Fund, the AmSouth
Equity Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the
AmSouth Capital Growth Fund, the AmSouth Small Cap Fund, the AmSouth Equity
Income Fund, the AmSouth Select Equity Fund and the AmSouth Enhanced Market Fund
(each a "Fund" and collectively the "Funds"), each dated December 1, 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 Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733,
or by telephoning toll free (800) 451-8382.
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TABLE OF CONTENTS
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Page
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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................................................................................... 52
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
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Tax-Free Funds....................................................................................... 67
Calculation of Total Return.......................................................................... 69
Performance Comparisons.............................................................................. 72
ADDITIONAL INFORMATION........................................................................................ 73
Organization and Description of Shares............................................................... 73
Shareholder Liability................................................................................ 74
Miscellaneous........................................................................................ 75
FINANCIAL STATEMENTS.......................................................................................... 78
APPENDIX ..................................................................................................... 79
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STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"): the AmSouth Prime Obligations Fund (the "Prime
Obligations Fund"), the AmSouth U.S. Treasury Fund (the "U.S. Treasury Fund"),
the AmSouth Tax Exempt Fund (the "Tax Exempt Fund," and these three Funds being
collectively referred to as the "Money Market Funds"), the AmSouth Equity Fund
(the "Equity Fund"), the AmSouth Regional Equity Fund (the "Regional Equity
Fund"), the AmSouth Balanced Fund (the "Balanced Fund"), the AmSouth Capital
Growth Fund (the "Capital Growth Fund"), the AmSouth Small Cap Fund (the "Small
Cap Fund"), the AmSouth Equity Income Fund (the "Equity Income Fund"), the
AmSouth Select Equity Fund (the "Select Equity Fund"), and the AmSouth Enhanced
Market Fund (the "Enhanced Market Fund" and these eight Funds being collectively
referred to as the "Capital Appreciation Funds"), the AmSouth Bond Fund (the
"Bond Fund"), the AmSouth Limited Maturity Fund (the "Limited Maturity Fund"),
the AmSouth Government Income Fund (the "Government Income Fund") the AmSouth
Municipal Bond Fund (the "Municipal Bond Fund"), the AmSouth Florida Tax-Free
Fund (the "Florida Fund" and these five Funds being collectively referred to as
the "Income Funds"), the AmSouth Institutional Prime Obligations Fund (the
"Institutional Prime Obligations Fund"), and the AmSouth Institutional U.S.
Treasury Fund (the "Institutional U.S. Treasury Fund" and these two Funds being
collectively referred to as the "Institutional Money Market Funds"). The Florida
Fund and the Municipal Bond Fund are also collectively referred to herein as the
"Tax-Free Funds." The Funds, except for the U.S. Treasury Fund, the Tax Exempt
Fund, the Institutional Prime Obligations Fund, and the Institutional U.S.
Treasury Fund, offer three classes of Shares: Premier Shares, Classic Shares,
and Class B Shares. The U.S. Treasury Fund and the Tax Exempt Fund offer two
classes of Shares: Premier Shares and Classic Shares. 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.
<PAGE> 279
INVESTMENT OBJECTIVES AND POLICIES
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 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 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
Obligations Fund and the Tax Exempt Fund are hereinafter referred to as
"Eligible Securities.")
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, (i.e., are
unrated) but are determined by the 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.
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The Prime Obligations Fund will not invest more than 5% of its total
assets in the securities of any one issuer, except that the Fund may invest up
to 25% of its total assets in the securities of a single issuer for a period of
up to three business days. If a percentage limitation is satisfied at the time
of purchase, a later increase in such percentage resulting from a change in the
Fund's net asset value or a subsequent change in a security's qualification as
an Eligible Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, and instrumentalities and repurchase agreements fully collateralized
by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), 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 Obligations
Fund will not invest in excess of 10% of its net assets in time deposits,
including ETDs and CTDs but not including certificates of deposit, with
maturities in excess of seven days which are subject to penalties upon early
withdrawal.
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
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published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation.
Commercial Paper. Each Fund, except for the U.S. Treasury Fund, may
invest in commercial paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
Each Fund except the U.S. Treasury Fund, the Tax Exempt Fund, and the
Tax-Free Funds may invest in (i) Canadian Commercial Paper, which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial
paper of an issue located in Europe.
** 1 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.
** 2 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
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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
Maturity Fund and the Prime Obligations Fund may invest in funding agreements
("Funding Agreements"), also known as guaranteed investment contracts, issued by
insurance companies. Pursuant to such agreements, the Bond Fund, Limited
Maturity Fund and the Prime Obligations Fund invest an amount of cash with an
insurance company and the insurance company credits such investment on a monthly
basis with guaranteed interest which is based on an index. The Funding
Agreements provide that this guaranteed interest will not be less than a certain
minimum rate. The Bond Fund, the Limited Maturity Fund and the Prime Obligations
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 Maturity Fund and the Prime
Obligations Fund may not receive the principal amount of a Funding Agreement
from the insurance company on seven days' notice or less, the Funding Agreement
is considered an illiquid investment, and, together with other instruments in
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 Maturity Fund, and 10% of
such Funds net assets in the case of the Prime Obligations Fund. In determining
average weighted portfolio maturity, a Funding Agreement will be deemed to have
a maturity equal to 30 days, representing the period of time remaining until the
principal amount can be recovered through demand.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Prime Obligations Fund, the Capital Appreciation Funds, and
the Income Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, a Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Funds to dispose of a
variable amount master demand note if the issuer defaulted on its payment
obligations or during periods when the Funds are not entitled to exercise their
demand rights, and the Funds could, for this or other reasons, suffer a loss to
the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master
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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.
** 3 Variable and Floating Rate Notes. The Tax Exempt Fund, the Bond
Fund, the Limited Maturity Fund and the Tax-Free Funds may acquire variable and
floating rate notes, subject to each Fund's investment objective, policies and
restrictions. A variable rate note is one whose terms provide "for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the 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.
** 4 For purposes of the Tax Exempt Fund, the Bond Fund, the Limited
Maturity Fund and the Tax-Free Funds, the maturities of the variable and
floating rate notes will be determined in accordance with Rule 2a-7 under the
1940 Act.
Zero Coupon Obligations. The Bond Fund, Limited Maturity 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
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coupon obligations and such obligations will be purchased when the yield spread,
in light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the Bond Fund's total assets, and
the Limited Maturity Fund will only purchase zero-coupon obligations if, at the
time of purchase, such investments do not exceed 25% of the value of the Limited
Maturity Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Income Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Adviser may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Adviser will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
Foreign Investment. All of the Funds, except the 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
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less stringent reserve requirements than those applicable to domestic branches
of U.S. banks. A Fund will acquire such securities only when the Adviser or Sub-
Adviser believes the risks associated with such investments are minimal.
Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation with capital, surplus, and undivided profits of not less than
$100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which the Adviser or Sub- Adviser
deems creditworthy under guidelines approved by the Board of Trustees, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price would generally equal the price
paid by the Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest) and the Adviser or Sub- Adviser
will monitor the collateral's value to ensure that it equals or exceeds the
repurchase price (including accrued interest). In addition, securities subject
to repurchase agreements will be held in a segregated account.
If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that the proceeds from a sale of the underlying portfolio securities were less
than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Fund were delayed 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,
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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 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.
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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.
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When-Issued Securities. As discussed in the Prospectuses, each Fund
except the Prime Obligations Fund and the U.S. Treasury Fund may purchase
securities on a when-issued basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a when-issued basis, the Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. 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.
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When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund incurring a loss or missing the opportunity to obtain a price considered to
be advantageous. No Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
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Asset-Backed Securities. The Bond Fund, the Limited Maturity Fund and
the Prime Obligations Fund may invest in securities backed by automobile
receivables and credit-card receivables and other securities backed by other
types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, 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 Maturity Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three highest rating categories by an NRSRO or, if unrated, found by the
Adviser under guidelines established by the Trust's Board of Trustees to be of
comparable quality.
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Mortgage-Related Securities. Mortgage-related securities have mortgage
obligations backing such securities, including among others, conventional thirty
year fixed rate mortgage obligations, graduated payment mortgage obligations,
fifteen year mortgage obligations, and adjustable rate mortgage obligations. All
of these mortgage obligations can be used to create pass-through securities. A
pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. Accelerated prepayments have an adverse impact on yields for
pass-throughs purchased at a premium (i.e., a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-throughs purchased at a discount. The Government
Income Fund may purchase mortgage-related securities at a premium or at a
discount.
Mortgage-Related Securities Issued By Nongovernmental Entities. The
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
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increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The Government Income Fund will not purchase
mortgage-related securities or any other assets which in the 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
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Real Estate Mortgage Investment Conduits (REMICs), are not subject to the 1940
Act's limitation on acquiring interests in other investment companies. In order
to be able to rely on the staff's interpretation, the CMOs and REMICs must be
unmanaged, fixed-asset issuers, that (a) invest primarily in mortgaged-backed
securities, (b) do not issue redeemable securities, (c) operate under general
exemptive orders exempting them from all provisions of the 1940 Act, and (d) are
not registered or regulated under the 1940 Act as investment companies. To the
extent that the Government Income Fund selects CMOs or REMICs that do not meet
the above requirements, the Government Income Fund's investment in such
securities will be subject to the limitations on its investment in investment
company securities. 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
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Statement of Additional Information. There is no lower limit with respect to
rating categories for convertible securities in which the Equity Income Fund may
invest.
Corporate debt obligations that are not determined to be
investment-grade are high-yield, high-risk bonds, typically subject to greater
market fluctuations and greater risk of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade securities, lower
rated securities tend to reflect short-term corporate, economic and market
developments, as well as investor perceptions or the issuer's credit quality.
Because investments in lower rated securities involve greater investment risk,
achievement of the Equity Income Fund's investment objective may be more
dependent on the Sub-Adviser's credit analysis than would be the case if the
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
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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.
