<PAGE> 1
As filed with the Securities and Exchange Commission
on March 13, 2000
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. 32 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 33 [ X ]
AMSOUTH 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 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)
[ X ] immediately upon filing pursuant to paragraph (b)
[ ] on ___________, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on November 24, 1999 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE> 2
AMSOUTH FUNDS
SUPPLEMENT DATED MARCH 13, 2000
TO THE PROSPECTUS (DISCUSSING ALL FUNDS) DATED MARCH 13, 2000
THIS SUPPLEMENT PROVIDES INFORMATION CORRECTING THE INTRODUCTION TO
FINANCIAL HIGHLIGHTS CONTAINED IN THE PROSPECTUS DISCUSSING ALL FUNDS. PLEASE
KEEP THIS SUPPLEMENT AND READ IT TOGETHER WITH THIS PROSPECTUS.
Under the introduction to Financial Highlights on page 127, the one
paragraph appearing on that page has been deleted and replaced in its entirety
with the following:
The financial highlights table is intended to help you understand the
Funds' financial performance for the past 5 years or, if shorter, the period of
the Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information pertaining to
the Capital Growth Fund, Large Cap Fund, Mid Cap Fund, International Equity
Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth and Income
Portfolio, Moderate Growth and Income Portfolio, Current Income Portfolio,
Limited Term U.S. Government Fund, Tennessee Tax-Exempt Fund, Limited Term
Tennessee Tax-Exempt Fund, and Treasury Reserve Money Market Fund has been
audited by KPMG LLP. The other information included herein, has been audited by
PricewaterhouseCoopers LLP. The reports of KPMG LLP and PricewaterhouseCoopers
LLP, along with the Funds' financial statements, are incorporated by reference
in the SAI, which is available upon request.
SHAREHOLDERS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS FOR FUTURE
REFERENCE.
<PAGE> 3
AmSouth Funds
Prospectus
Class A Shares
Class B Shares
Trust Shares
March 13, 2000
As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved these
Fund shares or determined whether this prospectus AMSOUTH
is truthful or complete. Anyone who tells you otherwise MUTUAL FUNDS
is committing a crime.
<PAGE> 4
AMSOUTH FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES
[LOGO]
Carefully review this important 3 Overview
section, which summarizes each 4 CAPITAL APPRECIATION FUNDS
Fund's investments, risks, past 5 Value Fund
performance, and fees. 8 Growth Fund
11 Capital Growth Fund
14 Large Cap Fund
17 Mid Cap Fund
19 Small Cap Fund
22 Equity Income Fund
25 Balanced Fund
28 Select Equity Fund
31 Enhanced Market Fund
34 International Equity Fund
37 STRATEGIC PORTFOLIOS
38 Strategic Portfolios: Aggressive Growth Portfolio
41 Strategic Portfolios: Growth Portfolio
44 Strategic Portfolios: Growth and Income Portfolio
47 Strategic Portfolios: Moderate Growth and Income Portfolio
50 Strategic Portfolios: Current Income Portfolio
53 INCOME FUNDS
54 Bond Fund
57 Limited Term Bond Fund
60 Government Income Fund
63 Limited Term U.S. Government Fund
66 Municipal Bond Fund
69 Florida Tax-Exempt Fund
72 Tennessee Tax-Exempt Fund
75 Limited Term Tennessee Tax-Exempt Fund
79 MONEY MARKET FUNDS
80 Prime Money Market Fund
83 U.S. Treasury Money Market Fund
86 Treasury Reserve Money Market Fund
89 Tax-Exempt Money Market Fund
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
[LOGO]
Review this section for 92 CAPITAL APPRECIATION FUNDS
information and on investment 92 Value Fund
strategies and their risks. 92 Growth Fund
92 Capital Growth Fund
92 Large Cap Fund
92 Mid Cap Fund
92 Small Cap Fund
92 Equity Income Fund
93 Balanced Fund
93 Select Equity Fund
93 Enhanced Market Fund
93 International Equity Fund
94 STRATEGIC PORTFOLIOS
94 INCOME FUNDS
94 Bond Fund
94 Limited Term Bond Fund
94 Government Income Fund
95 Limited Term U.S. Government Fund
95 Municipal Bond Fund
95 Florida Tax-Exempt Fund
96 Tennessee Tax-Exempt Fund and
Limited Term Tennessee
Tax-Exempt Fund
</TABLE>
<PAGE> 5
AMSOUTH FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
[LOGO]
Review this section for 97 MONEY MARKET FUNDS
information and on investment 97 Treasury Reserve Money Market Fund
strategies and their risks. 97 Tax-Exempt Money Market Fund
FUND MANAGEMENT
[LOGO]
Review this section for details on The Investment Adviser
the people and organizations who 104 The Investment Sub-Advisers
oversee the Funds. 105 Portfolio Managers
110 The Distributor and Administrator
112
SHAREHOLDER INFORMATION
[LOGO]
Review this section for details on 113 Choosing a Share Class
how shares are valued, how to 114 Pricing of Fund Shares
purchase, sell and exchange 115 Purchasing and Adding to Your Shares
shares, related charges and 118 Selling Your Shares
payments of dividends and 120 General Policies on Selling Shares
distributions. 121 Distribution Arrangements/Sales Charges
124 Distribution and Service (12b-1) Fees
and Shareholder Servicing Fees
125 Exchanging Your Shares
126 Dividends, Distributions and Taxes
OTHER INFORMATION ABOUT THE FUNDS
[LOGO]
127 Financial Highlights
</TABLE>
2
<PAGE> 6
[LOGO]
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES OVERVIEW
<TABLE>
<S> <C>
THE FUNDS AmSouth Funds (formerly AmSouth Mutual Funds) is a mutual
fund family that offers different classes of shares in
separate investment portfolios ("Funds"). The Funds have
individual investment goals and strategies. This prospectus
gives you important information about the Class A Shares
(formerly Classic Shares), the Class B Shares, and the Trust
Shares (formerly Premier Shares) of the Capital Appreciation
Funds, the Strategic Portfolios, the Income Funds and the
Money Market Funds that you should know before investing.
