<PAGE> 1
As filed with the Securities and Exchange Commission
on October 1, 1999
REGISTRATION NOS. 33-21660 AND 811-5551
---------------------------------------
-------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 30 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 31 [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 (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Common Stock.
<PAGE> 2
CROSS REFERENCE SHEET
- ---------------------
Part A
Form N-1A Item No. Prospectus Caption
- ------------------ ------------------
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
Part A of Post-Effective Amendment No. 29 to the Registrant's Registration
Statement (filed September 16, 1999) is incorporated herein by reference in its
entirety).
<PAGE> 3
AMSOUTH MUTUAL FUNDS
-------------------------------------------------------------------
PROSPECTUS
____________, 1999
CAPITAL APPRECIATION FUNDS
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
INCOME FUNDS
TAXABLE FUNDS
AmSouth Limited Term U.S. Government Fund
TAX-FREE FUNDS
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
MONEY MARKET FUNDS
AmSouth U.S. Treasury Money Market Fund
STRATEGIC PORTFOLIOS
MANAGED BY
AMSOUTH BANK AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
Questions? AmSouth Growth & Income Portfolio
Call 1-800-451-8382 AmSouth Moderate Growth & Income Portfolio
or your investment AmSouth Current Income Portfolio
representative.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT APPROVED OR DISAPPROVED THESE FUND SHARES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE
IS COMMITTING A CRIME.
<PAGE> 4
TABLE OF CONTENTS
Carefully review this important
section to learn about each Fund's Description of the Funds - Objectives,
goal, main investment strategies Risk/Return and Expenses
and risks, past performance, and
fees. Overview
Capital Appreciation Funds
-AmSouth International Equity Fund
-AmSouth Mid-Cap Equity Fund
-AmSouth Growth Opportunities Fund
-AmSouth Large-Cap Equity Fund
Income Funds
Taxable Funds
-AmSouth Limited Term U.S.
Government Fund
Tax-Free Funds
-AmSouth Tennessee Tax-Exempt Fund
-AmSouth Limited Term Tennessee
Tax-Exempt Fund
Money Market Funds
-AmSouth U.S. Treasury Money Market
Fund
Strategic Portfolios
-AmSouth Aggressive Growth Portfolio
-AmSouth Growth Portfolio
-AmSouth Growth & Income Portfolio
-AmSouth Moderate Growth & Income
Portfolio
-AmSouth Current Income Portfolio
Review this section for additional Additional Investment Strategies and Risks
information on investment strategies
and risks. Capital Appreciation Funds
-AmSouth International Equity Fund
-AmSouth Mid-Cap Equity Fund
-AmSouth Growth Opportunities Fund
-AmSouth Large-Cap Equity Fund
-2-
<PAGE> 5
Income Funds
Taxable Funds
-AmSouth Limited Term U.S. Government
Fund
Tax-Free Funds
-AmSouth Tennessee Tax-Exempt Fund
-AmSouth Limited Term Tennessee
Tax-Exempt Fund
Money Market Funds
-AmSouth U.S. Treasury Money Market Fund
Strategic Portfolios
Applicable to All Funds
Review this section for details on Fund Management
the people and organizations who
oversee the Funds. Investment Advisers
Investment Sub-Advisers
Primary Portfolio Managers
Administrator and Distributor
Review this section for details on Shareholder Information
how shares are valued, how to
purchase, sell and exchange shares, Choosing a Share Class
related charges and payments of Pricing of Fund Shares
dividends and distributions. Purchasing and Adding to Your Shares
Selling Your Shares
General Policies on Selling Shares
Distribution Arrangements/Sales Charges
Exchanging Your Shares
Dividends, Distributions, and Taxes
Where to learn more about the Back Cover
Funds.
-3-
<PAGE> 6
OVERVIEW
THE FUNDS AmSouth Mutual Funds consist of thirty-one
separate Funds, each with its own
investment strategy and risk/return profile.
Thirteen Funds are described in this
prospectus. The differences in strategy
among the Funds determine the types of
securities in which each Fund invests and
can be expected to affect the degree of
risk each Fund is subject to and its yield
or return. The Funds are actively
managed and, thus, are subject to manager
risk, which is the possibility that
poor securities selection will cause the
Funds to underperform other funds with
similar investment objectives. Because you
could lose money by investing in a
Fund, be sure to read all risk disclosure
carefully before investing.
You should be aware that AmSouth Funds:
- Are not bank deposits
- Are not guaranteed, endorsed or insured
by any bank, financial institution or
government entity such as the Federal
Deposit Insurance Corporation
- Are not guaranteed to achieve their
stated goals
-4-
<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 o uncomfortable with an
investment that will fluctuate in value
-5-
<PAGE> 8
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities of large non-U.S. companies
(i.e., incorporated or organized outside the
United States).
In choosing stocks for the Fund, the Fund's
Sub-Adviser, Lazard Asset Management, looks
for established companies in economically
developed countries that it believes are
undervalued based on their return on total
capital or equity. The Sub-Adviser attempts
to identify undervalued securities through
traditional measures of value, including low
price to earnings ratio, high yield,
unrecognized assets, potential for
management change and the potential to
improve profitability.
The Sub-Adviser focuses on individual stock
selection (a "bottom-up" approach) rather
than on forecasting stock market trends (a
"top-down" approach).
The percentage of the Fund's assets invested
in particular geographic sectors may shift
from time to time in accordance with the
judgment of the Adviser and Sub-Adviser.
Ordinarily, the Fund invests in at least
three different foreign countries. Although
the Fund invests primarily in the stocks of
companies located in developed foreign
countries, it may invest up to 25% of its
total assets in typically large companies
located, or doing significant business in
emerging markets. In addition, the Fund may
have substantial investments in American and
Global Depositary Receipts.
PRINCIPAL INVESTMENT RISKS The Fund's performance will be influenced by
political, social and economic factors
affecting companies in foreign countries.
The securities of foreign issuers fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced. Foreign securities
include special risks such as exposure to
currency fluctuations, a lack of adequate
company information, political instability,
and differing auditing and legal standards.
As a result, you could lose money by
investing in the Fund, particularly if there
is a sudden decline in the share prices of
the Fund's holdings or an overall decline in
the stock markets of the foreign countries
in which the Fund is invested.
Emerging market countries have economic
structures that are generally less diverse
and mature, and political systems that are
less stable, than those of developed
countries. As a result, their markets are
more volatile.
Value stocks involve the risk that they may
never reach what the Sub-Adviser believes is
their full market value. They also may
decline in price, even though in theory they
are already underpriced.
-6-
<PAGE> 9
The Fund is non-diversified and may invest a
greater percentage of its assets in a
particular company compared with other
funds. Accordingly, the Fund's portfolio may
be more sensitive to changes in the market
value of a single company or industry.
-7-
<PAGE> 10
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth International Transaction
Equity Fund, you will pay certain Expenses (fees
fees and expenses, which are paid by you INSTITUTIONAL
described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.50%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
Management 1.25% 1.25% 1.25%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .92% .92% .82%
----------------------------------------------------------------------------
Total Annual 2.17% 2.92% 2.07%
Fund Operating
Expenses(5)
-------------------- -------------------- ------------------ -------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements for each class through April 30, 2000 will be as
follows: Class A, 1.77%; Class B, 2.41%; and Institutional, 1.77% and thereafter
will be: Class A, 2.05%; Class B, 2.65%; and Institutional, 1.80%. Any fee
waiver or expense reimbursement arrangement is voluntary and may be discontinued
at any time.
-8-
<PAGE> 11
EXPENSE EXAMPLE
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth
compare the cost of investing in the International 1 3 5 10
Fund with the cost of investing in other Equity Fund Year Years Years Years
mutual funds. It illustrates the amount -----------------------------------------------------------------------------------
of fees and expenses you would pay, Class A Shares $660 $1,099 $1,562 $2,841
assuming the following:
- - $10,000 investment -----------------------------------------------------------------------------------
- - 5% annual return Class B Shares
- - no changes in the Fund's Assuming $795 $1,204 $1,738 $2,983
operating expenses Redemption
- - reinvestment of all dividends
and distributions Assuming No $295 $ 904 $1,538 $2,983
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------------------------------------
is for comparison only. Institutional $210 $ 649 $1,114 $2,400
Shares
-----------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE> 12
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH MID-CAP FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities of companies publicly traded on
U.S. exchanges that are either included in
the Russell Mid-Cap Growth Index or have
market capitalizations within the range of
such included companies.
In choosing stocks for the Fund, the Fund's
Sub-Adviser, Bennett Lawrence Management,
seeks to identify industries that are
benefiting from major demand trends or
themes and are therefore growing at a much
faster rate than the overall economy. The
Sub-Adviser then typically gathers
information on the companies that are
benefiting from these trends or themes.
Generally, the Fund will not invest in a
company unless the Sub-Adviser has met with
the company's top management. The
Sub-Adviser also seeks to talk to suppliers,
purchasers, and competitors to reinforce its
analysis and monitor the Fund's holdings.
The Sub-Adviser's experience has been that
when mid-sized companies are backed by major
demand trends, they can create attractive
gains for investors.
PRINCIPAL INVESTMENT RISKS Stocks and other equity securities fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced. The value of your
investment in the Fund will fluctuate in
response to movements in the stock market
and the activities of individual portfolio
companies. As a result, you could lose money
by investing in the Fund, particularly if
there is a sudden decline in share prices of
the Fund's holdings or an overall decline in
the stock market.
The Fund invests in mid-cap companies which
carry additional risks. These companies
typically have less predictable earnings
than larger companies and their securities
trade less frequently and in more limited
volume than those of larger, more
established companies. As a result, mid-cap
stocks and thus the Fund's shares may
fluctuate more in value than larger-cap
stocks and funds that focus on them.
Over time, growth companies are expected to
increase their earnings at an above-average
rate. If these expectations are not met, the
stock price can fall drastically--even if
earnings show an absolute increase.
Because demand trends and themes can change,
the Fund's performance could suffer if the
Adviser is slow to respond to such changes.
-10-
<PAGE> 13
<TABLE>
<CAPTION>
FEES AND EXPENSES
- -----------------
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Mid-Cap Fund, Transaction
you will pay certain fees and Expenses (fees
expenses, which are described in paid by you INSTITUTIONAL
the tables. Shareholder directly)(1) CLASS A SHARES CLASS B SHARES SHARES
transaction fees are paid from
your account. Annual Fund Maximum sales 4.50%(2) None None
operating expenses are paid out charge (load) on
of Fund assets, and are reflected purchases as a %
in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
Management 1.00% 1.00% 1.00%
Fee
----------------------------------------------------------------------------
Distribution 0.00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses 1.48% 1.48% 1.38%
----------------------------------------------------------------------------
Total Annual 2.48% 3.23% 2.38%
Fund Operating
Expenses(5)
-------------------- -------------------- ------------------ -------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements will be as follows: Class A, 2.85%; Class B, 3.45%;
and Institutional, 2.60%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
-11-
<PAGE> 14
EXPENSE EXAMPLE
- ---------------
<TABLE>
<S> <C> <C> <C>
Use the example at right to help you AmSouth Mid- 1 3
compare the cost of investing in the Cap Equity Fund Year Years
Fund with the cost of investing in -----------------------------------------------------
other mutual funds. It illustrates the Class A Shares $690 $1,188
amount of fees and expenses you would
pay, assuming the following: -----------------------------------------------------
- - $10,000 investment Class B Shares
- - 5% annual return o no changes in the Assuming $826 $1,295
Fund's operating expenses Redemption
- - reinvestment of all dividends
and distributions Assuming No $326 $ 995
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------
is for comparison only. Institutional $241 $ 742
Shares
-----------------------------------------------------
</TABLE>
-12-
<PAGE> 15
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH GROWTH OPPORTUNITIES FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital growth.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities of U.S. companies with market
capitalizations of at least $500 million
that the Adviser believes offer
opportunities for capital appreciation and
growth of earnings.
In choosing stocks for the Fund, the Adviser
first identifies industries that it believes
will expand over the next few years or
longer. The Adviser then uses fundamental
analysis of company financial statements to
find large U.S. companies within these
industries that offer the prospect of solid
earnings growth. The Adviser also may
consider other factors in selecting
investments for the Fund, including the
development of new or improved products or
services, opportunities for greater market
share, more effective management or other
signs that the company will have greater
than average earnings growth and capital
appreciation.
PRINCIPAL INVESTMENT RISKS Stocks and other equity securities fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced. The value of your
investment in the Fund will fluctuate in
response to movements in the stock market
and the activities of individual portfolio
companies. As a result, you could lose money
by investing in the Fund, particularly if
there is a sudden decline in the share
prices of the Fund's holdings or an overall
decline in the stock market.
The Fund may invest in medium-sized
companies which carry additional risks
because their earnings tend to be less
predictable, their share prices more
volatile and their securities less liquid
than larger, more established companies.
Over time, growth companies are expected to
increase their earnings at an above-average
rate. If these expectations are not met, the
stock price can fall drastically--even if
earnings show an absolute increase.
The Fund is non-diversified and may invest a
greater percentage of its assets in a
particular company compared with other
funds. Accordingly, the Fund's portfolio may
be more sensitive to changes in the market
value of a single company or industry.
-13-
<PAGE> 16
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Capital Growth Transaction
Fund 2, you will pay certain fees Expenses (fees
and expenses, which are paid by you INSTITUTIONAL
described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.50%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
----------------------------------------------------------------------------
Management .80% .80% .80%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .60% .60% .50%
----------------------------------------------------------------------------
Total Annual 1.40% 2.15% 1.30%
Fund Operating
Expenses(5)
-------------------- -------------------- ------------------ -------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements will be: Class A, 1.34%; Class B, 1.94%; and
Institutional, 1.09%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
-14-
<PAGE> 17
EXPENSE EXAMPLE
---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth
compare the cost of investing in the Capital Growth 1 3 5 10
Fund with the cost of investing in Fund(2) Year Years Years Years
other mutual funds. It illustrates the -----------------------------------------------------------------------------------
amount of fees and expenses you would Class A Shares $586 $ 873 $1,181 $2,054
pay, assuming the following:
- - $10,000 investment -----------------------------------------------------------------------------------
- - 5% annual return Class B Shares
- - no changes in the Fund's Assuming $718 $ 973 $1,354 $2,203
operating expenses Redemption
- - reinvestment of all dividends
and distributions Assuming No $218 $ 673 $1,154 $2,203
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------------------------------------
is for comparison only. Institutional $132 $ 412 $ 713 $1,568
Shares
-----------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE> 18
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH LARGE-CAP EQUITY FUND
INVESTMENT OBJECTIVE The Fund seeks to provide
investors with long-term capital
appreciation and, as a secondary objective,
current income.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity
securities of large U.S. companies with
market capitalizations over $1 billion that
the Adviser believes have the potential to
provide capital appreciation and growth of
income.
In choosing stocks for the Fund, the
Adviser's strategy is to select well managed
U.S. companies that have demonstrated
sustained patterns of profitability, strong
balance sheets, and the potential to achieve
predictable, above-average earnings growth.
The Adviser also looks for companies that
pay above-average dividends. The Adviser
seeks to diversify the Fund's portfolio
within the various industries typically
comprising, what the Adviser believes to be,
the Class A growth segments of the U.S.
economy: Technology, Consumer Non-Durables,
Health Care, Business Equipment and
Services, Retail, and Capital Goods.
The Fund invests for long-term growth rather
than short-term profits.
PRINCIPAL INVESTMENT RISKS Stocks and other equity securities fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced. The value of your
investment in the Fund will fluctuate in
response to movements in the stock market
and the activities of individual portfolio
companies. As a result, you could lose money
by investing in the Fund, particularly if
there is a sudden decline in the share
prices of the Fund's holdings or an overall
decline in the stock market.
Over time, growth companies are expected to
increase their earnings at an above-average
rate. If these expectations are not met, the
stock price can fall drastically--even if
earnings show an absolute increase.
The risks and returns of different
industries can vary over the long-term and
short-term. Because of this, the Fund's
performance could suffer during times when
the stocks of companies in the Class A
growth industries in which it is invested
are out of favor.
-16-
<PAGE> 19
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Large-Cap Transaction
Equity Fund, you will pay certain Expenses (fees
fees and expenses, which are paid by you INSTITUTIONAL
described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.50%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
----------------------------------------------------------------------------
Management .80% .80% .80%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .57% .57% .47%
----------------------------------------------------------------------------
Total Annual 1.37% 2.12% 1.27%
Fund Operating
Expenses(5)
-------------------- -------------------- ------------------ -------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements for each class through April 30, 2000 will be as
follows: Class A, 1.04%; and Institutional Class, 1.04% and
-17-
<PAGE> 20
thereafter will be: Class A, 1.41%; Class B, 2.01%; and Institutional, 1.16%.
Any fee waiver or expense reimbursement arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth Large-
compare the cost of investing in the Cap Equity Fund 1 3 5 10
Fund with the cost of investing in other Year Years Years Years
mutual funds. It illustrates the amount ----------------------------------------------------------------------------------
of fees and expenses you would pay, Class A Shares $583 $864 $1,166 $2,022
assuming the following:
- - $10,000 investment ----------------------------------------------------------------------------------
- - 5% annual return Class B Shares
- - no changes in the Fund's Assuming $715 $964 $1,339 $2,171
operating expenses Redemption
- - reinvestment of all dividends
and distributions Assuming No $215 $664 $1,139 $2,171
Because actual returns and operating Redemption
expenses will be different, this ----------------------------------------------------------------------------------
example is for comparison only. Institutional $129 $403 $ 697 $1,534
Shares
-------------------- -------------- ---------------- ------------- -------------
</TABLE>
-18-
<PAGE> 21
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
TAXABLE INCOME FUNDS -- AmSouth Taxable Income Funds 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
-19-
<PAGE> 22
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH LIMITED TERM U.S. GOVERNMENT FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
high current income without assuming undue
risk.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests in securities issued
or guaranteed as to payment of principal and
interest by the U.S. Government, its
agencies or instrumentalities, and enters
into repurchase agreements in respect of
such securities.
In choosing U.S. Government securities for
the Fund, the Adviser follows a controlled
duration strategy which limits how much the
Fund's portfolio duration will differ from
its benchmark--the Merrill Lynch 1-5 Year
Government Bond Index. Typically, the Fund
will have a portfolio duration between one
and four years and a dollar weighted average
portfolio life between one and five years,
depending on market conditions. Duration is
an indication of how sensitive a bond or
mutual fund portfolio may be to changes in
interest rates. For example, the market
price of a bond with a duration of three
years should decline 3% if interest rates
rise 1%. Conversely, the market price of the
same bond should increase 3% if interest
rates fall 1%. The market price of a bond
with a duration of six years should increase
or decline twice as much as the market price
of a bond with a three-year duration.
PRINCIPAL INVESTMENT RISKS Prices of U.S. Government securities tend to
move inversely with changes in interest
rates. The most immediate effect of a rise
in rates is usually a drop in the prices of
such securities, and therefore in the Fund's
share price as well. Interest rate risk is
usually greater for fixed-income securities
with longer maturities or durations. A
security backed by the U.S. Government is
guaranteed only as to timely payment of
interest and principal when held to
maturity. Neither the market value of such
securities nor the Fund's share price is
guaranteed. As a result, the value of your
investment in the Fund will fluctuate and
you could lose money by investing in the
Fund.
-20-
<PAGE> 23
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Limited Term Transaction
U.S. Government Fund, you will Expenses (fees
pay certain fees and expenses, paid by you INSTITUTIONAL
which are described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.00%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
----------------------------------------------------------------------------
Management .65% .65% .65%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .76% .76% .66%
----------------------------------------------------------------------------
Total Annual 1.41% 2.16% 1.31%
Fund Operating
Expenses(5)
----------------------------------------------------------------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements for each class through April 30, 2000 will be as
follows: Class A, 1.22%; Class B, 1.97%; and Institutional,
-21-
<PAGE> 24
1.22% and thereafter will be: Class A, 1.42%; Class B, 2.02%; and Institutional,
1.17%. Any fee waiver or expense reimbursement arrangement is voluntary and may
be discontinued at any time.
EXPENSE EXAMPLE
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth Limited
compare the cost of investing in the Term U.S.
Fund with the cost of investing in Government Fund 1 3 5 10
other mutual funds. It illustrates the Year Years Years Years
amount of fees and expenses you would -----------------------------------------------------------------------------------
pay, assuming the following: Class A Shares $538 $828 $1,140 $2,023
- - $10,000 investment
- - 5% annual return -----------------------------------------------------------------------------------
- - no changes in the Fund's Class B Shares
operating expenses Assuming $719 $976 $1,359 $2,213
- - reinvestment of all dividends Redemption
and distributions
Assuming No $219 $676 $1,159 $2,213
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------------------------------------
is for comparison only. Institutional $133 $415 $ 718 $1,579
Shares
-----------------------------------------------------------------------------------
</TABLE>
-22-
<PAGE> 25
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
TAX-FREE INCOME FUNDS -- AmSouth Tax-Free Income Funds seek tax-exempt income
and invest primarily in Municipal Obligations which are exempt from Federal and,
in the case of the Tennessee Funds, Tennessee income taxes.
WHO MAY WANT TO INVEST? Consider investing in these Funds if you are:
- looking to reduce Federal or Tennessee
taxes on investment income
- seeking monthly Federal or Tennessee 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
-23-
<PAGE> 26
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH TENNESSEE TAX-EXEMPT FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors
with current income exempt from Federal
and Tennessee income taxes without
assuming undue risk.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests substantially all
of its assets in municipal obligations of
the State of Tennessee, its political
subdivisions, authorities and corporations,
that provide income exempt from Federal and
Tennessee personal income taxes.
The average dollar-weighted credit rating of
the municipal obligations held by the Fund
will be at least A-. To further limit credit
risk, the Fund invests only in investment
grade municipal obligations or the unrated
equivalent as determined by the Adviser. The
Adviser evaluates municipal obligations
based on credit quality, financial outlook
and yield potential. Although the Fund
concentrates its assets in Tennessee
municipal obligations, the Adviser strives
to diversify the portfolio across sectors
and issuers within Tennessee. The Fund may
purchase securities of any maturity.
Generally, the average maturity of the
Fund's investments is primarily between six
and ten years.
PRINCIPAL INVESTMENT RISKS The Fund's investments in municipal
obligations will be subject primarily to
interest rate and credit risk.
Prices of municipal obligations tend to move
inversely with changes in interest rates.
The most immediate effect of a rise in rates
is usually a drop in the prices of such
securities, and therefore in the Fund's
share price as well. Interest rate risk is
usually greater for fixed-income securities
with longer maturities or durations. If
interest rates fall, it is possible that
issuers of callable bonds with high interest
coupons will "call" (or prepay) their bonds
before their maturity date. If a call were
exercised by the issuer during a period of
declining interest rates, the Fund is likely
to replace such called security with a lower
yielding security. If that were to happen,
it could decrease the Fund's dividends. As a
result, the value of your investment in the
Fund will fluctuate and you could lose money
by investing in the Fund.
The Fund's investments also are subject to
credit risk, which is the risk that the
issuer of the security will fail to make
timely payments of interest or principal, or
to otherwise honor its obligations. Credit
risk includes the possibility that any of
the Fund's investments will have its credit
rating downgraded or will default.
Because of the Fund's concentration in
Tennessee municipal obligations, the Fund
will be vulnerable to any development in
Tennessee's economy that weakens or
jeopardizes the ability of Tennessee
municipal obligation issuers to pay interest
and principal. As a result, the value of the
Fund's shares may fluctuate more widely than
those of a fund investing in municipal
obligations from a number of different
states.
Although the Fund's objective is to generate
income exempt from Federal and Tennessee
income taxes, interest from some of the
Fund's holdings may be subject to the
Federal alternative minimum tax.
-24-
<PAGE> 27
The Fund is non-diversified and may invest a
greater percentage of its assets in a
particular issuer compared with other funds.
Accordingly, the Fund's portfolio may be
more sensitive to changes in the market
value of a single issuer or industry.
-25-
<PAGE> 28
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Tennessee Tax- Transaction
Exempt Fund, you will pay Expenses (fees
certain fees and expenses, which paid by you INSTITUTIONAL
are described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.00%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
----------------------------------------------------------------------------
Management .65% .65% .65%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .67% .67% .57%
----------------------------------------------------------------------------
Total Annual 1.32% 2.07% 1.22%
Fund Operating
Expenses(5)
----------------------------------------------------------------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements will be: Class A, 1.35%; Class B, 1.85%; and
Institutional, 1.00%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
-26-
<PAGE> 29
EXPENSE EXAMPLE
---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth
compare the cost of investing in the Tennessee Tax- 1 3 5 10
Fund with the cost of investing in other Exempt Fund Year Years Years Years
mutual funds. It illustrates the amount ------------------------------------------------------------------------------
of fees and expenses you would pay, Class A Shares $529 $802 $1,095 $1,927
assuming the following: ------------------------------------------------------------------------------
- - $10,000 investment Class B Shares
- - 5% annual return Assuming $710 $949 $1,314 $2,118
- - no changes in the Fund's Redemption
operating expenses
- - reinvestment of all dividends Assuming No $210 $649 $1,114 $2,118
and distributions Redemption
Because actual returns and operating ------------------------------------------------------------------------------
expenses will be different, this example Institutional $124 $387 $670 $1,477
is for comparison only. Shares
------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE> 30
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
current income exempt from Federal and
Tennessee income taxes without assuming
undue risk.
PRINCIPAL INVESTMENT STRATEGIES The Fund normally invests substantially all
of its assets in municipal obligations of
the State of Tennessee, its political
subdivisions, authorities and corporations,
that provide income exempt from Federal and
Tennessee personal income taxes.
In choosing municipal obligations for the
Fund, the Adviser attempts to reduce
interest rate risk by maintaining a
portfolio duration of under five years and
an effective average portfolio maturity
between three and five years, depending on
market conditions. Duration is an indication
of how sensitive a bond or mutual fund
portfolio may be to changes in interest
rates. For example, the market price of a
bond with a duration of three years should
decline 3% if interest rates rise 1%.
Conversely, the market price of the same
bond should increase 3% if interest rates
fall 1%. The market price of a bond with a
duration of six years should increase or
decline twice as much as the market price of
a bond with a three-year duration.
The average dollar-weighted credit rating of
the municipal obligations held by the Fund
will be at least A-. To further limit credit
risk, the Fund invests only in investment
grade municipal obligations or the unrated
equivalent as determined by the Adviser. The
Adviser evaluates municipal obligations
based on credit quality, financial outlook
and yield potential. Although the Fund
concentrates its assets in Tennessee
municipal obligations, the Adviser strives
to diversify the portfolio across sectors
and issuers within Tennessee.
PRINCIPAL INVESTMENT RISKS The Fund's investments in municipal
obligations will be subject primarily to
interest rate and credit risk.
Prices of municipal obligations tend to move
inversely with changes in interest rates.
The most immediate effect of a rise in rates
is usually a drop in the prices of such
securities, and therefore in the Fund's
share price as well. Interest rate risk is
usually greater for fixed-income securities
with longer maturities or durations. If
interest rates fall, it is possible that
issuers of callable bonds with high interest
coupons will "call" (or prepay) their bonds
before their maturity date. If a call were
exercised by the issuer during a period of
declining interest rates, the Fund is likely
to replace such called security with a lower
yielding security. If that were to happen,
it could decrease the Fund's dividends. As a
result, the value of your investment in the
Fund will fluctuate and you could lose money
by investing in the Fund.
The Fund's investments also are subject to
credit risk, which is the risk that the
issuer of the security will fail to make
timely payments of interest or principal, or
to otherwise honor its obligations. Credit
risk includes the possibility that any of
the Fund's investments will have its credit
rating downgraded or will default.
Because of the Fund's concentration in
Tennessee municipal obligations, the Fund
will be vulnerable to any development in
Tennessee's economy that weakens or
jeopardizes the ability of Tennessee
municipal obligation issuers to
-28-
<PAGE> 31
pay interest and principal. As a result, the
value of the Fund's shares may fluctuate
more widely than those of a fund investing
in municipal obligations from a number of
different states.
Although the Fund's objective is to generate
income exempt from Federal and Tennessee
income taxes, interest from some of the
Fund's holdings may be subject to the
Federal alternative minimum tax.
The Fund is non-diversified and may invest a
greater percentage of its assets in a
particular issuer compared with other funds.
Accordingly, the Fund's portfolio may be
more sensitive to changes in the market
value of a single issuer or industry.
-29-
<PAGE> 32
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Limited Term Transaction
Tennessee Tax-Exempt Fund, Expenses (fees
you will pay certain fees and paid by you INSTITUTIONAL
expenses, which are described in directly)(1) CLASS A SHARES CLASS B SHARES SHARES
the tables. Shareholder
transaction fees are paid from Maximum sales 4.00%(2) None None
your account. Annual Fund charge (load) on
operating expenses are paid out purchases as a %
of Fund assets, and are reflected of offering price
in the share price. ---------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
---------------------------------------------------------------------------
Management .65% .65% .65%
Fee
---------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
---------------------------------------------------------------------------
Other Expenses .94% .94% .84%
---------------------------------------------------------------------------
Total Annual 1.59% 2.34% 1.49%
Fund Operating
Expenses(5)
---------------------------------------------------------------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other cash management services provided in
connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in certain
circumstances, waived. Class A shares bought as part of an investment of $1
million or more are not subject to an initial sales charge, but may be charged a
CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are in effect. Total expenses after fee waivers
and expense reimbursements will be as follows: Class A, 1.54%; Class B, 2.14%;
Institutional 1.29%. Any fee waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
-30-
<PAGE> 33
EXPENSE EXAMPLE
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth
compare the cost of investing in the Limited Term 1 3 5 10
Fund with the cost of investing in other Tennessee Tax- Year Years Years Years
mutual funds. It illustrates the amount Exempt Fund
of fees and expenses you would pay, -----------------------------------------------------------------------------------
assuming the following: Class A Shares $555 $882 $1,231 $2,214
- - $10,000 investment
- - 5% annual return -----------------------------------------------------------------------------------
- - no changes in the Fund's Class B Shares
operating expenses Assuming $737 $1,030 $1,450 $2,401
- - reinvestment of all dividends Redemption
and distributions
Assuming No $237 $730 $1,250 $2,401
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------------------------------------
is for comparison only. Institutional $152 $471 $813 $1,779
Shares
-----------------------------------------------------------------------------------
</TABLE>
-31-
<PAGE> 34
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
MONEY MARKET FUNDS--These Funds seek current income and liquidity and invest
primarily in short-term securities and will seek to maintain a stable price of
$1.00 per share. An investment in these Funds is not insured or guaranteed by
the FDIC or any other government agency.
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 returns
- pursuing a long-term goal or investing for
retirement
-32-
<PAGE> 35
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH U.S. TREASURY MONEY MARKET FUND
INVESTMENT OBJECTIVE The Fund seeks to provide investors with as
high a level of current income as is
consistent with the preservation of capital
and the maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in U.S. Treasury
securities and repurchase agreements in
respect thereof. The Fund may invest up to
35% of its assets in other securities
guaranteed as to payment of principal and
interest by the U.S. Government and
repurchase agreements in respect thereof.
The income from the Fund's investment in
direct obligations of the United States is
exempt from state and local, but not
Federal, income taxes. Dividends and
distributions attributable to income from
repurchase agreements may be subject to
Federal, state and local taxes.
The Fund invests based on considerations of
safety of principal and liquidity, which
means that the Fund may not necessarily
invest in securities paying the highest
available yield at a particular time. The
Fund will attempt to increase its yield by
trading to take advantage of short-term
market variations. The Adviser generally
evaluates investments based on interest rate
sensitivity.
PRINCIPAL INVESTMENT RISKS Although the Fund seeks to preserve the
value of your investment at $1.00 per share,
it is possible to lose money by investing in
the Fund. The Fund is subject to the risk
that changes in interest rates will affect
the yield or value of the Fund's
investments.
A security backed by the U.S. Treasury or
the full faith and credit of the United
States is guaranteed only as to timely
payment of interest and principal when held
to maturity. Neither the market value of
such securities nor the Fund's share price
is guaranteed.