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
Maturity Fund and the Government Income Fund may write (sell) "covered" call
options and purchase options to close out options previously written by it. Such
options must be issued by the Options Clearing Corporation and may or may not be
listed on a National Securities Exchange. The purpose of writing covered call
options is to generate additional premium income for a Fund. This premium income
will serve to enhance the Fund's total return and will reduce the effect of any
price decline of the security involved in the option. Covered call options will
generally be written on securities which, in the 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 Maturity Fund and the Government Income Fund will write
only covered call options. This means that a Fund will only write a call option
on a security which it already owns.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Capital
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Appreciation Funds, the Bond Fund, the Limited Maturity Fund and the Government
Income Fund will not do), but capable of enhancing a Fund's total return. When
writing a covered call option, a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but retains the risk of loss should the price of the
security decline. Unlike when a Fund owns securities not subject to an option,
the Capital Appreciation Funds, the Bond Fund, the Limited Maturity Fund and the
Government Income Fund will not have any control over when they may be required
to sell the underlying securities, since they may be assigned an exercise notice
at any time prior to the expiration of their obligation as a writer. If a call
option which the Fund has written expires, the Fund will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period. If the call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The security covering the call will be maintained in a
segregated account of the Fund's custodian. The Capital Appreciation Funds, the
Bond Fund, the Limited Maturity Fund and the Government Income Fund will
consider a security covered by a call to be "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
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case it would continue to be at market risk on the security. This could result
in higher transaction costs. A Fund will pay transaction costs in connection
with the writing of options to close out previously written options. Such
transaction costs are normally higher than those applicable to purchases and
sales of portfolio securities.
Call options written by the Capital Appreciation Funds, the Bond Fund,
the Limited Maturity Fund and the Government Income Fund will normally have
expiration dates of less than nine months from the date written. The exercise
price of the options may be below, equal to, or above the current market values
of the underlying securities at the time the options are written. From time to
time, a Fund may purchase an underlying security for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
Puts. The Tax Exempt Fund and the Tax-Free Funds may acquire "puts"
with respect to Municipal Securities held in their portfolios, and the Balanced
Fund, the Bond Fund, and the Limited Maturity Fund may acquire "puts" with
respect to debt securities held in their portfolios and the Enhanced Market Fund
and Select Equity Fund may acquire "puts" with respect to equity securities held
in their portfolios. A put is a right to sell a specified security (or
securities) within a specified period of time at a specified exercise price. The
Tax Exempt Fund, the Tax-Free Funds, the Bond Fund, the Balanced Fund, the
Limited Maturity Fund, the Enhanced Market Fund, and the Select Equity Fund may
sell, transfer, or assign a put only in conjunction with the sale, transfer, or
assignment of the underlying security or securities.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate the reinvestment of assets
at a rate of return more favorable than that of the underlying security. Puts
may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the Tax Exempt Fund's assets pursuant to Rule 2a-7 under
the 1940 Act. See "Variable and Floating Rate Notes" and "Valuation of the Prime
Obligations Fund, the U.S. Treasury Fund and the Tax Exempt Fund" in this
Statement of Additional Information.
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The Limited Maturity Fund will acquire puts solely to shorten the
maturity of the underlying debt security.
The Tax Exempt Fund, the Tax-Free Funds, the Limited Maturity Fund, the
Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, a Fund
may pay for puts either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the puts (thus reducing the
yield to maturity otherwise available for the same securities).
The Tax Exempt Fund, the Tax-Free Funds, the Limited Maturity Fund, the
Balanced Fund, the Enhanced Market Fund, and the Select Equity Fund intend to
enter into puts only with dealers, banks, and broker-dealers which, in the
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
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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 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
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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
Obligations Fund, the AmSouth U.S. Treasury Fund (the "AmSouth Money Market
Funds"), the AmSouth Institutional Prime Obligations Fund, and the AmSouth
Institutional U.S. Treasury Fund (the "AmSouth Institutional Money Market
Funds"), and the Prime Obligations 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
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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.
** 5 Municipal Securities. Under normal market conditions, the Tax
Exempt Fund and the Municipal Bond Fund will be primarily invested in bonds (and
in the case of the Tax Exempt Fund, notes) issued by or on behalf of states
(including the District of Columbia), territories, and possessions of the United
States and their respective authorities, agencies, instrumentalities, and
political subdivisions, the interest on which is exempt from federal income tax
("Municipal Securities"). Under normal market conditions, the Tax Exempt Fund
will invest at least 80% of its total assets, the Municipal Bond Fund will
invest at least 80% of its net assets, and the Florida Fund may invest up to 20%
of its net assets in Municipal Securities, the interest on which is not treated
as a preference item for purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from both federal income tax and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. 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.
** 6 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.
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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.
** 7 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.
** 8 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 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.
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** 9 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.
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
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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, 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
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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 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
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temporary loans not exceeding $300,000 to cover deficits in the state treasury.
Limited obligation debt may be authorized by the legislature without amendment
to the Constitution. The state has followed the practice of financing certain
capital improvement programs - principally for highways, education and
improvements to the State Docks through the issuance of limited obligation bonds
payable solely out of certain taxes and other revenues specifically pledged for
their payment and not from the general revenues of the state.
General Obligation Warrants. Municipalities and counties in
Alabama traditionally have issued general obligation warrants to finance various
public improvements. Alabama statutes authorizing the issuance of such
interest-bearing warrants do not require an election prior to issuance. On the
other hand, the Constitution of Alabama (Section 222) provides that general
obligation bonds may not be issued without an election.
The Supreme Court of Alabama validated certain general obligation
warrants issued by the City of Hoover, reaffirming that such obligations did not
require an election under Section 222 of the Constitution of Alabama. In so
holding, the Court found that warrants are not "bonds" within the meaning of
Section 222. According to the Court, warrants are not negotiable instruments and
transferees of warrants cannot be holders in due course. Therefore, a transferee
of warrants is subject to all defenses that the issuer of such warrants may have
against the transferor.
County boards of education may borrow money by issuing interest-bearing
warrants payable solely out of such board's allocated or apportioned share of
specified tax. The county board's apportioned share of such tax may be
diminished upon the establishment of a city school system, which could
jeopardize the payment of the county board's warrants.
Limited Taxing Authority. Political subdivisions of the state
have limited taxing authority. Ad valorem taxes may be levied only as authorized
by the Alabama Constitution. In order to increase the rate at which any ad
valorem tax is levied above the limit otherwise provided in the Constitution,
the proposed increase must be proposed by the governing body of the taxing
authority after a public hearing, approved by an act of the Alabama Legislature
and approved at an election within the taxing authority's jurisdiction. In
addition, the Alabama Constitution limits the total amount of state, county,
municipal and other ad valorem taxes that may be imposed on any 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
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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 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.
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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.
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
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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.
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 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 Prime
Obligations Fund's total assets would be invested in such issuer, except that
25% or less of the value of the Prime Obligations Fund's total assets may be
invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value
of the Prime Obligations Fund's total assets at the time of purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, bank certificates of deposit or
bankers' acceptances issued by a domestic bank or by a U.S. branch of a foreign
bank provided that such U.S. branch is subject to the same regulation as U.S.
banks, and repurchase agreements secured by bank instruments or obligations of
the U.S. government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services. For
example, gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry.
The U.S. Treasury Fund may not:
1. Purchase securities other than bills, notes, and bonds issued by the
U.S. Treasury, certain of which securities may be subject to repurchase
agreements collateralized by the underlying U.S. Treasury obligation.
The Tax Exempt Fund may not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the Tax
Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax
Exempt Fund's total assets at the time of purchase to be invested in the
securities of one or more
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issuers conducting their principal business activities in the same industry;
provided that this limitation shall not apply to Municipal Securities; and
provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax Exempt Fund's assets.
The Bond Fund, the Limited Maturity Fund, the Government Income Fund,
the Municipal Bond Fund and the Capital Appreciation Funds may not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. This investment restriction does not apply
to the Select Equity Fund.
The Income Funds and the Capital Appreciation Funds may not:
1. Purchase any securities which would cause more than 25% of the value
of such Income Fund's or Capital Appreciation Fund's total assets at the time of
purchase to be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that (a) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and
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repurchase agreements secured by obligations of the U.S. government or its
agencies or instrumentalities; (b) for the Bond Fund, the Limited Maturity Fund,
the Florida Fund, and the Municipal Bond Fund there is no limitation with
respect to Municipal Securities, which, for purposes of this limitation only, do
not include private activity bonds that are backed only by the assets and
revenues of a non-governmental user; (c) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (d)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
The Tax-Free Funds may not:
1. Write or sell puts, calls, straddles, spreads, or combinations
thereof except that the Funds may acquire puts with respect to Eligible
Municipal Securities and sell those puts in conjunction with a sale of those
Eligible Municipal Securities.
The Money Market Funds, the Income Funds, and the Capital Appreciation
Funds may not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing (33 1/3% with respect to the Select Equity Fund); or
mortgage, pledge, or hypothecate any assets, except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of such Fund's total assets at the time of its
borrowing (33 1/3% with respect to the Select Equity Fund). A Fund will not
purchase securities while 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:
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;
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2. Purchase or sell commodities, commodity contracts (including futures
contracts with respect to each Fund other than the Small Cap, Enhanced Market
and Select Equity Funds, which may purchase futures contracts), oil, gas or
mineral exploration or development programs, or real estate (although
investments by all of the Funds except the U.S. Treasury Fund in marketable
securities of companies engaged in such activities and in securities secured by
real estate or interests therein are not hereby precluded and investment in real
estate investment trusts are permitted for the Capital Growth Fund, the Small
Cap Fund, the Equity Income Fund, the Enhanced Market Fund and the Select Equity
Fund);
3. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; provided, however, that the Capital Appreciation Funds
and the Income Funds may purchase securities of a money market fund, including
securities of both the Prime Obligations Fund and the U.S. Treasury Fund (and in
the case of the Tax-Free Funds, securities of the Tax Exempt Fund) and the Tax
Exempt Fund and the Prime Obligations Fund may purchase securities of a money
market fund which invests primarily in high quality short-term obligations
exempt from federal income tax, if, with respect to each such Fund, immediately
after such purchase, the acquiring Fund, does not own in the aggregate (i) more
than 3% of the acquired company's outstanding voting securities, (ii) securities
issued by the acquired company having an aggregate value in excess of 5% of the
value of the total assets of the acquiring Fund, or (iii) securities issued by
the acquired company and all other investment companies (other than Treasury
stock of the acquiring Fund) having an aggregate value in excess of 10% of the
value of the acquiring Fund's total assets;
4. Invest in any issuer for purposes of exercising control or
management;
5. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its investment adviser
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities; and
6. Invest more than 10% of total assets in the securities of issuers
which together with any predecessors have a record of less than three years of
continuous operation.