Please read this prospectus and keep it for future
reference.
Each of the Funds in this prospectus is a mutual fund. A
mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities
like stocks and bonds. Before you look at specific Funds,
you should know a few general basics about investing in
mutual funds.
The value of your investment in a Fund is based on the
market prices of the securities the Fund holds. These prices
change daily due to economic and other events that affect
securities markets generally, as well as those that affect
particular companies or government units. These price
movements, sometimes called volatility, will vary depending
on the types of securities a Fund owns and the markets where
these securities trade.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR
INVESTMENT IN A FUND. YOUR INVESTMENT IN A FUND IS NOT A
DEPOSIT OR AN OBLIGATION OF AMSOUTH BANK, ITS AFFILIATES, OR
ANY BANK. IT IS NOT INSURED BY THE FDIC OR ANY GOVERNMENT
AGENCY.
Each Fund has its own investment goal and strategies for
reaching that goal. However, it cannot be guaranteed that a
Fund will achieve its goal. Before investing, make sure that
the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way
that the manager believes will help the Fund achieve its
goal. A manager's judgments about the stock markets, economy
and companies, or selecting investments may cause a Fund to
underperform other funds with similar objectives.
</TABLE>
3
<PAGE> 7
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES OVERVIEW
CAPITAL APPRECIATION FUNDS
<TABLE>
<S> <C>
These Funds seek capital appreciation and invest primarily
in equity securities, principally common stocks and, to a
limited extent, preferred stocks and convertible securities.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking a long-term goal such as retirement
- looking to add a growth component to your portfolio
- willing to accept the risks of investing in the stock
markets
These Funds may not be appropriate if you are:
- pursuing a short-term goal or investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
4
<PAGE> 8
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH VALUE FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Equity Fund) seeks capital
growth by investing primarily in a diversified portfolio of
common stock and securities convertible into common stock,
such as convertible bonds and convertible preferred stock.
The production of current income is an incidental objective.
PRINCIPAL INVESTMENT STRATEGIES To pursue these goals, the Fund invests primarily in common
stocks that the portfolio manager believes to be
undervalued.
In managing the Fund's portfolio, the manager uses a variety
of economic projections, quantitative techniques, and
earnings projections in formulating individual stock
purchase and sale decisions. The portfolio manager will
select investments believed to have basic investment value
which will eventually be recognized by other investors, thus
increasing their value to the Fund.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses - undervalued
stocks - will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
5
<PAGE> 9
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH VALUE FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
90 6.99
91 19.21
92 10.33
93 18.38
94 0.37
95 27.40
96 15.75
97 32.23
98 18.13
99 4.02
</TABLE>
Best
quarter: 16.62% 12/31/98
Worst
quarter: -14.37% 9/30/90
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Value Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below compares the
Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/1/88)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) -0.79% 17.88% 12.77% 14.00%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) -1.25% 18.37% 13.10% 14.30%
TRUST SHARES 4.02% 19.09% 13.35% 14.53%
S&P 500(R) INDEX 21.03% 28.54% 18.19% 19.39%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
6
<PAGE> 10
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH VALUE FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases 4.50%(2) None None
Maximum Deferred Sales Charge
(Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee 0.00% 1.00% 0.00%
Other Expenses(5) 0.56% 0.31% 0.46%(6)
Total Fund Operating Expenses(5) 1.36% 2.11% 1.26%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses are being limited
to 0.55% for Class A Shares and 0.30% for
Class B Shares. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 1.35%; Class B
Shares, 2.10%; and Trust Shares, 1.26%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $582 $861 $1,161 $2,011
CLASS B SHARES
Assuming redemption $714 $961 $1,334 $2,250
Assuming no redemption $214 $661 $1,134 $2,250
TRUST SHARES $128 $400 $ 692 $1,523
</TABLE>
As an investor in the Value Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
7
<PAGE> 11
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Capital Growth Fund) seeks
long-term capital appreciation by investing primarily in a
diversified portfolio of common stocks and securities
convertible into common stocks such as convertible bonds and
convertible preferred stocks.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
domestically traded U.S. common stocks, as well as non-U.S.