-33-
<PAGE> 36
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth U.S. Treasury Transaction
Money Market Fund, you will Expenses (fees
pay certain fees and expenses, paid by you INSTITUTIONAL
which are described in the tables. directly)(1) CLASS A SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
---------------------------------------------------------
Maximum None None
deferred sales
charge (CDSC)
Redemption Fee(2) 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES INSTITUTIONAL
SHARES
---------------------------------------------------------
Management .40% .40%
Fee
---------------------------------------------------------
Distribution .00% None
(12b-1) Fee
---------------------------------------------------------
Other Expenses .55% .45%
---------------------------------------------------------
Total Annual .95% .85%
Fund Operating
Expenses(3)
---------------------------------------------------------
</TABLE>
1 AmSouth Bank or other financial institutions may change their customer account
fees for automatic investment and other case 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 have been restated for Institutional to reflect current fees.
The expenses noted above do not reflect any fee waivers or expense reimbursement
arrangements that are or were in effect. Total expenses after fee waivers and
expense reimbursements through April 30, 2000 are as follows: Class A, .60%; and
Institutional Class, .60%, and thereafter will be: Class A, .72%; and
Institutional Class, .62%. Any fee waiver or expense reimbursement arrangement
is voluntary and may be discontinued at any time.
-34-
<PAGE> 37
EXPENSE EXAMPLE
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Use the example at right to help you AmSouth U.S.
compare the cost of investing in the Treasury Money 1 3 5 10
Fund with the cost of investing in other Market Fund Year Years Years Years
mutual funds. It illustrates the amount -------------------------------------------------------------------------------
of fees and expenses you would pay, Class A Shares $97 $303 $525 $1,166
assuming the following:
- - $10,000 investment -------------------------------------------------------------------------------
- - 5% annual return Institutional $87 $271 $471 $1,049
- - no changes in the Fund's Shares
operating expenses -------------------------------------------------------------------------------
- - reinvestment of all dividends
and distributions
Because actual returns and operating expenses will be
different, this example is for comparison only.
</TABLE>
-35-
<PAGE> 38
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
STRATEGIC PORTFOLIOS--These Funds are "funds of funds" which will invest
substantially all of their assets in Institutional Shares of other Funds of the
AmSouth Mutual Funds (Underlying Funds) as described herein.
WHO MAY WANT TO INVEST? Consider investing in these Funds if you are:
- seeking to spread your investment among
many different mutual funds that match
your goals in one simple package
- seeking investment professionals to
select and maintain a portfolio of
mutual funds for you
- seeking the benefits of asset allocation
and multiple levels of risk reducing
diversification
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
-36-
<PAGE> 39
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH AGGRESSIVE GROWTH PORTFOLIO
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital growth.
PRINCIPAL INVESTMENT STRATEGIES The Fund allocates its assets among the
Underlying Funds within predetermined
strategy ranges, as set forth below. The
Adviser will make allocation decisions
according to its outlook for the economy,
financial markets and relative market
valuation of the Underlying Funds.
The Fund will invest 0% to 100% of its total
assets in five Underlying Funds which invest
primarily in equity securities and up to 30%
of its total assets in one Underlying Fund
which invests in money market instruments.
The Fund will invest its assets in the
following Underlying Funds within the
strategy ranges (expressed as a percentage
of the Fund's total assets) indicated below:
<TABLE>
<CAPTION>
UNDERLYING FUND STRATEGY RANGE
- --------------- --------------
<S> <C>
AmSouth Large-Cap Equity Fund 0%-70%
AmSouth Growth Opportunities Fund 0%-45%
AmSouth Small-Cap Fund 0%-30%
AmSouth International Equity Fund 0%-20%
AmSouth Mid-Cap Equity Fund 0%-30%
AmSouth Prime Obligations Fund 0%-30%
</TABLE>
The Underlying Funds are described elsewhere in this Prospectus.
PRINCIPAL INVESTMENT RISKS The Fund's investments are concentrated in
the Underlying Funds, so the Fund's
investment performance is directly related
to the performance of those Underlying
Funds. Before investing in the Fund,
investors should assess the risks associated
with the Underlying Funds in which the Fund
invests and the types of investments made by
such Underlying Funds. In addition, since
the Fund must allocate its investments among
the Underlying Funds, the Fund does not have
the same flexibility to invest as a mutual
fund without such constraints. As a result,
you could lose money by investing in the
Fund, particularly if there is a sudden
decline in the share prices of the
Underlying Fund's holdings.
The Fund invests in Underlying Funds that
invest primarily in equity securities.
Stocks and other equity securities fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced.
-37-
<PAGE> 40
<TABLE>
<CAPTION>
FEES AND EXPENSES
- ------------------
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Aggressive Transaction
Growth Portfolio, you will pay Expenses (fees
certain fees and expenses, which paid by you INSTITUTIONAL
are described in the tables. directly)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.50%(2) NONE NONE
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
------------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) Class A Shares Class B Shares Institutional
Shares
------------------------------------------------------------------------------
Management .20% .20% .20%
Fee
------------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
------------------------------------------------------------------------------
Other Expenses .69% .69% .59%
Total Annual
------------------------------------------------------------------------------
Fund Operating .89% 1.64% .79%
Expenses(5)
-------------------- -------------------- ------------------ -------------------
</TABLE>
(1) AmSouth Bank or other financial institutions may change their customer
account fees for automatic investment and other cash management services
provided in connection with investment in the Funds.
(2) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. Class A shares bought as part of an investment of
$1 million or more are not subject to an initial sales charge, but may be
charged a CDSC of 1.00% if sold within one year of purchase.
(3) For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
(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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
-38-
<PAGE> 41
In addition to the expenses shown above, if you buy and hold shares of the
AmSouth Aggressive Growth Portfolio you will indirectly bear your pro rata share
of fees and expenses incurred by the Underlying Funds in which the Fund invests,
so that the investment returns of the Fund will be net of the expenses of the
Underlying Funds. After combining the total operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratio is
as follows:
AMSOUTH AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Class A Class B Institutional
Shares Shares Shares
- ---------- --------- --------------
<S> <C> <C>
2.42% 3.17% 2.32%
</TABLE>
-39-
<PAGE> 42
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C>
Use the example at right to help you AmSouth Aggressive 1 3
compare the cost of investing in the Growth Portfolio Year Years
Fund with the cost of investing in other
mutual funds. It illustrates the amount ---------------------------------------------------------
of fees and expenses you would pay,
assuming the following: Class A Shares $684 $1,171
---------------------------------------------------------
- - $10,000 investment Class B Shares
- - 5% annual return Assuming $820 $1,277
- - no changes in the Fund's Redemption
operating expenses
- - reinvestment of all dividends Assuming No $320 $977
and distributions Redemption
---------------------------------------------------------
Because actual returns and operating Institutional Shares $235 $724
expenses will be different, this example ---------------------------------------------------------
is for comparison only.
</TABLE>
-40-
<PAGE> 43
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
<TABLE>
<CAPTION>
AMSOUTH GROWTH PORTFOLIO
<S> <C>
Investment Objective The Fund seeks to provide investors with long-term capital growth.
Principal Investment Strategies The Fund allocates its assets among the Underlying Funds within predetermined
strategy ranges, as set forth below. The Adviser will make allocation decisions
according to its outlook for the economy, financial markets and relative market
valuation of the Underlying Funds.
The Fund will invest 0% to 100% of its total assets in six Underlying Funds
which invest primarily in equity securities, up to 20% of its total assets in one
Underlying Fund which invests primarily in fixed income securities and up to
20% of its total assets in one Underlying Fund which invests in money market
instruments. The Fund will invest its assets in the following Underlying Funds
within the strategy ranges (expressed as a percentage of the Fund's total assets)
indicated below:
</TABLE>
<TABLE>
<CAPTION>
Underlying Fund Strategy Range
- --------------- --------------
<S> <C>
AmSouth Large-Cap Equity Fund 0%-65%
AmSouth Growth Opportunities Fund 0%-25%
AmSouth Equity Income Fund 0%-25%
AmSouth Small-Cap Fund 0%-25%
AmSouth International Equity Fund 0%-15%
AmSouth Prime Obligations Fund 0%-20%
AmSouth Mid-Cap Equity Fund 0%-25%
AmSouth Government Income Fund 0%-25%
</TABLE>
The Underlying Funds are described elsewhere in this Prospectus.
<TABLE>
<S> <C>
Principal Investment Risks The Fund's investments are concentrated in the Underlying Funds, so the Fund's
investment performance is directly related to the performance of those
Underlying Funds. Before investing in the Fund, investors should assess the
risks associated with the Underlying Funds in which the Fund invests and the
types of investments made by such Underlying Funds. In addition, since the
Fund must allocate its investments among the Underlying Funds, the Fund does
not have the same flexibility to invest as a mutual fund without such constraints.
As a result, you could lose money by investing in the Fund, particularly if there
is a sudden decline in the share prices of the Underlying Fund's holdings.
The Fund invests in Underlying Funds that invest primarily in equity securities.
Stocks and other equity securities fluctuate in price, often based on factors
unrelated to the issuers' value, and such fluctuations can be pronounced.
</TABLE>
-41-
<PAGE> 44
FEES AND EXPENSES
- -----------------
<TABLE>
<S> <C> <C> <C> <C>
If you purchase and hold shares Shareholder
of the AmSouth Growth Transaction
Portfolio, you will pay certain Expenses (fees
fees and expenses, which are paid by you Institutional
described in the tables. directly)(1) Class A Shares Class B Shares 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. ----------------------------------------------------------------------------
Maximum sales 4.50%(2) None None
charge (load) on
purchases as a %
of offering price
----------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
----------------------------------------------------------------------------
Management .20% .20% .20%
Fee
----------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
----------------------------------------------------------------------------
Other Expenses .69% .69% .59%
----------------------------------------------------------------------------
Total Annual .89% 1.64% .79%
Fund Operating
Expenses(5)
----------------------------------------------------------------------------
</TABLE>
(1) AmSouth Bank or other financial institutions may change their customer
account fees for automatic investment and other cash management services
provided in connection with investment in the Funds.
(2) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. Class A shares bought as part of an investment of
$1 million or more are not subject to an initial sales charge, but may be
charged a CDSC of 1.00% if sold within one year of purchase.
(3) For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
(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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
-42-
<PAGE> 45
In addition to the expenses shown above, if you buy and hold shares of the
AmSouth Growth Portfolio you will indirectly bear your pro rata share of fees
and expenses incurred by the Underlying Funds in which the Fund invests, so that
the investment returns of the Fund will be net of the expenses of the Underlying
Funds. After combining the total operating expenses of the Fund with those of
the Underlying Funds, the estimated average weighted expense ratio is as
follows:
AMSOUTH GROWTH PORTFOLIO
CLASS A CLASS B INSTITUTIONAL
SHARES SHARES SHARES
- ------- --------- -------------
2.28% 3.03% 2.18%
-43-
<PAGE> 46
EXPENSE EXAMPLE
- ----------------
<TABLE>
<S> <C> <C> <C>
Use the example at right to help you AmSouth Growth 1 3
compare the cost of investing in the Portfolio Year Years
Fund with the cost of investing in other -----------------------------------------------------------------
mutual funds. It illustrates the amount
of fees and expenses you would pay,
assuming the following: Class A Shares $671 $1,130
- - $10,000 investment -----------------------------------------------------------------
- - 5% annual return Class B Shares
- - no changes in the Fund's Assuming $806 $1,236
operating expenses Redemption
- - reinvestment of all dividends
and distributions Assuming No $306 $936
Because actual returns and operating Redemption
expenses will be different, this example -----------------------------------------------------------------
is for comparison only.
Institutional Shares $221 $682
------------------------- ------------- ------------------------
</TABLE>
-44-
<PAGE> 47
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AmSouth Growth & Income Portfolio
Investment Objective The Fund seeks to provide investors with
long-term capital growth and a moderate level
of current income.
Principal Investment
Strategies The Fund allocates its assets among the
Underlying Funds within predetermined strategy
ranges, as set forth below. The Adviser will
make allocation decisions according to its
outlook for the economy, financial markets and
relative market valuation of the Underlying
Funds.
The Fund will invest 0% to 100% of its total
assets in six Underlying Funds which invest
primarily in equity securities, 0% to 80% of
its total assets in two Underlying Funds which
invest primarily in fixed income securities and
up to 20% of its total assets in one Underlying
Fund which invests in money market instruments.
The Fund will invest its assets in the
following Underlying Funds within the strategy
ranges (expressed as a percentage of the Fund's
total assets) indicated below:
Underlying Fund Strategy Range
- --------------- --------------
AmSouth International Equity Fund 0%-15%
AmSouth Small-Cap Fund 0%-20%
AmSouth Mid-Cap Equity Fund 0%-20%
AmSouth Government Income Fund 0%-60%
AmSouth Large-Cap Equity Fund 0%-60%
AmSouth Growth Opportunities Fund 0%-25%
AmSouth Equity Income Fund 0%-25%
AmSouth Limited Maturity Fund 0%-20%
AmSouth Prime Obligations Fund 0%-20%
The Underlying Funds are described elsewhere in this Prospectus.
Principal Investment Risks The Fund's investments are concentrated in the
Underlying Funds, so the Fund's investment
performance is directly related to the
performance of those Underlying Funds. Before
investing in the Fund, investors should assess
the risks associated with the Underlying Funds
in which the Fund invests and the types of
investments made by such Underlying Funds. In
addition, since the Fund must allocate its
investments among the Underlying Funds, the
Fund does not have the same flexibility to
invest as a mutual fund without such
constraints. As a result, you could lose money
by investing in the Fund, particularly if there
is a sudden decline in the share prices of the
Underlying Fund's holdings.
The Fund invests in Underlying Funds that
invest primarily in equity securities. Stocks
and other equity securities fluctuate in price,
often based on factors unrelated to the
issuers' value, and such fluctuations can be
pronounced.
The Fund also invests in Underlying Funds that
invest primarily in fixed income securities,
which are subject to interest rate and credit
risk. Interest rate risk is the potential for a
decline in bond prices due to rising interest
rates. Credit risk is the possibility that the
issuer of a fixed-income security will fail to
make timely payments of interest or principal,
or that the security will have its credit
rating downgraded.
-45-
<PAGE> 48
<TABLE>
<CAPTION>
FEES AND EXPENSES
- -----------------
<S> <C> <C> <C> <C>
If you purchase and hold shares SHAREHOLDER
of the AmSouth Growth & TRANSACTION
Income Portfolio, you will pay EXPENSES (FEES
certain fees and expenses, which PAID BY YOU INSTITUTIONAL
are described in the tables. DIRECTLY)(1) CLASS A SHARES CLASS B SHARES SHARES
Shareholder transaction fees are
paid from your account. Annual Maximum sales 4.50%(2) None None
Fund operating expenses are paid charge (load) on
out of Fund assets, and are purchases as a %
reflected in the share price. of offering price
--------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
--------------------------------------------------------------------------
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) Class A Shares Class B Shares Institutional
Shares
--------------------------------------------------------------------------
Management .20% .20% .20%
Fee
--------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
--------------------------------------------------------------------------
Other Expenses .69% .69% .59%
--------------------------------------------------------------------------
Total Annual .89% 1.64% .79%
Fund Operating
Expenses(5)
-------------------- ------------------- ------------------ --------------------
</TABLE>
(1) AmSouth Bank or other financial institutions may change their customer
account fees for automatic investment and other cash management services
provided in connection with investment in the Funds.
(2) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. Class A shares bought as part of an investment of
$1 million or more are not subject to an initial sales charge, but may be
charged a CDSC of 1.00% if sold within one year of purchase.
(3) For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
(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 based on estimated amounts for the current
fiscal year. The expenses noted above do not reflect any fee waivers or expense
reimbursement arrangements that are or were in effect. Any fee waiver or expense
reimbursement arrangement is voluntary and may be discontinued at any time.
-46-
<PAGE> 49
In addition to the expenses shown above, if you buy and hold shares of the
AmSouth Growth & Income Portfolio you will indirectly bear your pro rata share
of fees and expenses incurred by the Underlying Funds in which the Fund invests,
so that the investment returns of the Fund will be net of the expenses of the
Underlying Funds. After combining the total operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratio is
as follows:
AMSOUTH GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
Class A Class B Institutional
Shares Shares Shares
- -------- -------- ---------------
<S> <C> <C>
2.22% 2.97% 2.12%
</TABLE>
-47-
<PAGE> 50
EXPENSE EXAMPLE
Use the example at right to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It illustrates the amount of
fees and expenses you would pay, assuming the following:
- - $10,000 investment
- - 5% annual return
- - no changes in the Fund's
operating expenses
- - reinvestment of all dividends
and distributions
Because actual returns and operating expenses will be different, this example is
for comparison only.
<TABLE>
<CAPTION>
AmSouth Growth & 1 3
Income Portfolio Year Years
- -----------------------------------------------------------
<S> <C> <C>
Class A Shares $665 $1,113
- -----------------------------------------------------------
Class B Shares
Assuming $800 $1,218
Redemption
Assuming No $300 $918
Redemption
- -----------------------------------------------------------
Institutional Shares $215 $664
- ------------------------- ------------- ------------------
</TABLE>
-48-
<PAGE> 51
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH MODERATE GROWTH & INCOME PORTFOLIO
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
current income and a moderate level of
capital growth.
PRINCIPAL INVESTMENT STRATEGIES The Fund allocates its assets among the
Underlying Funds within Funds within
predetermined strategy ranges, as set forth
below. The Adviser will make allocation
decisions according to its outlook for the
economy, financial markets and relative
market valuation of the Underlying Funds.
The Fund will invest 0% to 80% of its total
assets in three Underlying Funds which
invest primarily in equity securities, 0% to
100% of its total assets in two Underlying
Funds which invest primarily in fixed income
securities and up to 20% of its total assets
in one Underlying Fund which invests in
money market instruments. The Fund will
invest its assets in the following
Underlying Funds within the strategy ranges
(expressed as a percentage of the Fund's
total assets) indicated below:
UNDERLYING FUND STRATEGY RANGE
- --------------- --------------
AmSouth Government Income Fund 0%-70%
AmSouth Limited Maturity Fund 0%-45%
AmSouth Large-Cap Equity Fund 0%-50%
AmSouth Growth Opportunities Fund 0%-15%
AmSouth Equity Income Fund 0%-15%
AmSouth Prime Obligations Fund 0%-20%
The Underlying Funds are described elsewhere in this Prospectus.
PRINCIPAL INVESTMENT RISKS The Fund's investments are concentrated in
the Underlying Funds, so the Fund's
investment performance is directly related
to the performance of those Underlying
Funds. Before investing in the Fund,
investors should assess the risks associated
with the Underlying Funds in which the Fund
invests and the types of investments made by
such Underlying Funds. In addition, since
the Fund must allocate its investments among
the Underlying Funds, the Fund does not have
the same flexibility to invest as a mutual
fund without such constraints. As a result,
you could lose money by investing in the
Fund, particularly if there is a sudden
decline in the share prices of the
Underlying Fund's holdings.
The Fund invests in Underlying Funds that
invest primarily in fixed income securities,
which are subject to interest rate and
credit risk. Interest rate risk is the
potential for a decline in bond prices due
to rising interest rates. Credit risk is the
possibility that the issuer of a
fixed-income security will fail to make
timely payments of interest or principal, or
that the security will have its credit
rating downgraded.
The Fund also invests in Underlying Funds
that invest primarily in equity securities.
Stocks and other equity securities fluctuate
in price, often based on factors unrelated
to the issuers' value, and such fluctuations
can be pronounced.
-49-
<PAGE> 52
FEES AND EXPENSES
If you purchase and hold shares of the AmSouth Moderate Growth & Income
Portfolio, you will pay certain fees and expenses, which are described in the
tables. 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.
Shareholder
Transaction
Expenses (fees
paid by you INSTITUTIONAL
directly)(1) CLASS A SHARES CLASS B SHARES SHARES
- ------------ -------------- -------------- ------
[S] [C] [C] [C]
Maximum sales 4.50%(2) None None
charge (load) on
purchases as a %
of offering price
- -------------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
- -------------------------------------------------------------------------------
Management .20% .20% .20%
Fee
- -------------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
- -------------------------------------------------------------------------------
Other Expenses .69% .69% .59%
- -------------------------------------------------------------------------------
Total Annual .89% 1.64% .79%
Fund Operating
Expenses(5)
- -------------------- ------------------- ------------------ --------------------
1 AmSouth Bank or other financial institutions may change their customer
account fees for automatic investment and other cash management services
provided in connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. Class A shares bought as part of an investment of
$1 million or more are not subject to an initial sales charge, but may be
charged a CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on
the CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
4 A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
-50-
<PAGE> 53
5 Other expenses for each class are based on estimated amounts for the
current fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements that are or were in effect. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
In addition to the expenses shown above, if you buy and hold shares of the
AmSouth Moderate Growth & Income Portfolio you will indirectly bear your pro
rata share of fees and expenses incurred by the Underlying Funds in which the
Fund invests, so that the investment returns of the Fund will be net of the
expenses of the Underlying Funds. After combining the total operating expenses
of the Fund with those of the Underlying Funds, the estimated average weighted
expense ratio is as follows:
AMSOUTH MODERATE GROWTH & INCOME PORTFOLIO
CLASS A CLASS B INSTITUTIONAL
SHARES SHARES SHARES
- ------ ------ ------
2.06% 2.81% 1.96%
-51-
<PAGE> 54
EXPENSE EXAMPLE
Use the example at right to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It illustrates the amount of
fees and expenses you would pay, assuming the following:
- - $10,000 investment
- - 5% annual return
- - no changes in the Fund's operating expenses
- - reinvestment of all dividends and distributions
Because actual returns and operating expenses will be different, this example is
for comparison only.
AmSouth Moderate
Growth & Income 1 3
Portfolio Year Years
- ------------------------------------------------------------
Class A Shares $650 $1,067
- ------------------------------------------------------------
Class B Shares
Assuming $784 $1,171
Redemption
Assuming No $284 $871
Redemption
- ------------------------------------------------------------
Institutional Shares $199 $615
- ------------------------------------------------------------
-52-
<PAGE> 55
DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
AMSOUTH CURRENT INCOME PORTFOLIO
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
current income.
PRINCIPAL INVESTMENT STRATEGIES The Fund allocates its assets among the
Underlying Funds within predetermined
strategy ranges, as set forth below. The
Adviser will make allocation decisions
according to its outlook for the economy,
financial markets and relative market
valuation of the Underlying Funds.
The Fund will invest 75% to 100% of its
total assets in two Underlying Funds which
invest primarily in fixed income securities
and up to 30% of its total assets in one
Underlying Fund which invests in money
market instruments. The Fund will invest its
assets in the following Underlying Funds
within the strategy ranges (expressed as a
percentage of the Fund's total assets)
indicated below:
UNDERLYING FUND STRATEGY RANGE
- --------------- --------------
AmSouth Limited Maturity Fund 40%-60%
AmSouth Bond Fund 35%-55%
AmSouth Prime Obligations Fund 0%-30%
The Underlying Funds are described elsewhere in this Prospectus.
PRINCIPAL INVESTMENT RISKS The Fund's investments are concentrated in
the Underlying Funds, so the Fund's
investment performance is directly related
to the performance of those Underlying
Funds. Before investing in the Fund,
investors should assess the risks associated
with the Underlying Funds in which the Fund
invests and the types of investments made by
such Underlying Funds. In addition, since
the Fund must allocate its investments among
the Underlying Funds, the Fund does not have
the same flexibility to invest as a mutual
fund without such constraints. As a result,
you could lose money by investing in the
Fund, particularly if there is a sudden
decline in the share prices of the
Underlying Fund's holdings.
The Fund invests in Underlying Funds that
invest primarily in fixed income securities,
which are subject to interest rate, credit
and prepayment risk.
Prices of fixed income securities tend to
move inversely with changes in interest
rates. The most immediate effect of a rise
in rates is usually a drop in the prices of
such securities, and therefore in the
Underlying Fund's share price as well.
Interest rate risk is usually greater for
fixed-income securities with longer
maturities or durations. To the extent the
Underlying Funds maintain a comparatively
long duration, their share prices will react
more to interest rate movements.
-53-
<PAGE> 56
The Underlying Funds' investments also are
subject to credit risk, which is the risk
that the issuer of the security will fail to
make timely payments of interest or
principal, or to otherwise honor its
obligations. Credit risk includes the
possibility that any of the Underlying
Funds' investments will have its credit
rating downgraded or will default.
Mortgage-related and asset-backed
securities, which are derivative
instruments, are subject to both credit and
prepayment risk, and may be more volatile
and less liquid than more traditional debt
securities. If the borrowers prepay some or
all of the principal owed to the issuer much
earlier than expected, the Underlying Fund
may have to replace the security by
investing the proceeds in a less attractive
security which could reduce the Underlying
Fund's share price or yield.
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<PAGE> 57
FEES AND EXPENSES
If you purchase and hold shares of the AmSouth Current Income Portfolio, you
will pay certain fees and expenses, which are described in the tables.
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.
Shareholder
Transaction
Expenses (fees
paid by you INSTITUTIONAL
directly)(1) CLASS A SHARES CLASS B SHARES SHARES
4.00%(2) None None
Maximum sales
charge (load) on
purchases as a %
of offering price
- --------------------------------------------------------------------------------
Maximum None 5.00%(3) None
deferred sales
charge (CDSC)
Redemption Fee(4) 0% 0% 0%
Annual Fund
Operating
Expenses (fees
paid from Fund
assets) CLASS A SHARES CLASS B SHARES INSTITUTIONAL
SHARES
- --------------------------------------------------------------------------------
Management .20% .20% .20%
Fee
- --------------------------------------------------------------------------------
Distribution .00% .75% None
(12b-1) Fee
- --------------------------------------------------------------------------------
Other Expenses .69% .69% .59%
- --------------------------------------------------------------------------------
Total Annual .89% 1.64% .79%
Fund Operating
Expenses(5)
- --------------------------------------------------------------------------------
1 AmSouth Bank or other financial institutions may change their customer
account fees for automatic investment and other cash management services
provided in connection with investment in the Funds.
2 Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. Class A shares bought as part of an investment of
$1 million or more are not subject to an initial sales charge, but may be
charged a CDSC of 1.00% if sold within one year of purchase.
3 For former B Share investors of the ISG Funds, waivers are in place on
the CDSC, charged if Class B shares are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For
all other holders of B Shares, the CDSC declines over the same seven year period
as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately seven years after
purchase, Class B shares automatically convert to Class A shares.
4 A wire transfer fee of $7.00 will be deducted from the amount of your
redemption if you request a wire transfer.
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<PAGE> 58
5 Other expenses for each class are based on estimated amounts for the
current fiscal year. The expenses noted above do not reflect any fee waivers or
expense reimbursement arrangements that are or were in effect. Any fee waiver or
expense reimbursement arrangement is voluntary and may be discontinued at any
time.
In addition to the expenses shown above, if you buy and hold shares of the
AmSouth Current Income Portfolio you will indirectly bear your pro rata share of
fees and expenses incurred by the Underlying Funds in which the Fund invests, so
that the investment returns of the Fund will be net of the expenses of the
Underlying Funds. After combining the total operating expenses of the Fund with
those of the Underlying Funds, the estimated average weighted expense ratio is
as follows:
AMSOUTH CURRENT INCOME PORTFOLIO
CLASS A CLASS B INSTITUTIONAL
SHARES SHARES SHARES
- ------ ------ ------
1.99% 2.74% 1.89%
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<PAGE> 59
EXPENSE EXAMPLE
Use the example at right to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It illustrates the amount of
fees and expenses you would pay, assuming the following:
- - $10,000 investment
- - 5% annual return
- - no changes in the Fund's operating expenses
- - reinvestment of all dividends and distributions
Because actual returns and operating expenses will be different, this example is
for comparison only.
AmSouth Current 1 3
Income Portfolio Year Years
- ------------------------- ------------- ------------------
Class A Shares $594 $999
- ------------------------- ------------- ------------------
Class B Shares
Assuming $777 $1,150
Redemption
Assuming No $277 $850
Redemption
- ------------------------- ------------- ------------------
Institutional Shares $192 $594
- ------------------------- ------------- ------------------
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<PAGE> 60
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
AMSOUTH CAPITAL APPRECIATION FUNDS
AMSOUTH INTERNATIONAL EQUITY FUND--The Fund will invest at least 65% of its
total assets in equity securities of non-United States companies (i.e.,
incorporated or organized outside the United States). Under normal market
conditions, the Fund will invest at least 80% of the value of its total assets
in the equity securities of companies within not less than three different
countries (not including the United States).
Foreign securities held by the Fund may trade on days when the Fund does not
calculate its NAV and thus affect the Fund's NAV on days when investors have no
access to the Fund.
The Fund is not required to invest exclusively in common stocks or other equity
securities, and, if deemed advisable, the Fund may invest, to a limited extent,
in fixed income securities and money market instruments. The Fund will not
invest in fixed income securities rated lower than A by a credit rating agency,
such as Moody's, S&P, Fitch or Duff, or, if unrated, deemed to be of comparable
quality by the Adviser.
The Fund may engage in foreign currency transactions to hedge the Fund's
portfolio or increase returns. The Fund's success in these transactions will
depend principally on the Sub-Adviser's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar.
The Fund also may engage in short-selling, which involves selling a security it
does not own in anticipation of a decline in the market price of the security.
To complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it later in the market. The price at such time may be more or less
than the price at which the security was sold by the Fund, which would result in
a loss or gain, respectively.
AMSOUTH MID-CAP EQUITY FUND--The Fund will invest at least 65% of its total
assets in equity securities of companies publicly traded on U.S. exchanges that
are either included in the Russell Mid-Cap Growth Index or have market
capitalizations within the range of such included companies. The Fund may invest
up to 20% of its total assets in securities of foreign issuers traded on the New
York or American Stock Exchange or in the over-the-counter market in the form of
depositary receipts, such as ADRs. The Fund also may invest in debt securities
of domestic issuers rated no lower than investment grade (Baa/BBB) by a credit
rating agency, or, if unrated, deemed to be of comparable quality by the
Adviser.
Securities of foreign issuers (including ADRs) fluctuate in price, often based
on factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Foreign securities tend to be more volatile than U.S. securities
because they include special risks such as exposure to currency fluctuations, a
lack of comprehensive company information, potential instability, and differing
auditing and legal standards.
AMSOUTH GROWTH OPPORTUNITIES FUND--The Fund will invest at least 65% of its
total assets in equity securities. The Fund also may invest in debt securities
of domestic and foreign issuers when the Adviser believes that such securities
offer opportunities for capital growth. The Fund may invest up to 10% of its
total assets in foreign securities which are not publicly traded in the United
States.
At least 65% of the Fund's total assets invested in debt securities must consist
of debt securities which are rated no lower than investment grade (Baa/BBB) by a
credit rating agency, or, if unrated, deemed to be of comparable quality by the
Adviser. The remainder of such assets may be invested in debt securities which
are rated no lower than Ba by Moody's and BB by S&P, Fitch and Duff or, if
unrated, deemed to be of comparable quality by the Adviser. Debt securities
rated Ba by Moody's and BB by S&P, Fitch and Duff are considered speculative
grade
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<PAGE> 61
debt (also known as junk bonds) and the payment of principal and interest may be
affected at any time by adverse economic changes.
AMSOUTH LARGE-CAP EQUITY FUND--The Fund will invest at least 70% of its total
assets in equity securities. The Fund also may invest in debt securities of
domestic issuers rated no lower than investment grade (Baa/BBB) by a credit
rating agency, or, if unrated, deemed to be of comparable quality by the
Adviser.
APPLICABLE TO AMSOUTH INTERNATIONAL EQUITY, MID-CAP EQUITY, CAPITAL GROWTH 2 AND
LARGE CAP EQUITY FUNDS-- While the Capital Appreciations typically invest
primarily in common stocks, the equity securities in which they may invest also
include convertible securities and preferred stocks. Convertible securities are
exchangeable for a certain amount of another form of an issuer's securities,
usually common stock, at a prestated price. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same issuer
and, thus, typically have lower credit ratings than similar non-convertible
securities. Preferred stock pays dividends at a specified rate and has
preference over common stock in the payment of dividends and the liquidation of
assets. Preferred stock ordinarily does not carry voting rights.