The Prime Obligations Fund and the U.S. Treasury Fund may not buy
common stocks or voting securities, or state, municipal, or private activity
bonds. The Money Market Funds and the Tax-Free Funds may not write or purchase
call options. None of the Funds (except the Enhanced Market and Select Equity
Fund) may write put options. The Prime Obligations Fund, the U.S. Treasury Fund,
the Equity Fund, the Regional Equity Fund, the Capital Growth Fund and the
Equity Income Fund may not purchase put options. The Tax Exempt Fund and the
Tax-Free Funds may not invest in private activity bonds where the payment of
principal and interest are the responsibility of a company (including its
predecessors) with less than three years of continuous operation. As a
non-fundamental investment restriction with
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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 ____% and 17.15% ,
respectively, for the common stock portion of its portfolio and ___% 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:
<TABLE>
<CAPTION>
Fund 1999 1998
- ---- ---- ----
<S> <C> <C>
Balanced Fund 23.24 25.40
Capital Growth Fund 79.30 77.26
Enhanced Market Fund 36.03 --
Equity 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
Government Income Fund 26.85 34.89
Limited Maturity Fund 39.15 39.31
</TABLE>
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<TABLE>
<CAPTION>
Fund 1999 1998
- ---- ---- ----
<S> <C> <C>
Florida Tax-Free Fund 34.33 29.55
Municipal Bond Fund 20.74 28.75
</TABLE>
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.
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
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instrument. The value of securities in these Funds can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that no Fund will
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Trust's Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires that the Board of Trustees promptly consider what action, if any,
should be initiated. If the Trustees believe that the extent of any deviation
from a Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the
dollar-weighted average portfolio maturity, withholding or reducing dividends,
reducing the number of a Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per Share determined by using
available market quotations.
Valuation of the Capital Appreciation Funds and the Income Funds
The value of the portfolio securities held by each of the Capital
Appreciation Funds and the Income Funds for purposes of determining such Fund's
net asset value per Share will be established on the basis of current valuations
provided by Muller Data Corporation or Kenny S&P Evaluation Services, whose
procedures shall be monitored by the Administrator, and which valuations shall
be the fair market value of such securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each 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.
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Purchase of Shares
As stated in the relevant Prospectuses, the public offering price of
Classic Shares of the Capital Appreciation Funds and the Income Funds is their
net asset value computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of Class B and Premier
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 Classic Shares of a Capital Appreciation Fund or Income
Fund and one or more of the other Classic Shares of a Fund or by combining a
current purchase of Classic Shares of a Fund with prior purchases of Classic
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
Classic 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 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.
Classic Shares of the Money Market Funds are sold at their net asset
value per share, as next computed after an order is received. However, as
discussed in the Classic and Class B Shares Prospectus, the Class B Shares are
subject to a Contingent Deferred Sales Charge if they are redeemed prior to the
sixth anniversary of purchase. Class B Shares of the Prime
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Obligations Fund only are available to Shareholders of Class B Shares of another
Fund who wish to exchange their Class B Shares of such other Fund for Class B
Shares of the Prime Obligations Fund.
Certain sales of Classic Shares are made without a sales charge, as
described in the relevant Prospectuses under the caption "Sales Charge Waivers",
to promote goodwill with employees and others with whom BISYS, AmSouth and/or
the Trust have business relationships, and because the sales effort, if any,
involved in making such sales is negligible.
Additional Information Regarding Broker Compensation. As the
Trust's principal underwriter, BISYS acts as principal in selling Classic Shares
and Class B Shares of the Trust to dealers. BISYS re-allows a portion of the
sales charge as dealer discounts and brokerage commissions. Dealer allowances
expressed as a percentage of the offering price for all offering prices are set
forth in the relevant Classic Shares and Class B Shares Prospectuses (see
"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 Classic Shares and Class B
Shares of any of the Funds. Such compensation will include financial assistance
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Funds of the Trust, and/or other dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside the United States
for meetings or seminars of a business nature. Dealers may not use sales of a
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by any Fund or its Shareholders.
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
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("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 Classic Shares and Class B Shares
either by telephone or by wiring funds to the Trust's custodian. Telephone
orders may be placed by calling the Trust at (800) 451-8382. Payment for Shares
ordered by telephone may be made by check and must be received by the Trust's
custodian within three days of the telephone order. If payment is not received
within three days or a check timely received does not clear, the purchase will
be 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
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
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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 the following January are treated for tax
purposes as if they were received by each Shareholder on December 31 of the
prior year.
Information Specific to the Prime Obligations Fund and the U.S.
Treasury Fund. Dividends will generally be taxable to a Shareholder as ordinary
income to the extent of
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the Shareholder's ratable share of each Fund's earnings and profits as
determined for tax purposes. Because all of the net investment income of the
Prime Obligations Fund and the U.S. Treasury Fund is expected to be interest
income, it is anticipated that no distributions will qualify for the
dividends-received deduction for corporate shareholders. The Prime Obligations
Fund and the U.S. Treasury Fund do not expect to realize any long-term capital
gains and, therefore, do not foresee paying any "capital gains dividends" as
described in the Code. Dividends received by a Shareholder that are derived from
the U.S. Treasury Fund's investments in U.S. government obligations may not be
eligible for exemption from state and local taxes even though the income on such
investments would have been exempt from state and local taxes if the Shareholder
directly held such investments. In addition, the state and local tax exemption
for interest earned on U.S. government obligations may not extend to income
earned on U.S. government obligations that are subject to a repurchase
agreement. Shareholders are advised to consult their own tax 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 Maturity Fund and
the Government Income Fund. Distributions by the Bond Fund, the Limited Maturity
Fund and the Government Income Fund of ordinary income and/or an excess of net
short-term capital gain over net long-term loss are taxable to shareholders as
ordinary income. It is not expected that the dividends-received deduction for
corporations will apply to these
distributions.
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Distributions designated by the Bond Fund, the Limited Maturity Fund
and the Government Income Fund as derived from net gains on securities held for
more than one year are taxable to Shareholders as such regardless of how long
the Shareholder has held Shares in such Fund. Such distributions are not
eligible for the dividends-received deduction.
Prior to purchasing Shares of the Bond Fund, the Limited Maturity Fund
or the Government Income Fund, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Dividends or capital gains distributions
paid after a purchase of Shares are subject to federal income taxes, although in
some circumstances the dividends or distributions may be, as an economic matter,
a return of capital. A Shareholder should consult his or her own Adviser for any
special advice.
Dividends received by a Shareholder that are derived from the Bond
Fund's, the Limited Maturity Fund's or the Government Income Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly.
A Shareholder will generally recognize long-term capital gain or loss
on the sale or exchange of shares in an Income Fund held by the Shareholder for
more than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Maturity Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
The holder of a security issued with "original issue discount"
(including a zero-coupon U.S. Treasury security) is required to accrue as income
each year a portion of the discount at which the security was purchased, even
though the holder does not currently receive the interest payment in cash. A
security has original issue discount if its redemption price exceeds its issue
price by more than a de minimis amount. Accordingly, the Bond Fund, the Limited
Maturity Fund and the Government Income Fund may be required to distribute each
year an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions may be made from the cash assets of the
Fund or by liquidation of its portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution than they would have in the absence of such
transactions.
B-43
<PAGE> 321
Information Specific to the Tax Exempt Fund, the Florida Fund and the
Municipal Bond Fund. Shareholders of the Tax Exempt Fund and the Tax-Free Funds
may treat as exempt-interest and exclude from gross income for federal income
tax purposes dividends derived from net exempt-interest income and designated by
the Funds as exempt-interest dividends. However, such dividends may be taxable
to shareholders under state or local law as ordinary income even though all or a
portion of the amounts may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such taxes.
Dividends from the Tax Exempt and Tax-Free Funds attributable to
exempt-interest dividends may cause the social security and railroad retirement
benefits of individual Shareholders to become taxable, or increase the amount
that is taxable. Interest on indebtedness incurred by a Shareholder to purchase
or carry Shares is not deductible for federal income tax purposes to the extent
the Funds distribute exempt-interest dividends during the Shareholder's taxable
year. The amount of the disallowed interest deduction is the total amount of
interest paid or accrued on the indebtedness multiplied by a fraction, the
numerator of which is the amount of exempt-interest dividends received by the
Shareholder and the 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.
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<PAGE> 322
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.
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
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<PAGE> 323
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 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.
B-46
<PAGE> 324
However, if for any taxable year the Funds do not qualify for the
special federal tax treatment afforded regulated investment companies, all of
their taxable income will be subject to federal income tax at regular corporate
rates at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders may be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Trust's Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax 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-
B-47
<PAGE> 325
interest dividends would retain the exclusion under Section 103 of the Code if
the Shareholder were treated as a "substantial user" or a "related person."
The Code permits a regulated investment company which invests at least
50% of its assets in tax-free Municipal Securities to pass through to its
investors, tax-free, net Municipal Securities interest income. The policy of the
Tax Exempt Fund and the Tax-Free Funds is to pay each year as dividends
substantially all such Fund's Municipal Securities interest income net of
certain deductions. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Tax Exempt Fund and the
Tax-Free Funds and designated as an exempt-interest dividend in a written notice
mailed to Shareholders after the close of such Fund's taxable year, but not to
exceed in the aggregate the net Municipal Securities interest received by the
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from the Tax Exempt Fund and the
Tax-Free Funds during such year, regardless of the period for which the Shares
were held.
While the Tax Exempt Fund and the Tax-Free Funds do not expect to
realize any significant amount of long-term capital gains, any net realized
long-term capital gains will be distributed annually. The Tax Exempt Fund and
the Tax-Free Funds will have no tax liability with respect to such gains and the
distributions will be taxable to Shareholders as net gains on securities held
for more than one year, regardless of how long a Shareholder has held the Shares
of the Funds. Such distributions will be designated as a capital gains dividend
in a written notice mailed by the Tax Exempt Fund and the Tax-Free Funds to
Shareholders after the close of the Fund's taxable year.
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
B-48
<PAGE> 326
regarding the tax consequences of the purchase of puts, there is currently no
guidance available from the Internal Revenue Service that definitively
establishes the tax consequences of many of the types of puts that the Tax
Exempt Fund and the Tax-Free Funds could acquire under the 1940 Act. Therefore,
although the Tax Exempt Fund and the Tax-Free Funds will only acquire a put
after concluding that it will have the tax consequences described above, the
Internal Revenue Service could reach a different conclusion from that of the
Funds. If the Tax Exempt Fund and the Tax-Free Funds were not treated as the
owner of the Municipal Securities, income from such securities would probably
not be tax-exempt.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of Shares of the Tax Exempt Fund
and the Tax-Free Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Tax Exempt Fund and the
Tax-Free Funds or their Shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential purchasers of Shares
of the Tax Exempt Fund and the Tax-Free Funds are urged to consult their tax
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
B-49
<PAGE> 327
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.
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.