common stocks and American Depositary Receipts ("ADRs") that
the portfolio manager believes have attractive potential for
growth.
In managing the Fund, the portfolio manager seeks
reasonably-priced securities with the potential to produce
above-average earnings growth. In choosing individual stocks
the portfolio manager uses a quantitative process to
identify companies with a history of above-average growth or
companies that are expected to enter periods of
above-average growth or are positioned in emerging growth
industries. Some of the criteria that the manager uses to
select these companies are earnings growth, return on
capital, cash flow and price earnings ratios.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- growth stocks -- will
underperform other kinds of investments or market averages.
FOREIGN SECURITIES RISK: Investing in foreign markets
involves a greater risk than investing in the United States.
Foreign securities may be adversely affected by myriad
factors, including currency fluctuations and social,
economic or political instability.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
8
<PAGE> 12
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH GROWTH FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
98 34.46
99 18.66
</TABLE>
Best
quarter: 30.59% 12/31/98
Worst
quarter: -11.70% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Growth Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Trust Shares over two
years of operations. The table
below compares the Fund's
performance over time to that of
the S&P 500(R) Index, a widely
recognized, unmanaged index of
common stocks. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (8/3/97)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 13.13% 19.38%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 12.73% 19.90%
TRUST SHARES 18.66% 21.96%
S&P 500(R) INDEX 21.03% 21.31%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
9
<PAGE> 13
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH GROWTH FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee 0.00% 1.00% 0.00%
Other Expenses(5) 0.95% 0.70% 0.85%(6)
Total Fund Operating Expenses(5) 1.75% 2.50% 1.65%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses for Class A are
being limited to 0.43% for Class A Shares,
0.17% for Class B Shares, and for Trust
Shares, 0.18%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 1.23%; Class B
Shares, 1.97%; and Trust Shares, 0.98%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $621 $ 979 $1,361 $2,430
CLASS B SHARES
Assuming redemption $753 $1,079 $1,531 $2,654
Assuming no redemption $253 $ 779 $1,331 $2,654
TRUST SHARES $167 $ 517 $ 892 $1,944
</TABLE>
As an investor in the Growth
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
10
<PAGE> 14
AMSOUTH CAPITAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES 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. The Fund also
may invest in medium-sized companies.
In choosing stocks for the Fund, the portfolio manager first
identifies industries that it believes will expand over the
next few years or longer. The portfolio manager 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 portfolio manager
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.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 90 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS MARKET RISK: 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.
INVESTMENT STYLE RISK: 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.
NON-DIVERSIFIED RISK: 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.
The Fund may trade securities actively, which could increase
in transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 90.
</TABLE>
11
<PAGE> 15
AMSOUTH CAPITAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES GROWTH FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<S> <C>
90 -5.64
91 24.66
92 6.49
93 3.48
94 -0.42
95 30.42
96 22.25
97 30.79
98 32.05
99 21.85
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best quarter: 22.63% 12/31/99
Worst quarter: -11.65% 9/30/90
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ended
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Capital
Growth Fund by showing how the Fund
has performed. The bar chart shows
how the performance of the Fund's
Class A shares has varied from year
to year. The table below compares
the performance of Class A and
Trust shares over time to that of
the S&P 500(R) Index, a widely
recognized, unmanaged index of
common stocks. Both the bar chart
and the table assume the
reinvestment of dividends and
distributions. Class B shares had
not been offered for a full
calendar year. Of course, past
performance does not indicate how
the Fund will perform in the
future.
<TABLE>
<CAPTION>
INCEPTION 1 5 10 SINCE
DATE YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 12/31/80* 16.36% 26.24% 15.25% 13.47%
CLASS B SHARES
(with applicable Contingent Deferred Sales
Charge) 12/31/80* 16.11% 26.66% 15.52% 13.61%
TRUST SHARES 12/31/80* 22.09% 27.29% 15.74% 13.73%
S&P 500(R)INDEX 12/31/80 21.03% 28.54% 18.19% 17.14%
</TABLE>
* The Capital Growth Fund commenced operations on 4/1/96 through a transfer of
assets from collective trust fund accounts managed by the Adviser, using
materially equivalent investment objectives, policies and methodologies as the
Fund. The quoted performance of the Fund includes the performance of these
trust accounts for periods prior to the Fund's commencement of operations, as
adjusted to reflect the expenses associated with the Fund. The trust accounts
were not registered with the SEC and were not subject to the investment
restrictions imposed by law on registered mutual funds. If these trust
accounts had been registered, their returns may have been lower.