To a limited extent, each Fund may invest in debt securities. These securities
will be subject primarily to interest rate and credit risks. Interest rate risk
is the potential for a decline in bond prices due to rising interest rates. In
general, the prices of debt securities are inversely affected by changes in
interest rates and, therefore, are subject to the risk of market price
fluctuations. Credit risk is the possibility that the issuer of the security
will fail to make timely payments of interest or principal to the Fund. The
credit risk of a Fund depends on the quality of its investments. Certain debt
securities that may be purchased by the Funds, such as those rated Baa by
Moody's and BBB by S&P, Fitch and Duff, may be subject to such risk with respect
to the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated securities.
Under adverse market conditions, each Fund may invest some or all of its assets
in money market instruments. Although the Fund would do this to avoid losses, it
could reduce the benefit from any upswing in the market.
During such periods, the Fund may not achieve its investment objective.
Each Fund may invest, to a limited extent, in securities issued by other
investment companies which principally invest in securities of the type in which
the Fund invests. Such investments will involve duplication of advisory fees and
certain other expenses.
Each Fund may invest some assets in derivative securities, such as options and
futures. These instruments are used primarily to hedge the Fund's portfolio but
may be used to increase returns; however, they sometimes may reduce returns or
increase volatility. In addition, derivatives can be illiquid and highly
sensitive to changes in their underlying security, interest rate or index, and
as a result can be highly volatile. A small investment in certain derivatives
could have a potentially large impact on the Fund's performance.
Each Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, which could subject the Fund to risk of loss if the
institution breaches it agreement with the Fund. In connection with such loans,
the Fund will receive collateral consisting of cash or U.S. Government
securities which will be maintained at all times in an amount equal to 100% of
the current market value of the loaned securities.
AMSOUTH INCOME FUNDS
AMSOUTH LIMITED TERM U.S. GOVERNMENT FUND--The Fund will invest at least 65% of
its total assets in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and repurchase agreements in respect of such
securities.
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<PAGE> 62
Repurchase agreements are contracts in which a U.S. commercial bank or
securities dealer sells U.S. Government securities to the Fund and agrees to
repurchase them on a specific date (usually the next day) and at a specific
price. These agreements offer the Fund a means of investing money for a short
period of time. If the seller defaults, the Fund could be delayed in selling the
securities which could affect the Fund's yield.
The Fund's controlled duration strategy may limit its ability to take advantage
of investment opportunities.
U.S. Government securities are bonds or other debt obligations issued or
guaranteed as to principal and interest by the U.S. Government or one of its
agencies or instrumentalities. U.S. Treasury securities and some obligations of
U.S. Government agencies and instrumentalities are supported by the "full faith
and credit" of the United States Government. Other U.S. Government securities
are backed by the right of the issuer to borrow from the U.S. Treasury. Still
others are supported only by the credit of the issuer or instrumentality. While
the U.S. Government provides financial support to U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always do
so.
The Fund may invest, to a limited extent, in securities issued by other
investment companies which principally invest in securities of the type in which
the Fund invests. Such investments will involve duplication of advisory fees and
certain other expenses.
The Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, which could subject the Fund to risk of loss if the
institution breaches its agreement with the Fund. In connection with such loans,
the Fund will receive collateral consisting of cash or U.S. Government
securities which will be maintained at all times in an amount equal to 100% of
the current market value of the loaned securities.
AMSOUTH TENNESSEE TAX-EXEMPT FUND AND AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT
FUND--The AmSouth Tennessee Tax-Exempt Fund and AmSouth Limited Term Tennessee
Tax-Exempt Fund (each a "Tennessee Fund") will each invest, as a fundamental
policy, at least 80% of its net assets (except when maintaining a temporary
defensive position) in municipal obligations. Under normal circumstances, each
Tennessee Fund will invest at least 65% of its total assets in bonds,
debentures, and other debt securities of the State of Tennessee, its political
subdivisions, authorities and corporations, the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal and Tennessee
personal income taxes. The remainder each Tennessee Fund's assets may be
invested in securities that are not Tennessee municipal obligations and
therefore may be subject to Tennessee income tax. Each Tennessee Fund intends to
invest in such securities when their return to investors, taking into account
applicable Tennessee income taxes, would be greater than comparably rated
Tennessee municipal obligations. In addition, to the extent acceptable Tennessee
municipal obligations are at any time unavailable for investment by each
Tennessee Fund, the Fund will invest temporarily in other municipal obligations.
When the Fund has adopted a temporary defensive position, including when
acceptable Tennessee municipal obligations are unavailable for investment by the
Fund, in excess of 35% of the Fund's total assets may be invested in securities
that are not exempt from Tennessee State income tax.
Each Tennessee Fund may invest up to 10% of its total assets in industrial
development bonds backed only by the assets and revenues of non-governmental
users. Each Tennessee Fund may invest up to 10% of its net assets in municipal
obligations which provide income subject to the alternative minimum tax.
From time to time, on a temporary basis other than for temporary defensive
purposes (but not to exceed 20% of the Fund's net assets) or for temporary
defensive purposes, each Tennessee Fund may invest in taxable money market
instruments having, at the time of purchase, a quality rating in the two highest
grades of Moody's, S&P or Fitch or, if unrated, deemed to be of comparable
quality by the Adviser. Except for temporary defensive purposes, at no time will
more than 20% of each Tennessee Fund's net assets be invested in taxable money
market instruments and municipal obligations which provide income subject to the
alternative minimum tax.
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<PAGE> 63
The AmSouth Limited Term Tennessee Tax-Exempt Fund's controlled duration
strategy may limit its ability to take advantage of investment opportunities.
Each Tennessee Fund may invest some assets in derivative securities, such as
options and futures, which may give rise to taxable income. These instruments
are used primarily to hedge the Fund's portfolio but may be used to increase
returns; however, they sometimes may reduce returns or increase volatility. In
addition, derivatives can be illiquid and highly sensitive to changes in their
underlying security, interest rate or index, and as a result can be highly
volatile. A small investment in certain derivatives could have a potentially
large impact on the Fund's performance.
Municipal obligations in which each Tennessee Funds may invest are debt
obligations typically divided into two types:
- GENERAL OBLIGATION BONDS, which are secured by the full faith and
credit of the issuer and its taxing power; and
- REVENUE BONDS, which are payable from the revenues derived from a
specific revenue source, such as charges for water and sewer service
or highway tolls.
To the extent described above, each Tennessee Fund may invest in industrial
development bonds which, although nominally issued by municipal authorities, are
in most cases revenue bonds that are not secured by the taxing power of the
municipality, but by the revenues derived from payments by the non-governmental
users. Certain industrial development bonds, while exempt from Federal income
tax, provide income subject to the alternative minimum tax.
Each Tennessee Fund may invest, to a limited extent, in securities issued by
other investment companies which principally invest in securities of the type in
which the Fund invests. Such investments will involve duplication of advisory
fees and certain other expenses.
Each Tennessee Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, which could subject the Fund to risk of loss if
the institution breaches its agreement the Fund and may give rise to taxable
income. In connection with such loans, the Fund will receive collateral
consisting of cash or U.S. Government securities which will be maintained at all
times in an amount equal to 100% of the current market value of the loaned
securities.
AMSOUTH MONEY MARKET FUNDS
AMSOUTH U.S. TREASURY MONEY MARKET FUND--The Fund will invest, as a fundamental
policy, at least 65% of its total assets in securities issued by the U.S.
Treasury and repurchase agreements in respect thereof. The remainder of its
assets may be invested in other securities guaranteed as to payment of principal
and interest by the U.S. Government and repurchase agreements in respect
thereof.
Repurchase agreements are contracts in which a U.S. commercial bank or
securities dealer sells a security to the Fund and agrees to repurchase the
security on a specific date (usually the next day) and at a specific price.
These agreements offer the Fund a means of investing money for a short period of
time. If the seller defaults, the Fund could be delayed in selling the
securities which could affect the Fund's yield.
The Fund will not invest in securities issued or guaranteed by U.S. Government
agencies, instrumentalities or government-sponsored enterprises that are not
backed by the full faith and credit of the United States.
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<PAGE> 64
As a money market fund, the AmSouth U.S. Treasury Money Market Fund is subject
to maturity, quality and diversification requirements designed to help it
maintain a stable price of $1.00 per share. The Fund must do the following:
- maintain an average dollar weighted portfolio maturity of 90 days or
less
- buy individual securities that have remaining maturities of 397 days
or less
- buy only high quality U.S. dollar denominated obligations
The Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, which could subject the Fund to risk of loss if the
institution breaches its agreement with the Fund. In connection with such loans,
the Fund will receive collateral consisting of cash or U.S. Government
securities which will be maintained at all times in an amount equal to 100% of
the current market value of the loaned securities.
The Fund may enter into reverse repurchase agreements with banks, brokers or
dealers. In these transactions, the Fund sells a portfolio security to another
party in return for cash and agrees to repurchase the security generally at a
particular price and time. The Fund will use the cash to make investments which
either mature or have a demand feature to resell to the issuer at a date
simultaneous with or prior to the time the Fund must repurchase the security.
Reverse repurchase agreements may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transaction costs. Such transactions, however, may increase the risk of
potential fluctuations in the market value of the Fund's assets. In addition,
interest costs on the cash received may exceed the return on the securities
purchased.
The Fund expects to maintain a net asset value of $1.00 per share, but there is
no assurance that the Fund will be able to do so on a continuous basis. The
Fund's performance per share will change daily based on many factors, including
fluctuation in interest rates.
AMSOUTH STRATEGIC PORTFOLIOS
The AmSouth Strategic Portfolios invest in other funds of the Trust (underlying
funds). The specific underlying funds held by each Strategic Portfolio are
identified in "Description of the Funds -- Objectives, Risk/Return and
Expenses." A number of those underlying funds are described earlier in this
Prospectus. The remaining underlying funds are described below.
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.
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
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<PAGE> 65
strategic position in a specialized market,
earnings growth consistently above market,
and fundamental value.
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.
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.
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<PAGE> 66
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.
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 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.
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.
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<PAGE> 67
AMSOUTH BOND FUND
INVESTMENT OBJECTIVES The Fund seeks current income consistent
with the preservation of capital.
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 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.
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.
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<PAGE> 68
AMSOUTH GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES The Fund seeks current income consistent
with the preservation of capital.
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
adjust, a target for the interest rate
sensitivity of the Fund based upon
expectations about interest rates. The
manager then selects individual securities
whose maturities fit this target and which
the manger believes are the best relative
values.
The Fund may also invest in certain other
debt securities in addition to those
described above. The Fund invests at least
65% of its total assets in obligations
issued or guaranteed by the U.S. government
or its agencies and instrumentalities. Up to
35% of the Fund's total assets may be
invested in other types of debt securities,
preferred stocks and options. Under normal
market conditions, the Fund will invest up
to 80% of its total assets in
mortgage-related securities issued or
guaranteed by the U.S. government or its
agencies and instrumentalities, such as the
Government National Mortgage Association
("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"), and in
mortgage-related securities issued by
nongovernmental entities which are rated, at
the time of purchase, in one of the three
highest rating categories by an NRSRO or, if
unrated, determined by its portfolio manager
to be of comparable quality.
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.
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<PAGE> 69
AMSOUTH LIMITED MATURITY FUND
INVESTMENT OBJECTIVES The Fund seeks current income consistent
with the preservation of capital.
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 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.
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.
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<PAGE> 70
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.
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<PAGE> 71
AMSOUTH PRIME OBLIGATIONS FUND
INVESTMENT OBJECTIVES The Fund seeks current income with liquidity
and stability of 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.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject
to the following principal risks:
INTEREST RATE RISK: The possibility that the
value of the Fund's investments will decline
due to an increase in interest rates or that
the Fund's yield will decrease due to a
decrease in interest rates.
CREDIT RISK: The possibility that an issuer
cannot make timely interest and principal
payments on its debt securities such as
bonds. The lower a security's rating, the
greater its credit risk.
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<PAGE> 72
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.
APPLICABLE TO ALL AMSOUTH STRATEGIC PORTFOLIOS -- The Adviser will make
allocation decisions according to its outlook for the economy, financial markets
and relative market valuation of the Funds. Each Strategic Portfolio has a
"benchmark percentage" representing the asset class mix of the Underlying Funds
the Adviser expects to maintain when its assessment of economic conditions and
other factors indicate that the financial markets are fairly valued relative to
each other. The Adviser anticipates that each AmSouth Strategic Portfolio's
asset class benchmark percentage will be as follows:
<TABLE>
<CAPTION>
BENCHMARK PERCENTAGES
MODERATE
AGGRESSIVE GROWTH & GROWTH & CURRENT
UNDERLYING FUND GROWTH GROWTH INCOME INCOME INCOME
ASSET CLASS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Equity.............. 95% 80% 60% 30% 0%
Fixed-Income........ 0% 15% 35% 65% 95%
Money Market
Instruments....... 5% 5% 5% 5% 5%
</TABLE>
Under normal market conditions, the Adviser expects to adhere to the benchmark
percentages set forth above and the strategy ranges set forth herein; however,
the Adviser reserves the right to vary such percentages and ranges as the
risk/return characteristics of the financial markets or Underlying Fund asset
classes, as assessed by the Adviser, vary over time.
Each AmSouth Strategic Portfolio may invest, in anticipation of otherwise
investing cash positions, directly in U.S. Government securities and short-term
paper, such as bankers' acceptances. Under normal market conditions, none of the
Strategic Portfolios expects to have a substantial portion of its assets
invested in such securities. However, when the Adviser determines that adverse
market conditions exist, the Fund may adopt a temporary defensive posture and
invest entirely in such securities. Although the Fund would do this to avoid
losses, it could reduce the benefit of any upswing in the market. During such
periods, the Fund may not achieve its investment objective.
Because the AmSouth Strategic Portfolios invest in the Underlying Funds, there
will be duplication of advisory fees and certain other expenses.
APPLICABLE TO ALL FUNDS
- -----------------------
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.
-70-
<PAGE> 73
FUND MANAGEMENT
INVESTMENT ADVISERS AND SUB-ADVISERS
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.
The Adviser has engaged Lazard Asset Management and Bennett Lawrence Management,
LLC to serve as sub-investment adviser to the International Equity Fund and
Mid-Cap Fund, respectively. The Adviser pays each sub-investment adviser from
the advisory fee it receives from the Fund.
Lazard Asset Management, located at 30 Rockefeller Plaza, New York, New York
10112, serves as the sub-investment adviser to the International Equity Fund.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, which is a New
York limited liability company, provides investment management services to
client discretionary accounts with assets totaling approximately $71 billion as
of December 31, 1998.
Bennett Lawrence Management, LLC, located at 757 Third Avenue, New York, New
York 10017, serves as the sub-investment adviser to the Mid-Cap Fund. Bennett
Lawrence Management provides discretionary investment management services to
client discretionary accounts with assets totaling approximately $950 million as
of December 31, 1998.
PRIMARY PORTFOLIO MANAGERS
The primary portfolio manager for each Fund, other than the Money Market Funds,
is as follows:
AMSOUTH INTERNATIONAL EQUITY FUND--Herbert W. Gullquist and John R. Reinsberg.
Messrs. Gullquist and Reinsberg have been the International Equity Fund's
primary portfolio managers since its inception, and have been Managing Directors
of Lazard for over five years.
AMSOUTH MID-CAP EQUITY FUND--S. Van Zandt Schreiber and Robert W. Deaton.
Messrs. Schreiber and Deaton have been the Mid-Cap Fund's primary portfolio
managers since its inception. Mr. Schreiber has been the Chief Portfolio Manager
at Bennett Lawrence since its inception in August 1995. For more than five years
prior thereto, Mr. Schreiber was Managing Director and Senior Growth Portfolio
Manager with Deutsche Morgan Grenfell/C.J. Lawrence, Inc. Mr. Deaton has been an
Associate Portfolio Manager at Bennett Lawrence since its inception in August
1995. From 1994 to August 1995, Mr. Deaton was a portfolio manager and research
analyst with Deutsche Morgan Grenfell/C.J. Lawrence, Inc. Prior thereto, Mr.
Deaton managed the Long-Term Growth Fund for the Tennessee Consolidated
Retirement System.
AMSOUTH GROWTH OPPORTUNITIES FUND--Charles E. Winger, Jr. Mr. Winger has been
the Growth Opportunities Fund's primary portfolio manager since its inception.
He has been a Trust Officer of First American National Bank since 1988 and has
been employed by the Adviser since 1999.
-71-
<PAGE> 74
AMSOUTH LARGE-CAP EQUITY FUND--Ronald E. Lindquist. Mr. Lindquist, who has over
30 years' experience as a portfolio manager, has been the Large-Cap Equity
Fund's primary portfolio manager since its inception, and has been employed by
First American National Bank since May 1998 and has been employed by the Adviser
since December 1999. Prior to May 1998, he was employed since 1978 by Deposit
Guaranty National Bank and Commercial National Bank, affiliates of the Adviser.
AMSOUTH LIMITED TERM U.S. GOVERNMENT FUND--John Mark McKenzie. Mr. McKenzie has
been a portfolio manager of the Limited Term U.S. Government Fund since May 1998
and the Fund's primary portfolio manager since December 1998. He has been
employed by First American National Bank since May 1998 and has been employed by
the Adviser since December 1999. Prior to May 1998, he was employed by Deposit
Guaranty National Bank since 1984.
AMSOUTH TENNESSEE TAX-EXEMPT FUND--Sharon S. Brown. She has been the Tennessee
Tax-Exempt Fund's primary portfolio manager since its inception and has been a
Trust Officer of First American National Bank since 1988 and has been employed
by the Adviser since December 1999.
AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT FUND--Sharon S. Brown. Ms. Brown has
been the Limited Term Tennessee Tax-Exempt Fund's primary portfolio manager
since its inception and has been a Trust Officer of First American National Bank
since 1988 and has been employed by the Adviser since December 1999.
AMSOUTH STRATEGIC PORTFOLIOS--Investment decisions for each Strategic Portfolio
are made by a team of the Adviser's portfolio managers, and no person is
primarily responsible for making recommendations to the team.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Ohio, Inc. (the "Administrator"), 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as each Fund's administrator. The
administrative services of the Administrator include providing office space,
equipment and clerical personnel to the Funds and supervising custodial,
auditing, valuation, bookkeeping, legal and dividend disbursing services.
BISYS Fund Services Limited Partnership (the "Distributor"), an affiliate of the
Administrator, serves as the distributor of each Fund's shares. The Distributor
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.
-72-
<PAGE> 75
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
- ----------------------
Class A Shares and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments. Your financial
representative can help you decide which share class is best for you.
CLASS A SHARES
- - Capital Appreciation and Income Funds: Front-end sales charges, as
described below.
- - Money Market Funds: No sales charges
- - Shareholder servicing fees of 0.25%.
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 below.
- - Automatic conversion to Class A shares after seven years, thus reducing
future annual expenses.
- - Maximum investment for all Class B purchases: $250,000.
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 Institutional 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).
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<PAGE> 76
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.
U.S. TREASURY MONEY MARKET FUND
Per share net asset value (NAV) for the U.S. Treasury Money Market Fund is
determined and its shares are priced twice a day. The NAV 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 U.S. Treasury Money Market Fund uses the amortized cost method of valuing
its investments, which does not take into account unrealized gains or losses.
ALL 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.
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<PAGE> 77
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
MINIMUM MINIMUM
ACCOUNT TYPE INITIAL INVESTMENT SUBSEQUENT
CLASS A OR
CLASS B
Regular $1,000 $ 0
Automatic
Investment Plan $1,000 $50
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.
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> 78
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> 79
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> 80
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
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 Class A shares than for Class B shares, because Class A
shares have lower distribution expenses. Income dividends are usually paid
monthly. Capital gains are distributed at least annually.
Distributions are made on a per share basis regardless of how long you've owned
your shares. Therefore, if you invest shortly before the distribution date, some
of your investment will be returned to you in the form of a distribution.
- --------------------------------------------------------------------------------
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<PAGE> 81
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 (unless you have
declined telephone
sales privileges) 1. Call 1-800-451-8382 with instructions as
to how you wish to receive your funds
(mail, wire, electronic transfer). (See
"General Policies on Selling
Shares--Verifying Telephone Redemptions"
below)
- -------------------------------------------------------------------------------
By mail
1. Call 1-800-451-8382 to request redemption
forms or write a letter of instruction
indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to:
AmSouth 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 AmSouth Mutual Funds
in Writing Required" below) c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, OH 43219
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<PAGE> 82
SHAREHOLDER INFORMATION
SELLING YOUR SHARES - CONTINUED
Wire transfer Call 1-800-451-8382 to request a wire
You must indicate this option transfer.
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 NAV
the Automated Clearing House of your shares will normally be determined
(ACH) and must be a U.S. on the same day and the proceeds credited
bank. within 7 days.
Your bank may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from you account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $25. To activate this
feature:
-Make sure you've checked the appropriate box on the account
application. Or call 1-800-451-8382.
-Include a voided personal check.
-Your account must have a value of $5,000 or more to start withdrawals.
-If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may
close your account and mail the proceeds to you.
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.
-80-
<PAGE> 83
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.
-81-
<PAGE> 84
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
Class A Shares
- -------------------------------------------------------------------------------
Shareholders who beneficially acquired Class A shares of a Fund in connection
with the reorganization of a corresponding DG Investor Series fund in December
1998 may be eligible for lower sales charges; consult your investment
representative or see the Statement of Additional Information.
Class A shares are sold at their public offering price. This price equals NAV
plus the initial sales charge, if applicable. Therefore, part of the money you
invest will be used to pay the sales charge. The remainder is invested in Fund
shares. The sales charge decreases with larger purchases. There is no sales
charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
FOR THE AMSOUTH INTERNATIONAL EQUITY, MID-CAP EQUITY, CAPITAL GROWTH 2 AND LARGE
CAP FUNDS, AGGRESSIVE GROWTH PORTFOLIO, GROWTH PORTFOLIO, GROWTH & INCOME
PORTFOLIO AND MODERATE GROWTH & INCOME PORTFOLIO
<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 AMSOUTH LIMITED TERM U.S. GOVERNMENT, AMSOUTH TENNESSEE TAX-EXEMPT AND
AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT FUNDS AND CURRENT INCOME PORTFOLIO
<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%
- ---------------------------------------- ----------------------- ------------------------
<FN>
(1) There is no initial sales charge on purchases of $1 million or more.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of the
purchase price will be charged to the shareholder if shares are redeemed in the
first year after purchase. This charge will be based on the lower of your cost
for the shares or their NAV at the time of redemption. There will be no CDSC on
reinvested distributions. The Distributor will provide additional compensation
in an amount up to 1.00% of the offering price of Class A Shares of the Funds
for sales of $1 million to $3 million. For sales over $3 million, the amount of
additional compensation will be negotiated.
</TABLE>
-82-
<PAGE> 85
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
FOR THE MONEY MARKET FUNDS
No sales charge.
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> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
- ------------------------------------ ------------------------------------------
</TABLE>
If you sell some but not all of your Class shares, certain shares not subject to
the CDSC (i.e., shares purchased with reinvested dividends) will be redeemed
first, followed by shares subject to the lowest CDSC (typically shares held for
the longest time).
CONVERSION FEATURE - CLASS B SHARES
- - Class B shares automatically convert to Class A shares of the same Fund
after eight years from the end of the month of purchase.
- - After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares which will increase
your investment return compared to the Class B shares.
- - You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- - If you purchased Class B shares of one Fund which you exchanged for Class B
shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B shares.
- - The dollar value of Class A shares you receive will equal the dollar value
of the Class B shares converted.
* For former B Share investors of the ISG Funds, waivers are in place on the
CDSC, charged if Class B shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh
year.
-83-
<PAGE> 86
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced sales
charges under the following circumstances.
- - Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
- - Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- - Combination Privilege. Combine accounts of multiple Funds (excluding the
Money Market Fund) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
- --------------
The following qualify for waivers of sales charges:
- - Shares purchased by investment representatives through fee-based investment
products or accounts.
- - Shares purchased with proceeds from redemptions from another mutual fund
complex within 30 days after redemption, if you paid a front end sales
charge for those shares.
- - Shares purchased upon the reinvestment of dividend and capital gain
distributions.
- - Shares purchased by investors through a payroll deduction plan.
- - Shares purchased by officers, directors, trustees, employees, retired
employees, and their immediate family members of AmSouth Bancorporation,
its affiliates and BISYS Fund Services and its affiliates and the
sub-advisers of the Funds and their affiliates.
- - Shares purchased by employees and their immediate family members of dealers
who have an agreement with the Distributor.
- - Shares obtained through exchange of Institutional Class Shares.
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 Class A shares and decide to reinvest in the Fund within a 90
day period, you will not be charged the applicable sales charge on amounts up to
the value of the shares you sold. You must provide a written request for
reinstatement and payment within 90 days of the date your instructions to sell
were processed.
- --------------------------------------------------------------------------------
-84-
<PAGE> 87
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
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. 12b-1 fees are
paid from Fund assets on an ongoing basis, and will increase the cost of your
investment.
- The 12b-1 and shareholder servicing fees vary by share class as
follows:
- Class A shares pay a shareholder servicing fee of up to .25% of
the average daily net assets of a Fund.
- Class B shares pay a 12b-1 fee of up to 1.00% of the average
daily net assets of the applicable Fund. This will cause expenses
for Class B shares to be higher and dividends to be lower than
for Class A shares.
- The higher 12b-1 fee on Class B shares, together with the CDSC,
help the Distributor sell Class B shares without an "up-front"
sales charge. In particular, these fees help to defray the
Distributor's costs of advancing brokerage commissions to
investment representatives.
- The Distributor may use up to .25% of the 12b-1 fee for
shareholder servicing and up to .75% for distribution.
Over time shareholders will pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 distribution and service fees are
paid out of the Fund's assets on an on-going basis.
-85-
<PAGE> 88
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.
Class A Shares may also be exchanged for Institutional Shares of the same Fund
if you become eligible to purchase Institutional Shares. 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 Institutional Shares of a Fund for Class A Shares of a Fund, you
will be exempt from any applicable sales charge.
For Class A Shares, when exchanging from a Fund that has no sales charge or a
lower sales charge to a Fund with a higher sales charge, 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.
-86-
<PAGE> 89
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.
MONTHLY
- - AmSouth Limited Term U.S. Government Fund
- - AmSouth Tennessee Tax-Exempt Fund
- - AmSouth Limited Term Tennessee Tax-Exempt Fund
- - AmSouth U.S. Treasury Money Market Fund
- - AmSouth Current Income Portfolio
QUARTERLY
- - AmSouth Large-Cap Equity Fund
- - AmSouth Growth Opportunities Fund
- - AmSouth Mid-Cap Equity Fund
- - AmSouth Aggressive Growth Portfolio
- - AmSouth Growth Portfolio
- - AmSouth Growth & Income Portfolio
- - AmSouth Moderate Growth & Income Portfolio
The Tennessee Tax-Exempt Fund and Limited Term Tennessee Tax-Exempt Fund
anticipate that, under normal conditions, substantially all of their income
dividends will be exempt from Federal and Tennessee personal income taxes.
However, any dividends from taxable investment are taxable as ordinary income.
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).
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 AmSouth Tennessee Tax-Exempt Fund and the
AmSouth Limited Term Tennessee Tax-Exempt Fund, the dividends and
short-term capital gains that you receive are considered ordinary income
for tax purposes. For the AmSouth Tennessee Tax-Exempt Fund and the AmSouth
Limited Term Tennessee 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.
-87-
<PAGE> 90
- - Generally, the Funds' advisers do not consider taxes when deciding to buy
or sell securities. Capital gains are realized from time to time as
by-products of ordinary investment activities. Distributions may vary
considerably from year to year.
- - If you sell or exchange shares, any gain or loss you have is a taxable
event. This means that you may have a capital gain to report as income, or
a capital loss to report as a deduction, when you complete your federal
income tax return.
- - Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account such
as an IRA or a qualified employee benefit plan. (Non-U.S. investors may be
subject to U.S. withholding and estate tax.)
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
-88-
<PAGE> 91
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. 811-05551.
-89-
<PAGE> 92
CROSS REFERENCE SHEET
- ---------------------
Part B
Form N-1A Item No. Caption
- ------------------ -------
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History AmSouth Mutual Funds
12. Description of the Fund and Its
Investments and Risks Description of the Trust and
the Funds
13. Management of the Fund Management of the Trust
14. Control Persons and Principal
Holders of Securities Miscellaneous
15. Investment Advisory and
Other Services Management of the Trust
16. Brokerage Allocation and
Other Practices Management of the Trust
17. Capital Stock and Other
Securities Valuation; Additional
Purchase and Redemption
Information; Management of
the Trust; Redemptions;
Additional Information
18. Purchase, Redemption and Pricing
of Shares Valuation; Additional
Purchase and Redemption
Information; Management of
the Trust
19. Taxation of the Fund Additional Purchase and
Redemption Information
20. Underwriters Management of the Trust
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
Part B of Post-Effective Amendment No. 29 to the Registrant's Registration
Statement (filed September 16, 1999) is incorporated herein by reference in its
entirety.
<PAGE> 93
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
1999
------------------,
--------------------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth International Equity Fund, the
AmSouth Mid-Cap Equity Fund, the AmSouth Growth Opportunities Fund, the AmSouth
Large-Cap Fund, the AmSouth Limited Term U.S. Government Fund, the AmSouth
Tennessee Tax-Exempt Fund, the AmSouth Limited Term Tennessee Tax-Exempt Fund,
the AmSouth U.S. Treasury Money Market Fund, the AmSouth Aggressive Growth
Portfolio, the AmSouth Growth Portfolio, the AmSouth Growth & Income Portfolio,
the AmSouth Moderate Growth & Income Portfolio, and the AmSouth Current Income
Portfolio (each a "Fund" and collectively the "Funds"), dated ___________, 1999.
This Statement of Additional Information is incorporated by reference in its
entirety into that Prospectus. A copy of the 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> 94
TABLE OF CONTENTS
PAGE
Description of the Trust and the Funds.............................. B-
Management of the Trust............................................. B-
Management Arrangements............................................. B-
Purchase and Redemption of Shares................................... B-
Determination of Net Asset Value.................................... B-
Shareholder Services and Privileges................................. B-
Performance Information............................................. B-
Dividends, Distribution and Taxes................................... B-
Portfolio Transactions.............................................. B-
Information About the Trust and the Funds........................... B-
Counsel and Independent Auditors.................................... B-
Financial Statements................................................ B-
Appendix ........................................................... B-
<PAGE> 95
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management investment
company. The Trust consists of thirty-one series of units of beneficial interest
("Shares"), each representing interests in one of thirty-one separate investment
portfolios. This Statement of additional information provides information with
respect to thirteen such investment portfolios (each a "Fund"): the AmSouth
International Equity Fund (the "International Equity Fund"), the AmSouth Mid-Cap
Equity Fund (the "Mid-Cap Equity Fund"), the AmSouth Growth Opportunities Fund
(the "Growth Opportunities Fund"), the AmSouth Large-Cap Fund (the "Large-Cap
Fund," and these four Funds being collectively referred to as the "Capital
Appreciation Funds"), the AmSouth Limited Term U.S. Government Fund (the
"Limited Term U.S. Government Fund"), the AmSouth Tennessee Tax-Exempt Fund (the
"Tennessee Tax-Exempt Fund"), the AmSouth Limited Term Tennessee Tax-Exempt Fund
(the "Limited Term Tennessee Tax-Exempt Fund," and these three Funds being
collectively referred to as the "Income Funds"), the AmSouth U.S. Treasury Money
Market Fund (the "U.S. Treasury Money Market Fund", and this Fund also being
referred to as the "Money Market Fund"), the AmSouth Aggressive Growth Portfolio
(the "Aggressive Growth Portfolio"), the AmSouth Growth Portfolio (the "Growth
Portfolio"), the AmSouth Growth & Income Portfolio (the "Growth & Income
Portfolio"), the AmSouth Moderate Growth & Income Portfolio (the "Moderate
Growth & Income Portfolio"), and the AmSouth Current Income Portfolio (the
"Current Income Portfolio," and these five Funds being collectively referred to
as the "Strategic Portfolios"). The Limited Term U.S. Government Fund is also
referred to herein as the "Taxable Fund," and the Tennessee Tax-Exempt Fund and
the Limited Term Tennessee Tax-Exempt Fund are also collectively referred to
herein as the "Tax-Free Funds." The Funds, except for the U.S. Treasury Money
Market Fund, offer three classes of Shares: Institutional Shares, Class A
Shares, and Class B Shares. The U.S. Treasury Money Market Fund offers two
classes of Shares: Institutional Shares and Class A Shares. Much 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 Funds' Prospectus. No investment in Shares of a Fund should be
made without first reading that Fund's Prospectus.