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<PAGE> 328
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 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
3435 Stelzer Road of BISYS Fund Services Limited
Columbus, Ohio 43219 Partnership
Dick D. Briggs, Jr., M.D. 65 Trustee From September 1989 to present,
459 DER Building Emeritus Professor and Eminent
1808 7th Avenue South Scholar Chair, Univ. of Alabama at
UAB Medical Center Birmingham; from October 1979 to
Birmingham, Alabama 35294 present, Physician, 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
Mobile, Alabama 36608 August, 1993, Executive Vice
President, Chief Operating Officer and
Director, Mobile Gas Service
Corporation
</TABLE>
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<PAGE> 329
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired;
751 Cary Drive until June 1991, Vice President,
Auburn, Alabama 36830-2505 Birmingham Division, Alabama Power
Company
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The Sessions
The University of North Group; from July 1989 to present,
Carolina at Charlotte Chancellor, The University of North Carolina
Charlotte, North Carolina 28223 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
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>
** 10 John F. Calvano 39 President From October, 1994 to present, employee of
BISYS Fund Services Limited Partnership; from
July, 1992 to August, 1994, investment
representative, BA Investment Services; and
from October, 1986 to July, 1994, Marketing
Manager, Great Western Investment
Management.
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 present,
President of Leigh Investments Consulting
(investments firm).
</TABLE>
B-52
<PAGE> 330
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Charles L. Booth 39 Treasurer From 1988 to present, employee of BISYS Fund
Services Limited Partnership.
* 10 moved from here; text not shown
James L. Smith 39 Secretary From October 1996 to present, employee of
BISYS Fund Services Limited Partnership; from
October, 1995 to October, 1996, employee of
Davis, Graham & Stubbs; from June, 1991 to
October, 1995, Director of Legal and
Compliance, ALPS Mutual Fund Services, Inc.
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. Calvano, Cusick, Grimm, Booth and
Smith and Ms. Metz are employees of BISYS Fund Services Limited Partnership.
B-53
<PAGE> 331
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>
None None None
J. David Huber $14,000 None None $14,000
James H.
Woodward, Jr. $14,000 None None $14,000
Homer H. Turner $14,000 None None $14,000
Wendell D. Cleaver $14,000 None $14,000
Dick D. Briggs, Jr., None None
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 Maturity 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 Maturity 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 Equity 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.
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<PAGE> 332
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 Obligations Fund forty one-hundredths of one percent
(0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one percent
(0.40%) annually; the Institutional Prime Obligations Fund - twenty
one-hundredths of one percent (0.20%); the Institutional U.S. Treasury Fund -
twenty one-hundredths of one percent (0.20%); the Equity Fund - eighty
one-hundredths of one percent (0.80%) annually; the Regional Equity Fund -
eighty one-hundredths of one percent (0.80%) annually; the Tax Exempt Fund -
forty one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Maturity Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund -
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Capital Growth Fund - eighty one-hundredths of one percent (0.80%) annually; the
Small Cap Fund - one hundred twenty one-hundredths of one percent (1.20%)
annually; the Select Equity Fund - eighty one hundredths of one percent (.80%)
annually; and the Enhanced Market Fund forty-five hundredths of one percent
(.45%) annually. A fee agreed to in writing from time to time by the Trust and
the 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:
Fiscal Year Ended
<TABLE>
<CAPTION>
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
Additional Additional
Amount Amount
Paid Paid Waived Paid Waived
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Balanced Fund $3,046,371 $3,005,940 $NA $2,855,190 $NA
Capital Growth Fund 207,326 70,873 NA NA NA
Enhanced Market Fund 78,331 NA NA NA NA
Equity Fund 8,292,490 7,981,703 NA 3,733,019 NA
Equity Income Fund 324,890 267,522 NA 36,130 NA
Regional Equity Fund 856,308 1,263,837 NA 953,375 NA
Select Equity Fund 129,762 NA NA NA NA
Small Cap Fund 127,255 33,202 NA NA NA
Bond Fund 1,784,041 1,581,387 NA 745,426 224,000
Government Income Fund 28,600 32,006 NA 41,620 48,000
Limited Maturity Fund 565,032 595,473 NA 247,500 74,000
Florida Tax-Free Fund 212,699 170,463 NA 156,820 183,000
Municipal Bond Fund 1,305,134 1,335,325 NA 111,117 70,000
Prime Obligation Fund 2,765,375 2,515,690 NA 2,366,707 NA
U.S. Treasury Fund 1,261,718 1,256,351 NA 1,325,127 NA
Tax Exempt Fund 191,668 176,963 176,963 160,785 160,785
</TABLE>
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Institutional Prime
Obligations Fund
Institutional U.S. Treasury
Fund
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 Maturity Fund until January 31, 2000 and
for successive one-year periods thereafter if such continuance is approved at
least annually by the Trust's Board of Trustees or by vote of the holders of a
majority of the outstanding voting Shares of the Limited Maturity Fund, 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.
B-56
<PAGE> 334
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 Capital 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 Capital 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;
B-57
<PAGE> 335
(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 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.
The Trust will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, BISYS, the Sub-
Adviser, or their affiliates, and will not give preference to AmSouth's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
B-58
<PAGE> 336
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:
Fiscal Year Ended
<TABLE>
<CAPTION>
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Balanced Fund $132,669 $365,522 $145,513
Capital Growth Fund 34,442 NA NA
Enhanced Market Fund 20,125** NA NA
Equity 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.
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
B-59
<PAGE> 337
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.
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
B-60
<PAGE> 338
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.
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<PAGE> 339
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
------------- ------------- -------------
Additional
Amount
Paid Paid Paid Waived
---- ---- ---- ------
<S> <C> <C> <C> <C>
Balanced Fund $761,600 $751,492 $549,167 $165,000
Capital Growth Fund - 2,137 NA NA
Enhanced Market Fund - NA NA NA
Equity Fund 2,073,141 1,995,442 745,786 188,000
Equity Income Fund 81,223 66,881 9,033 NA
Regional Equity Fund 214,079 316,102 187,612 51,000
Select Equity Fund - NA NA NA
Small Cap Fund - 0 NA NA
Bond Fund 428,174 379,537 178,921 119,000
Government Income Fund 9,533 10,668 13,872 14,000
Limited Maturity Fund 135,609 142,915 59,376 60,000
Florida Tax-Free Fund 70,901 6,820 52,227 53,000
Municipal Bond Fund 391,544 400,601 33,335 22,000
Prime Obligation Fund 1,382,700 1,257,853 1,183,357 NA
U.S. Treasury Fund 630,865 628,179 662,565 NA
Tax Exempt Fund 191,672 176,963 160,785 NA
Institutional Prime
Obligations Fund
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.
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
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<PAGE> 340
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 Premier, Classic,
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 Classic, 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 Classic 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.
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
B-63
<PAGE> 341
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.
Classic Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Classic Shares of each Fund.
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 Classic 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 Classic 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 Classic Class. The Trust's Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the 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
B-64
<PAGE> 342
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 year ended July 31, 1999, the Distributor received the
following servicing fees with respect to the Classic Shares and the following
distribution fees with respect to the Class B, Class II and Class III Shares
from the following Funds:
B-65
<PAGE> 343
<TABLE>
<CAPTION>
Fund Classic Shares Class B Shares
- ---- -------------- --------------
<S> <C> <C>
Balanced Fund $113,423 $78,669
Capital Growth Fund $28,262 $51,893
Enhanced Market Fund $17,938 $20,045
Equity Fund $178,812 $102,305
Equity Income Fund $58,845 $77,644
Regional Equity Fund $76,403 $15,114
Select Equity Fund $17,905 $8,018
Small Cap Fund $3,080 $8,620
Bond Fund $7,330 $16,859
Government Income Fund $6,909 $ -
Limited Maturity Fund $3,008 $4,053
Florida Tax-Free Fund $9,991 $1,086
Municipal Bond Fund $58,845 $77,644
Prime Obligation Fund $134,574 $1,468
U.S. Treasury Fund $6,422 $ -
Tax Exempt Fund $25,017 $ -
</TABLE>
<TABLE>
<CAPTION>
Fund Class II Shares Class III Shares
- ---- --------------- ----------------
<S> <C> <C>
Institutional Prime
Obligations Fund $17,200 $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
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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.
Transfer Agent and Fund Accounting Services.
BISYS Fund Services Ohio, Inc. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each tax exempt fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
Auditors
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
incorporated by reference into this Statement of Additional Information which
have been audited by __________________, LLP, independent accountants, as set
forth in their report
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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.
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,
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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 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
Premier Shares and Classic Shares of each Money Market Fund, calculated as
described, above was as follows:
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<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Premier 4.39% 4.48%
U.S. Treasury Fund Premier 4.05% 4.13%
Tax Exempt Fund Premier 2.57% 2.60% 4.25% 4.30%
Prime Obligations Fund Classic 4.29% 4.37%
U.S. Treasury Fund Classic 3.96% 4.02%
Tax Exempt Fund Classic 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 N/A N/A N/A N/A
Institutional
Prime Obligations Fund Class II 4.58% 4.68% -- --
Institutional
U.S. Treasury Fund Class II N/A N/A N/A N/A
Institutional
Prime Obligations Fund Class III 4.33% 4.42% -- --
Institutional
U.S. Treasury Fund Class III N/A N/A N/A N/A
</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
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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:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- -----
<S> <C> <C> <C>
Florida Fund Classic 3.88% 6.42%
Premier 3.96% 6.56%
Municipal Bond Fund Classic 4.01% 6.64%
Premier 4.10% 6.79%
Bond Fund Classic 5.43% N/A
Premier 5.53% N/A
Class B 4.60% N/A
Government Income Fund Classic 6.11% N/A
Premier 6.22% N/A
Limited Maturity Fund Classic 5.29% N/A
Premier 5.38% N/A
</TABLE>
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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>
Equity Fund Premier 0.63%
Regional Equity Fund Premier 0.28%
Balanced Fund Premier 2.84%
Equity Income Fund Premier 0.79%
Capital Growth Fund Premier -0.38%
Small Cap Fund Premier -0.99%
Enhanced Market Fund Premier 0.31%
Select Equity Fund Premier -0.84%
Equity Fund Classic 0.38%
Regional Equity Fund Classic 0.03%
Balanced Fund Classic 2.59%
Equity Income Fund Classic 0.54%
Capital Growth Fund Classic -0.63%
Small Cap Fund Classic -1.24%
Enhanced Market Fund Classic 0.56%
Select Equity Fund Classic -1.10%
Equity 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%
Capital 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.
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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 Obligations Fund Premier 4.59% 4.99%
U.S. Treasury Fund Premier 4.16% 4.70%
Tax Exempt Fund Premier 2.76% 3.08%
Prime Obligations Fund Classic 4.48% 4.92%
U.S. Treasury Fund Classic 4.06% 4.63%
Tax Exempt Fund Classic 2.66% 3.01%
Florida Fund Classic -2.06% NA
Bond Fund Classic -1.52% 6.00%
Limited Maturity Fund Classic -0.11% 5.03%
Government Income Fund Classic -1.47% 5.86%
Municipal Bond Classic -1.77% 3.71%
Institutional
Prime Obligations Fund Class I N/A N/A
Institutional
U.S. Treasury Fund Class I N/A N/A
Institutional
Prime Obligations Fund Class II N/A N/A
Institutional
U.S. Treasury Fund Class II N/A N/A
Institutional
Prime Obligations Fund Class III N/A N/A
Institutional
U.S. Treasury Fund Class III N/A N/A
</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>
Equity Fund Premier 15.43% 19.61%
Regional Equity Fund Premier -9.57% 10.32%
Balanced Fund Premier 9.74% 13.71%
Capital Growth Fund Premier 22.05% NA
Equity Income Fund Premier 14.43% NA
Equity Fund Classic 9.74% 18.38%
Regional Equity Fund Classic -13.90% 9.20%
Balanced Fund Classic 4.45% 12.55%
Capital Growth Fund Classic 16.26% NA
Equity Income Fund Classic 9.03% NA
Equity Fund Class B 9.03% 18.95%
Regional Equity Fund Class B -14.73% 9.63%
Balanced Fund Class B 3.74% 13.04%
</TABLE>
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<PAGE> 351
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Capital Growth Fund Class B 15.96% NA
Equity Income Fund Class B 8.34% NA
</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>
Prime Obligations Fund Premier 5.33% August 8, 1988
U.S. Treasury Fund Premier 5.08% September 8,
1988
Tax Exempt Fund Premier 3.06% June 27, 1988
Florida Fund Premier 5.05% September 2,
1997
Municipal Bond Fund Premier 5.90% September 2,
1997
Bond Fund Premier 7.94% September 2,
1997
Limited Maturity Fund Premier 6.78% September 2,
1997
Government Income Fund Premier 5.69% September 2,
1997
Prime Obligations Fund Classic 5.30% April 1, 1996
U.S. Treasury Fund Classic 5.05% April 1, 1996
Tax Exempt Fund Classic 3.03% April 1, 1996
Florida Fund Classic 4.10% September 30,
1994
Municipal Bond Fund Classic 5.72% July 1, 1997
Bond Fund Classic 7.51% December 1,
1988
Limited Maturity Fund Classic 6.34% February 1, 1988
Government Income Fund Classic 4.94% October 1, 1993
Bond Fund Class B 7.75% September 2,
1997
Prime Obligations 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 N/A Not Funded
Institutional
Prime Obligations Fund Class II 3.94% September 15, 1998
Institutional
U.S. Treasury Fund Class II N/A Not Funded
Institutional
Prime Obligations Fund Class III 3.82% September 15, 1998
Institutional
U.S. Treasury Fund Class III N/A Not Funded
</TABLE>
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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>
Equity Fund Premier 15.49% December 1,
1988
Regional Equity Fund Premier 12.36% December 1,
1988
Balanced Fund Premier 12.97% December 19,
1991
Equity Income Fund Premier 17.01% March 20, 1997
Capital Growth Fund Premier 19.36% July 31, 1997
Small Cap Fund Premier -11.30% March 2, 1998
Enhanced Market Fund Premier 40.10% September 1, 1998
Select Equity Fund Premier 19.62% September 1, 1998
Equity 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
Capital 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
Equity Fund Classic 14.93% December 1, 1988
Regional Equity Fund Classic 11.83% December 1,
1988
Balanced Fund Classic 12.22% December 19,
1991
Equity Income Fund Classic 14.54% March 20, 1997
Capital Growth Fund Classic 16.34% August 3, 1997
Small Cap Fund Classic -14.27% March 2, 1998
Enhanced Market Fund Classic 33.65% September 1, 1998
Select Equity Fund Classic 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.
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Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
All Funds. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by 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 and to "AmSouth Mutual Funds" as of August 19, 1993 by
amendments to the Agreement and Declaration of Trust. A copy of the Trust's
Agreement and Declaration of Trust, as amended (the "Declaration of Trust") is
on file with the Secretary of State of The Commonwealth of Massachusetts. The
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest. The Trust presently
has eighteen series of Shares which represent interests in the Prime Obligations
Fund, the U.S. Treasury Fund, the Tax Exempt Fund, the Equity Fund, the Regional
Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced Fund, the
Municipal Bond Fund, the Government Income Fund, the Florida Fund, the Capital
Growth Fund, the Small Cap Fund, the Equity Income Fund, the Select Equity Fund,
the Enhanced Market Fund, the Institutional Prime Obligations Fund, and the
Institutional U.S. Treasury Fund. The Trust's Declaration of Trust authorizes
the Board of Trustees to divide or redivide any unissued Shares of the Trust
into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the 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
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<PAGE> 355
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, 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.
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<PAGE> 356
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 Premier Shares, of the Classic 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 Premier Shares of the Funds as follows: 92.6% of the Prime Obligations Fund,
46.91% of the U.S. Treasury Fund, 99.99% of the Tax Exempt Fund, 97.49% of the
Equity Fund, 98.90% of the Regional Equity Fund, 98.19% of the Bond Fund, 99.09%
of the Limited Maturity 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 Capital 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 Classic
Shares of the Select Equity Fund and 100% of the Class I, Class II and Class III
Shares of the Institutional Prime Obligation Fund. Under the 1940 Act, AmSouth
may be deemed to be a controlling person of the Premier Class of each of the
above-mentioned Funds. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of 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 Classic Shares of
the Funds as follows: 99.54% of the Prime Obligations 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 Maturity Fund, 36.55% of the
Municipal Bond Fund, 68.22% of the Florida Fund, 13.75% of the Capital 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 Obligations 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
Maturity 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
B-79
<PAGE> 357
of the Classic Shares of the Prime Obligations Fund, Treasury Fund, Tax Exempt
Fund, Municipal Bond Fund, Florida Fund and Small Cap Fund and the Class B
Shares of the Prime Obligations 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:
U.S. Treasury Fund -- Premier Shares
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Hare & Co. 160,484,114 -51.83%
One Wall Street
New York, NY 10286
</TABLE>
Limited Maturity Fund -- Classic Shares
<TABLE>
<CAPTION>
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>
Municipal Bond Fund -- Classic Shares
<TABLE>
<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.
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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> 359
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1999,
Financial Statements for the AmSouth Mutual Funds for the period ended July 31,
1999, will be incorporated by reference to the Annual Report of the AmSouth
Mutual Funds, dated as of such dates, which has been previously sent to
Shareholders of each Fund pursuant to the 1940 Act and previously filed with the
Securities and Exchange Commission by subsequent amendment prior to the
effectiveness of this amendment to AmSouth Mutual Funds' registration statement.
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> 360
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
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<PAGE> 361
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
Corporate Debt and State and Municipal Bond Ratings.
Standard & Poor's Corporation. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B -- Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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<PAGE> 362
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
Moody's Investor Services. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium-grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
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<PAGE> 363
Other Ratings of Municipal Obligations
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. Obligations rated "MIG-2" or
"VMIG-2" denote high quality with ample margins of protection although not so
large as in the preceding rating group.
Preferred Stock Ratings
The following summarizes the ratings used by Moody's for preferred
stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
B-86
<PAGE> 364
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
The following summarizes the ratings used by Standard & Poor's for
preferred stock:
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a
high-quality, fixed income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than for issues
in the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates
the lowest degree of speculation and "CCC" the highest. While such
issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
B-87
<PAGE> 365
"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of
preferred stock quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
B-88
<PAGE> 366
CROSS REFERENCE SHEET
Part B
<TABLE>
<CAPTION>
Form N-1A Item No. Caption
- ------------------ -------
<S> <C>
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Additional Information - Organization and
Description of Shares
12. Description of the Fund and its
Investments and Risks Investment Objectives and Policies
13. Management of the Trust Management of the Trust
14. Control Persons and Principal
Holders of Securities Additional Information - Miscellaneous
15. Investment Advisor and
Other Services Management of the Trust
16. Brokerage Allocation Management of the Trust
17. Capital Stock and Other
Securities Valuation; Additional Purchase and Redemption
Information; Management of the Trust;
Additional Information
18. Purchase, Redemption and Pricing
of Securities Being Offered Valuation; Additional Purchase and Redemption
Information; Management of the Trust
19. Taxation of the Trust Additional Purchase and Redemption Information
20. Underwriters Management of the Trust
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
</TABLE>
<PAGE> 367
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 Fund and the AmSouth Institutional U.S. Treasury 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 Mutual Funds at P.O. Box 182733, Columbus, Ohio 43218-2733, or by
telephoning toll free (800) 451-8382.
<PAGE> 368
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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.............................................................................. 29
Distributor..................................................................................... 30
Custodian....................................................................................... 33
Transfer Agent and Fund Accounting Services..................................................... 33
Auditors ....................................................................................... 34
Legal Counsel................................................................................... 34
PERFORMANCE INFORMATION............................................................................. 34
Yields of the Money Market Funds................................................................ 35
Yield of the Capital Appreciation Funds, the Income Funds and the
Tax-Free Funds......................................................................... 36
Calculation of Total Return..................................................................... 38
Performance Comparisons......................................................................... 41
ADDITIONAL INFORMATION.............................................................................. 43
</TABLE>
B-i
<PAGE> 369
<TABLE>
<S> <C>
Organization and Description of Shares....................................................... 43
Shareholder Liability........................................................................ 44
Miscellaneous................................................................................ 44
FINANCIAL STATEMENTS............................................................................. 48
APPENDIX......................................................................................... 49
</TABLE>
B-ii
<PAGE> 370
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH INSTITUTIONAL MONEY MARKET FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of eighteen series of units of beneficial interest
("Shares"), each representing interests in one of eighteen separate investment
portfolios (each a "Fund"). This Statement of Additional Information relates to
two of these Funds: the AmSouth Institutional Prime Obligations Fund (the
"Institutional Prime Obligations Fund") and the AmSouth Institutional U.S.