<PAGE> 96
DESCRIPTION OF THE TRUST AND THE FUNDS
GENERAL
The Trust is an open-end management investment company, known as a
mutual fund. Each of the Mid-Cap Equity, Large-Cap Equity, Limited Term U.S.
Government, U.S. Treasury Money Market Funds and the Aggressive Growth, Growth,
Growth & Income, Moderate Growth & Income and Current Income Portfolios is a
diversified investment company, which means that, with respect to 75% of its
total assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer. Each of the International Equity, Capital
Growth 2, Tennessee Tax-Exempt and Limited Term Tennessee Tax Exempt Funds is a
non-diversified investment company, which means that the proportion of the
Fund's assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940, as amended (the "1940 Act").
AmSouth Bank (the "Adviser") serves as each Fund's investment adviser.
ASO Services Company (the "Administrator") serves as each Fund's
administrator.
BISYS Fund Services Limited Partnership (the "Distributor"), an
affiliate of the Administrator, serves as each Fund's distributor.
2
<PAGE> 97
STRATEGIC PORTFOLIOS
Each of the Aggressive Growth Portfolio, Growth Portfolio, Growth &
Income Portfolio, Moderate Growth & Income Portfolio and Current Income
Portfolio (collectively, the "Strategic Portfolios") seeks to achieve its
investment objective by allocating its assets among other mutual funds
("Underlying Funds") advised by the Adviser, within predetermined strategy
ranges, as set forth below. The Adviser will make allocation decisions according
to its outlook for the economy, financial markets and relative market valuation
of the Underlying Funds.
Each Strategic Portfolio will invest its assets in the Underlying Funds
within the strategy ranges (expressed as a percentage of the Strategic
Portfolio's assets) indicated below:
<TABLE>
<CAPTION>
Strategy Ranges
---------------
Moderate
Aggressive Growth & Growth & Current
Growth Growth Income Income Income
Underlying Fund Portfolio Portfolio Portfolio Portfolio Portfolio
- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Large-Cap Equity Fund 0-70% 0-65% 0-60% 0-50% 0%
Capital Growth 2 Fund 0-45% 0-25% 0-25% 0-15% 0%
Equity Income Fund 0% 0-25% 0-25% 0-15% 0%
Mid-Cap Equity Fund 0-30% 0-25% 0-20% 0% 0%
Small-Cap Fund 0-30% 0-25% 0-20% 0% 0%
International Equity Fund 0-20% 0-15% 0-15% 0% 0%
Bond Fund 0% 0% 0% 0% 35-55%
Limited Maturity Fund 0% 0% 0-20% 0-45% 40-60%
Prime Obligations Fund 0-30% 0-20% 0-20% 0-20% 0-30%
Government Income Fund 0% 0-25% 0-60% 0-70% 0%
</TABLE>
The Strategic Portfolios' selection of the Underlying Funds in which to
invest, as well as the percentage of a Strategic Portfolio's assets which can be
invested in each Underlying Fund, are not fundamental investment policies and
can be changed without the approval of shareholders.
Changes in the net asset value of the Underlying Funds may affect cash
income, if any, derived from these investments and will affect a Strategic
Portfolio's net asset value. Because each Strategic Portfolio invests primarily
in other mutual funds, which fluctuate in value, the Strategic Portfolio's
shares will correspondingly fluctuate in value. Although the Strategic
Portfolios normally seek to remain substantially fully invested in the
Underlying Funds, each Strategic Portfolio may invest temporarily in certain
short-term obligations. Such obligations may be used to invest uncommitted cash
balances or to maintain liquidity to meet shareholder
3
<PAGE> 98
redemptions. Each Strategic Portfolio also may borrow money for temporary or
emergency purposes.
The 1940 Act permits the Strategic Portfolios to invest without
limitation in other investment companies that are part of the same "group of
investment companies" (as defined in the 1940 Act), such as the Strategic
Portfolios and the Underlying Funds, provided that the Strategic Portfolios
observe certain limitations on the amount of sales loads and
distribution-related fees that are borne by shareholders and do not invest in
other funds of funds.
OTHER PORTFOLIO SECURITIES
U.S. TREASURY SECURITIES. (Capital Appreciation, Income and Money
Market) Each Fund may invest in U.S. Treasury securities which include Treasury
Bills, Treasury Notes and Treasury Bonds that differ in their interest rates,
maturities and times of issuance. Treasury Bills have initial maturities of one
year or less; Treasury Notes have initial maturities of one to ten years; and
Treasury Bonds generally have initial maturities of greater than ten years.
U.S. GOVERNMENT SECURITIES. (Capital Appreciation, Income and Money
Market Funds) In addition to U.S. Treasury securities, each Fund may invest in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Principal
and interest may fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides financial support to
such U.S. Government-sponsored agencies or instrumentalities, no assurance can
be given that it will always do so, since it is not so obligated by law. Each
Fund will invest in such securities only when it is satisfied that the credit
risk with respect to the issuer is minimal. The U.S. Treasury Money Market Fund
will not invest in securities issued or guaranteed by U.S. Government agencies,
instrumentalities or government-sponsored enterprises that are not backed by the
full faith and credit of the United States.
BANK OBLIGATIONS. (Capital Appreciation and Tax-Free Funds) Each of
these Funds may invest in bank obligations (other than those issued by the
Adviser or its affiliates), including certificates of deposit ("CDs"), time
deposits ("TDs"), bankers' acceptances and other short-term obligations of
domestic banks, foreign subsidiaries or foreign branches of domestic banks, and
domestic branches of foreign banks, domestic savings and loan
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associations and other banking institutions. Domestic commercial banks organized
under Federal law are supervised and examined by the Comptroller of the Currency
and are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of the Federal Reserve System only if they
elect to join. In addition, state banks whose CDs may be purchased by the Fund
are insured by the Bank Insurance Fund administered by the FDIC (although such
insurance may not be of material benefit to the Fund, depending upon the
principal amount of the CDs of each bank held by the Fund) and are subject to
Federal examination and to a substantial body of Federal law and regulation. As
a result of Federal and state laws and regulations, domestic branches of
domestic banks, among other things, are generally required to maintain specified
levels of reserves, and are subject to other supervision and regulation designed
to promote financial soundness.
Obligations of foreign branches of domestic banks, foreign subsidiaries
of domestic banks and domestic branches of foreign banks, such as CDs and TDs,
may be general obligations of the parent banks in addition to the issuing
branch, or may be limited by the terms of a specific obligation or governmental
regulation. Such obligations are subject to different risks than are those of
domestic banks. These risks include foreign economic and political developments,
foreign governmental restrictions that may adversely affect payment of principal
and interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches and
subsidiaries are not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank. If a domestic bank with deposits insured by the FDIC
becomes insolvent, unsecured deposits and other general obligations of such
bank's foreign branches will be subordinated to the receivership expenses of the
FDIC and such bank's domestic deposits and would be subject to the loss of
principal to a greater extent than such bank's domestic branch deposits.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by depositing assets
with a designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of Federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.
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In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, or by domestic branches of foreign banks, the Adviser carefully
evaluates such investments on a case-by-case basis.
Each of these Funds may purchase CDs issued by banks, savings and loan
associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided the Fund purchases any such CD
in a principal amount of not more than $100,000, which amount would be fully
insured by the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the FDIC. Interest payments on such a CD are not insured by the
FDIC. No Fund will own more than one such CD per such issuer.
Each of these Funds may invest in short-term U.S. dollar denominated
corporate obligations that are originated, negotiated and structured by a
syndicate of lenders ("Co-Lenders") consisting of commercial banks, thrift
institutions, insurance companies, finance companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third
parties called "Participants." The Fund may invest in such securities either by
participating as a Co-Lender at origination or by acquiring an interest in the
security from a Co-Lender or a Participant (collectively, "participation
interests"). Co-Lenders and Participants interposed between the Fund and the
corporate borrower (the "Borrower"), together with Agent Banks, are referred
herein as "Intermediate Participants." The Fund also may purchase a
participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Fund
and the Borrower. In such cases, the Fund would be required to rely on the
Intermediate Participant that sold the participation interest not only for the
enforcement of the Fund's rights against the Borrower but also for the receipt
and processing of payments due to the Fund under the security. Because it may be
necessary to assert through an Intermediate Participant such rights as may exist
against the Borrower, in the event the Borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses and risks that
are greater than those that would be involved if the Fund could enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Fund also
may be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Fund were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such cases, the Fund might incur
certain costs and delays in realizing payment in connection with the
participation interest or suffer a loss of principal and/or interest. Further,
in the event of the bankruptcy or insolvency of the Borrower, the obligation of
the Borrower to repay the loan may be subject to certain defenses that can be
asserted by such Borrower as a result of improper conduct by the Agent Bank or
Intermediate Participant.
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COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. (Capital
Appreciation and Tax-Free Funds) Each of these Funds may invest in commercial
paper, which consists of short-term, unsecured promissory notes issued to
finance short-term credit needs. The commercial paper purchased by the Funds
will consist only of direct obligations which, at the time of their purchase,
are (a) rated not lower than Prime-1 by Moody's Investors Service, Inc.
("Moody's"), A-1 by Standard & Poor's Ratings Group ("S&P"), F-1 by Fitch IBCA,
Inc. ("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff"), or (b)
issued by companies having an outstanding unsecured debt issue currently rated
not lower than Aa3 by Moody's or AA- by S&P, Fitch or Duff, or (c) if unrated,
determined by the Adviser to be of comparable quality to those rated obligations
which may be purchased by the Fund.
REPURCHASE AGREEMENTS. (Capital Appreciation, Income and Money Market
Funds) Each Fund may enter into repurchase agreements which involve the
acquisition by a Fund of an underlying debt instrument, subject to an obligation
of the seller to repurchase, and such Fund to resell, the instrument at a fixed
price usually not more than one week after its purchase. The Fund's custodian or
sub-custodian employed in connection with third-party repurchase transactions
will have custody of, and will hold in a segregated account, securities acquired
by a Fund under a repurchase agreement. In connection with its third-party
repurchase transactions, the Fund will employ only eligible sub-custodians that
meet the requirements set forth in Section 17(f) of the 1940 Act. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Fund entering into them. Certain costs may be incurred by a
Fund in connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy or insolvency proceedings are commenced with respect to the seller of
the securities, realization on the securities by a Fund may be delayed or
limited. Each Fund will consider on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase agreements. In an attempt to
reduce the risk of incurring a loss on a repurchase agreement, each Fund will
enter into repurchase agreements only with registered or unregistered securities
dealers or banks with total assets in excess of one billion dollars or primary
government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to securities of the type in which such Fund may invest or
government securities regardless of their remaining maturities, and will require
that additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. The Adviser will monitor on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Each Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.
ZERO COUPON AND STRIPPED SECURITIES. (Capital Appreciation, Income and
Money Market Funds) Each Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of their
unmatured interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. Each Fund,
except the Limited Term U.S. Government Fund and U.S. Treasury Money Market
Fund, also may invest in zero coupon securities issued by
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corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A zero
coupon security pays no interest to its holder during its life and is sold at a
discount to its face value at maturity. The amount of the discount fluctuates
with the market price of the security. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities. The Tennessee Tax-Exempt Fund will invest no
more than 25% of the value of its net assets in zero coupon and stripped
securities.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
(Capital Appreciation and Tax-Free Funds) Each of these Funds may invest in
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Adviser to be of comparable quality to the other obligations in which
such Fund may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of a Fund's assets invested in securities issued by foreign
governments will vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the investments are
made and the interest rate climate of such countries.
FLOATING AND VARIABLE RATE OBLIGATIONS. (Capital Appreciation and
Tax-Free Funds) Each of these Funds may purchase floating and variable rate
demand notes and bonds, which are obligations ordinarily having stated
maturities in excess of 397 days, but which permit the holder to demand payment
of principal at any time, or at specified intervals. Variable rate demand notes
include master demand notes which are obligations that permit the Fund to invest
fluctuating amounts, at varying rates of interest, pursuant to direct
arrangements between the Fund, as lender, and the borrower. These obligations
permit daily changes in the amount borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and a Fund may invest in obligations which are not so rated only if the Adviser
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. The Adviser, on
behalf of each Fund, will consider on an ongoing basis the creditworthiness of
the issuers of the floating and variable rate demand obligations purchased by
such Fund.
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NOTES. (Capital Appreciation Funds and Tax-Free Funds) Each of these
Funds may purchase unsecured promissory notes ("Notes") which are not readily
marketable and have not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), provided such investments are consistent with its
investment objective.
PARTICIPATION INTERESTS AND TRUST RECEIPTS. (Capital Appreciation and
Tax-Free Funds) Each of these Funds may purchase from financial institutions and
trusts created by such institutions participation interests and trust receipts
in securities in which it may invest and may enter into loan participation
agreements. A participation interest or receipt gives the Fund an undivided
interest in the security in the proportion that the Fund's participation
interest or receipt bears to the total principal amount of the security. These
instruments may have fixed, floating or variable rates of interest with
remaining maturities of 397 days or less. If the instrument is unrated, or has
been given a rating below that which is permissible for purchase by the Fund,
the instrument will be backed by an irrevocable letter of credit or guarantee of
a bank or other entity the debt securities of which are rated high quality, or
the payment obligation otherwise will be collateralized by U.S. Government
securities, or, in the case of unrated instruments, the Adviser, acting upon
delegated authority from the Trust's Board of Directors, must have determined
that the instrument is of comparable quality to those instruments in which the
Fund may invest. Participation interests or trust receipts with a rating below
high quality that are backed by an irrevocable letter of credit or guarantee as
described above will be purchased only if the Adviser, acting as described
above, determines after an analysis of, among other factors, the
creditworthiness of the guarantor that such instrument is high quality, and if
the rating agency did not include the letter of credit or guarantee in its
determination of the instrument's rating. If the rating of a participation
interest or trust receipt is reduced subsequent to its purchase by the Fund, the
Adviser will consider, in accordance with procedures established by the Board of
Directors, all circumstances deemed relevant in determining whether the Fund
should continue to hold the instrument. The guarantor of a participation
interest or trust receipt will be treated as a separate issuer. For certain
participation interests and trust receipts, the Fund will have the unconditional
right to demand payment, on not more than seven days' notice, for all or any
part of the Fund's interest in the security, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand payment only upon
a default under the terms of the security, as needed to provide liquidity to
meet redemptions, or to maintain or improve the quality of its investment
portfolio.
GUARANTEED INVESTMENT CONTRACTS. (Capital Appreciation and Tax-Free
Funds) Each of these Funds may make limited investments in guaranteed investment
contracts ("GICs") issued by highly rated U.S. insurance companies. Pursuant to
such a contract, the Fund would make cash contributions to a deposit fund of the
insurance company's general account. The insurance company would then credit to
the Fund on a monthly basis interest which is based on an index (in most cases
the Salomon Smith Barney CD Index), but is guaranteed not to be less than a
certain minimum rate.
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ILLIQUID SECURITIES. (Capital Appreciation, Income and Money Market
Funds) Each Fund may invest up to 15% (10% in the case of the Capital Growth 2,
Limited Term U.S. Government, Tennessee Tax-Exempt, Limited Term Tennessee
Tax-Exempt and U.S. Treasury Money Market Fund) of the value of its net assets
in illiquid securities. As to these securities, the Fund is subject to a risk
that should the Fund desire to sell them when a ready buyer is not available at
a price the Fund deems representative of their value, the value of the Fund's
net assets could be adversely affected. The term "illiquid securities" for this
purpose means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities and includes, among other things, restricted securities
other than those the Adviser has determined to be liquid pursuant to guidelines
established by the Trust's Board and repurchase agreements maturing in more than
seven days. Commercial paper issues include securities issued by major
corporations without registration under the 1933 Act, in reliance on the
exemption from such registration afforded by Section 3(a)(3) thereof and
commercial paper and medium term notes issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the Federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper ordinarily is
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity.
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
To facilitate the increased size and liquidity of the institutional
markets for unregistered securities, the Securities and Exchange Commission
adopted Rule 144A under the 1933 Act. Rule 144A establishes a "safe harbor" from
the registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Section 4(2) paper that is issued by a
company that files reports under the Securities Exchange Act of 1934, as
amended, generally is eligible to be sold in reliance on the safe harbor of Rule
144A. Pursuant to Rule 144A, the institutional restricted securities markets may
provide both readily ascertainable values for restricted securities and the
ability to liquidate an investment in order to satisfy share redemption orders
on a timely basis. Where a substantial market of qualified institutional buyers
has developed for certain restricted securities purchased by the Fund pursuant
to Rule 144A under the 1933 Act, the Fund intends to treat such securities as
liquid securities in accordance with procedures approved by the Trust's Board.
Because it is not possible to
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predict with assurance how the market for specific restricted securities sold
pursuant to Rule 144A will develop, the Trust's Board has directed the Adviser
to monitor carefully each Fund's investments in such securities with particular
regard to trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to Rule
144A, a Fund's investing in such securities may have the effect of increasing
the level of illiquidity in its investment portfolio during such period.
FORWARD COMMITMENTS. (Capital Appreciation, Income and Money Market
Funds) Each Fund may purchase securities on a when-issued or forward commitment
basis, which means that the price is fixed at the time of commitment, but
delivery and payment ordinarily take place a number of days after the date of
the commitment to purchase. Each Fund will make commitments to purchase such
securities only with the intention of actually acquiring the securities, but the
Fund may sell these securities before the settlement date if it is deemed
advisable. The Fund will not accrue income in respect of a security purchased on
a forward commitment basis prior to its stated delivery date.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.
INVESTMENT COMPANY SECURITIES. (Capital Appreciation, Income and Money
Market Funds) Each Fund may invest in securities issued by other investment
companies which principally invest in securities of the type in which such Fund
invests. Under the 1940 Act, a Fund's investment in such securities currently is
limited to, subject to certain exceptions, (i) 3% of the total voting stock of
any one investment company, (ii) 5% of such Fund's total assets with respect to
any one investment company and (iii) 10% of such Fund's total assets in the
aggregate. Investments in the securities of other investment companies will
involve duplication of advisory fees and certain other expenses.
CONVERTIBLE SECURITIES. (Large-Cap Equity, Capital Growth 2, Mid-Cap
Equity and International Equity) Convertible securities may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as
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corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
WARRANTS. (Large-Cap Equity, Capital Growth 2, Mid-Cap Equity and
International Equity Funds) A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. A
Fund may invest up to 5% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Fund that are sold in
units with, or attached to, other securities.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages. Pools
of mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations. These securities may
include complex instruments such as collateralized mortgage obligations and
stripped mortgage-backed securities, mortgage pass-through securities, interests
in real estate mortgage investment conduits ("REMICs"), adjustable rate
mortgages, real estate investment trusts ("REITs"), including debt and preferred
stock issued by REITs, as well as other real estate-related securities.
Mortgage-related securities include those with fixed, floating and variable
interest rates, those with interest rates that change based
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on multiples of changes in a specified index of interest rates and those with
interest rates that change inversely to changes in interest rates.
Mortgages eligible for inclusion in a mortgage pool can include
adjustable rate mortgage loans ("ARMs"). Arms will generally provide for a fixed
initial mortgage interest rate for a specified period of time, generally for
either the first three, six, twelve, thirteen, thirty-six, or sixty scheduled
monthly payments. Thereafter, the interest rates are subject to periodic
adjustment based on changes in an index. ARMs typically have minimum and maximum
rates beyond which the mortgage interest rate may not vary over the lifetime of
the loans. Certain ARMs provide for additional limitations on the maximum amount
by which the mortgage interest rate may adjust for any single adjustment period.
Negatively amortizing ARMs may provide limitations on changes in the required
monthly payment. Limitations on monthly payments can result in monthly payments
that are greater or less than the amount necessary to amortize a negatively
amortizing ARM by its maturity at the interest rate in effect during any
particular month.
Mortgage-related securities include securities other than those
described above that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real property, including CMO
residuals. Other mortgage-related securities may be equity or debt 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, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
GOVERNMENT AGENCY SECURITIES. (Capital Growth 2 and Limited Term U.S.
Government Funds) Mortgage-related securities issued by the Government National
Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates
(also known as "Ginnie Maes") which are guaranteed as to the timely payment of
principal and interest by GNMA and such guarantee is backed by the full faith
and credit of the United States. GNMA is a wholly-owned U.S. Government
corporation within the department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee.
GOVERNMENT RELATED SECURITIES. (Capital Growth 2 and Limited Term U.S.
Government Funds) Mortgage-related securities issued by the Federal National
Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States. The FNMA is a government-sponsored organization owned entirely by
private stockholders. Fannie Maes are guaranteed as to timely payment of
principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie
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Macs" or "PCs"). The FHLMC is a corporate instrumentality of the United States
created pursuant to an Act of Congress, which is owned entirely by Federal Home
Loan Banks. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to
timely payment of interest, which is guaranteed by the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When the FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
PRIVATE ENTITY SECURITIES. (Capital Growth 2) These mortgage-related
securities are issued by commercial banks, savings and loan institutions,
mortgage bankers, private mortgage insurance companies and other
non-governmental issuers. Timely payment of principal and interest on
mortgage-related securities backed by pools created by non-governmental issuers
often is supported partially 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. There can be no assurance that the private insurers or mortgage poolers
can meet their obligations under the policies, so that if the issuers default on
their obligations the holders of the security could sustain a loss. No insurance
or guarantee covers the Fund or the price of the Fund's shares. Mortgage-related
securities issued by non-governmental issuers generally offer a higher rate of
interest than government-agency and government-related securities because there
are no direct or indirect government guarantees of payment.
COMMERCIAL MORTGAGE-RELATED SECURITIES. (Capital Growth 2) Commercial
mortgage-related securities generally are multi-class debt or pass-through
certificates secured by mortgage loans on commercial properties. These
mortgage-related securities generally are structured to provide protection to
the senior classes investors against potential losses on the underlying mortgage
loans. This protection generally is provided by having the holders of
subordinated classes of securities ("Subordinated Securities") take the first
loss if there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated Securities,
cross-collateralization and over-collateralization.
The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Subordinated
Securities have no governmental guarantee, and are subordinated in some manner
as to the payment of principal and/or interest to the holders of more senior
mortgage-related securities arising out of the same pool of mortgages. The
holders of Subordinated Securities typically are compensated with a higher
stated yield than are the holders of more senior mortgage-related securities. On
the other hand, Subordinated Securities typically subject the holder to greater
risk than senior mortgage-related
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securities and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related securities
issued in respect of the same pool of mortgage. Subordinated Securities
generally are likely to be more sensitive to changes in prepayment and interest
rates and the market for such securities may be less liquid than is the case for
traditional fixed-income securities and senior mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is viewed
as exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves larger
loans to single borrowers or groups of related borrowers than residential one-to
four-family mortgage loans. In addition, the repayment of loans secured by
income producing properties typically is dependent upon the successful operation
of the related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-related securities secured by loans
on commercial properties than on those secured by loans on residential
properties.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). (Capital Growth 2) A CMO
is a multiclass bond backed by a pool of mortgage pass-through certificates or
mortgage loans. CMOs may be collateralized by (a) Ginnie Mae, Fannie Mae, or
Freddie Mac pass-through certificates, (b) unsecuritized mortgage loans insured
by the Federal Housing Administration or guaranteed by the Department of
Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other
mortgage-related securities, or (e) any combination thereof. Each class of CMOs,
often referred to as a "tranche," is issued at a specific coupon rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. The principal and interest on the
underlying mortgages may be allocated among the several classes of a series of a
CMO in many ways. One or more tranches of a CMO may have coupon rates which
reset periodically at a specified increment over an index, such as the London
Interbank Offered Rate ("LIBOR") (or sometimes more than one index). These
floating rate CMOs typically are issued with lifetime caps on the coupon rate
thereon. Each of these Funds also may invest in inverse floating rate CMOs.
Inverse floating rate CMOs constitute a tranche of a CMO with a coupon rate that
moves in the reverse direction to an applicable index such a LIBOR. Accordingly,
the coupon rate thereon will increase as interest rates decrease. Inverse
floating rate CMOs are typically more volatile than fixed or floating rate
tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. The Fund's
ability to
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dispose of its positions in such securities will depend on the degree of
liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES. (Capital Growth 2 and Limited Term
U.S. Government Funds) Each of these Funds also may invest in mortgage-backed
securities otherwise eligible for investment when those securities are in
"stripped" form. Stripped mortgage-backed securities are created by segregating
the cash flows from underlying mortgage loans or mortgage securities to create
two or more new securities, each with a specified percentage of the underlying
security's principal or interest payments. Mortgage securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security, known as an interest-only
security, or IO, and all of the principal is distributed to holders of another
type of security known as a principal-only security, or PO. Strips can be
created in a pass-through structure or as tranches of a CMO. The yields to
maturity on IOs and POs are very sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially and adversely
affected.
REAL ESTATE INVESTMENT TRUSTS. (Capital Growth 2) A REIT is a
corporation, or a business trust that would otherwise be taxed as a corporation,
which meets the definitional requirements of the Internal Revenue Code of 1986,
as amended (the "Code"). The Code permits a qualifying REIT to deduct dividends
paid, thereby effectively eliminating corporate level Federal income tax and
making the REIT a pass-through vehicle for Federal income tax purposes. To meet
the definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities, derive most of its
income from rents from real property or interest on loans secured by mortgages
on real property, and distribute to shareholders annually a substantial portion
of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by
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perceptions of management skill. They also are subject to heavy cash flow
dependency, defaults by borrowers or tenants, self-liquidation and the
possibility of failing to qualify for tax-free status under the Code or to
maintain exemption from the 1940 Act.
ASSET-BACKED SECURITIES. (Capital Growth 2) Asset-backed securities are
a form of derivative. The securitization techniques used for asset-backed
securities are similar to those used for mortgage-related securities. These
securities include debt securities and securities with debt-like
characteristics. The collateral for these securities has included home equity
loans, automobile and credit card receivables, boat loans, computer leases,
airplane leases, mobile home loans, recreational vehicle loans and hospital
account receivables. Each of these Funds may invest in these and other types of
asset-backed securities that may be developed in the future.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.
AMERICAN DEPOSITARY RECEIPTS. (Large-Cap Equity, Capital Growth 2,
Mid-Cap Equity and International Equity Funds) Each of these Funds may invest in
the securities of foreign issuers in the form of American Depositary Receipts
("ADRs") and other forms of depositary receipts. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. Generally, ADRs in registered form are designed for
use in the United States securities markets. Each of these Funds may invest in
ADRs through "sponsored" or "unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the underlying security and a depositary,
whereas a depositary may establish an unsponsored facility without participation
by the issuer of the deposited security. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities and the depositary of
an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security or
to pass through voting rights to the holders of such receipts in respect of the
deposited securities.
STANDARD & POOR'S DEPOSITARY RECEIPTS. (Growth Opportunities Fund)
These securities, commonly referred to as "spiders," represent an interest in a
fixed portfolio of common stocks designed to track the price and dividend yield
performance of the Standard & Poor's 500 Index or the Standard & Poor's MidCap
400 Index, as the case may be.
MUNICIPAL OBLIGATIONS. (Limited Term Tennessee Tax-Exempt and Tennessee
Tax-Exempt) The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public
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facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal; the interest paid on such obligations may be
exempt from Federal income tax, although current tax laws place substantial
limitations on the size of such issues. There are, of course, variations in the
security of Municipal Obligations, both within a particular classification and
between classifications.
Municipal Obligations bear fixed, floating or variable rates of
interest, which are determined in some instances by formulas under which the
Municipal Obligation's interest rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. Certain Municipal Obligations are subject to
redemption at a date earlier than their stated maturity pursuant to call
options, which may be separated from the related Municipal Obligations and
purchased and sold separately.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of one year, but which
permit the holder to demand payment of principal at any time, or at specified
intervals. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders thereof. The interest rate on a floating rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable rate demand obligation is adjusted automatically at specified
intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a particular
offering, maturity of the obligation and rating of the issue. The imposition of
the advisory and administration fees, as well as other Fund operating expenses,
will have the effect of reducing the yield to investors.
Each of these Funds may invest up to 5% of the value of its total
assets in municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations"). Lease obligations have special
risks not ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation ordinarily is
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. Certain lease obligations in which
these Funds may invest may contain
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"non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the leased
property in the event of foreclosure might prove difficult. In addition, no
assurance can be given as to the liquidity of certain lease obligations. The
staff of the Securities and Exchange Commission currently considers certain
lease obligations to be illiquid. The Trust's Board of Directors has established
guidelines for the Adviser to determine the liquidity and appropriate valuation
of lease obligations based on factors which include: (1) the frequency of trades
and quotes for the lease obligation or similar securities; (2) the number of
dealers willing to purchase or sell the lease obligation or similar securities
and the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security or similar securities; and (4) the
nature of the marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer.
Each of these Funds may purchase tender option bonds and similar
securities. A tender option bond is a Municipal Obligation (generally held
pursuant to a custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax exempt rates, that has been coupled with the agreement of a third party,
such as a bank, broker-dealer or other financial institution, pursuant to which
such institution grants the security holders the option, at periodic intervals,
to tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing or
similar agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term tax
exempt rate. The Adviser, on behalf of the Fund, will consider on an ongoing
basis the creditworthiness of the issuer of the underlying Municipal Obligation,
of any custodian and of the third party provider of the tender option. In
certain instances and for certain tender option bonds, the option may be
terminable in the event of a default in payment of principal or interest on the
underlying Municipal Obligations and for other reasons.
Each Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have the
effect of creating taxable income for the Fund. Based on the tender option bond
agreement, each of these Funds expects to be able to value the tender option
bond at par; however, the value of the instrument will be monitored to assure
that it is valued at fair value.
RATINGS OF MUNICIPAL OBLIGATIONS. Subsequent to its purchase by a Fund,
an issue of rated Municipal Obligations may cease to be rated or its rating may
be reduced below the
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minimum required for purchase by the Fund. Neither event will require the sale
of such Municipal Obligations by the Fund, but the Adviser will consider such
event in determining whether the Fund should continue to hold the Municipal
Obligations. To the extent that the ratings given by Moody's, S&P or Fitch for
Municipal Obligations may change as a result of changes in such organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments in accordance with the investment policies
contained in the Fund's Prospectus and this Statement of Additional Information.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Adviser also will evaluate
these securities and the creditworthiness of the issuers of such securities
based upon financial and other available information.
The average dollar-weighted credit rating of the Municipal Obligations
held by the Tennessee Tax-Exempt Fund and Limited Term Tennessee Tax-Exempt Fund
will be at least A- by Moody's, S&P or Fitch. To further limit risk, each
Municipal Obligation in which the Fund may invest must be rated, in the case of
bonds, at least Baa by Moody's or at least BBB by S&P and Fitch. Each Fund may
invest in short-term Municipal Obligations which are rated in the two highest
categories by Moody's, S&P or Fitch. The average dollar-weighted portfolio
credit rating will be measured on the basis of the dollar value of the Municipal
Obligations purchased and their credit rating without reference to rating
subcategories. The Tennessee Tax-Exempt Fund and Limited Term Tennessee
Tax-Exempt Fund also may invest in Municipal Obligations which, while not rated,
are determined by the Adviser to be of comparable quality to the rated
securities in which the Fund may invest.
POLICIES
INVESTMENT TECHNIQUES AND PORTFOLIO TURNOVER RATES. (Capital
Appreciation, Income and Money Market Funds) As discussed below, each Fund may
engage in various investment techniques the use of which involves risk.
Investors in the Tennessee Tax-Exempt or Limited Term Tennessee Tax-Exempt Funds
should be aware that the use of these techniques may give rise to taxable
income. Using these techniques may produce higher than normal portfolio turnover
for a Fund and may affect the degree to which its net asset value fluctuates.
Portfolio turnover may vary from year to year, as well as within a
year. No Fund will consider portfolio turnover to be a limiting factor in making
investment decisions. Under normal market conditions, the portfolio turnover
rate for the current fiscal year is anticipated to be less than 200% for the
Mid-Cap Fund, Growth Opportunities Fund, International Equity Fund, Tennessee
Tax-Exempt Fund and Limited Term Tennessee Tax-Exempt Fund, and is anticipated
to be less than 100% for the Large-Cap Equity Fund, Limited Term U.S. Government
Fund and each Strategic Portfolio. A portfolio turnover rate of 100% is
equivalent to the Fund buying and selling all of the securities in its portfolio
once in the course of a year.