Treasury Fund (the "Institutional U.S. Treasury Fund," and these two Funds being
collectively referred to as the "Institutional Money Market Funds"). The Trust's
other sixteen Funds, which are offered through separate prospectuses and have a
separate Statement of Additional Information, are: the AmSouth Prime Obligations
Fund (the "Prime Obligations Fund"), the AmSouth U.S. Treasury Fund (the "U.S.
Treasury Fund"), the AmSouth Tax Exempt Fund (the "Tax Exempt Fund" and,
collectively, with the Prime Obligations Fund and the U.S. Treasury Fund, the
"Money Market Funds"), the AmSouth Equity Fund (the "Equity Fund"), the AmSouth
Regional Equity Fund (the "Regional Equity Fund"), the AmSouth Balanced Fund
(the "Balanced Fund"), the AmSouth Capital Growth Fund (the "Capital Growth
Fund"), the AmSouth Small Cap Fund (the "Small Cap Fund"), the AmSouth Equity
Income Fund (the "Equity Income Fund"), the AmSouth Select Equity Fund (the
"Select Equity Fund") and the AmSouth Enhanced Market Fund (the "Enhanced Market
Fund" and, collectively with the Equity Fund, the Regional Equity Fund, the
Balanced Fund, the Capital Growth Fund, the Small Cap Fund, the Equity Income
Fund, the Select Equity Fund and the Enhanced Market Fund, the "Capital
Appreciation Funds"), the AmSouth Bond Fund (the "Bond Fund"), the AmSouth
Limited Maturity Fund (the "Limited Maturity Fund"), the AmSouth Government
Income Fund (the "Government Income Fund") the AmSouth Municipal Bond Fund (the
"Municipal Bond Fund"), and the AmSouth Florida Tax-Free Fund (the "Florida
Fund" and, collectively with the Bond Fund, the Limited Maturity Fund, the
Government Income Fund and the Municipal Bond Fund, the "Income Funds," and the
Florida Fund and the Municipal Bond Fund sometimes collectively referred to
herein as the "Tax-Free Funds.")
The Institutional Prime Obligations Fund and the Institutional U.S.
Treasury Fund offer three classes of Shares: Class I Shares, Class II Shares and
Class III Shares. Some of the information contained in this Statement of
Additional Information expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of a Fund should be made without first reading that Fund's
Prospectus.
<PAGE> 371
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
B-2
<PAGE> 372
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. The Institutional
Prime Obligation Fund may invest in bankers' acceptances, certificates of
deposit, and demand and time deposits. Bankers' acceptances are negotiable
drafts or bills of exchange typically drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. 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
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<PAGE> 373
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. 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
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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 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
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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
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
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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.
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.
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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. Asset-backed securities purchased by the Institutional Prime
Obligation 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
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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:
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.
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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 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
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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.
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
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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.
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
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Share may result in material dilution or other unfair results to new or existing
investors, they will take such steps as they consider appropriate to eliminate
or reduce to the extent reasonably practicable any such dilution or unfair
results. These steps may include selling portfolio instruments prior to
maturity, shortening the dollar-weighted average portfolio maturity, withholding
or reducing dividends, reducing the number of a Fund's outstanding Shares
without monetary consideration, or utilizing a net asset value per Share
determined by using available market quotations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each of the Trust's Funds are sold on a continuous basis by
BISYS Fund Services Limited Partnership ("BISYS"), and BISYS has agreed to use
appropriate efforts to solicit all purchase orders. In addition to purchasing
Shares directly from BISYS, Shares may be purchased through procedures
established by BISYS in connection with the requirements of accounts at or
AmSouth or financial institutions that provide certain support services for
their customers or account holders ("Financial Institutions"). Customers
purchasing Shares of the Trust may include officers, directors, or employees of
AmSouth or AmSouth's correspondent banks.
Purchase of Shares
As stated in the Prospectus, the public offering price of the Class I,
Class II, and Class III Shares is their net asset value per Share, as next
computed after an order is received.
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.
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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.
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 Premier Shares if, because of
redemptions of Shares by or on behalf of the Shareholder, the account of such
Shareholder in Class I Shares of an Institutional Money Market Fund has a value
of less than $3 million. Accordingly, an investor purchasing Class I Shares of
an Institutional Money Market Fund in only the minimum investment amount may be
subject to such involuntary conversion to Premier Shares of a Money Market Fund
if he or she thereafter redeems some of his or her Shares. Before the Trust
exercises its right to convert Class I Shares to Premier Shares, the Shareholder
will be given notice that the value of the Class I Shares in his or her account
is less than the
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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 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
B-15
<PAGE> 385
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 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
B-16
<PAGE> 386
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 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> 387
<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
3435 Stelzer Road of BISYS Fund Services Limited
Columbus, Ohio 43219 Partnership
Dick D. Briggs, Jr., M.D. 65 Trustee From September 1989 to present,
459 DER Building Emeritus Professor and Eminent
1808 7th Avenue South Scholar Chair, Univ. of Alabama at
UAB Medical Center Birmingham; from October 1979 to
Birmingham, Alabama 35294 present, Physician, 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
Mobile, Alabama 36608 August, 1993, Executive Vice
President, Chief Operating Officer and
Director, Mobile Gas Service
Corporation
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired;
751 Cary Drive until June 1991, Vice President,
Auburn, Alabama 36830-2505 Birmingham Division, Alabama Power
Company
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The
The University of North Sessions Group; from July 1989 to
Carolina at Charlotte present, Chancellor, The
Charlotte, North Carolina 28223 University of North Carolina at
Charlotte; from April 1997 to
present, Trustee, BISYS Variable
Insurance Funds; from August 1984
to July 1989, Senior Vice
President, University College,
University of Alabama at Birmingham
</TABLE>
- -------------
* Indicates an "interested person" of the Trust as defined in the 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
B-18
<PAGE> 388
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>
**(1)John F. Calvano 39 President From October, 1994 to present, employee of
BISYS Fund Services Limited Partnership; from
July, 1992 to August, 1994, investment
representative, BA Investment Services; and
from October, 1986 to July, 1994, Marketing
Manager, Great Western Investment
Management.
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 present,
President of Leigh Investments Consulting
(investments firm).
Charles L. Booth 39 Treasurer From 1988 to present, employee of BISYS Fund
Services Limited Partnership.
*(1) moved from here;
text not shown
James L. Smith 39 Secretary From October 1996 to present, employee of
BISYS Fund Services Limited Partnership; from
October, 1995 to October, 1996, employee of
Davis, Graham & Stubbs; from June, 1991 to
October, 1995, Director of Legal and
Compliance, ALPS Mutual Fund Services, Inc.
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.
</TABLE>
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<PAGE> 389
<TABLE>
<S> <C> <C> <C>
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. Calvano, Cusick, Grimm, Booth and
Smith 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>
None None None
J. David Huber $14,000 None None $14,000
James H.
Woodward, Jr. $14,000 None None $14,000
Homer H. Turner $14,000 None $14,000
Wendell D. Cleaver $14,000 None None $14,000
Dick D. Briggs, Jr., None None
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 Maturity 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 Maturity 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."
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<PAGE> 390
In selecting investments for the Equity 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 Obligations Fund forty one-hundredths of one percent
(0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one percent
(0.40%) annually; the Institutional Prime Obligations Fund - twenty
one-hundredths of one percent (0.20%); the Institutional U.S. Treasury Fund -
twenty one-hundredths of one percent (0.20%); the Equity Fund - eighty
one-hundredths of one percent (0.80%) annually; the Regional Equity Fund -
eighty one-hundredths of one percent (0.80%) annually; the Tax Exempt Fund -
forty one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Maturity Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund -
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Capital Growth Fund - eighty one-hundredths of one percent (0.80%) annually; the
Small Cap Fund - one hundred twenty one-hundredths of one percent (1.20%)
annually; the Select Equity Fund - eighty one hundredths of one percent (.80%)
annually; and the Enhanced Market Fund forty-five hundredths of one percent
(.45%) annually. A fee agreed to in writing from time to time by the Trust and
the 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.
B-21
<PAGE> 391
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 July 31, 1998 July 31, 1997
----------- -------------------------------- -----------------------------
Additional Additional
Amount Amount
Paid Paid Waived Paid Waived
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Balanced Fund $3,046,371 $3,005,940 $NA $2,855,190 $NA
Capital Growth Fund 207,326 70,873 NA NA NA
Enhanced Market Fund 78,331 NA NA NA NA
Equity Fund 8,292,490 7,981,703 NA 3,733,019 NA
Equity Income Fund 324,890 267,522 NA 36,130 NA
Regional Equity Fund 856,308 1,263,837 NA 953,375 NA
Select Equity Fund 129,762 NA NA NA NA
Small Cap Fund 127,255 33,202 NA NA NA
Bond Fund 1,784,041 1,581,387 NA 745,426 224,000
Government Income Fund 28,600 32,006 NA 41,620 48,000
Limited Maturity Fund 565,032 595,473 NA 247,500 74,000
Florida Tax-Free Fund 212,699 170,463 NA 156,820 183,000
Municipal Bond Fund 1,305,134 1,335,325 NA 111,117 70,000
Prime Obligation Fund 2,765,375 2,515,690 NA 2,366,707 NA
U.S. Treasury Fund 1,261,718 1,256,351 NA 1,325,127 NA
Tax Exempt Fund 191,668 176,963 176,963 160,785 160,785
Institutional Prime
Obligations Fund
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 Maturity Fund until January 31, 2000 and
for successive one-year periods thereafter if such continuance is approved at
least annually by the Trust's Board of Trustees or by vote of the holders of a
majority of the outstanding voting Shares of the Limited
B-22
<PAGE> 392
Maturity 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 Capital 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 Capital Growth Fund until July 31, 2000, with respect to the Small Cap Fund
until January 31, 2000, and with respect
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<PAGE> 393
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 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
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<PAGE> 394
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.
The Trust will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, BISYS, the Sub-
Adviser, or their affiliates, and will not give preference to AmSouth's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by the
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 :
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<PAGE> 395
<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
Capital Growth Fund 34,442 NA NA
Enhanced Market Fund 20,125** NA NA
======== ======== ========
Equity 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.
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.