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Higher portfolio turnover rates are likely to result in comparatively greater
brokerage commissions or transaction costs. In addition, short-term gains
realized from portfolio transactions are taxable to shareholders as ordinary
income. Each Money Market Fund will have a high portfolio turnover, but that
should not adversely affect the Fund since it usually does not pay brokerage
commissions when it purchases short-term debt obligations.
DURATION. (Limited Term Tennessee Tax-Exempt Fund) This Fund follows a
controlled duration strategy. As a measure of a fixed income security's cash
flow, duration is an alternative to the concept of "term to maturity" in
assessing the price volatility associated with changes in interest rates.
Generally, the longer the duration, the more volatility an investor should
expect. For example, the market price of a bond with a duration of three years
would be expected to decline 3% if interest rates rose 1%. Conversely, the
market price of the same bond would be expected to increase 3% if interest rates
fell 1%. The market price of a bond with a duration of six years would be
expected to increase or decline twice as much as the market price of a bond with
a three-year duration. Duration is a way of measuring a security's maturity in
terms of the average time required to receive the present value of all interest
and principal payments as opposed to its term to maturity. The maturity of a
security measures only the time until final payment is due; it does not take
account of the pattern of a security's cash flows over time, which would include
how cash flow is affected by prepayments and by changes in interest rates.
Incorporating a security's yield, coupon interest payments, final maturity and
option features into one measure, duration is computed by determining the
weighted average maturity of a bond's cash flows, where the present values of
the cash flows serve as weights. In computing the duration of the Fund, the
Adviser will estimate the duration of obligations that are subject to features
such as prepayment or redemption by the issuer, put options retained by the
investor or other imbedded options, taking into account the influence of
interest rates on prepayments and coupon flows.
LENDING PORTFOLIO SECURITIES. (Capital Appreciation Funds, Income Funds
and Money Market Funds) From time to time, each Fund may lend securities from
its investment portfolio to brokers, dealers and other financial institutions
needing to borrow securities to complete certain transactions. Such loans may
not exceed 33-1/3% of the value of the relevant Fund's total assets. In
connection with such loans, each Fund will receive collateral consisting of cash
or U.S. Government securities which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
Each Fund can increase its income through the investment of such collateral.
Each Fund continues to be entitled to payments in amounts equal to the
dividends, interest and other distributions payable on the loaned security and
receives interest on the amount of the loan. Such loans will be terminable at
any time upon specified notice. A Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with such Fund. From time to time, a Fund may return to the
borrower or a third party which is unaffiliated with the Fund, and which is
acting as a "placing broker," a part of the interest earned from the investment
of collateral received for securities loaned.
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The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions payable
on the loaned securities, and any increase in market value; (5) the Fund may pay
only reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Trust's Board of
Directors must terminate the loan and regain the right to vote the securities if
a material event adversely affecting the investment occurs.
OPTIONS TRANSACTIONS. (Large-Cap Equity, Capital Growth 2, Mid-Cap
Equity and International Equity Funds) Each of these Funds may purchase call and
put options in respect of specific securities in which the Fund may invest and
write covered call and put option contracts. A call option gives the purchaser
of the option the right to buy, and obligates the writer to sell, the underlying
security at the exercise price at any time during the option period. Conversely,
a put option gives the purchaser of the option the right to sell, and obligates
the writer to buy, the underlying security at the exercise price at any time
during the option period. A covered call option sold by the Fund, which is a
call option with respect to which the Fund owns the underlying security, exposes
the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or to
possible continued holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security. A covered put
option sold by the Fund exposes the Fund during the term of the option to a
decline in price of the underlying security. A put option sold by the Fund is
covered when, among other things, permissible liquid assets are placed in a
segregated account to fulfill the obligation undertaken.
The principal reason for the Fund writing covered call options is to
realize, through the receipt of premiums, a greater return than would be
realized on its portfolio securities alone. In return for a premium, the writer
of a covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing covered put options is to realize
income in the form of premiums. The writer of a covered put option accepts the
risk of a decline in the price of the underlying security. The size of the
premiums that the Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase their
option-writing activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
time the options are written. In the case of call options, these exercise prices
are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Fund may write (a) in-the-money call options when the
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Adviser expects that the price of the underlying security will remain stable or
decline moderately during the option period, (b) at-the-money call options when
the Adviser expects that the price of the underlying security will remain stable
or advance moderately during the option period and (c) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this lower price, the
amount of any realized loss will be offset wholly or in part by the premium
received. Out-of-the-money, at-the-money and in-the-money put options (the
reverse of call options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call options are used
in equivalent transactions.
So long as the Fund's obligation as the writer of an option continues,
it may be assigned an exercise notice by the broker-dealer through which the
option was sold, requiring it to deliver, in the case of a call, or take
delivery of, in the case of a put, the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. The Fund can no longer effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice.
While it may choose to do otherwise, the Fund generally will purchase
or write only those options for which the Adviser believes there is an active
secondary market so as to facilitate closing transactions. There is no assurance
that sufficient trading interest to create a liquid secondary market on a
securities exchange will exist for any particular option or at any particular
time, and for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety of reasons. In
the past, for example, higher than anticipated trading activity or order flow,
or other unforeseen events, at times have rendered certain clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that otherwise may interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.
The Fund intends to treat options in respect of specific securities
that are not traded on a national securities exchange and the securities
underlying covered call options written by the Fund as illiquid securities.
STOCK INDEX OPTIONS. (Large-Cap Equity, Capital Growth 2, Mid-Cap
Equity and International Equity Funds) Each of these Funds may purchase and
write put and call options
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on stock indexes listed on national securities exchanges or traded in the
over-the-counter market to the extent of 15% of the value of its net assets. A
stock index fluctuates with changes in the market values of the stocks included
in the index. Options on stock indexes are similar to options on stock except
that (a) the expiration cycles of stock index options are monthly, while those
of stock options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of a stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. The amount of cash
received will be equal to such difference between the closing price of the index
and the exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position in
stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised.
The effectiveness of the Fund's purchasing or writing stock index
options will depend upon the extent to which price movements in its portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than movements in the price of
a particular stock. Accordingly, successful use by the Fund of options on stock
indexes will be subject to the Adviser's ability to predict correctly movements
in the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
When the Fund writes an option on a stock index, it will place in a
segregated account permissible liquid assets in an amount at least equal to the
market value of the underlying stock index and will maintain the account while
the option is open or will otherwise cover the transaction.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. (Large-Cap Equity,
Capital Growth 2, Mid-Cap Equity, International Equity, Tennessee Tax-Exempt and
Limited Term Tennessee Tax-Exempt Funds) None of these Funds will be a commodity
pool. However, as a substitute for a comparable market position in the
underlying securities or for hedging purposes, each of these Funds may engage in
futures and options on futures transactions, as described below.
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The commodities transactions of each of these Funds must constitute
bona fide hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission. In addition, none of
these Funds may engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, each of these Funds may be required to segregate permissible liquid
assets in connection with its commodities transactions in an amount at least
equal to the value of the underlying commodity.
Initially, when purchasing or selling futures contracts, a Fund will be
required to deposit with the Trust's custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate its
existing position in the contract.
Although each of these Funds intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the relevant Fund to substantial losses. If it is not possible, or
the Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures contract.
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To the extent a Fund is engaging in a futures transaction as a hedging
device, because of the risk of an imperfect correlation between securities in a
portfolio that are the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not be fully
effective if, for example, losses on the portfolio securities exceed gains on
the futures contract or losses on the futures contract exceed gains on the
portfolio securities. For futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of a Fund's investments
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, the Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the futures contract
has been less or greater than that of the securities. Such "over hedging" or
"under hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established.
Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market or
interest rates. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, such Fund will lose part or all of the
benefit of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
Call options sold by a Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which are
expected to move relatively consistently with, the instruments underlying the
futures contract. Put options sold by a Fund with respect to futures contracts
will be covered in the same manner as put options on specific securities as
described above.
Upon exercise of an option, the writer of the option delivers to the
holder of the option the futures position and the accumulated balance in the
writer's futures margin account, which
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represents the amount by which the market price of the futures contract exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the futures contract. The potential loss related to the
purchase of options on futures contracts is limited to the premium paid for the
option (plus transaction costs). Because the value of the option is fixed at the
time of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change daily
and that change would be reflected in the net asset value of the Fund.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES. (Large-Cap
Equity, Capital Growth 2, Mid-Cap Equity and International Equity Funds) Each of
these Funds may purchase and sell stock index futures contracts and options on
stock index futures contracts to the extent of 15% of the value of its net
assets.
A stock index future obligates the seller to deliver (and the purchaser
to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indexes that are permitted investments, each of these Funds intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.
Each of these Funds may use index futures as a substitute for a
comparable market position in the underlying securities.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS. (Tennessee Tax-Exempt and Limited Term Tennessee Tax-Exempt Funds)
Each of these Funds may invest in interest rate futures contracts and options on
interest rate futures contracts as a substitute for a comparable market position
and to hedge against adverse movements in interest rates to the extent of 15% of
the value of its net assets.
To the extent the Fund has invested in interest rate futures contracts
or options on interest rate futures contracts as a substitute for a comparable
market position, the Fund will be subject to the same investment risks had it
purchased the securities underlying the contract.
Each of these Funds may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase put
options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates. The Fund may sell call options on
interest rate futures contracts to partially hedge against declining prices of
portfolio securities. The Fund may sell put options on interest rate futures
contracts to hedge against increasing prices of the securities which are
deliverable upon exercise of the futures contracts.
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Each of these Funds also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or the degree of correlation between price movements in the options on
interest rate futures and price movements in the Fund's investment securities
which are the subject of the hedge.
FUTURE DEVELOPMENTS. Each Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivative investments which are not presently contemplated for use by
such Fund or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with its investment objective
and legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or this Statement of Additional Information.
FOREIGN CURRENCY TRANSACTIONS. (International Equity Fund) Foreign
currency transactions may be entered into for a variety of purposes, including:
to fix in U.S. dollars, between trade and settlement date, the value of a
security the Fund has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Fund already owns, particularly if it expects a decrease in the
value of the currency in which the foreign security is denominated; or to gain
exposure to the foreign currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange. The
Fund's success in these transactions will depend principally on the ability of
the Fund's Sub-Adviser to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
SHORT-SELLING. (International Equity Fund and, to a limited extent,
Capital Growth 2, Limited Term U.S. Government, Tennessee Tax-Exempt and Limited
Term Tennessee Tax-Exempt Funds) In these transactions the Fund sells a security
it does not own in anticipation of a decline in the market value of the
security. To complete the transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund, which would result in a loss or gain, respectively. Securities
will not be sold short if, after effect is given to any such short sale, the
total market value of all securities sold short would exceed 25% of the value of
the Fund's net assets. Each of these Funds, other than the International Equity
Fund, will limit its short sales to those that are "against the box," a
transaction in which the Fund enters into a short sale of a security which it
owns. The proceeds of the short sale will be held by a broker until the
settlement date at which time the
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Fund delivers the security to close the short position. The Fund receives the
net proceeds from the short sale. At no time will any of these Funds have more
than 15% of the value of its net assets in deposits on short sales against the
box.
BORROWING MONEY. (Capital Appreciation Funds, Income Funds and Money
Market Funds) As a fundamental policy, each Fund is permitted to borrow money in
an amount up to 33-1/3% of the value of its total assets. However, each Fund
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 33-1/3% of the value of its total
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of a Fund's total assets, such Fund will not
make any investments. In addition, each Money Market Fund may borrow for
investment purposes on a secured basis through entering into reverse repurchase
agreements as described below.
REVERSE REPURCHASE AGREEMENTS. (U.S. Treasury Money Market Fund only)
This Fund may enter into reverse repurchase agreements with banks, brokers or
dealers. Reverse repurchase agreements involve the transfer by the Fund of an
underlying debt instrument in return for cash proceeds based on a percentage of
the value of the security. The Fund retains the right to receive interest and
principal payments on the security. The Fund will use the proceeds of reverse
repurchase agreements only to make investments which generally either mature or
have a demand feature to resell to the issuer at a date simultaneous with or
prior to the expiration of the reverse repurchase agreement. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. In certain types of agreements, there is no agreed upon repurchase
date and interest payments are calculated daily, often based on the prevailing
overnight repurchase rate. As a result of these transactions, the Fund may be
exposed to greater potential fluctuations in the value of its assets and its net
asset value per share. Interest costs on the money borrowed may exceed the
return received on the securities purchased. The Trust's Directors have
considered the risks to each of these Funds and their shareholders which may
result from the entry into reverse repurchase agreements and have determined
that the entry into such agreements is consistent with such Fund's investment
objective and management policies. The Fund will maintain in a segregated
account permissible liquid assets equal to the aggregate amount of its reverse
repurchase obligations, plus accrued interest, in certain cases, in accordance
with releases promulgated by the Securities and Exchange Commission.
INVESTMENT CONSIDERATIONS AND RISK FACTORS
RISK OF INVESTING IN MUNICIPAL OBLIGATIONS. (Tennessee Tax-Exempt and
Limited Term Tennessee Tax-Exempt Funds) Each of these Funds may invest more
than 25% of the value of its total assets in Municipal Obligations which are
related in such a way that an economic, business or political development or
change affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects or securities whose issuers are located in the same state. As
a result,
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the Fund may be subject to greater risk as compared to a fund that does not
follow this practice.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce its available yield. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to adversely affect its
shareholders, the Trust would reevaluate the Fund's investment objective and
policies and submit possible changes in the Fund's structure to shareholders for
their consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, the Fund would treat such security as a
permissible taxable investment within the applicable limits set forth in the
Prospectus.
RISK OF INVESTING IN TENNESSEE MUNICIPAL OBLIGATIONS. (Tennessee
Tax-Exempt Fund and Limited Term Tennessee Tax-Exempt Fund) Investors in the
Tennessee Tax-Exempt Fund and Limited Term Tennessee Tax-Exempt Fund should
consider carefully the special risks inherent in such Funds' investment in
Tennessee Municipal Obligations. These risks result from the financial condition
of the State of Tennessee. The following information constitutes only a brief
summary, does not purport to be a complete description, and is based on
information drawn from official statements relating to securities offerings of
the State of Tennessee (the "State") and various local agencies, available as of
the date of the Statement of Additional Information. While the Trust has not
independently verified such information, it has no reason to believe that such
information is not correct in all material respects.
The Constitution of the State of Tennessee requires a balanced budget.
In 1978, the voters of the State of Tennessee approved an amendment to the State
Constitution requiring that (1) the total expenditures of the State for any
fiscal year may not exceed the State's revenues and reserves, including the
proceeds of debt obligations issued to finance capital expenditures and (2) in
no year may the rate of growth of appropriations from State tax revenues exceed
the estimated rate of growth of the State's economy. In the past the Governor
and the General Assembly have had to restrict expenditures to comply with the
State Constitution.
Tennessee's fiscal year 1997-98 budget completed a six year plan for
funding of improvements in the Basic Education Program for public schools and of
teacher salary equalization, funded certain crime legislation aimed at juvenile
crime, and expanded TennCare enrollment to all children without access to health
insurance. The reduction in retirement contributions sufficient to fund
contingency appropriations for a compound cost-of-living retirement adjustment,
a 3.6% retirement adjustment, and a 1.5% salary increase for state employees,
teachers and higher education was confirmed effective January 1, 1998. The
General Assembly approved $60.8 million in general obligation bonds (excluding
highway
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bonds), of which $24.8 million was for higher education projects, to fund part
of the $93.1 million capital projects program.
A budget transfer of $43 million from the Tennessee Housing Development
Agency dedicated tax revenues, reserves and other funds was made as of June 30,
1998, to the State's General Fund. Such transfer did not impact the ratings on
the Agency's outstanding debt.
The Governor's $15.4 billion budget for fiscal year 1998-99 was amended
and approved April 29, 1998. The budget includes a 1,049 reduction in then
existing staff positions and an increase of 406 positions necessary for
recommended improvements. The base budget includes a $57.1 million reduction in
expenditures from General Fund taxes ($66.2 million from all tax sources). The
improvement budget of $370 million from General Fund taxes includes $66.3
million for the Basic Education Program for public schools; $20.3 million for
higher education operating budgets; $67.8 million for TennCare; $21 million for
new prison beds and operating requirements; and a 2% salary increase effective
January 1, 1999. The Governor recommended and the General Assembly passed $265.5
million in general obligation bonds (excluding highway bonds), of which $196.2
million is for higher education projects, to fund part of the $322.7 million
capital projects program.
On February 8, 1999, the Funding Board reported to the Governor and the
Chairmen of the Finance, Ways & Means Committees of the Tennessee General
Assembly its revised consensus revenue estimates for fiscal year 1998-99 and the
first estimates for fiscal year 1999-2000, which became the basis for the fiscal
year 1998-99 revised estimates and the estimates for fiscal year 1999-2000. The
growth estimates for fiscal year 1998-99 for the General Fund taxes range from
2.25% to 2.75% and for all tax collections range from 2.5% to 3.0%. The budget
document for fiscal year 1999-2000 estimates growth of 2.43% in 1998-99 which is
$69.8 million less than the budgeted estimate. The shortfall is offset by fiscal
year 1997-98's surplus and available reserves in the current year.
Revenue collections for the six months of August 1998 through January
1999 increased by 3.36% over the same period last year. General Fund collections
are $2.6 billion which is $20.2 million less than budgeted. The undercollection
was in the franchise and excise taxes.
The estimated financial effects of the Governor's proposed "Tax Relief
& Fairness Act of 1999", which repeals the sales tax on grocery food and
replaces the franchise and excise taxes with the "fair business tax" -a 2.5% tax
on business compensation and profits (with a $50,000 exemption on each), are
included in the 1999-2000 budget. The budget contemplates a net revenue increase
from the 1999 Tax Bill of $406 million in General Fund revenue consisting of
$40.6 million to the Reserve for Revenue Fluctuations and $365.4 million to fund
the 1999-2000 budget.
The $16.568 billion budget recommended for fiscal year 1999-2000
includes no growth in positions. The base budget includes $42.3 million to fund
supplemental appropriations. The
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improvement budget of $416 million from general fund taxes includes $68.9
million for the Basic Education Program for public schools; $25.6 million for
higher education operating budgets; $142.3 million for TennCare; $13.6 million
for new prison beds and local jail beds; $20 million for state employee
compensation issues; and $26 million for a 1.7% salary increase effective
January 1, 2000 for state employees, teachers and higher education employees.
The Governor recommended $166.5 million in general obligation bonds (excluding
highway bonds), of which $75.9 million is for higher education projects, to fund
part of the $246.9 million capital projects program.
LOWER RATED SECURITIES RISK. (Growth Opportunities Fund) The Capital
Growth 2 Fund is permitted to invest, to a limited extent, in securities rated
as low as Ba by Moody's or BB by S&P, Fitch or Duff. Such securities, though
higher yielding, are characterized by risk. See the "Appendix" for a general
description of Moody's, S&P, Fitch and Duff ratings. Although ratings may be
useful in evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these securities. The Fund will rely on the
Adviser's judgment, analysis and experience in evaluating the creditworthiness
of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities are considered
by S&P, Moody's, Fitch and Duff generally to be predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Fund's ability to dispose of particular issues when necessary to meet its
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
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Fund to obtain accurate market quotations for purposes of valuing its securities
and calculating its net asset value. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of these securities. In such cases, judgment may play a greater role
in valuation because less reliable, objective data may be available.
These securities may be particularly susceptible to economic downturns.
It is likely that an economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such securities.
In addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
This Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund does
not have any arrangement with any persons concerning the acquisition of such
securities, and the Adviser will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities. Such zero coupon securities carry an
additional risk in that, unlike securities which pay interest throughout the
period to maturity, the Fund will realize no cash until the cash payment date
unless a portion of such securities are sold and, if the issuer defaults, the
Fund may obtain no return at all on its investment. See "Dividends,
Distributions and Taxes."
MORTGAGE-RELATED SECURITIES RISK. (Capital Growth 2 and Limited Term
U.S. Government Funds) Mortgage-related securities in which these Funds may
invest are complex derivative instruments, subject to both credit and prepayment
risk, and may be more volatile and less liquid than more traditional debt
securities. Some mortgage-related securities have structures that make their
reactions to interest rate changes and other factors difficult to predict,
making their value highly volatile. No assurance can be given as to the
liquidity of the market for certain mortgage-backed securities, such as
collateralized mortgage obligations and stripped mortgage-backed securities.
Determination as to the liquidity of interest-only and principal-only fixed
mortgage-backed securities issued by the U.S. Government or its agencies and
instrumentalities will be made in accordance with guidelines established by the
Trust's Board of Directors. In accordance with such guidelines, the Adviser will
monitor investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. The Fund intends to treat other stripped mortgage-backed securities
as illiquid securities.
Mortgage-related securities are subject to credit risks associated with
the performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although
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commercial mortgages typically have shorter maturities than residential
mortgages and prepayment protection features. In certain instances, the credit
risk associated with mortgage-related securities can be reduced by third party
guarantees or other forms of credit support. Improved credit risk does not
reduce prepayment risk which is unrelated to the rating assigned to the
mortgage-related security. Prepayment risk can lead to fluctuations in value of
the mortgage-related security which may be pronounced. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting from
changes in interest rates or prepayments in the underlying mortgage collateral.
Certain mortgage-related securities that may be purchased by the Fund, such as
inverse floating rate collateralized mortgage obligations, have coupons that
move inversely to a multiple of a specific index which may result in a form of
leverage. As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security are more likely
to be prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is not possible to predict accurately the
security's return to the Fund. Moreover, with respect to certain stripped
mortgage-backed securities, if the underlying mortgage securities experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment in these securities even if the securities are
rated in the highest rating category. During periods of rapidly rising interest
rates, prepayments of mortgage-related securities may occur at slower than
expected rates. Slower prepayments effectively may lengthen a mortgage-related
security's expected maturity which generally would cause the value of such
security to fluctuate more widely in response to changes in interest rates. Were
the prepayments on the Fund's mortgage-related securities to decrease
significantly, the Fund's effective duration, and thus sensitivity to interest
rate fluctuations, would increase.
SIMULTANEOUS INVESTMENTS. (Capital Appreciation, Income and Money
Market Funds) Investment decisions for each Fund are made independently from
those of the other investment companies, investment advisory accounts, custodial
accounts, individual trust accounts and commingled funds that may be advised by
the Adviser or, if applicable, sub-investment adviser. However, if such other
investment companies or managed accounts desire to invest in, or dispose of, the
same securities as the Fund, available investments or opportunities for sales
will be allocated equitably to each of them. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by a Fund
or the price paid or received by a Fund.
INVESTMENT RESTRICTIONS
Each Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted
investment restrictions
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numbered 1 through 5 as fundamental policies, and only the Funds so indicated
have adopted investment restrictions numbered 6 through 9 as additional
fundamental policies. These restrictions cannot be changed, as to a Fund,
without approval by the holders of a majority (as defined in the 1940 Act) of
such Fund's outstanding voting securities. Each Fund, except as otherwise
indicated, has adopted investment restrictions numbered 10 through 13 as
non-fundamental policies which may be changed by vote of a majority of the
Trust's Trustees at any time.
FUNDAMENTAL POLICIES
No Fund may:
1. Purchase or sell commodities, commodity contracts (including futures
contracts with respect to each Fund other than the International Equity, Mid-Cap
Equity, Capital Growth 2, Large Cap, Limited Term U.S. Government, Tennessee
Tax-Exempt, and Limited Term Tennessee Tax-Exempt Funds, which may purchase
futures contracts), oil, gas or mineral exploration or development programs, or
real estate (although investments by all of the Funds except the U.S. Treasury
Money Market Fund in marketable securities of companies engaged in such
activities and in securities secured by real estate or interests therein are not
hereby precluded and investment in real estate investment trusts are permitted
for the Mid-Cap Equity, Capital Growth 2, and Large Cap Funds).
2. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 331/3% of the value of its total assets at
the time of such borrowing, or mortgage, pledge, or hypothecate any assets,
except in connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 331/3% of the value of such Fund's
total assets at the time of its borrowing. A Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
its total assets are outstanding.
3. Make loans, except that each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, may lend
Fund securities in accordance with its investment objective and policies, and
may enter into repurchase agreements.
4. Purchase securities on margin, sell securities short, participate on
a joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that a Fund may
be deemed to be an underwriter under certain securities laws in the disposition
of "restricted securities" acquired in accordance with such Fund's investment
objectives, restrictions and policies.
5. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act). A Fund's permitted borrowings and transactions in futures and
options, to the extent
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<PAGE> 130
permitted under the 1940 Act, are not considered senior securities for purposes
of this investment restriction.
The following investment restriction numbered 6 is a fundamental policy
which applies only to the U.S. Treasury Money Market Fund. The U.S. Treasury
Money Market Fund may not:
6. Invest in securities other than those issued or guaranteed by the
U.S. Government or its agencies or instrumentalities or repurchase agreements
related thereto.
The following investment restriction numbered 7 is a fundamental policy
which applies to each of the Tennessee Tax-Exempt and Tennessee Limited Term
Tax-Exempt Funds. Neither of these Funds may:
7. Purchase any securities which would cause 25% or more of the Fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
The following investment restriction numbered 8 is fundamental for the
U.S. Treasury Money Market, International Equity Fund, Mid-Cap Equity Fund,
Growth Opportunities Fund, Large Cap Equity Fund, Limited Term U.S. Government
Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth & Income Portfolio,
Moderate Growth & Income Portfolio, and Current Income Portfolio. None of these
Funds may:
8. Purchase any securities which would cause more than 25% of the value
of such Fund's total assets at the time of purchase to be invested in securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the U.S.
government or its agencies or instrumentalities; (b) for the Aggressive Growth
Portfolio, Growth Portfolio, Growth & Income Portfolio, Moderate Growth & Income
Portfolio, and Current Income Portfolio, there is no limitation with respect to
registered investment companies; (c) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (d)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
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<PAGE> 131
The following investment restriction numbered 9 is fundamental for the
Mid-Cap Equity Fund, Large Cap Equity Fund, Limited Term U.S. Government Fund,
U.S. Treasury Money Market Fund, Aggressive Growth Portfolio, Growth Portfolio,
Growth & Income Portfolio, Moderate Growth & Income Portfolio, and Current
Income Portfolio. No such fund may:
9. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities or securities of other investment
companies.
* * *
NONFUNDAMENTAL POLICIES
None of the Funds may:
10. Invest in the securities of a company for the purpose of exercising
management or control.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Fund's net assets would be so
invested.
12. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
None of the International Equity, Capital Growth 2, Tennessee
Tax-Exempt, and Limited Term Tennessee Tax-Exempt Funds will:
13. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. government or its agencies or instrumentalities
if, immediately after such purchase, more than 5% of the value of its total
assets would be invested in such issuer (except that up to 50% of the value of
the Fund's total assets may be invested without regard to such 5% limitation).
For purposes of this limitation, a security is considered to be issued by the
government entity (or entities) whose assets and revenues back the security;
with respect to a private activity bond that is backed only by the assets and
revenues of a non-government user, a security is considered to be issued by such
non-governmental user.
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<PAGE> 132
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,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services Limited Partnership
Dick D. Briggs, Jr., M.D. 65 Trustee From September 1989 to present,
459 DER Building Emeritus Professor and Eminent Scholar
1808 7th Avenue South Chair, Univ. of Alabama at Birmingham;
UAB Medical Center from October 1979 to present, Physician,
Birmingham, Alabama 35294 University of Alabama Health Services
Foundation; from 1981 to 1995,
Professor and Vice Chairman, Dept. of
Medicine, Univ. of Alabama at
Birmingham School of Medicine; from
1988 to 1992, President, CEO and
Medical Director, Univ. of Alabama
Health Services Foundation
Wendell D. Cleaver 64 Trustee From September 3, 1993 to present,
209 Lakewood Drive, West retired; from December, 1988 to August,
Mobile, Alabama 36608 1993, Executive Vice President, Chief
Operating Officer and Director, Mobile
Gas Service Corporation
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired; until
751 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830-2505 Division, Alabama Power Company
</TABLE>
38
<PAGE> 133
<TABLE>
<S> <C> <C> <C>
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The Sessions
The University of North Group; from July 1989 to present, Chancellor,
Carolina at Charlotte The University of North Carolina at Charlotte;
Charlotte, North Carolina 28223 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>
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.
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
</TABLE>
39
<PAGE> 134
<TABLE>
<S> <C> <C> <C>
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.
COMPENSATION TABLE(1)
------------------
<TABLE>
<CAPTION> Pension or
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued Annual from AmSouth
Name of from AmSouth As Part of Benefits Upon Mutual Funds
Position Fund Expenses Fund Expenses Retirement paid to Trustee
- -------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
J. David Huber None None None None
James H. $14,000 None None $14,000
Woodward, Jr.
Homer H. Turner $14,000 None None $14,000
Wendell D. Cleaver $14,000 None None $14,000
Dick D. Briggs, Jr., - $14,000 None None $14,000
M.D.
</TABLE>
1 Figures are for the Trust's fiscal year ended July 31, 1999.
INVESTMENT ADVISER
Investment advisory and management services are provided to the Money
Market Funds, the Capital Appreciation Funds and the Income Funds by the Adviser
pursuant to the
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<PAGE> 135
Investment Advisory Agreement dated as of August 1, 1988, as amended (the "First
Investment Advisory Agreement").
In selecting investments for each of the Income Funds, 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 terms of the Agreement, the Trust has agreed to pay the
Adviser a monthly fee at the annual rate set forth below as a percentage of the
relevant Fund's average daily net assets.
<TABLE>
<CAPTION>
Annual Rate Of
Investment
Name Of Fund Advisory Fee Payable
- ------------ --------------------
<S> <C>
International Equity Fund 1.25%
Mid-Cap Equity Fund 1.00%
Capital Growth 2 Fund .80%
Large-Cap Equity Fund .80%
Limited Term U.S. Government Fund .65%
Tennessee Tax-Exempt Fund .65%
Limited Term Tennessee Tax-Exempt Fund .65%
U.S. Treasury Money Market Fund .40%
Aggressive Growth Portfolio .20%
Growth Portfolio .20%
Growth & Income Portfolio .20%
Moderate Growth & Income Portfolio .20%
Current Income Portfolio .20%
</TABLE>
From time to time, the Adviser may waive receipt of its fees and/or
voluntarily assume certain expenses of a Fund, which would have the effect of
lowering the overall expense ratio of that Fund and increasing yield to its
investors. The Fund will not pay the Adviser at a later time for any amounts it
may waive, nor will the Fund reimburse the Adviser for any amounts it may
assume.
With respect to International Equity Fund, the Adviser has entered into
a Sub-Investment Advisory Agreement (the "Lazard Sub-Advisory Agreement") with
Lazard Asset Management ("Lazard") dated [_________] 1999. As to such Fund, the
Lazard Sub-Advisory Agreement is subject to annual approval by (i) the Board or
(ii) vote of a majority (as defined in the 1940 Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or Lazard, by vote cast in
41
<PAGE> 136
person at a meeting called for the purpose of voting on such approval. The
Lazard Sub-Advisory Agreement is terminable without penalty, (i) by the Adviser
on 60 days' notice, (ii) by the Fund's Board or by vote of the holders of a
majority of the Fund's outstanding voting securities on 60 days' notice, or
(iii) upon not less than 90 days' notice, by Lazard. The Lazard Sub-Advisory
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act). Under the terms of the Lazard Sub-Advisory Agreement,
the Adviser has agreed to pay Lazard a monthly fee at the annual rate of [.50%]
of the value of the International Equity Fund's average daily net assets.
With respect to Mid-Cap Fund, the Adviser has entered into a
Sub-Investment Advisory Agreement (the "Bennett Lawrence Sub-Advisory
Agreement") with Bennett Lawrence Management, LLC ("Bennett Lawrence") dated
[__________] 1999. As to such Fund, the Bennett Lawrence Sub-Advisory Agreement
is subject to annual approval by (i) the Board or (ii) vote of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund or Bennett Lawrence, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Bennett Lawrence Sub-Advisory Agreement
is terminable without penalty, (i) by the Adviser on 60 days' notice, (ii) by
the Fund's Board or by vote of the holders of a majority of the Fund's
outstanding voting securities on 60 days' notice, or (iii) upon not less than 90
days' notice, by Bennett Lawrence. The Bennett Lawrence Sub-Advisory Agreement
will terminate automatically in the event of its assignment (as defined in the
1940 Act). Under the terms of the Bennett Lawrence Sub-Advisory Agreement, the
Adviser has agreed to pay Bennett Lawrence a monthly fee at the annual rate set
forth below as a percentage of the average daily net assets of the Mid-Cap Fund:
<TABLE>
<CAPTION>
Annual Rate of Sub-
Average Daily New Advisory Fee Payable
Assets of Mid-Cap Fund By the Adviser
<S> <C>
on the first $25 million [.75%]
on the next $50 million [.625%]
on assets in excess of $75 million [.50%]
</TABLE>
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
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<PAGE> 137
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 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. 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:
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the Administration Agreement shall be renewed
automatically for successive five-year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days' prior to
the expiration of the then-current term. The Administration Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Trust's Board of Trustees or by the Administrator.
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<PAGE> 138
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
EXPENSES
Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Trustees of the
Trust, Securities and Exchange Commission fees, state securities qualification
fees, costs of preparing and printing Prospectuses for regulatory purposes and
for distribution to current Shareholders, outside auditing and legal expenses,
advisory and administration fees, fees and out-of-pocket expenses of the
custodian and the transfer agent, dividend disbursing agents fees, fees and
out-of-pocket expenses for fund accounting services, expenses incurred for
pricing securities owned by it, certain insurance premiums, costs of maintenance
of its existence, costs of Shareholders' and Trustees' reports and meetings, and
any extraordinary expenses incurred in its operation.
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Adviser and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for a Fund. No Fund will bear, directly or indirectly, the cost of any
activity primarily intended to result in the distribution of Shares of such
Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Premier, Classic,
and Class B Shares of a Fund on the basis of the relative net asset value of
each class. At present, the only expenses that will be borne solely by Classic
and Class B Shares, other than in accordance with the relative net asset value
of the class, are expenses under the Servicing Plan which relates only to the
Class A Shares and the Distribution Plan which relates only to the Class B
Shares.
SUB-ADMINISTRATORS
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO as the Sub-Administrator of the
Trust. Pursuant to this agreement, AmSouth has assumed certain of the
Administrator's duties, for which AmSouth receives a fee, paid by the
Administrator, calculated at an annual rate of up to (0.10%) ten one-hundredths
of one percent of each Fund's average net assets.
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.
44
<PAGE> 139
DISTRIBUTOR
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, and from year to year thereafter if
such continuance is approved at least annually (i) by the Trust's Board of
Trustees or by the vote of a majority of the outstanding Shares of the Funds or
Fund subject to such Distribution Agreement, and (ii) by the vote of a majority
of the Trustees of the Trust who are not parties to such Distribution Agreement
or interested persons (as defined in the 1940 Act) of any party to such
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
Class A Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Class A Shares of each Fund.
The Servicing Plan was initially approved on December 6, 1995 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Servicing Plan (the "Independent
Trustees"). The Servicing Plan reflects the creation of the Class A Shares, and
provides for fees only upon that Class.
The Servicing Plan may be terminated with respect to any Fund by a vote
of a majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class A Shares of that Fund. The Servicing Plan may be amended by
vote of the Trust's Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for such purpose, except that any
change in the Servicing Plan that would materially increase the shareholder
servicing fee with respect to a Fund requires the approval of the holders of
that Fund's 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
45
<PAGE> 140
Shareholder Servicing fee of 0.25% of the average daily net assets of the Class
B Shares of each Fund. The Distributor may periodically waive all or a portion
of the fee with respect to a Fund in order to increase the net investment income
of the Fund available for distribution as dividends. The Distributor may apply
the Class B 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 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 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 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 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 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 Shares of a Fund requires the approval of the
holders of that Fund's Class B Shares. The Trust's Board of Trustees will review
on a quarterly and annual basis written reports of the amounts received and
expended under the Distribution Plan (including amounts expended by the
Distributor to Participating Organizations pursuant to the Servicing Agreements
entered into under the Distribution Plan) indicating the purposes for which such
expenditures were made.
All payments by the Distributor for distribution assistance or
shareholder services under the Distribution Plan will be made pursuant to an
agreement (a "Servicing Agreement") between the Distributor and such bank, other
financial institution or intermediary, broker-dealer, or affiliate or subsidiary
of the Distributor (hereinafter referred to individually as "Participating
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares to the Participating Organization's customers on whose behalf the
investment in such Shares is made and/or to the provision of shareholder
services to the Participating Organization's customers owning a Fund's Class B
Shares. Under the Distribution Plan, a Participating Organization may include
AmSouth or a subsidiary bank or nonbank affiliates, or the subsidiaries or
affiliates of those banks. A Servicing Agreement entered into with a bank (or
any of its
46
<PAGE> 141
subsidiaries or affiliates) will contain a representation that the bank (or
subsidiary or affiliate) believes that it possesses the legal authority to
perform the services contemplated by the Servicing Agreement without violation
of applicable banking laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks
generally from engaging in the business of underwriting securities, but in
general do not prohibit banks from purchasing securities as agent for and upon
the order of customers. Accordingly, the Trust will require banks acting as
Participating Organizations to provide only those services which, in the banks'
opinion, are consistent with the then current legal requirements. It is
possible, however, that future legislative, judicial or administrative action
affecting the securities activities of banks will cause the Trust to alter or
discontinue its arrangements with banks that act as Participating Organizations,
or change its method of operations. It is not anticipated, however, that any
change in a Fund's method of operations would affect its net asset value per
share or result in financial loss to any customer.
CUSTODIAN
AmSouth serves as custodian of the Trust pursuant to a Custodial
Services Agreement with the Trust (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments.
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.
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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 Ernst & Young, 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. Ernst & Young, LLP's address is [_______________].
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each Fund are sold on a continuous basis by BISYS Fund
Services Limited Partnership ("BISYS"), and BISYS has agreed to use appropriate
efforts to solicit all purchase orders. In addition to purchasing Shares
directly from BISYS, Shares may be purchased through procedures established by
BISYS in connection with the requirements of accounts at AmSouth or financial
institutions that provide certain support services for their customers or
account holders ("Financial Institutions"). Customers purchasing Shares may
include officers, directors, or employees of AmSouth or AmSouth's correspondent
banks.
PURCHASE OF SHARES
As stated in the relevant Prospectuses, the public offering price of
Class A Shares of the Capital Appreciation Funds and the Income Funds is their
net asset value computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of Class B and
Institutional 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).
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SALES CHARGES. The offering price is rounded to two decimal places each
time a computation is made. The sales charge scale set forth in a Fund's
Prospectus applies to purchases of Shares of such a Fund made at one time by any
purchaser (a "Purchaser"), which includes: (i) an individual, his or her spouse
and children under the age of 18; (ii) a trustee or other fiduciary of a single
trust estate or single fiduciary account; or (iii) any other organized group of
persons, whether incorporated or not, provided that such organization has been
in existence for at least six months and has some purpose other than the
purchase of redeemable securities of a registered investment company. In order
to qualify for a lower sales charge, all orders from a Purchaser will have to be
placed through a single investment dealer and identified at the time of purchase
as originating from the same Purchaser, although such orders may be placed into
more than one discrete account which identifies the Purchasers.
A Purchaser may qualify for a reduced sales charge by combining
concurrent purchases of Class A Shares of a Capital Appreciation Fund or Income
Fund and one or more of the other Class A Shares of a Fund or by combining a
current purchase of Class A Shares of a Fund with prior purchases of Class A
Shares of any Fund. The applicable sales charge is based on the sum of (i) the
Purchaser's current purchase of shares of any Fund sold with a sales charge plus
(ii) the dollar amount of purchases of the Purchaser's combined holdings of all
Class A Shares in any Fund. The "Purchaser's combined holdings" described in the
preceding sentence shall include the combined holdings of the Purchaser, the
Purchaser's spouse, children under the age of 18, the Purchaser's retirement
plan accounts and sole proprietorship accounts that the Purchaser may own. To
receive the applicable public offering price pursuant to the right of
accumulation, Shareholders must at the time of purchase provide the Transfer
Agent or the Distributor with sufficient information to permit confirmation of
qualification. Accumulation privileges may be amended or terminated without
notice at any time by the Distributor.
Class A Shares of the Money Market Funds are sold at their net asset
value per share, as next computed after an order is received. However, as
discussed in the 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
seventh anniversary of purchase.
Certain sales of Class A Shares are made without a sales charge, as
described in the relevant Prospectuses under the caption "Sales Charge Waivers",
to promote goodwill with employees and others with whom BISYS, AmSouth and/or
the Trust have business relationships, and because the sales effort, if any,
involved in making such sales is negligible.
ADDITIONAL INFORMATION REGARDING BROKER COMPENSATION. As the Trust's
principal underwriter, BISYS acts as principal in selling Class A Shares and
Class B Shares of the Trust to dealers. BISYS re-allows a portion of the sales
charge as dealer discounts and brokerage commissions. Dealer allowances
expressed as a percentage of the offering price for all offering prices are set
forth in the relevant Class A Shares and Class B Shares Prospectuses (see
"Shareholder Information - Pricing of Fund Shares"). From time to time, BISYS
may
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make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
In some instances, promotional incentives to dealers may be offered only to
certain dealers who have sold or may sell significant amounts of Group shares.
Neither BISYS nor dealers are permitted to delay the placement of orders to
benefit themselves by a price change.
From time to time dealers who receive dealer discounts and broker
commissions from the Distributor may reallow all or a portion of such dealer
discounts and broker commissions to other dealers or brokers.
The Distributor, at its expense, will also provide additional
compensation to dealers in connection with sales of Class A Shares and Class B
Shares of any of the Funds. Such compensation will include financial assistance
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Funds of the Trust, and/or other dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside the United States
for meetings or seminars of a business nature. Dealers may not use sales of a
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by any Fund or its Shareholders.
PURCHASES THROUGH FINANCIAL INSTITUTIONS. Shares of the Funds may be
purchased through procedures established by the Distributor in connection with
requirements of qualified accounts maintained by or on behalf of certain persons
("Customers") by AmSouth or financial institutions that provide certain
administrative support services for their customers or account holders
(collectively, "Financial Institutions"). These procedures may include
instructions under which a Customer's account is "swept" automatically no less
frequently than weekly and amounts in excess of a minimum amount agreed upon by
a Financial Institution and its Customer are invested by the Distributor in
Shares of a Money Market Fund. These procedures may also include transactions
whereby AmSouth as agent purchases Shares of the Funds in amounts that
correspond to the market value of securities sold to the Funds by AmSouth as
agent.
Shares of the Trust sold to Financial Institutions acting in a
fiduciary, advisory, custodial, agency, or other similar capacity on behalf of
Customers will normally be held of record by the Financial Institutions. With
respect to Shares so sold, it is the responsibility of the particular Financial
Institution to transmit purchase or redemption orders to the Distributor and to
deliver federal funds for purchase on a timely basis. Beneficial ownership of
the Shares
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will be recorded by the Financial Institutions and reflected in the account
statements provided by the Financial Institutions to Customers.
Depending upon the terms of a particular Customer account, the
Financial Institutions may charge a Customer's account fees for automatic
investment and other cash management services provided in connection with
investment in the Capital Appreciation Funds. Information concerning these
services and any charges can be obtained from the Financial Institutions.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Class A Shares and Class B Shares
either by telephone or by wiring funds to the Trust's custodian. Telephone
orders may be placed by calling the Trust at (800) 451-8382. Payment for Shares
ordered by telephone may be made by check and must be received by the Trust's
custodian within three days of the telephone order. If payment is not received
within three days or a check timely received does not clear, the purchase will
be canceled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Shares effected by wiring funds to the Trust's
custodian, investors must call the Trust at (800) 451-8382 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
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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 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.
"SWEEP" PROGRAM. (Applicable to the Money Market Funds Only) Shares of
the Money Market Funds may be purchased or sold through the "sweep" program
established by certain financial institutions under which a portion of their
customers' accounts may be automatically invested in the Fund. The customer
becomes the beneficial owner of specific shares of the Fund which may be
purchased, redeemed and held by the financial institution in accordance with the
customer's instructions and may fully exercise all rights as a shareholder. The
shares will be held by the Transfer Agent in book-entry form. A statement with
regard to the customer's shares is generally supplied to the customer monthly,
and confirmations of all transactions for the account of the customer ordinarily
are available to the customer promptly on request. In addition, each customer is
sent proxies, periodic reports and other information from the Trust with regard
to shares of the Funds. The customer's shares are fully assignable and may be
encumbered by the customer. The "sweep" agreement can be terminated by the
customer at any time, without affecting its beneficial ownership of the shares.
To obtain the benefits of this service, a customer typically is
required to maintain a minimum balance subject to a monthly maintenance fee, or
a higher minimum balance for
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which no monthly fee would be imposed. In either case, a penalty fee is imposed
if the minimum should not be maintained. In general, the automatic investment in
the Fund's shares occurs on the same day that withdrawals are made by the
financial institution, at the next determined net asset value after the order is
received.
All agreements which relate to the service are with the financial
institution. Neither the Distributor nor the Trust is a party to any of those
agreements and no part of the compensation received by the financial institution
flows to the Trust or to BISYS or to any of their affiliates, either directly or
indirectly. Further information concerning this program and any related charges
or fees is provided by the financial institution prior to any purchase of the
Fund's shares. Any fees charged by the financial institution effectively reduces
the Fund's yield for those customers.
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., (1:00 p.m.
and 4:00 p.m. for the U.S. Treasury Money Market Fund) 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 U.S. TREASURY MONEY MARKET FUND
The U.S. Treasury Money Market Fund has 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 this Fund can be expected to vary inversely with
changes in prevailing interest rates.
Pursuant to Rule 2a-7, the U.S. Treasury 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 the
Fund will not purchase any security with a remaining maturity of more than
thirteen months (securities subject to repurchase agreements may bear
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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 U.S. Treasury Money Market Fund 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 the 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 the 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 the 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.
SHAREHOLDER SERVICES AND PRIVILEGES
The services and privileges described under this heading may not be
available to certain clients of the Adviser, its affiliates, certain Service
Organizations and Institutions, and the Adviser, its affiliates, some Service
Organizations and Institutions may impose certain conditions on their clients
which are different from those described in the Prospectus or this Statement of
Additional Information. Such investors should consult the Adviser, its
affiliates, their Service Organization or Institution in this regard.
DIRECTED DISTRIBUTION PLAN. The Directed Distribution Plan enables you
to invest automatically dividends and capital gain distributions, if any, paid
by a Fund in Class A or Class B Shares of another Fund of which you are a
shareholder. Class A or Class B Shares of the other Fund will be purchased at
the then-current net asset value. Minimum subsequent investments do not apply.
Investors desiring to participate in the Directed Distribution Plan should check
the appropriate box and supply the necessary information on the Account
Application. The Plan is available only for existing accounts and may not be
used to open new accounts. The Trust may modify or
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terminate the Directed Distribution Plan at any time or charge a service fee. No
such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50), with respect
to Class A or Class B Shares, on either a monthly, quarterly, semi-annual or
annual basis if you have a $5,000 minimum account. The automatic withdrawal will
be made on the first or fifteenth day, at your option, of the period selected.
To participate in the Automatic Withdrawal Plan, you must check the appropriate
box and supply the necessary information on the Account Application. The
Automatic Withdrawal Plan may be ended at any time by the investor, the Trust or
the Transfer Agent.
No CDSC with respect to Class B Shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts withdrawn
under the plan do not exceed on an annual basis 10% of the account value at the
time the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B Shares under the Automatic Withdrawal Plan
that exceed on an annual basis 10% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 10% of the initial account
value. Purchases of additional Class A Shares where the sales load is imposed
concurrently with withdrawals of Class A Shares generally are undesirable.
REINSTATEMENT PRIVILEGE. The Reinstatement Privilege enables investors
who have redeemed Class A or Class B Shares to repurchase, within 90 days of
such redemption, Class A or Class B Shares of a Fund in an amount not to exceed
the redemption proceeds received at a purchase price equal to the then-current
net asset value determined after a reinstatement request and payment are
received by the Transfer Agent. This privilege also enables such investors to
reinstate their account for the purpose of exercising the Exchange Privilege.
Upon reinstatement for Class B Shares, the investor's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the Class B
Shares reinvested. To use the Reinstatement Privilege, you must submit a written
reinstatement request to the Transfer Agent. The reinstatement request and
payment must be received within 90 days of the trade date of the redemption.
There currently are no restrictions on the number of times an investor may use
this privilege.
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
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past or anticipated portfolio holdings for one or more of the Funds within the
Trust; (5) descriptions of investment strategies for one or more of such Funds;
(6) descriptions or comparisons of various investment products, which may or may
not include the Funds; (7) comparisons of investment products (including the
Funds) with relevant market or industry indices or other appropriate benchmarks;
and (8) discussions of fund rankings or ratings by recognized rating
organizations.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. and Donoghue's Money
Fund Report. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, Ibbotson
Associates, Inc., Morning Star, Inc., CDA/Wiesenberger, Pensions and
Investments, U.S.A. Today, and local newspapers and periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and in reports to Shareholders. Additional performance
information is contained in the Trust's Annual Report, which is available free
of charge by calling the number on the front page of the Prospectus.
Information about the performance of a Fund is based on the Fund's
record up to a certain date and is not intended to indicate future performance.
Yield and total return are functions of the type and quality of instruments held
in a Fund, operating expenses, and marketing conditions. Any fees charged by a
Financial Institution with respect to customer accounts investing in Shares of a
Fund will not be included in performance calculations.
YIELDS OF THE MONEY MARKET FUNDS
The "yield" of each 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 yield and effective yield of each of the Money Market Funds will
vary in response to fluctuations in interest rates and in the expenses of the
Fund. For comparative purposes the
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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.
YIELD OF THE CAPITAL APPRECIATION FUNDS, THE INCOME FUNDS AND THE TAX-FREE FUNDS
The yield of each of the Capital Appreciation Funds, the Income Funds
and the Tax- Free Funds will be computed by annualizing net investment income
per share for a recent 30- day period and dividing that amount by the maximum
offering price per share (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed-income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The yield of each of the
Capital Appreciation Funds and the Income Funds will vary from time to time
depending upon market conditions, the composition of the Fund's portfolios and
operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of the
Capital Appreciation Funds and the Income Funds.
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.
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
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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.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. From time to time, performance information for
the Funds showing their average annual total return and/or yield may be included
in advertisements or in information furnished to present or prospective
Shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
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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.
DIVIDENDS, DISTRIBUTION AND TAXES
THE U.S. TREASURY MONEY MARKET FUNDS
The net income of the U.S. Treasury 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.
Dividends will generally be taxable to a Shareholder as ordinary income
to the extent of the Shareholder's ratable share of each Fund's earnings and
profits as determined for tax purposes. Because all of the net investment income
of the 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 U.S. Treasury Fund does not expect to realize any
long-term capital gains and, therefore, does 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
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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 TAX-FREE FUNDS. Shareholders of 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-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-
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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-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-Free Funds may at times purchase Municipal Securities at a
discount from the price at which they were originally issued. For federal income
tax purposes, some or all of this market discount will be included in a Fund's
ordinary income and will be taxable to Shareholders as such when it is
distributed to them.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit, market discount
or repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax Adviser for any
special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in the alternative minimum taxable
income of individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate Shareholders.
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-
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exempt income, and the excess, if any, of its net short-term capital gains over
its net long-term capital losses; and (c) diversify its holdings so that, at the
end of each fiscal quarter (i) at least 50% of the market value of its total
assets is represented by cash, cash items (including receivables), U.S.
Government securities, securities of other regulated investment companies, and
other securities, limited in respect of any one issuer to a value not greater
than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities (other than those of the U.S.
government or other regulated investment companies) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar, or related trades or businesses.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they have a non-calendar taxable year) an amount at least equal to the sum of
98% of their "ordinary income" (as defined) for the calendar year, 98% of their
capital gain net income for the 1-year period ending on October 31 of such
calendar year, and any undistributed amounts from the previous year. For the
foregoing purposes, a Fund is treated as having distributed the sum of (i) the
deduction for dividends paid (defined in Section 561 of the Code) during such
calendar year, and (ii) any amount on which it is subject to income tax for any
taxable year ending in such calendar year. If distributions during a calendar
year by a Fund did not meet the excise tax threshold, the Fund would be subject
to the 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
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investors in a Fund should consult their tax advisers with respect to the
potential application of these new regulations.
A Fund's transactions in options, foreign-currency-denominated
securities, and certain other investment and hedging activities of the Fund,
will be subject to special tax rules (including "mark-to-market," "straddle,"
"wash sale," "constructive sale" and "short sale" rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, convert short-term
capital losses into long-term capital losses, convert long-term capital gains
into short-term capital gains, and otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing, and character of
distributions to Shareholders. Income earned as a result of these transactions
would, in general, not be eligible for the dividends-received deduction or for
treatment as exempt-interest dividends when distributed to Shareholders. The
Funds will endeavor to make any available elections pertaining to these
transactions in a manner believed to be in the best interest of the Funds.
The Funds each expect to qualify to be taxed as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes.
Depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or independent contractors
are located, or in which they are otherwise deemed to be conducting business,
the Funds may be subject to the tax laws of such states or localities.
However, if for any taxable year the Funds do not qualify for the
special federal tax treatment afforded regulated investment companies, all of
their taxable income will be subject to federal income tax at regular corporate
rates at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders may be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
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-FREE FUNDS
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As indicated in the Prospectuses of 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-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-Free Funds, being tax-exempt, and such dividends would
be ultimately taxable to the beneficiaries when distributed to them.
In addition, the Tax-Free Funds may not be appropriate investments for
Shareholders that may be "substantial users" of facilities financed by private
activity bonds or "related persons" thereof. "Substantial user" is defined under
U.S. Treasury Regulations to include a non-exempt person who regularly uses a
part of such facilities in his trade or business, and whose gross revenues
derived with respect to the facilities financed by the issuance of bonds
represent more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities,
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related person" includes certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders. Each Shareholder that may be considered a
"substantial user" should consult a tax adviser with respect to whether
exempt-interest dividends would retain the exclusion under Section 103 of the
Code if the Shareholder were treated as a "substantial user" or a "related
person."
The Code permits a regulated investment company which invests at least
50% of its assets in tax-free Municipal Securities to pass through to its
investors, tax-free, net Municipal Securities interest income. The policy of the
Tax-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-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-Free Funds during such year, regardless of the period for
which the Shares were held.
While 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-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
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designated as a capital gains dividend in a written notice mailed by the
Tax-Free Funds to Shareholders after the close of the Fund's taxable year.
While 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-Free Funds, the Funds may
acquire puts with respect to Municipal Securities held in their portfolios. See
"INVESTMENT MANAGEMENT AND POLICIES - Options Transactions - Puts" in this
Statement of Additional Information. The policy of the Tax-Free Funds is to
limit their acquisition of puts to those under which the Fund will be treated
for federal income tax purposes as the owner of the Municipal Securities
acquired subject to the put and the interest on the Municipal Securities will be
tax-exempt to such Fund. Although the Internal Revenue Service has issued a
published ruling that provides some guidance regarding the tax consequences of
the purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Tax-Free Funds could acquire under the 1940 Act.
Therefore, although 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-Free Funds.
No attempt has been made to present a detailed explanation of the federal income
tax treatment of 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-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.
All distributions from the Tennessee Tax-Exempt Fund or Tennessee
Limited Term Tax-Exempt Fund, regardless of source, will be subject to the
Tennessee corporate excise tax. Shares of these Funds may be subject to the
Tennessee inheritance tax and the Tennessee estate tax if owned by a Tennessee
decedent at the time of death.
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The International Equity Fund may qualify for and may make an election
permitted under Section 853 of the Code so that shareholders may be eligible to
claim a credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The International Equity
Fund may make an election under Section 853 of the Code, provided more than 50%
of the value of the Fund's total assets at the close of the taxable year
consists of securities in foreign corporations, and the Fund satisfies the
applicable distribution provisions of the Code. The foreign tax credit available
to shareholders is subject to certain limitations imposed by the Code.
If the International Equity Fund invests in an entity that is
classified as a "passive foreign investment company" ("PFIC") for Federal income
tax purposes, the operation of certain provisions of the Code applying to PFICs
could result in the imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of PFIC securities
may be treated as ordinary income under Section 1291 of the Code and gain
realized with respect to PFIC securities that are marked-to-market will be
treated as ordinary income under Section 1296 of the Code.
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 and Income
Funds 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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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 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. The Trust may execute portfolio transactions through an affiliate of
the Advisor.
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.
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
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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.
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INFORMATION ABOUT THE TRUST AND THE FUNDS
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 thirty-one series of Shares each of which represent interests a separate
Fund to thirteen funds discussed in this Statement of Additional Information are
in the International Equity Fund, the Mid-Cap Equity Fund, the Growth
Opportunities Fund, the Large-Cap Fund, the Limited Term U.S. Government Fund,
the Tennessee Tax-Exempt Fund, the Limited Term Tennessee Tax-Exempt Fund, the
U.S. Treasury Money Market Fund, the Aggressive Growth Portfolio, the Growth
Portfolio, the Growth & Income Portfolio, the Moderate Growth & Income
Portfolio, and the Current Income Portfolio. 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
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addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding voting Shares of the Trust and filed
with the Trust's custodian or by vote of the holders of two-thirds of the
outstanding voting Shares of the Trust at a meeting duly called for the purpose,
which meeting shall be held upon the written request of the holders of not less
than 10% of the outstanding voting Shares of any Fund. Except as set forth
above, the Trustees shall continue to hold office and may appoint their
successors.
SHAREHOLDER LIABILITY
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in every agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any Shareholder of such
Fund held liable on account of being or having been a Shareholder. Thus, the
risk of a Shareholder incurring financial loss on account of Shareholder
liability is limited to circumstances in which a Fund would be unable to meet
its obligations.
MISCELLANEOUS
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Trust.
As used in this Statement of Additional Information, "assets belonging
to a Fund" means the consideration received by the Fund upon the issuance or
sale of Shares in that Group, 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
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the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to a particular Fund are
conclusive.
As used in this Statement of Additional Information, a "vote of a
majority of the outstanding Shares" of the Trust or a particular Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Trust or such Fund present at
such meeting at which the holders of more than 50% of the votes attributable to
the Shareholders of record of the Trust or such Fund are represented in person
or by proxy, or (b) the holders of more than 50% of the outstanding votes of
Shareholders of the Trust or such Fund.
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
A shareholder who beneficially owns, directly or indirectly, more than
25% of a Fund's voting securities may be deemed a "control person" (as defined
in the 1940 Act) of the Fund.
FINANCIAL STATEMENTS
[TO BE ADDED]
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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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(+) 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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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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OTHER RATINGS OF MUNICIPAL OBLIGATIONS
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing. Obligations rated "MIG-2" or
"VMIG-2" denote high quality with ample margins of protection although not so
large as in the preceding rating group.
PREFERRED STOCK RATINGS
The following summarizes the ratings used by Moody's for preferred
stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rate "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
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"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor prospects
of ever attaining any real investment standing.
The following summarizes the ratings used by Standard & Poor's for
preferred stock:
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated "AA" also qualifies as a
high-quality, fixed income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
"BBB" An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than for issues
in the "A" category.
"BB," "B," "CCC" Preferred stock rated "BB," "B," and "CCC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates
the lowest degree of speculation and "CCC" the highest. While such
issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
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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. 30
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
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accounting or to take any action in court or elsewhere
against the Trust or the 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
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investments. The Trustees may also, at any time and from
time to time, contract with the Manager or any other
corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract
to comply with such requirements and restrictions as may
be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to
said requirements and restrictions as the Trustees may
determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter
or distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any
parent or affiliate of any organization, with which an
advisory or management contract, or principal
underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have
been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract
or principal underwriter's or distributor's contract, or
transfer, shareholder servicing or other agency contract
may have been or may hereafter be made also has an
advisory or management contract, or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract with one or
more other corporations, trusts, associations, or other
organizations, 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
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Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or
former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or
other general successor) shall be entitled to be held
harmless from and indemnified against all loss and
expense, arising from such liability, but only out of the
assets, of the particular series of Shares of which he or
she is or was a Shareholder.
ARTICLE IX
Miscellaneous
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular
series of Shares shall look only to the assets of the
Trust or the assets of that particular series of Shares
for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past,
present or future, shall be personally liable 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
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at least a majority of the Shares of such series entitled
to vote or by the Trustees by written notice to the
Shareholders of such series.
Upon termination of the Trust or of any one or more series
of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated, of the Trust or of the particular
series as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities,
or any combination thereof, and distribute the proceeds to
the Shareholders of the series involved, ratably 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
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Article IX, Section 7 of the Declaration of Trust, (v) to
the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or
maintained 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
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Shareholder or his attorney thereunto authorized and filed
with the records of the meeting, shall be deemed
equivalent to such notice.
11.3 QUORUM AND REQUIRED VOTE. A majority of Shares
entitled to vote shall be a quorum for the transaction of
business at a Shareholders' meeting, except that where any
provision of law or of the Declaration of Trust or these
Bylaws permits or requires that holders of any series
shall vote as a series, then a majority of the aggregate
number of Shares of that series entitled to vote shall be
necessary to constitute a quorum for the transaction of
business by that series. Any lesser number shall be
sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity
of further notice. Except when a larger vote is required
by any provision of law or the Declaration of Trust or
these Bylaws, a majority of the Shares voted shall decide
any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of the
Declaration of Trust or these Bylaws permits or requires
that the holders of any series shall vote as a series,
then a majority of the Shares of that series voted on the
matter (or a plurality with respect to the election of a
Trustee) shall decide that matter insofar as that series
is concerned.
11.4 ACTION BY WRITTEN CONSENT. Any action taken by
Shareholders may be taken without a meeting if a majority
of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by any
express provision of law or the Declaration of Trust or
these Bylaws) consent to the action in writing and such
written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of
Shareholders.
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. --
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incorporated by reference to
Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(2) Amendment No. 1 dated as of December 5,
1989 to Investment Advisory Agreement
dated as of August 1, 1988 between the
Registrant and AmSouth Bank N.A.
--incorporated by reference to
Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(3) Form of Amended Schedule A dated
September 15, 1998 to the Investment
Advisory Agreement dated as of August 1,
1988 between the Registrant and AmSouth
Bank, N.A. is incorporated by reference
to Exhibit 5(c) of Post-Effective
Amendment No. 28 to the Registrant's
Registration Statement filed on
September 24, 1998 on Form N-1A (File
No. 33-21660).
(4) Form of Amended Schedule A to the
Investment Advisory Agreement between
the Registrant and AmSouth Bank, N.A. is
filed herewith.
(5) 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).
(6) 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).
(7) 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).
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(8) 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).
(9) 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).
(10) 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).
(11) Form of the Investment Sub-Advisory
Agreement between AmSouth Bank and
Lazard Asset Management is filed
herewith.
(12) Form of the Investment Sub-Advisory
Agreement between AmSouth Bank and
Bennett Lawrence Management is filed
herewith.
(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).
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(3) Form of Amended Schedules A, B, C and D
to the Distribution Agreement between
the Registrant and BISYS Fund Services
Limited Partnership are filed herewith.
(4) 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).
(5) 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).
(6) Dealer Agreement between The Winsbury
Company and AmSouth Bank N.A. --
incorporated by reference to Post-
Effective Amendment No. 5 to the
Registrant's Registration Statement on
Form N-1A (File No. 33-21660).
(f) None.
(g) (1) Custodian Agreement dated as of April
17, 1997 between the Registrant and
AmSouth Bank -- incorporated by
reference to Exhibit 8(a) to
Post-Effective Amendment No. 23 to the
Registrant's Registration Statement
filed on July 3, 1997 on Form N-1A (File
No. 33-21660).
(2) Form of Amended Schedule A dated
September 15, 1998 to the Custodian
Agreement between the Registrant and
AmSouth Bank is incorporated by
reference to Exhibit 8(b) of Post-
Effective Amendment No. 28 to the
Registrant's Registration Statement
filed on September 24, 1998 on Form N-1A
(File No. 33-21660).
(3) Form of Amended Schedule A to the
Custodian Agreement between the
Registrant and AmSouth Bank is filed
herewith.