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
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<PAGE> 396
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 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
B-27
<PAGE> 397
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:
<TABLE>
<CAPTION>
Fiscal Year or Period Ended
July 31, July 31, 1998 July 31, 1997
-------------- -------------- ------------------------------
Additional
Amount
Paid Paid Paid Waived
----- ------ ---- ------
<S> <C> <C> <C> <C>
Balanced Fund $ 761,600 $ 751,492 $ 549,167 $ 165,000
Capital Growth Fund -- 2,137 NA NA
Enhanced Market Fund -- NA NA NA
Equity Fund 2,073,141 1,995,442 745,786 188,000
Equity Income Fund 81,223 66,881 9,033 NA
Regional Equity Fund 214,079 316,102 187,612 51,000
Select Equity Fund -- NA NA NA
Small Cap Fund -- 0 NA NA
Bond Fund 428,174 379,537 178,921 119,000
Government Income Fund 9,533 10,668 13,872 14,000
Limited Maturity Fund 135,609 142,915 59,376 60,000
Florida Tax-Free Fund 70,901 6,820 52,227 53,000
Municipal Bond Fund 391,544 400,601 33,335 22,000
Prime Obligation Fund 1,382,700 1,257,853 1,183,357 NA
U.S. Treasury Fund 630,865 628,179 662,565 NA
Tax Exempt Fund 191,672 176,963 160,785 NA
Institutional Prime
Obligations Fund
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
B-28
<PAGE> 398
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 Premier, Classic,
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 Classic, 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 Classic 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-29
<PAGE> 399
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.
Classic Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Classic Shares of each Fund.
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 Classic 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 Classic 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 Classic Class. The Trust's Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the 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
B-30
<PAGE> 400
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 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.
B-31
<PAGE> 401
For the fiscal year ended July 31, 1999, the Distributor received the
following servicing fees with respect to the Classic Shares and the following
distribution fees with respect to the Class B, Class II and Class III Shares
from the following Funds:
<TABLE>
<CAPTION>
Fund Classic Shares Class B Shares
- ---- -------------- --------------
<S> <C> <C>
Balanced Fund $113,423 $ 78,669
Capital Growth Fund $ 28,262 $ 51,893
Enhanced Market Fund $ 17,938 $ 20,045
Equity Fund $178,812 $102,305
Equity Income Fund $ 58,845 $ 77,644
Regional Equity Fund $ 76,403 $ 15,114
Select Equity Fund $ 17,905 $ 8,018
Small Cap Fund $ 3,080 $ 8,620
Bond Fund $ 7,330 $ 16,859
Government Income Fund $ 6,909 $ --
Limited Maturity Fund $ 3,008 $ 4,053
Florida Tax-Free Fund $ 9,991 $ 1,086
Municipal Bond Fund $ 58,845 $ 77,644
Prime Obligation Fund $134,574 $ 1,468
U.S. Treasury Fund $ 6,422 $ --
Tax Exempt Fund $ 25,017 $ --
</TABLE>
<TABLE>
<CAPTION>
Fund Class II Shares Class III Shares
- ---- --------------- ----------------
<S> <C> <C>
Institutional Prime
Obligations Fund $17,200 $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
B-32
<PAGE> 402
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.
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.
B-33
<PAGE> 403
Auditors
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
incorporated by reference into this Statement of Additional Information which
have been audited by PricewaterhouseCoopers, LLP, independent accountants, as
set forth in their report incorporated by reference herein, and are included in
reliance upon such report and on the authority of such firm as experts in
auditing and accounting. PricewaterhouseCoopers, LLP's address is 100 East Broad
Street, Columbus, Ohio 43215.
Legal Counsel
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
PERFORMANCE INFORMATION
General
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry indices or other
appropriate benchmarks; and (8) discussions of fund rankings or ratings by
recognized rating organizations.
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
B-34
<PAGE> 404
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 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.
B-35
<PAGE> 405
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
Premier Shares and Classic Shares of each Money Market Fund, calculated as
described, above was as follows:
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
---- ----- ----- ----- ----- ---------------
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Premier 4.39 % 4.48 % -- --
U.S. Treasury Fund Premier 4.05 % 4.13 % -- --
Tax Exempt Fund Premier 2.57 % 2.60 % 4.25 % 4.30 %
Prime Obligations Fund Classic 4.29 % 4.37 % -- --
U.S. Treasury Fund Classic 3.96 % 4.02 % -- --
Tax Exempt Fund Classic 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 N/A N/A N/A N/A
Institutional
Prime Obligations Fund Class II 4.58 % 4.68 % -- --
Institutional
U.S. Treasury Fund Class II N/A N/A N/A N/A
Institutional
Prime Obligations Fund Class III 4.33 % 4.42 % -- --
Institutional
U.S. Treasury Fund Class III N/A N/A N/A N/A
</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
B-36
<PAGE> 406
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:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
---- ----- ----- -----
<S> <C> <C> <C>
Florida Fund Classic 3.88% 6.42%
Premier 3.96% 6.56%
Municipal Bond Fund Classic 4.01% 6.64%
Premier 4.10% 6.79%
Bond Fund Classic 5.43% N/A
Premier 5.53% N/A
Class B 4.60% N/A
Government Income Fund Classic 6.11% N/A
Premier 6.22% N/A
Limited Maturity Fund Classic 5.29% N/A
Premier 5.38% N/A
</TABLE>
B-37
<PAGE> 407
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>
Equity Fund Premier 0.63%
Regional Equity Fund Premier 0.28%
Balanced Fund Premier 2.84%
Equity Income Fund Premier 0.79%
Capital Growth Fund Premier -0.38%
Small Cap Fund Premier -0.99%
Enhanced Market Fund Premier 0.31%
Select Equity Fund Premier -0.84%
Equity Fund Classic 0.38%
Regional Equity Fund Classic 0.03%
Balanced Fund Classic 2.59%
Equity Income Fund Classic 0.54%
Capital Growth Fund Classic -0.63%
Small Cap Fund Classic -1.24%
Enhanced Market Fund Classic 0.56%
Select Equity Fund Classic -1.10%
Equity 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%
Capital 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-38
<PAGE> 408
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 Obligations Fund Premier 4.59% 4.99%
U.S. Treasury Fund Premier 4.16% 4.70%
Tax Exempt Fund Premier 2.76% 3.08%
Prime Obligations Fund Classic 4.48% 4.92%
U.S. Treasury Fund Classic 4.06% 4.63%
Tax Exempt Fund Classic 2.66% 3.01%
Florida Fund Classic -2.06% NA
Bond Fund Classic -1.52% 6.00%
Limited Maturity Fund Classic -0.11% 5.03%
Government Income Fund Classic -1.47% 5.86%
Municipal Bond Classic -1.77% 3.71%
Institutional
Prime Obligations Fund Class I N/A N/A
Institutional
U.S. Treasury Fund Class I N/A N/A
Institutional
Prime Obligations Fund Class II N/A N/A
Institutional
U.S. Treasury Fund Class II N/A N/A
Institutional
Prime Obligations Fund Class III N/A N/A
Institutional
U.S. Treasury Fund Class III N/A N/A
</TABLE>
B-39
<PAGE> 409
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>
Equity Fund Premier 15.43% 19.61%
Regional Equity Fund Premier -9.57% 10.32%
Balanced Fund Premier 9.74% 13.71%
Capital Growth Fund Premier 22.05% NA
Equity Income Fund Premier 14.43% NA
Equity Fund Classic 9.74% 18.38%
Regional Equity Fund Classic -13.90% 9.20%
Balanced Fund Classic 4.45% 12.55%
Capital Growth Fund Classic 16.26% NA
Equity Income Fund Classic 9.03% NA
Equity Fund Class B 9.03% 18.95%
Regional Equity Fund Class B -14.73% 9.63%
Balanced Fund Class B 3.74% 13.04%
Capital Growth Fund Class B 15.96% NA
Equity Income Fund Class B 8.34% NA
</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>
Prime Obligations Fund Premier 5.33% August 8, 1988
U.S. Treasury Fund Premier 5.08% September 8, 1988
Tax Exempt Fund Premier 3.06% June 27, 1988
Florida Fund Premier 5.05% September 2, 1997
Municipal Bond Fund Premier 5.90% September 2, 1997
Bond Fund Premier 7.94% September 2, 1997
Limited Maturity Fund Premier 6.78% September 2, 1997
Government Income Fund Premier 5.69% September 2, 1997
Prime Obligations Fund Classic 5.30% April 1, 1996
U.S. Treasury Fund Classic 5.05% April 1, 1996
Tax Exempt Fund Classic 3.03% April 1, 1996
Florida Fund Classic 4.10% September 30, 1994
Municipal Bond Fund Classic 5.72% July 1, 1997
Bond Fund Classic 7.51% December 1, 1988
Limited Maturity Fund Classic 6.34% February 1, 1988
Government Income Fund Classic 4.94% October 1, 1993
Bond Fund Class B 7.75% September 2, 1997
Prime Obligations Fund Class B 3.62% June 15, 1998
Institutional
Prime Obligations Fund Class I 4.31% September 15, 1998
Institutional
</TABLE>
B-40
<PAGE> 410
<TABLE>
<S> <C> <C> <C>
U.S. Treasury Fund Class I N/A Not Funded
Institutional
Prime Obligations Fund Class II 3.94 % September 15, 1998
Institutional
U.S. Treasury Fund Class II N/A Not Funded
Institutional
Prime Obligations Fund Class III 3.82 % September 15, 1998
Institutional
U.S. Treasury Fund Class III N/A 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>
Equity Fund Premier 15.49% December 1, 1988
Regional Equity Fund Premier 12.36% December 1, 1988
Balanced Fund Premier 12.97% December 19, 1991
Equity Income Fund Premier 17.01% March 20, 1997
Capital Growth Fund Premier 19.36% July 31, 1997
Small Cap Fund Premier -11.30% March 2, 1998
Enhanced Market Fund Premier 40.10% September 1, 1998
Select Equity Fund Premier 19.62% September 1, 1998
Equity 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
Capital 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
Equity Fund Classic 14.93% December 1, 1988
Regional Equity Fund Classic 11.83% December 1, 1988
Balanced Fund Classic 12.22% December 19, 1991
Equity Income Fund Classic 14.54% March 20, 1997
Capital Growth Fund Classic 16.34% August 3, 1997
Small Cap Fund Classic -14.27% March 2, 1998
Enhanced Market Fund Classic 33.66% September 1, 1998
Select Equity Fund Classic 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.
B-41
<PAGE> 411
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/ Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
All Funds. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by Financial
Institutions for cash management services will reduce a Fund's effective yield
to Customers.