(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
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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) Form of Amended Schedule A to the
Management and Administration Agreement
between the Registrant and ASO Services
Company is filed herewith.
(4) 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).
(5) 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).
(6) Form of Amended Schedules A and B to the
Sub-Administration Agreement between
ASO Services Company and AmSouth Bank
are filed herewith.
(7) Sub-Administration Agreement between ASO
Services Company and BISYS Fund
Services, LP -- incorporated by
reference to Post-Effective Amendment
No. 19 to the Registrant's Registration
Statement on Form N-1A (File
No. 33-21660).
(8) 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).
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<PAGE> 183
(9) Form of Amended Schedules A and B to the
Sub-Administration Agreement between ASO
Services Company and BISYS Fund Services
Limited Partnership are filed herewith.
(10) 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).
(11) 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).
(12) Form of Amended Schedule A to the
Transfer Agency and Shareholder Services
Agreement between the Registrant and
BISYS Fund Services Ohio, Inc. is filed
herewith.
(13) Amended Schedule D dated September 15,
1998 to the Transfer Agency Agreement
between the Registrant and BISYS Fund
Services Ohio, Inc. is filed herewith.
(14) 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).
(15) 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).
(16) 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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(17) 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).
(18) Form of Amended Schedule I to the
Shareholder Servicing Plan is filed
herewith.
(19) 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).
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(m) (1) Distribution and Shareholder Services
Plan between the Registrant and BISYS
Fund Services, LP, dated as of March 12,
1997, as amended and restated as of
March 18, 1998 -- incorporated by
reference to Exhibit 18(e) to Post-
Effective Amendment No. 26 to the
Registrant's Registration Statement
filed on May 22, 1998 on Form N-1A (File
No. 33-21660).
(2) Form of Amended Schedule A dated
September 15, 1998 to the Distribution
and Shareholder Services Plan is
incorporated by reference to
Exhibit 18(h) to Post-Effective
Amendment No. 27 to the Registrant's
Registration Statement filed on June 17,
1998 on Form N-1A (File No. 33-21660).
(3) Form of Amended Schedule A to the
Distribution and Shareholder Services
Plan is filed herewith.
(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).
(3) Form of Amended Schedule I to the
Multiple Class Plan is filed herewith.
_____________
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, Small Cap
Fund, U.S. Treasury Money Market Fund, Current Income
Portfolio,
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<PAGE> 186
Moderate Growth & Income Portfolio, Growth & Income
Portfolio, Growth Portfolio, Aggressive Growth Portfolio,
Mid-Cap Equity Fund, Large-Cap Equity Fund, International
Equity Fund, Growth Opportunities Fund, Tennessee Tax-Exempt
Fund, Limited Term Tennessee Tax-Exempt Fund and Limited
Term U.S. Government Fund.
Item 25. INDEMNIFICATION
Article VIII, Sections 1 and 2 of the Registrant's
Declaration of Trust provides as follows:
"TRUSTEES, OFFICERS, ETC.
Section 1. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a
party or otherwise or with which such Covered Person may be
or may have been threatened, while in office or thereafter,
by reason of being or having been such a Covered Person
except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Expenses, including counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise or as fines or penalties), shall
be paid from time to time by the Trust in advance of the
final disposition of any such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it
is ultimately determined that indemnification of such
expenses is not authorized under this Article, provided,
however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (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
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inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this
Article.
COMPROMISE PAYMENT
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or
otherwise) without an adjudication by a court, or by any
other body before which the proceeding was brought, that
such Covered Person either (a) did not act in good faith in
the reasonable belief that his action was in the best
interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his or her office,
indemnification shall be provided if (a) approved as in the
best interests of the Trust, after notice that it involves
such indemnification, by at least a majority of the
disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on
the matter) upon a determination, based upon a review of
readily available facts (as opposed to a full trial type
inquiry) that such Covered Person acted in good faith in the
reasonable belief that his action was in the best interests
of the Trust and is not liable to the Trust or its
Shareholders by reasons of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there
has been obtained an opinion in writing of independent legal
counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry) to the effect that
such Covered Person appears to have acted in good faith in
the reasonable belief that his action was in the best
interests of the Trust and that such indemnification would
not protect such Person against any liability to the Trust
to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section
as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the
Trust or to have been liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office."
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,
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<PAGE> 188
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is
asserted by such trustee, officer, or controlling person in
connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
Indemnification for the Group's principal underwriter is
provided for in the Distribution Agreement incorporated
herein by reference as Exhibits 6(a).
In addition, the Trust maintains a directors and officer
liability insurance policy with a maximum coverage of
$3,000,000.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR AND
INVESTMENT SUB-ADVISORS.
AMSOUTH BANK
AmSouth Bank ("AmSouth") is the investment advisor of each
Fund of the Trust. AmSouth is the bank affiliate of AmSouth
Bancorporation, one of the largest banking institutions
headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of 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.
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<PAGE> 189
Name and Position with Other business, profession,
AmSouth Bank AmSouth Bank vocation, or employment
- ---------------------- ------------------------------------
J. Harold Chandler Chairman, President & CEO
Director Provident Companies, Inc.
One Fountain Square
Chattanooga, Tennessee 37402
James E. Dalton, Jr. President and CEO
Director Quorum Health Group, Inc.
103 Continental Place
Brentwood, Tennessee 37027
Rodney C. Gilbert Director
Chairman of the Board & CEO
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
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<PAGE> 190
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
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
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<PAGE> 191
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, 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.
<TABLE>
<CAPTION>
Name and Position with Other business, profession,
Rockhaven Asset Management vocation, or employment
- -------------------------- -----------------------
<S> <C>
Christopher H. Wiles Prior to February 7, 1997, Senior Vice
President and Chief Investment President, Federated Investors, Pittsburgh, PA
Officer and Managing Partner
Michael C. Baker Senior Executive Vice President, AmSouth
Managing Partner Bank, Birmingham, Alabama
</TABLE>
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
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<PAGE> 192
the past two fiscal years has been, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name and Position with Other business, profession,
Peachtree Asset Management vocation, or employment
- -------------------------- -----------------------
<S> <C>
Lamond Godwin N/A
Chairman & CEO
Dennis A. Johnson N/A
President & Chief Investment Officer
</TABLE>
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.
<TABLE>
<CAPTION>
Name and Position with Other business, profession,
Sawgrass Asset Management, LLC vocation or employment
- ------------------------------ ----------------------
<S> <C>
Dean E. McQuiddy, Principal Barnett Capital Advisors
Andrew M. Cantor, Principal Barnett Capital Advisors
Brian K. Monroe, Principal Barnett Asset Management
</TABLE>
OAKBROOK
OakBrook Investments, LLC ("OakBrook") serves as the investment
sub-advisor to the AmSouth Enhanced Market Fund and the AmSouth Select Equity
Fund. OakBrook is 50% owned by AmSouth Bank and 50% jointly owned by Neil
Wright, Janna Sampson and Peter Jankovskis. OakBrook was organized in February,
1998 to perform advisory services for
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<PAGE> 193
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.
<TABLE>
<CAPTION>
Name and Position with Other business, profession,
OakBrook Investments, LLC vocation or employment
- ------------------------- ----------------------
<S> <C>
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.
</TABLE>
LAZARD
Lazard Asset Management ("Lazard") is the sub-advisor of the AmSouth
International Equity Fund. Lazard, a division of Lazard Freres & Co., LLC, which
is a New York limited liability company, provides investment management services
to client discretionary accounts with assets totaling approximately $71 billion
as of December 31, 1998.
Registrant is fulfilling the requirement of this Item 26 to provide a
list of the officers and diretors of Lazard Asset Management, the investment
adviser of the Registrant's AmSouth International Equity Fund, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by Lazard Asset Management or those of its
officers and directors during the past two years, by incorporating by reference
the information contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by the Lazard Asset Management (SEC File No.
801-50349).
C-21
<PAGE> 194
BENNETT LAWRENCE
Bennett Lawrence Management ("Bennett Lawrence") is the sub-advisor of
the AmSouth Mid-Cap Equity Fund. Bennett Lawrence, located at 757 Third Avenue,
New York, NY 10017, provides discretionary investment management services to
client discretionary accounts with assets totaling approximately $950 million as
of December 31, 1998.
Registrant is fulfilling the requirement of this Item 26 to provide a
list of the officers and directors of Bennett Lawrence Management LLC, the
investment adviser of the Registrant's AmSouth Mid-Cap Equity Fund, together
with information as to any other business, profession, vocation or employment of
a substantial nature engaged in by Bennett Lawrence Management, LLC or those of
its officers and directors during the past tow years, by incorporating by
reference the information contained in the Form ADV filed with the SEC pursuant
to the Investment Advisers Act of 1940 by the Bennett Lawrence Management, LLC
(SEC File No. 801-49805).
Item 27. PRINCIPAL UNDERWRITER.
(a) BISYS Fund Services Limited Partnership ("BISYS Fund Services")
acts as distributor for the Registrant. BISYS Fund Services also
distributes the securities of American Performance Funds, Mercentile
Mutual Funds, Inc., The BB&T Mutual Funds Group, The Coventry Group,
The Empire Builder Tax Free Bond Fund, ESC Strategic Funds, Inc., The
Eureka Funds, Fifth Third Funds, Hirtle Callaghan Trust, HSBC Family
of Funds, The Infinity Mutual Funds, Inc., INTRUST Funds Trust, The
Kent Funds, Magna Funds, Meyers Investment Trust, MMA Praxis Mutual
Funds, M.S.D.&T. Funds, Pacific Capital Funds, The Republic Funds
Trust, The Republic Advisors Funds Trust, SBSF Funds, Inc. dba Key
Mutual Funds, Sefton Funds, The Sessions Group, Summit Investment
Trust, Variable Insurance Funds, The Victory Portfolios, The Victory
Variable Funds, and Vintage Mutual Funds, Inc. each of which is a
management investment company. The parent of BISYS Fund Services is
The BISYS Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this filing
are as follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and
Name and Principal BISYS Fund Services, Offices with
Business Addresses Limited Partnership The Registrant
- ------------------ ------------------- --------------
<S> <C> <C>
BISYS Fund Services Sole General None
Limited Partnership Partner
3435 Stelzer Road
Columbus, Ohio 43219
</TABLE>
C-23
<PAGE> 195
WC Subsidiary Sole Limited None
Corporation Partner
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole None
150 Clove Road Shareholder
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)
C-23
<PAGE> 196
(6) BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
(Transfer and Shareholder Servicing Agent,
Provider of Fund
Accounting Services)
(7) Peachtree Asset Management
A Division of Smith Barney Mutual Funds
Management Inc.
One Peachtree Center
Atlanta, Georgia 30308
(Sub-Advisor to the Capital Growth Fund)
(8) Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, Florida 32224
(Sub-Advisor to the Small Cap Fund)
(9) OakBrook Investments, LLC
701 Warrenville Road, Suite 135
Lisle, Illinois 60532
(Sub-Advisor to the Enhanced Market Fund
and the Select Equity Fund)
(10) Lazard Asset Management
30 Rockefeller Plaza
New York, NY 10112
(Sub-Advisor to the International Equity Fund)
(11) Bennett Lawrence Management
757 Third Avenue
New York, NY 10017
(Sub-Advisor to the Mid-Cap 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
C-25
<PAGE> 197
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-25
<PAGE> 198
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.30 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 first day of October, 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.
30 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the first day of
October, 1999.
Signature Title Date
*/s/ J. David Huber Chairman October 1, 1999
- -----------------------------
J. David Huber
*/s/ Charles L. Booth Treasurer October 1, 1999
- -----------------------------
Charles L. Booth
*/s/ James H. Woodward, Jr. Trustee October 1, 1999
- -----------------------------
James H. Woodward, Jr.
*/s/ Homer H. Turner, Jr. Trustee October 1, 1999
- -----------------------------
Homer H. Turner, Jr.
*/s/ Wendell D. Cleaver Trustee October 1, 1999
- -----------------------------
Wendell D. Cleaver
*/s/ Dick D. Briggs, Jr. Trustee October 1, 1999
- -----------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest October 1, 1999
--------------------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
C-26
<PAGE> 199
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> 200
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> 201
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> 202
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> 203
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> 204
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> 205
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
(d)(4) Form of Amended Schedule A to the Investment Advisory Agreement
between AmSouth Mutual Funds and AmSouth Bank
(d)(11) Form of Investment Sub-Advisory Agreement between AmSouth Bank and
Lazard Asset Management
(d)(12) Form of Investment Sub-Advisory Agreement between AmSouth Bank and
Bennett Lawrence Management
(e)(3) Form of Amended Schedules A, B, C and D to the Distribution
Agreement between Registrant and BISYS Fund Services Limited
Partnership
(g)(3) Form of Amended Schedule A to the Custodian Agreement between
Registrant and AmSouth Bank
(h)(3) Form of Amended Schedule A to the Management and Administration
Agreement between Registrant and ASO Services Company
(h)(6) Form of Amended Schedules A and B to the Sub-Administration
Agreement between ASO Services Company and AmSouth Bank
(h)(9) Form of Amended Schedules A and B to the Sub-Administration
Agreement between ASO Services Company and BISYS Fund Services
Limited Partnership
(h)(12) Form of Amended Schedule A to the Transfer Agency and Shareholder
Services Agreement between Registrant and BISYS Fund Services
Ohio, Inc.
(h)(13) Amended Schedule D dated September 15, 1998 to the Transfer Agency
Agreement between Registrant and BISYS Fund Services Ohio, Inc.
(h)(18) Form of Amended Schedule I to the Shareholder Servicing Plan
(i) Opinion of Ropes & Gray
(j)(1) Consent of Ropes & Gray
<PAGE> 206
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(m)(3) Form of Amended Schedule A to the Distribution and Shareholder
Service Plan
(n)(3) Form of Amended Schedule I to the Multiple Class Plan
-2-
<PAGE> 1
EXHIBIT (d)(4)
<PAGE> 2
<PAGE> 3
Dated:
FORM OF AMENDED SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
DATED AS OF AUGUST 1, 1988 BETWEEN
AMSOUTH MUTUAL FUNDS (FORMERLY THE ASO OUTLOOK GROUP)
AND
AMSOUTH BANK (FORMERLY AMSOUTH BANK, N.A.)
<TABLE>
<CAPTION>
NAME OF FUND
- ---------------------
<S> <C>
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent (.40%) of AmSouth
Prime Obligations Fund Mutual Funds Prime Obligations Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Equity Fund Mutual Funds Equity Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Regional Equity Fund Mutual Funds Regional Equity Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent (.40%) of AmSouth
U.S. Treasury Fund Mutual Funds U.S. Treasury Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent (.40%) of AmSouth
Tax Exempt Fund Mutual Funds Tax Exempt Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one percent (.65%) of
Bond Fund AmSouth Mutual Funds Bond Fund's average daily net assets.
AmSouth Mutual Funds Balanced Fund Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Mutual Funds Balanced Fund's average daily net assets.
AmSouth Mutual Funds Municipal Bond Annual rate of sixty-five one-hundredths of one percent (.65%)
Fund of AmSouth Mutual Funds Municipal Bond Fund's average daily net assets.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one percent (.65%) of
Government Income Fund AmSouth Mutual Funds Government Income Fund's average daily net assets.
AmSouth Mutual Funds Florida Tax-Free Annual rate of sixty-five one-hundredths of one percent (.65%) of
Fund AmSouth Mutual Funds Florida Tax-Free Fund's average daily net assets.
AmSouth Mutual Funds Capital Growth Annual basic rate of eighty one-hundredths of one percent (.80%) of
Fund AmSouth Mutual Funds Capital Growth Fund's average daily net assets.
AmSouth Mutual Funds Annual basic rate of one hundred twenty one-hundredths of one percent
Small Cap Fund (1.20%) of AmSouth Mutual Funds Small Cap Fund's average daily net
assets.
AmSouth Mutual Funds Equity Income Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Fund Mutual Funds Equity Income Fund's average daily net assets.
AmSouth Mutual Funds Institutional Annual rate of twenty one-hundredths of one percent (.20%) of the
Prime Obligations Fund AmSouth Mutual Funds Institutional Prime Obligations Fund
AmSouth Mutual Funds Institutional Annual rate of twenty one-hundredths of one percent (.20%) of the
U.S. Treasury Fund AmSouth Mutual Funds Institutional U.S. Treasury Fund
AmSouth Mutual Funds Enhanced Market Annual rate of forty-five one-hundredths of one percent (.45%) of
Fund AmSouth Mutual Funds Enhanced Market Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Select Equity Fund Mutual Funds Select Equity Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of one hundred twenty-five one-hundredths of one percent
International Equity Fund (1.25%) of AmSouth Mutual Funds International Equity Fund's average
daily net assets.
AmSouth Mutual Funds Annual rate of one hundred one-hundredths of one percent (1.00%) of
Mid-Cap Equity Fund AmSouth Mutual Funds Mid-Cap Equity Fund's average daily net assets.
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Growth Opportunities Fund Mutual Funds Growth Opportunities Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth
Large-Cap Equity Mutual Funds Large-Cap Equity Fund's average daily net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one percent (.65%) of
Limited Term AmSouth Mutual Funds Limited Term U.S. Government Fund's average daily
U.S. Government Fund net assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one percent (.65%) of
Tennessee Tax-Exempt Fund AmSouth Mutual Funds Tennessee Tax-Exempt Fund's average daily net
assets.
AmSouth Mutual Funds Annual rate of sixty-five one-hundredths of one percent (.65%) of
Limited Term AmSouth Mutual Funds Limited Term Tennessee Tax-Exempt Fund's average
Tennessee Tax-Exempt Fund daily net assets.
AmSouth Mutual Funds Annual rate of forty one-hundredths of one percent (.40%) of AmSouth
U.S. Treasury Money Mutual Funds U.S. Treasury Money Market Fund's average daily net assets.
Market Fund
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth
Aggressive Growth Portfolio Mutual Funds Aggressive Growth Portfolio's average daily net assets.
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth
Growth Portfolio Mutual Funds Growth Portfolio's average daily net assets.
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth
Growth & Income Portfolio Mutual Funds Growth & Income Portfolio's average daily net assets.
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth
Moderate Growth & Mutual Funds Moderate Growth & Income Portfolio's average daily net
Income Portfolio assets.
AmSouth Mutual Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth
Current Income Portfolio Mutual Funds Current Income Portfolio's average daily net assets.
</TABLE>
<PAGE> 6
AMSOUTH BANK AMSOUTH MUTUAL FUNDS
By:____________________________ By:____________________________
Name:__________________________ Name:_________________________
Title:___________________________ Name:_________________________
<PAGE> 1
EXHIBIT (d)(11)
<PAGE> 2
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of _____________, 1999 between AmSouth Bank, an
Alabama banking association with its principal place of business in Alabama
(herein called the "Investment Adviser") and Lazard Asset Management, an
investment management services provider (a division of Lazard Freres & Co., LLC,
which is a New York limited liability company) with its principal place of
business in New York (herein called the "Sub-Adviser").
WHEREAS, the Investment Adviser is the investment adviser to AmSouth
Mutual Funds, a Massachusetts business trust (herein called the "Trust"), an
open-end management investment company registered under the Investment Company
Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Investment Adviser wishes to retain the Sub-Adviser to
assist the Investment Adviser in providing investment advisory services in
connection with such portfolios of the Trust as now or hereafter may be
identified on Schedule A hereto as such Schedule may be amended from time to
time with the consent of the parties hereto (each herein called a "Fund"); and
WHEREAS, the Board of Trustees of the Trust has duly approved this
Agreement upon consideration of the Trust's existing contractual arrangements
and applicable law; and
WHEREAS, the Sub-Adviser is willing to provide such services to the
Investment Adviser upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT. The Investment Adviser hereby appoints the Sub-Adviser
to act as sub-adviser with respect to the Fund. The Sub-Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Investment Adviser shall provide to the
Sub-Adviser copies of the Trust's most recent prospectus and statement of
additional information (including supplement thereto) which relate to any class
of shares representing interests in the Fund (each such prospectus and statement
of additional information as presently in effect, and as they shall from time to
time be amended and supplemented, is herein respectively called a "Prospectus"
and a "Statement of Additional Information").
<PAGE> 3
3. SUB-ADVISORY SERVICES TO THE FUNDS.
(a) Subject to the supervision of the Investment Adviser, the
Sub-Adviser will supervise the day-to-day operations of the Fund and perform the
following services: (i) provide investment research and credit analysis
concerning the Fund's investments; (ii) conduct a continual program of
investment of the Fund's assets; (iii) place orders for all purchases and sales
of the investments made for the Fund; (iv) maintain the books and records
required in connection with its duties hereunder; and (v) keep the Investment
Adviser informed of developments materially affecting the Fund.
(b) The Sub-Adviser will use the same skill and care in providing
such services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities; provided that, notwithstanding this
Paragraph 3(b), the liability of the Sub-Adviser for actions taken and
non-actions with respect to the performance of services under this Agreement
shall be subject to the limitations set forth in Paragraph 11(a) of this
Agreement.
(c) The Sub-Adviser will communicate to the Investment Adviser and to
the Trust's custodian and Fund accountants as instructed by the Investment
Adviser on each day that a purchase or sale of a security is effected for the
Fund (i) the name of the issuer, (ii) the amount of the purchase or sale, (iii)
the name of the broker or dealer, if any, through which the purchase or sale
will be affected, (iv) the CUSIP number of the security, if any, and (v) such
other information as the Investment Adviser may reasonably require for purposes
of fulfilling its obligations to the Trust under its investment advisory
agreement.
(d) The Sub-Adviser will provide the services rendered by it
hereunder in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus and Statement of Additional
Information.
(e) The Sub-Adviser will maintain records of the information set
forth in Paragraph 3(c) hereof with respect to the securities transactions of
the Fund and will furnish the Trust's Board of Trustees with such periodic and
special reports as the Board may reasonably request.
(f) The Sub-Adviser will promptly review all (1) reports of current
security holdings in the Fund, (2) summary reports of transactions and pending
maturities (including the principal, cost and accrued interest on each portfolio
security in maturity date order) and (3) current cash position reports
(including cash available from portfolio sales and maturities and sales of the
Fund's shares less cash needed for redemptions and settlement of portfolio
purchases), all within a reasonable time after receipt thereof from the Trust
and will report any errors or discrepancies in such reports to the Trust or its
designee within three (3) business days after discovery of such discrepancies.
4. BROKERAGE. The Sub-Adviser may place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In
<PAGE> 4
placing orders, the Sub-Adviser will consider the experience and skill of the
firm's securities traders, as well as the firm's financial responsibility and
administrative efficiency. The Sub-Adviser will attempt to obtain the best price
and the most favorable execution of its orders. Consistent with these
obligations, the Sub-Adviser may, subject to the approval of the Board of
Trustees of the Trust, select brokers on the basis of the research, statistical
and pricing services they provide to the Fund. A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Sub-Adviser determines in good
faith that such transaction is reasonable in terms either of the transaction or
the overall responsibility of the Sub-Adviser to the Fund and its other clients
and that the total commissions paid by the Fund will be reasonable in relation
to the benefits in the Fund over the long term. In no instance will portfolio
securities be purchased from or sold to the Trust's principal distributor, the
Investment Adviser or any affiliate thereof (as the term "affiliate" is defined
in the 1940 Act), except to the extent permitted by SEC exemptive order or by
applicable law.
5. COMPLIANCE WITH LAWS: CONFIDENTIALITY: CONFLICTS OF INTEREST.
(a) The Sub-Adviser agrees that it will comply with all applicable
laws, rules and regulations of all federal and state regulatory agencies having
jurisdiction over the Sub-Adviser in performance of its duties hereunder (herein
called the "Rules").
(b) The Sub-Adviser will treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
(c) The Sub-Adviser will maintain a policy and practice of conducting
sub-advisory services hereunder independently of the banking operations of its
affiliates. In making investment recommendations for the Fund, the Sub-Adviser's
personnel will not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Fund's account are bank
customers of the Sub-Adviser's affiliates unless so required by applicable law.
In dealing with their bank customers, affiliates of Sub-Adviser will not inquire
or take into consideration whether securities of those customers are held by the
Fund. AmSouth Bank, upon request, will supply the Sub-Adviser with a list of
"affiliated persons" for purposes of the 1940 Act.
<PAGE> 5
6. CONTROL BY TRUST'S BOARD OF TRUSTEES. Any recommendations concerning
the Fund's investment program proposed by the Sub-Adviser to the Fund and the
Investment Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto shall at
all times be subject to any applicable directives of the Board of Trustees of
the Trust.
7. SERVICES NOT EXCLUSIVE. The Sub-Adviser's services hereunder are not
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
dissimilar services to others so long as its services under this Agreement are
not impaired thereby.
8. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
of the 1940 Act, and any other applicable Rule, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 and any other applicable Rule, the records required to
be maintained by the Sub-Adviser hereunder pursuant to Rule 31a-1 and any other
applicable Rule. The Sub-Adviser may retain a copy of Trust records solely for
the purpose of satisfying its record retention obligations under the 1940 Act
and the Investment Advisers Act of 1940, as amended.
9. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all expenses incurred by it in connection with the performance of its
services under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund. Notwithstanding the
foregoing, the Sub-Adviser shall not bear expenses related to the operation of
the Trust or any Fund including, but not limited to, taxes, interest, brokerage
fees and commissions and any extraordinary expense items.
10. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month equal to the
lesser of (i) the fee at the applicable annual rates set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Investment Adviser and the Sub-Adviser. If the fee payable to the
Sub-Adviser pursuant to this paragraph begins to accrue after the beginning of
any month or if this Agreement terminates before the end of any month, the fee
for the period from such date to the end of such month or from the beginning of
such month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating fees, the
value of a Fund's net assets shall be computed in the manner specified in the
Prospectus and the Trust's Declaration of Trust for the computation of the value
of the Fund's net assets in connection with the determination of the net asset
value of the Fund's shares. Payment of said compensation shall be the sole
responsibility of the Investment Adviser and shall in no way be an obligation of
the Fund or of the Trust.
<PAGE> 6
11. LIMITATION OF LIABILITY.
(a) The Sub-Adviser shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Investment Adviser, the Trust or
the Fund in connection with the matters to which Agreement relates, except that
Sub-Adviser shall be liable to the Investment Adviser for a loss resulting from
a breach of fiduciary duty by Sub-Adviser under the 1940 Act with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations or
duties under this Agreement. In no case shall the Sub-Adviser be liable for
actions taken or non-actions with respect to the performance of services under
this Agreement based upon specific information, instructions or requests given
or made to the Sub-Adviser by the Investment Adviser.
(b) The Investment Adviser shall be responsible at all times for
supervising the Sub-Adviser, and this Agreement does not in any way limit the
duties and responsibilities that the Investment Adviser has agreed to under its
investment advisory agreement.
12. DURATION AND TERMINATION. This Agreement shall become effective as
of the date hereof provided that it shall have been approved by vote of a
majority of the outstanding voting securities of the Fund and, unless sooner
terminated as provided herein, shall continue with respect to the Fund until
January 31, 2000. Thereafter, if not terminated, this Agreement shall continue
in effect for successive 12-month periods ending on January 31st of each year,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Board of Trustees of the Trust who
are not parties to this Agreement or interested persons of the Trust or any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Fund; PROVIDED, HOWEVER, that this
Agreement may be terminated with respect to the Fund (i) by the Trust at any
time without the payment of any penalty by the Board of Trustees of the Trust,
(ii) by vote of a majority of the outstanding voting securities of the Fund,
(iii) by the Investment Adviser on 60 days written notice to the Sub-Adviser or
(iv) by the Sub-Adviser on 60 days written notice to the Investment Adviser.
This Agreement will also immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meaning as
such terms have in the 1940 Act.)
13. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be effected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties
<PAGE> 7
herein and their respective successors and shall be governed by Alabama law.
The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Amended Agreement
and Declaration of Trust dated as of June 25, 1993 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
The Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"AmSouth Mutual Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
(SEAL) AMSOUTH BANK
By:
------------------------
Title:
---------------------
(SEAL) LAZARD ASSET MANAGEMENT
(LAZARD FRERES & CO., LLC)
By:
----------------------
Title:
-------------------
<PAGE> 8
SCHEDULE A
To Sub-Advisory Agreement
dated as of ____________, 1999
between AmSouth Bank and Lazard Asset Management
NAME OF FUND COMPENSATION
- ------------ ------------
AmSouth International Equity Fund Annual rate of fifty one-hundredths
of one percent (.50%) of the AmSouth
International Equity Fund's average
daily net assets
Consented to by:
Date: AMSOUTH BANK
---------------------
By:
-------------------------
Date: LAZARD ASSET MANAGEMENT
---------------------- (LAZARD FRERES & CO., LLC)
By:
-----------------------
A-1
<PAGE> 1
EXHIBIT (d)(12)
<PAGE> 2
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of _______________, 1999 between AmSouth Bank, an
Alabama banking association with its principal place of business in Alabama
(herein called the "Investment Adviser") and Bennett Lawrence Management, LLC,
a New York investment management services corporation with its principal place
of business in New York (herein called the "Sub-Adviser").
WHEREAS, the Investment Adviser is the investment adviser to AmSouth
Mutual Funds, a Massachusetts business trust (herein called the "Trust"), an
open-end management investment company registered under the Investment Company
Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Investment Adviser wishes to retain the Sub-Adviser to
assist the Investment Adviser in providing investment advisory services in
connection with such portfolios of the Trust as now or hereafter may be
identified on Schedule A hereto as such Schedule may be amended from time to
time with the consent of the parties hereto (each herein called a "Fund"); and
WHEREAS, the Board of Trustees of the Trust has duly approved this
Agreement upon consideration of the Trust's existing contractual arrangements
and applicable law; and
WHEREAS, the Sub-Adviser is willing to provide such services to the
Investment Adviser upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. APPOINTMENT. The Investment Adviser hereby appoints the Sub-Adviser
to act as sub-adviser with respect to the Fund. The Sub-Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Investment Adviser shall provide to the
Sub-Adviser copies of the Trust's most recent prospectus and statement of
additional information (including supplement thereto) which relate to any class
of shares representing interests in the Fund (each such prospectus and statement
of additional information as presently in effect, and as they shall from time to
time be amended and supplemented, is herein respectively called a "Prospectus"
and a "Statement of Additional Information").
<PAGE> 3
3. SUB-ADVISORY SERVICES TO THE FUNDS.
(a) Subject to the supervision of the Investment Adviser, the
Sub-Adviser will supervise the day-to-day operations of the Fund and perform the
following services: (i) provide investment research and credit analysis
concerning the Fund's investments; (ii) conduct a continual program of
investment of the Fund's assets; (iii) place orders for all purchases and sales
of the investments made for the Fund; (iv) maintain the books and records
required in connection with its duties hereunder; and (v) keep the Investment
Adviser informed of developments materially affecting the Fund.
(b) The Sub-Adviser will use the same skill and care in
providing such services as it uses in providing services to fiduciary accounts
for which it has investment responsibilities; provided that, notwithstanding
this Paragraph 3(b), the liability of the Sub-Adviser for actions taken and
non-actions with respect to the performance of services under this Agreement
shall be subject to the limitations set forth in Paragraph 11(a) of this
Agreement.
(c) The Sub-Adviser will communicate to the Investment Adviser
and to the Trust's custodian and Fund accountants as instructed by the
Investment Adviser on each day that a purchase or sale of a security is effected
for the Fund (i) the name of the issuer, (ii) the amount of the purchase or
sale, (iii) the name of the broker or dealer, if any, through which the purchase
or sale will be affected, (iv) the CUSIP number of the security, if any, and (v)
such other information as the Investment Adviser may reasonably require for
purposes of fulfilling its obligations to the Trust under its investment
advisory agreement.
(d) The Sub-Adviser will provide the services rendered by it
hereunder in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus and Statement of Additional
Information.
(e) The Sub-Adviser will maintain records of the information
set forth in Paragraph 3(c) hereof with respect to the securities transactions
of the Fund and will furnish the Trust's Board of Trustees with such periodic
and special reports as the Board may reasonably request.
(f) The Sub-Adviser will promptly review all (1) reports of
current security holdings in the Fund, (2) summary reports of transactions and
pending maturities (including the principal, cost and accrued interest on each
portfolio security in maturity date order) and (3) current cash position reports
(including cash available from portfolio sales and maturities and sales of the
Fund's shares less cash needed for redemptions and settlement of portfolio
purchases), all within a reasonable time after receipt thereof from the Trust
and will report any errors or discrepancies in such reports to the Trust or its
designee within three (3) business days after discovery of such discrepancies.
4. BROKERAGE. The Sub-Adviser may place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In
<PAGE> 4
placing orders, the Sub-Adviser will consider the experience and skill of the
firm's securities traders, as well as the firm's financial responsibility and
administrative efficiency. The Sub-Adviser will attempt to obtain the best price
and the most favorable execution of its orders. Consistent with these
obligations, the Sub-Adviser may, subject to the approval of the Board of
Trustees of the Trust, select brokers on the basis of the research, statistical
and pricing services they provide to the Fund. A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Sub-Adviser determines in good
faith that such transaction is reasonable in terms either of the transaction or
the overall responsibility of the Sub-Adviser to the Fund and its other clients
and that the total commissions paid by the Fund will be reasonable in relation
to the benefits in the Fund over the long term. In no instance will portfolio
securities be purchased from or sold to the Trust's principal distributor, the
Investment Adviser or any affiliate thereof (as the term "affiliate" is defined
in the 1940 Act), except to the extent permitted by SEC exemptive order or by
applicable law.
5. COMPLIANCE WITH LAWS: CONFIDENTIALITY: CONFLICTS OF INTEREST.
(a) The Sub-Adviser agrees that it will comply with all
applicable laws, rules and regulations of all federal and state regulatory
agencies having jurisdiction over the Sub-Adviser in performance of its duties
hereunder (herein called the "Rules").
(b) The Sub-Adviser will treat confidentially and as
proprietary information of the Trust all records and information relative to the
Trust and prior, present or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Sub-Adviser may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.
(c) The Sub-Adviser will maintain a policy and practice of
conducting sub-advisory services hereunder independently of the banking
operations of its affiliates. In making investment recommendations for the Fund,
the Sub-Adviser's personnel will not inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Fund's account
are bank customers of the Sub-Adviser's affiliates unless so required by
applicable law. In dealing with their bank customers, affiliates of Sub-Adviser
will not inquire or take into consideration whether securities of those
customers are held by the Fund. AmSouth Bank, upon request, will supply the
Sub-Adviser with a list of "affiliated persons" for purposes of the 1940 Act.
<PAGE> 5
6. CONTROL BY TRUST'S BOARD OF TRUSTEES. Any recommendations concerning
the Fund's investment program proposed by the Sub-Adviser to the Fund and the
Investment Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto shall at
all times be subject to any applicable directives of the Board of Trustees of
the Trust.
7. SERVICES NOT EXCLUSIVE. The Sub-Adviser's services hereunder are not
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
dissimilar services to others so long as its services under this Agreement are
not impaired thereby.
8. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
of the 1940 Act, and any other applicable Rule, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 and any other applicable Rule, the records required to
be maintained by the Sub-Adviser hereunder pursuant to Rule 31a-1 and any other
applicable Rule. The Sub-Adviser may retain a copy of Trust records solely for
the purpose of satisfying its record retention obligations under the 1940 Act
and the Investment Advisers Act of 1940, as amended.
9. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all expenses incurred by it in connection with the performance of its
services under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund. Notwithstanding the
foregoing, the Sub-Adviser shall not bear expenses related to the operation of
the Trust or any Fund including, but not limited to, taxes, interest, brokerage
fees and commissions and any extraordinary expense items.
10. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month equal to the
lesser of (i) the fee at the applicable annual rates set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Investment Adviser and the Sub-Adviser. If the fee payable to the
Sub-Adviser pursuant to this paragraph begins to accrue after the beginning of
any month or if this Agreement terminates before the end of any month, the fee
for the period from such date to the end of such month or from the beginning of
such month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating fees, the
value of a Fund's net assets shall be computed in the manner specified in the
Prospectus and the Trust's Declaration of Trust for the computation of the value
of the Fund's net assets in connection with the determination of the net asset
value of the Fund's shares. Payment of said compensation shall be the sole
responsibility of the Investment Adviser and shall in no way be an obligation of
the Fund or of the Trust.
<PAGE> 6
11. LIMITATION OF LIABILITY.
(a) The Sub-Adviser shall not be liable for any error of
judgement or mistake of law or for any loss suffered by the Investment Adviser,
the Trust or the Fund in connection with the matters to which Agreement relates,
except that Sub-Adviser shall be liable to the Investment Adviser for a loss
resulting from a breach of fiduciary duty by Sub-Adviser under the 1940 Act with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Sub-Adviser in
the performance of its duties or from reckless disregard by it of its
obligations or duties under this Agreement. In no case shall the Sub-Adviser be
liable for actions taken or non-actions with respect to the performance of
services under this Agreement based upon specific information, instructions or
requests given or made to the Sub-Adviser by the Investment Adviser.
(b) The Investment Adviser shall be responsible at all times
for supervising the Sub-Adviser, and this Agreement does not in any way limit
the duties and responsibilities that the Investment Adviser has agreed to under
its investment advisory agreement.
12. DURATION AND TERMINATION. This Agreement shall become effective as
of the date hereof provided that it shall have been approved by vote of a
majority of the outstanding voting securities of the Fund and, unless sooner
terminated as provided herein, shall continue with respect to the Fund until
January 31, 2000. Thereafter, if not terminated, this Agreement shall continue
in effect for successive 12-month periods ending on January 31st of each year,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Board of Trustees of the Trust who
are not parties to this Agreement or interested persons of the Trust or any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Fund; PROVIDED, HOWEVER, that this
Agreement may be terminated with respect to the Fund (i) by the Trust at any
time without the payment of any penalty by the Board of Trustees of the Trust,
(ii) by vote of a majority of the outstanding voting securities of the Fund,
(iii) by the Investment Adviser on 60 days written notice to the Sub-Adviser or
(iv) by the Sub-Adviser on 60 days written notice to the Investment Adviser.
This Agreement will also immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meaning as
such terms have in the 1940 Act.)
13. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be effected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties
<PAGE> 7
herein and their respective successors and shall be governed by Alabama
law.
The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Amended Agreement
and Declaration of Trust dated as of June 25, 1993 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
The Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"AmSouth Mutual Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
(SEAL) AMSOUTH BANK
By:
----------------------------------
Title:
(SEAL) BENNETT LAWRENCE MANAGEMENT, LLC
By:
----------------------------------
Title:
<PAGE> 8
SCHEDULE A
To Sub-Advisory Agreement
dated as of __________________, 1999
between AmSouth Bank and Bennett Lawrence Management, LLC
NAME OF FUND COMPENSATION
- ------------ ------------
AmSouth Mid-Cap Equity Fund Annual rate of seventy-five
one-hundredths of one percent (.75%)
on the first twenty-five million
($25,000,000), six hundred and
twenty-five one-thousandths of one
percent (.625%) on the next fifty
million ($50,000,000), fifty
one-hundredths of one percent (.50%)
on assets in excess of seventy-five
million ($75,000,000) of the AmSouth
International Equity Fund's average
daily net assets
Consented to by:
Date: AMSOUTH BANK
-----------------------
By:
------------------------------
Date: BENNETT LAWRENCE MANAGEMENT, LLC
-----------------------
By:
------------------------------
A-1
<PAGE> 1
EXHIBIT (e)(3)
<PAGE> 2
Dated:
----------------- , 1999
FORM OF AMENDED SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
<TABLE>
NAME OF FUND
------------
<S> <C>
AmSouth Prime Obligations Fund AmSouth Enhanced Market Fund
AmSouth U.S. Treasury Fund AmSouth Select Equity Fund
AmSouth Tax Exempt Fund AmSouth International Equity Fund
AmSouth Equity Fund AmSouth Mid-Cap Equity Fund
AmSouth Regional Equity Fund AmSouth Growth Opportunities Fund
AmSouth Bond Fund AmSouth Large-Cap Equity Fund
AmSouth Limited Maturity Fund AmSouth Limited Term U.S. Government Fund
AmSouth Municipal Bond Fund AmSouth Tennessee Tax-Exempt Fund
AmSouth Balanced Fund AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth Government Income Fund AmSouth U.S. Treasury Money Market Fund
AmSouth Florida Tax-Free Fund AmSouth Aggressive Growth Portfolio
AmSouth Capital Growth Fund AmSouth Growth Portfolio
AmSouth Small Cap Fund AmSouth Growth & Income Portfolio
AmSouth Equity Income Fund AmSouth Moderate Growth & Income Portfolio
AmSouth Institutional Prime Obligations Fund AmSouth Current Income Portfolio
AmSouth Institutional U.S. Treasury Fund
</TABLE>
AMSOUTH MUTUAL FUNDS
By:
--------------------------
Name:
------------------------
Title:
------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
--------------------------
Name:
------------------------
Title:
------------------------
A-1
<PAGE> 3
Dated:
-------------------, 1999
FORM OF AMENDED SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
SERVICING PLAN FUNDS
- --------------------
Class A Shares of the AmSouth Prime Obligations Fund
Class A Shares of the AmSouth U.S. Treasury Fund
Class A Shares of the AmSouth Tax Exempt Fund
Class A Shares of the AmSouth Equity Fund
Class A Shares of the AmSouth Regional Equity Fund
Class A Shares of the AmSouth Bond Fund
Class A Shares of the AmSouth Limited Maturity Fund
Class A Shares of the AmSouth Municipal Bond Fund
Class A Shares of the AmSouth Balanced Fund
Class A Shares of the AmSouth Government Income Fund
Class A Shares of the AmSouth Florida Tax-Free Fund
Class A Shares of the AmSouth Capital Growth Fund
Class A Shares of the AmSouth Small Cap Fund
Class A Shares of the AmSouth Equity Income Fund
Class A Shares of the AmSouth Enhanced Market Fund
Class A Shares of the AmSouth Select Equity Fund
Class A Shares of the AmSouth International Equity Fund
Class A Shares of the AmSouth Mid-Cap Equity Fund
Class A Shares of the AmSouth Growth Opportunities Fund
Class A Shares of the AmSouth Large-Cap Equity Fund
Class A Shares of the AmSouth Limited Term U.S. Government Fund
Class A Shares of the AmSouth Tennessee Tax-Exempt Fund
Class A Shares of the AmSouth Limited Term Tennessee Tax-Exempt Fund
Class A Shares of the AmSouth U.S. Treasury Money Market Fund
Class A Shares of the AmSouth Aggressive Growth Portfolio
Class A Shares of the AmSouth Growth Portfolio
Class A Shares of the AmSouth Growth & Income Portfolio
Class A Shares of the AmSouth Moderate Growth & Income Portfolio
Class A Shares of the AmSouth Current Income Portfolio
DISTRIBUTION PLAN FUNDS
- -----------------------
Class B Shares of the AmSouth Prime Obligations Fund
Class B Shares of the AmSouth Equity Fund
Class B Shares of the AmSouth Regional Equity Fund
Class B Shares of the AmSouth Bond Fund
Class B Shares of the AmSouth Limited Maturity Fund
<PAGE> 4
Class B Shares of the AmSouth Municipal Bond Fund
Class B Shares of the AmSouth Balanced Fund
Class B Shares of the AmSouth Government Income Fund
Class B Shares of the AmSouth Florida Tax-Free Fund
Class B Shares of the AmSouth Capital Growth Fund
Class B Shares of the AmSouth Small Cap Fund
Class B Shares of the AmSouth Equity Income Fund
Class B Shares of the AmSouth Enhanced Market Fund
Class B Shares of the AmSouth Select Equity Fund
Class II Shares of the AmSouth Institutional Prime Obligations Fund
Class III Shares of the AmSouth Institutional Prime Obligations Fund
Class II Shares of the AmSouth Institutional U.S. Treasury Fund
Class III Shares of the AmSouth Institutional U.S. Treasury Fund
Class B Shares of the AmSouth International Equity Fund
Class B Shares of the AmSouth Mid-Cap Equity Fund
Class B Shares of the AmSouth Growth Opportunities Fund
Class B Shares of the AmSouth Large-Cap Equity Fund
Class B Shares of the AmSouth Limited Term U.S. Government Fund
Class B Shares of the AmSouth Tennessee Tax-Exempt Fund
Class B Shares of the AmSouth Limited Term Tennessee Tax-Exempt Fund
Class B Shares of the AmSouth Aggressive Growth Portfolio
Class B Shares of the AmSouth Growth Portfolio
Class B Shares of the AmSouth Growth & Income Portfolio
Class B Shares of the AmSouth Moderate Growth & Income Portfolio
Class B Shares of the AmSouth Current Income Portfolio
AMSOUTH MUTUAL FUNDS
By:
--------------------------
Name:
------------------------
Title:
------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
--------------------------
Name:
------------------------
Title:
------------------------
B-2
<PAGE> 5
Dated:
---------------, 1999
FORM OF AMENDED SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
Class A Shares of the AmSouth Equity Fund
Class A Shares of the AmSouth Regional Equity Fund
Class A Shares of the AmSouth Bond Fund
Class A Shares of the AmSouth Limited Maturity Fund
Class A Shares of the AmSouth Municipal Bond Fund
Class A Shares of the AmSouth Balanced Fund
Class A Shares of the AmSouth Government Income Fund
Class A Shares of the AmSouth Florida Tax-Free Fund
Class A Shares of the AmSouth Capital Growth Fund
Class A Shares of the AmSouth Small Cap Fund
Class A Shares of the AmSouth Equity Income Fund
Class A Shares of the AmSouth Select Equity Fund
Class A Shares of the AmSouth Enhanced Market Fund
Class A Shares of the AmSouth International Equity Fund
Class A Shares of the AmSouth Mid-Cap Equity Fund
Class A Shares of the AmSouth Growth Opportunities Fund
Class A Shares of the AmSouth Large-Cap Equity Fund
Class A Shares of the AmSouth Limited Term U.S. Government Fund
Class A Shares of the AmSouth Tennessee Tax-Exempt Fund
Class A Shares of the AmSouth Limited Term Tennessee Tax-Exempt Fund
Class A Shares of the AmSouth U.S. Treasury Money Market Fund
Class A Shares of the AmSouth Aggressive Growth Portfolio
Class A Shares of the AmSouth Growth Portfolio
Class A Shares of the AmSouth Growth & Income Portfolio
Class A Shares of the AmSouth Moderate Growth & Income Portfolio
Class A Shares of the AmSouth Current Income Portfolio
<PAGE> 6
AMSOUTH MUTUAL FUNDS
By:
--------------------------
Name:
------------------------
Title:
------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
--------------------------
Name:
------------------------
Title:
------------------------
C-2
<PAGE> 7
Dated:
---------------, 1999
FORM OF AMENDED SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
Class B Shares of the AmSouth
Prime Obligations Fund
Class B Shares of the AmSouth
Equity Fund
Class B Shares of the AmSouth
Regional Equity Fund
Class B Shares of the AmSouth
Bond Fund
Class B Shares of the AmSouth
Limited Maturity Fund
Class B Shares of the AmSouth
Municipal Bond Fund
Class B Shares of the AmSouth
Balanced Fund
Class B Shares of the AmSouth
Government Income Fund
Class B Shares of the AmSouth
Florida Tax-Free Fund
Class B Shares of the AmSouth
Capital Growth Fund
Class B Shares of the AmSouth
Small Cap Fund
Class B Shares of the AmSouth
Equity Income Fund
D-1
<PAGE> 8
Class B Shares of the AmSouth
Enhanced Market Fund
Class B Shares of the AmSouth
Select Equity Fund
Class II Shares of the AmSouth
Institutional Prime Obligations Fund
Class III Shares of the AmSouth
Institutional Prime Obligations Fund
Class II Shares of the AmSouth
Institutional U.S. Treasury Fund
Class III Shares of the AmSouth
Institutional U.S. Treasury Fund
Class B Shares of the AmSouth
International Equity Fund
Class B Shares of the AmSouth
Mid-Cap Equity Fund
Class B Shares of the AmSouth
Growth Opportunities Fund
Class B Shares of the AmSouth
Large-Cap Equity Fund
Class B Shares of the AmSouth
Limited Term U.S. Government Fund
Class B Shares of the AmSouth
Tennessee Tax-Exempt Fund
Class B Shares of the AmSouth
Limited Term Tennessee Tax-Exempt Fund
Class B Shares of the AmSouth
Aggressive Growth Portfolio
Class B Shares of the AmSouth
Growth Portfolio
D-2
<PAGE> 9
Class B Shares of the AmSouth
Growth & Income Portfolio
Class B Shares of the AmSouth
Moderate Growth & Income Portfolio
Class B Shares of the AmSouth
Current Income Portfolio
AMSOUTH MUTUAL FUNDS
By:
--------------------------
Name:
------------------------
Title:
------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
--------------------------
Name:
------------------------
Title:
------------------------
D-3
<PAGE> 1
EXHIBIT (g)(3)
<PAGE> 2
Dated:___________________________, 1999
FORM OF AMENDED SCHEDULE A
TO THE CUSTODY AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
AMSOUTH BANK
DATED APRIL 17, 1997
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income Portfolio
AmSouth Current Income Portfolio
<PAGE> 3
AMSOUTH MUTUAL FUNDS
By: _______________________________
Title: ____________________________
AMSOUTH BANK
By: _______________________________
Title:_____________________________
<PAGE> 1
EXHIBIT (h)(3)
<PAGE> 2
Dated:___________________ , 1999
FORM OF AMENDED SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS AND
ASO SERVICES COMPANY
DATED APRIL 1, 1996
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund, AmSouth Annual Rate of twenty one-
U.S. Treasury Fund, AmSouth Tax Exempt hundredths of one percent
Fund, AmSouth Equity Fund, AmSouth (0.20%) of each such
Regional Equity Fund, AmSouth Balanced Fund, Fund's average daily net
AmSouth Bond Fund, AmSouth Limited assets
Maturity Fund, AmSouth Municipal Bond Fund,
AmSouth Government Income Fund, AmSouth
Florida Tax-Free Fund, AmSouth Capital
Growth Fund, AmSouth Small Cap Fund,
AmSouth Equity Income Fund, AmSouth
Enhanced Market Fund, AmSouth Select
Equity Fund, AmSouth International Equity
Fund, AmSouth Mid-Cap Equity Fund,
AmSouth Growth Opportunities Fund, AmSouth
Large-Cap Equity Fund, AmSouth Limited
Term U.S. Government Fund, AmSouth
Tennessee Tax-Exempt Fund, AmSouth Limited
Term Tennessee Tax-Exempt Fund,
AmSouth Aggressive Growth Portfolio,
AmSouth Growth Portfolio, AmSouth Growth &
Income Portfolio, AmSouth Moderate Growth
& Income Portfolio, AmSouth Current
Income Portfolio
AmSouth Institutional Prime Obligations Fund and Annual Rate of ten one-
AmSouth Institutional U.S. Treasury Fund and hundredths of one percent
AmSouth U.S. Treasury Money Market Fund (0.10%) of each such
Fund's average daily net
assets
- --------------------
*All fees are computed daily and paid periodically.
<PAGE> 3
AMSOUTH MUTUAL FUNDS
By:_____________________________
Title:___________________________
ASO SERVICES COMPANY
By:______________________________
Title:____________________________
<PAGE> 1
EXHIBIT (h)(6)
<PAGE> 2
Dated:_________________________, 1999
FORM OF AMENDED SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK
DATED APRIL 1, 1996
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income Portfolio
AmSouth Current Income Portfolio
<PAGE> 3
ASO SERVICES COMPANY
By: ___________________________
Name: _________________________
Title: ________________________
AMSOUTH BANK
By: ___________________________
Name: _________________________
Title: ________________________
<PAGE> 4
Dated:___________________, 1999
FORM OF AMENDED SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK
DATED APRIL 1, 1996
NAME OF FUND COMPENSATION*
- ------------ -------------
AmSouth Prime Obligations Fund Such percentage of ASO's
AmSouth U.S. Treasury Fund compensation received
AmSouth Tax Exempt Fund pursuant to the Management
AmSouth Equity Fund and Administration
AmSouth Regional Equity Fund Agreement with the Trust
AmSouth Balanced Fund as shall be agreed upon
AmSouth Bond Fund from time to time between
AmSouth Municipal Bond Fund the parties, but in no
AmSouth Limited Maturity Fund event to exceed an annual
AmSouth Government Income Fund rate of ten one-hundredths
AmSouth Florida Tax-Free Fund of one percent (.10%) of
AmSouth Capital Growth Fund each such Fund's average
AmSouth Small Cap Fund daily net assets.
AmSouth Equity Income Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime
Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-
Exempt Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income
Portfolio
AmSouth Current Income Portfolio
<PAGE> 5
ASO SERVICES COMPANY
By: ___________________________
Name: ________________________
Title: ________________________
AMSOUTH BANK
By: ___________________________
Name: ________________________
Title: ________________________
*All fees are computed daily and paid periodically
<PAGE> 1
EXHIBIT (h)(9)
<PAGE> 2
Dated:_____________________, 1999
FORM OF AMENDED SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
DATED APRIL 1, 1996
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income Portfolio
AmSouth Current Income Portfolio
<PAGE> 3
ASO SERVICES COMPANY
By: ___________________________
Title: ________________________
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ___________________________
Title: ________________________
<PAGE> 4
Dated:______________________ , 1999
FORM OF AMENDED SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
DATED APRIL 1, 1996
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund Such percentage of ASO's
AmSouth U.S. Treasury Fund compensation received pursuant to
AmSouth Tax Exempt Fund the Management and Administration
AmSouth Equity Fund Agreement with the Trust as shall
AmSouth Regional Equity Fund be agreed upon from time to time
AmSouth Balanced Fund between the parties.
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt
Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income Portfolio
AmSouth Current Income Portfolio
<PAGE> 5
ASO SERVICES COMPANY
By: ___________________________
Title: ________________________
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ___________________________
Title: ________________________
- ------------------
*All fees are computed daily and paid periodically
<PAGE> 1
EXHIBIT (h)(12)
<PAGE> 2
Dated: __________, 1999
FORM OF AMENDED SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS
AND BISYS FUND SERVICES OHIO, INC.
DATED JANUARY 16, 1989
Name of Fund
- -------------
AmSouth Prime Obligations Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth U.S. Treasury Fund
Class A Shares
Institutional Shares
AmSouth Tax Exempt Fund
Class A Shares
Institutional Shares
AmSouth Equity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Regional Equity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Balanced Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Bond Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Limited Maturity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Municipal Bond Fund
Class A Shares
Institutional Shares
Class B Shares
<PAGE> 3
Name of Fund
- ------------
AmSouth Government Income Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Florida Tax-Free Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Capital Growth Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Small Cap Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Equity Income Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Select Equity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Enhanced Market Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Institutional Prime Obligations Fund
Class I Shares
Class II Shares
Class III Shares
AmSouth Institutional U.S. Treasury Fund
Class I Shares
Class II Shares
Class III Shares
AmSouth International Equity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Mid-Cap Equity Fund
Class A Shares
Institutional Shares
Class B Shares
<PAGE> 4
Name of Fund
- ------------
AmSouth Growth Opportunities Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Large-Cap Equity Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Limited Term U.S. Government Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Tennessee Tax-Exempt Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth Limited Term Tennessee Tax-Exempt Fund
Class A Shares
Institutional Shares
Class B Shares
AmSouth U.S. Treasury Money Market Fund
Class A Shares
Institutional Shares
AmSouth Aggressive Growth Portfolio
Class A Shares
Institutional Shares
Class B Shares
AmSouth Growth Portfolio
Class A Shares
Institutional Shares
Class B Shares
AmSouth Growth & Income Portfolio
Class A Shares
Institutional Shares
Class B Shares
AmSouth Moderate Growth & Income Portfolio
Class A Shares
Institutional Shares
Class B Shares
AmSouth Current Income Portfolio
Class A Shares
Institutional Shares
Class B Shares
<PAGE> 5
AMSOUTH MUTUAL FUNDS
By:_________________________
Name: ______________________
Title: _____________________
BISYS FUND SERVICES OHIO, INC.
By:_________________________
Name: ______________________
Title: ____________________
<PAGE> 1
EXHIBIT (h)(13)
<PAGE> 2
Dated: September 15, 1998
AMENDMENT TO SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN AMSOUTH MUTUAL FUNDS
AND BISYS FUND SERVICES OHIO, INC.
Revised Fee Schedule for the AmSouth Mutual Funds (formally the ASO
Outlook Group) effective October 3, 1997.
A. ANNUAL FEE
1. Base Fee shall be equal to 1.5 basis points of the Group's
total assets, such Base Fee shall then be allocated to each
portfolio/class based on their relative total asset size.
2. The total Base Fee shall not equal less than $10,000 per
portfolio/class.
B. ADDITIONAL FEES
1. Each portfolio utilizing the payroll deduction feature will
pay a fee of $.50 per transaction plus a $500 set-up fee.
2. Each portfolio will pay a $20.00 fee per T.I.N. per year for
each I.R.A.
3. Each portfolio with asset allocation will pay the following
fees:
$3,000 annually (quarterly rebalancing)
$4,000 annually (monthly rebalancing)
$.05 per transaction fee
C. OTHER PROVISIONS
All fees are subject to increases as agreed in writing between the
parties.
D-1
<PAGE> 3
AMSOUTH MUTUAL FUNDS
By: /s/ John F. Calvano
---------------------------
Name: John F. Calvano
--------------------------
Title: President
-------------------------
BISYS FUND SERVICES
OHIO, INC.
By: /s/ William J. Tomko
---------------------------
Name: William J. Tomko
--------------------------
Title:
-------------------------
D-2
<PAGE> 1
EXHIBIT (h)(18)
<PAGE> 2
Dated: ----------, 1999
FORM OF AMENDED SCHEDULE I
TO THE
SHAREHOLDER SERVICING PLAN
DATED MARCH 20, 1996
This Shareholder Servicing Plan shall be adopted with respect to the
following Funds (and Classes) of AmSouth Mutual Funds:
<TABLE>
<CAPTION>
Name of Fund Class
------------ -----
<S> <C>
AmSouth Prime Obligations Fund Class A Class
AmSouth U.S. Treasury Fund Class A Class
AmSouth Tax Exempt Fund Class A Class
AmSouth Government Bond Fund Class A Class
AmSouth Bond Fund Class A Class
AmSouth Limited Maturity Fund Class A Class
AmSouth Municipal Bond Fund Class A Class
AmSouth Florida Tax-Free Fund Class A Class
AmSouth Equity Fund Class A Class
AmSouth Regional Equity Fund Class A Class
AmSouth Balanced Fund Class A Class
AmSouth Capital Growth Fund Class A Class
AmSouth Small Cap Fund Class A Class
AmSouth Equity Income Fund Class A Class
AmSouth Select Equity Fund Class A Class
AmSouth Enhanced Market Fund Class A Class
AmSouth International Equity Fund Class A Class
AmSouth Mid-Cap Equity Fund Class A Class
AmSouth Growth Opportunities Fund Class A Class
AmSouth Large-Cap Equity Fund Class A Class
AmSouth Limited Term U.S. Government Fund Class A Class
AmSouth Tennessee Tax-Exempt Fund Class A Class
AmSouth Limited Term Tennessee Tax-Exempt Fund Class A Class
AmSouth U.S. Treasury Money Market Fund Class A Class
AmSouth Aggressive Growth Portfolio Class A Class
AmSouth Growth Portfolio Class A Class
AmSouth Growth & Income Portfolio Class A Class
AmSouth Moderate Growth & Income Portfolio Class A Class
AmSouth Current Income Portfolio Class A Class
</TABLE>
<PAGE> 1
EXHIBIT (i)
OPINION OF ROPES & GRAY
<PAGE> 2
October 1, 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
October 1, 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. 30 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.
October 1, 1999
<PAGE> 1
EXHIBIT (m)(3)
<PAGE> 2
Dated: , 1999
-----------------
FORM OF AMENDED SCHEDULE A TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
DATED MARCH 17, 1998
<TABLE>
<CAPTION>
NAME OF FUNDS COMPENSATION*
- ------------- -------------
<S> <C>
The AmSouth Prime Obligations Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Prime Obligations Fund.
The AmSouth Limited Maturity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Limited Maturity Fund.
The AmSouth Bond Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Bond Fund.
The AmSouth Government Income Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Government Income Fund.
The AmSouth Florida Tax-Free Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Florida Tax-Free Fund.
The AmSouth Municipal Bond Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Municipal Bond Fund.
The AmSouth Equity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Equity Fund.
The AmSouth Regional Equity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Regional Equity Fund.
The AmSouth Balanced Fund-- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Balanced Fund.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
The AmSouth Capital Growth Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Capital Growth Fund.
The AmSouth Small Cap Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Small Cap Fund.
The AmSouth Equity Income Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Equity Income Fund.
The AmSouth Select Equity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Select Equity Fund
The AmSouth Enhanced Market Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Enhanced Market Fund
The AmSouth Institutional Prime Obligations Fund -- Annual rate of twenty-five one-hundredths of one
Class II Shares percent (0.25%) of the average daily net assets of the
AmSouth Institutional Prime Obligations Fund.
The AmSouth Institutional Prime Obligations Fund -- Annual rate of fifty one-hundredths of one percent
Class III Shares (0.50%) of the average daily net assets of the AmSouth
Institutional Prime Obligations Fund.
The AmSouth Institutional U.S. Treasury Fund -- Annual rate of twenty-five one-hundredths of one
Class II Shares percent (0.25%) of the average daily net assets of the
AmSouth Institutional U.S. Treasury Fund.
The AmSouth Institutional U.S. Treasury Fund -- Annual rate of fifty one-hundredths of one percent
Class III Shares (0.50%) of the average daily net assets of the AmSouth
Institutional U.S. Treasury Fund.
The AmSouth International Equity Fund -- Class B Annual rate of one percent (1.00%) of the average daily
Shares net assets of the AmSouth International Equity Fund.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
The AmSouth Mid-Cap Equity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Mid-Cap Equity Fund.
The AmSouth Growth Opportunities Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Growth Opportunities Fund
The AmSouth Large-Cap Equity Fund -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Large-Cap Equity Fund.
The AmSouth Limited Term U.S. Government Fund -- Annual rate of one percent (1.00%) of the average daily
Class B Shares net assets of the AmSouth Limited Term U.S. Government
Fund.
The AmSouth Tennessee Tax-Exempt Fund -- Class B Annual rate of one percent (1.00%) of the average daily
Shares net assets of the AmSouth Tennessee Tax-Exempt Fund.
The AmSouth Limited Term Tennessee Tax-Exempt Fund Annual rate of one percent (1.00%) of the average daily
- -- Class B Shares net assets of the AmSouth Limited Term Tennessee
Tax-Exempt Fund.
The AmSouth Aggressive Growth Portfolio -- Class B Annual rate of one percent (1.00%) of the average daily
Shares net assets of the AmSouth Aggressive Growth Portfolio.
The AmSouth Growth Portfolio -- Class B Shares Annual rate of one percent (1.00%) of the average daily
net assets of the AmSouth Growth Portfolio.
The AmSouth Growth & Income Portfolio Annual rate of one percent (1.00%) of the average daily
- -- Class B Shares net assets of the AmSouth Growth & Income Portfolio.
The AmSouth Moderate Growth & Income Portfolio -- Annual rate of one percent (1.00%) of the average daily
Class B Shares net assets of the AmSouth Moderate Growth & Income
Portfolio.
The AmSouth Current Income Portfolio -- Class B Annual rate of one percent (1.00%) of the average daily
Shares net assets of the AmSouth Current Income Portfolio.
</TABLE>
<PAGE> 5
[SEAL]
AMSOUTH MUTUAL FUNDS
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- -------------------
* All fees are computed and paid monthly.
<PAGE> 1
EXHIBIT (n)(3)
<PAGE> 2
Dated:_______________________ , 1999
FORM OF AMENDED SCHEDULE I
MULTIPLE CLASS PLAN
FOR AMSOUTH MUTUAL FUNDS
DATED MARCH 17, 1998
Retail Funds
------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Capital Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Florida Tax-Free Fund
AmSouth Municipal Bond Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth International Equity Fund
AmSouth Mid-Cap Equity Fund
AmSouth Growth Opportunities Fund
AmSouth Large-Cap Equity Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Aggressive Growth Portfolio
AmSouth Growth Portfolio
AmSouth Growth & Income Portfolio
AmSouth Moderate Growth & Income Portfolio
AmSouth Current Income Portfolio
Institutional Funds
-------------------
AmSouth Institutional Prime Obligations Fund
AmSouth Institutional U.S. Treasury Fund