B-42
<PAGE> 412
ADDITIONAL INFORMATION
Organization and Description of Shares
The Trust was organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988 and to "AmSouth Mutual Funds" as of August 19, 1993 by
amendments to the Agreement and Declaration of Trust. A copy of the Trust's
Agreement and Declaration of Trust, as amended (the "Declaration of Trust") is
on file with the Secretary of State of The Commonwealth of Massachusetts. The
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest. The Trust presently
has eighteen series of Shares which represent interests in the Prime Obligations
Fund, the U.S. Treasury Fund, the Tax Exempt Fund, the Equity Fund, the Regional
Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced Fund, the
Municipal Bond Fund, the Government Income Fund, the Florida Fund, the Capital
Growth Fund, the Small Cap Fund, the Equity Income Fund, the Select Equity Fund,
the Enhanced Market Fund, the Institutional Prime Obligations Fund, and the
Institutional U.S. Treasury Fund. The Trust's Declaration of Trust authorizes
the Board of Trustees to divide or redivide any unissued Shares of the Trust
into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the 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
B-43
<PAGE> 413
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, 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.
B-44
<PAGE> 414
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 Premier Shares, of the Classic 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 Premier Shares of the Funds as follows: 92.6% of the Prime Obligations Fund,
46.91% of the U.S. Treasury Fund, 99.99% of the Tax Exempt Fund, 97.49% of the
Equity Fund, 98.90% of the Regional Equity Fund, 98.19% of the Bond Fund, 99.09%
of the Limited Maturity 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 Capital 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 Classic
Shares of the Select Equity Fund and 100% of the Class I, Class II and Class III
Shares of the Institutional Prime Obligation Fund. Under the 1940 Act, AmSouth
may be deemed to be a controlling person of the Premier Class of each of the
above-mentioned Funds. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of 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 Classic Shares of
the Funds as follows: 99.54% of the Prime Obligations 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 Maturity Fund, 36.55% of the
Municipal Bond Fund, 68.22% of the Florida Fund, 13.75% of the Capital 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 Obligations 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
Maturity 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
B-45
<PAGE> 415
of the Classic Shares of the Prime Obligations Fund, Treasury Fund, Tax Exempt
Fund, Municipal Bond Fund, Florida Fund and Small Cap Fund and the Class B
Shares of the Prime Obligations 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:
U.S. Treasury Fund -- Premier Shares
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
<S> <C> <C>
Hare & Co. 160,484,114 -51.83%
One Wall Street
New York, NY 10286
</TABLE>
Limited Maturity Fund -- Classic Shares
<TABLE>
<CAPTION>
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>
Municipal Bond Fund -- Classic Shares
<TABLE>
<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.
B-46
<PAGE> 416
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
B-47
<PAGE> 417
FINANCIAL STATEMENTS
The Independent Accountant's Report for the year ended July 31, 1999,
Financial Statements for the AmSouth Mutual Funds for the period ended July 31,
1999, are all incorporated by reference to the Annual Report of the AmSouth
Mutual Funds, dated as of such dates, which has been previously sent to
Shareholders of each Fund pursuant to the 1940 Act and previously filed with the
Securities and Exchange Commission. A copy of each such report may be obtained
without charge by contacting the Distributor, BISYS Fund Services at 3435
Stelzer Road, Columbus, Ohio 43219 or by telephone toll-free at 800-451-8382.
B-48
<PAGE> 418
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
B-49
<PAGE> 419
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
Corporate Debt and State and Municipal Bond Ratings.
Standard & Poor's Corporation. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B -- Debt rated "B" has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
B-50
<PAGE> 420
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
Moody's Investor Services. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium-grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
B-51
<PAGE> 421
Other Ratings of Municipal Obligations
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. Obligations rated "MIG-2" or
"VMIG-2" denote high quality with ample margins of protection although not so
large as in the preceding rating group.
Preferred Stock Ratings
The following summarizes the ratings used by Moody's for preferred
stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
B-52
<PAGE> 422
"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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Part C of Post-Effective Amendment No. 29
to
Registration Statement
of
AMSOUTH MUTUAL FUNDS
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
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Trustees, but only to the rights of said decedent 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
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,
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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, 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
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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 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.
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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 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
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maintained 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
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.
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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.
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).
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(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).
(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).
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(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
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).
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(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 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
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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).
(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).
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(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.
(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).
(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-
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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).
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.
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Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect
to any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other
proceeding to be liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
such Covered Person's office. Expenses, including counsel fees
so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of
such Covered Person to repay amounts so paid to the Trust if
it is ultimately determined that indemnification of such
expenses is not authorized under this Article, provided,
however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any such
advance payments or (c) either a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
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
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<PAGE> 438
interests of the Trust, after notice that it involves such
indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon
a determination, based upon a review of readily available
facts (as opposed to a full trial type inquiry) that such
Covered Person acted in good faith in the reasonable belief
that his action was in the best interests of the Trust and is
not liable to the Trust or its Shareholders by reasons of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, or (b) there has been obtained an opinion in writing
of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to
the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his action was in the
best interests of the Trust and that such indemnification
would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Any approval pursuant to this Section shall not prevent the
recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered
Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or 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).
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<PAGE> 439
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 March 31, 1999 of $____ billion and
operated 270 banking offices and over 600 ATM locations in
Alabama, Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment
Department since 1915. As of March 31, 1999, AmSouth and its
affiliates had over $___ billion in assets under discretionary
management and provided custody services for an additional
$____ billion in securities. AmSouth is the largest provider
of trust services in Alabama, and its Trust Natural Resources
and Real Estate Department is a major manager of timberland,
mineral, oil and gas properties and other real estate
interests.
There is set forth below information as to any other business,
vocation or employment of a substantial nature (other than
service in wholly-owned subsidiaries or the parent corporation
of AmSouth Bank) in which each director or senior officer of
the Registrant's investment advisor is, or at any time during
the past two fiscal years has been, engaged for his own
account or in the capacity of director, officer, employee,
partner or trustee.
Name and Position with Other business, profession,
AmSouth Bank AmSouth Bank vocation, or employment
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
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<PAGE> 440
Rodney C. Gilbert Chairman of the Board & CEO
Director Enfinity Corporation
3700 Old Leeds Road
Birmingham, Alabama 35213
Elmer B. Harris President and CEO
Director Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Victoria Jackson Gregorious President and CEO
Director DSS/ProDiesel, Inc.
922 Main Street
Nashville, Tennessee 37206
Ronald L. Kuehn, Jr. Chairman of the Board, President and CEO
Director Sonat Inc.
1900 Fifth Avenue North
Birmingham, Alabama 35203
James R. Malone Chairman and CEO
Director HMI Industries, Inc./Intok Capital, Inc.
8889 Pelican Bay Boulevard
Naples, Florida 34108
Claude B. Nielson President and CEO
Director Coca-Cola Bottling Company United, Inc.
4600 East Lake Boulevard
Birmingham, Alabama 35217
Dr. Benjamin F. Payton President
Director Tuskegee University
399 Montgomery Road
Tuskegee, Alabama 36083
C. Dowd Ritter AmSouth Bancorporation
Chairman, President and CEO AmSouth Bank
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
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<PAGE> 441
Herbert A. Sklenar Chairman Emeritus
Director Vulcan Materials Company
Two Metroplex Drive
Birmingham, Alabama 35209
Michael C. Baker None
Senior Executive Vice President
O.B. Grayson Hall, Jr. None
Executive Vice President
David B. Edmonds None
Executive Vice President
Sloan D. Gibson, IV None
Senior Executive Vice President
and Chief Financial Officer
W. Charles Mayer, III None
Senior Executive Vice President
Candice W. Rogers None
Senior Executive Vice President
E.W. Stephenson, Jr. None
Senior Executive Vice President
Alfred W. Swan, Jr. None
Senior Executive Vice President
Stephen A. Yoder None
Executive Vice President
and General Counsel
Rockhaven
Rockhaven Asset Management, LLC ("Rockhaven") is the sub-advisor of the
AmSouth Equity Income Fund. Rockhaven is jointly owned by Christopher H. Wiles
(50%) and AmSouth Bank (50%), and is headquartered in Pittsburgh, Pennsylvania.
As of March 1,
C-18
<PAGE> 442
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 Vice
President and Chief Investment President, Federated Investors,
Officer and Managing Partner Pittsburgh, PA
Michael C. Baker Senior Executive Vice President, AmSouth
Managing Partner Bank, Birmingham, Alabama
Peachtree
Peachtree Asset Management ("Peachtree") is the sub-adviser of the
AmSouth Capital Growth Fund. Peachtree is a division of 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
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Position with Other business, profession,
Peachtree Asset Management vocation, or employment
Lamond Godwin N/A
Chairman & CEO
C-19
<PAGE> 443
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 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.
C-20
<PAGE> 444
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:
Positions and Offices with Positions and
Name and Principal BISYS Fund Services, Offices with
Business Addresses Limited Partnership The Registrant
BISYS Fund Services Sole General None
Limited Partnership Partner
3435 Stelzer Road
Columbus, Ohio 43219
C-21
<PAGE> 445
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
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
100 First Avenue, Suite 1050
Pittsburgh, Pennsylvania 15222
(Sub-Advisor to the Equity Income Fund)
(6) BISYS Fund Services, Inc.
C-22
<PAGE> 446
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-23
<PAGE> 447
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this Amendment
No. 29 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 16th day of September, 1999.
AMSOUTH MUTUAL FUNDS,
Registrant
*/s/ J. David Huber
--------------------
J. David Huber
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
29 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the 16th day of
September, 1999.
Signature Title Date
*/s/ J. David Huber Chairman September 16, 1999
------------------
J. David Huber
*/s/ Charles L. Booth Treasurer September 16, 1999
--------------------
Charles L. Booth
*/s/ James H. Woodward, Jr. Trustee September 16, 1999
--------------------------
James H. Woodward, Jr.
*/s/ Homer H. Turner, Jr. Trustee September 16, 1999
------------------------
Homer H. Turner, Jr.
*/s/ Wendell D. Cleaver Trustee September 16, 1999
------------------------
Wendell D. Cleaver
*/s/ Dick D. Briggs, Jr. Trustee September 16, 1999
--------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest September 16, 1999
--------------------------
Alan G. Priest,
Attorney-in-fact, pursuant to
Powers of Attorney filed herewith
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<PAGE> 448
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> 449
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> 450
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> 451
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> 452
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> 453
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> 454
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
(i) Opinion of Ropes & Gray
(j)(1) Consent of Ropes & Gray
<PAGE> 1
EXHIBIT (i)
OPINION OF ROPES & GRAY
<PAGE> 2
ROPES & GRAY
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005
September 16, 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
September 16, 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. 29 to the Registration Statement of AmSouth Mutual
Funds on Form N-1A under the Securities Act of 1933, as amended.
/s/ ROPES & GRAY
ROPES & GRAY
Washington, D.C.
September 16, 1999