12
<PAGE> 16
AMSOUTH CAPITAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES GROWTH FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES CLASS A CLASS B TRUST
PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee None 0.75% None
Other Expenses(5) 0.61% 0.61% 0.51%(6)
TOTAL FUND OPERATING EXPENSES(6) 1.41% 2.16% 1.31%
Fee Waiver and/or Expense Reimbursement (0.05%) (0.20%) (0.20%)
NET EXPENSES(7) 1.36% 1.96% 1.11%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A, 1.36%; Class B, 1.96%; and Trust, 1.11%
until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $587 $876 $1,186 $2,065
CLASS B SHARES
Assuming Redemption $719 $976 $1,359 $2,213
Assuming No Redemption $219 $676 $1,159 $2,213
TRUST SHARES $133 $415 $ 718 $1,579
</TABLE>
As an investor in the Capital
Growth Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
13
<PAGE> 17
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH LARGE
RISK/RETURN AND EXPENSES CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 portfolio manager believes have the potential to
provide capital appreciation and growth of income.
In choosing stocks for the Fund, the portfolio manager'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 portfolio manager also
looks for companies that pay above-average dividends. The
portfolio manager seeks to diversify the Fund's portfolio
within the various industries typically comprising, what the
portfolio manager 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. For a more complete description of the various
securities in which the Fund may invest, please see the
Additional Investment Strategies and Risks on page 92 or
consult the SAI.
PRINCIPAL INVESTMENT RISKS MARKET RISK: 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.
INVESTMENT STYLE RISK: 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.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
14
<PAGE> 18
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH LARGE CAP FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<S> <C>
93 5.6
94 1.78
95 34.99
96 17.63
97 35.93
98 37.87
99 18.85
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 24.83% 12/31/98
Worst
quarter: -5.95% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ended
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Large Cap
Fund by showing how the Fund has
performed. The bar chart shows how
the performance of the Fund's Class
A shares has varied from year to
year. The table below compares the
performance of Class A shares over
time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Both the bar chart and the table
assume the reinvestment of
dividends and distributions. Class
B shares and Class I shares had not
been offered for a full calendar
year. Of course, past performance
does not indicate how the Fund will
perform in the future.
<TABLE>
<CAPTION>
INCEPTION 1 5 10 SINCE
DATE YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 8/3/92 13.49% 27.57% N/A 19.86%
CLASS B SHARES
(with applicable Contingent Deferred Sales
Charge) 8/3/92 12.78% 28.35% N/A 20.46%
TRUST SHARES 8/3/92 18.84% 28.73% N/A 20.60%
S&P 500(R)INDEX 7/31/92 21.03% 28.54% N/A 20.84%
</TABLE>
15
<PAGE> 19
AMSOUTH LARGE
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES CAP
FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES CLASS A CLASS B TRUST
PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses(5) 0.57% 0.57% 0.47%(6)
TOTAL FUND OPERATING EXPENSES 1.37% 2.12% 1.27%
Fee Waiver and/or Expense Reimbursement n/a (0.10%) (0.10%)
NET EXPENSES(7) 1.37% 2.02% 1.17%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) Total expenses after fee waivers and
expense reimbursements for each class through
April 30, 2000 will be as follows: Class A,
1.04%; and Trust Class, 1.07%. AmSouth Bank
has contractually agreed to waive fees and/or
reimburse expenses to limit total annual fund
operating expenses to: Class A, 1.41%; Class
B, 2.01%; and Trust, 1.16% until October 1,
2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $583 $864 $1,166 $2,022
CLASS B SHARES
Assuming Redemption $715 $964 $1,339 $2,171
Assuming No Redemption $215 $664 $1,139 $2,171
TRUST SHARES $129 $403 $ 697 $1,534
</TABLE>
As an investor in the Large Cap
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
16
<PAGE> 20
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH MID CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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.
For a more complete description of the various securities in
which the Fund may invest please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS MARKET RISK: 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.
INVESTMENT STYLE RISK: 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.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
</TABLE>
17
<PAGE> 21
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH MID CAP FUND
This section would normally include a bar chart and a table showing how the
Mid Cap Fund has performed and how its performance has varied from year to
year. Because the Fund has not been in operation for full calendar year, the
bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales Charge
(Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 1.00% 1.00% 1.00%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses(5) 1.34% 1.34% 1.24%(6)
Total Fund Operating Expenses(5) 2.34% 3.09% 2.24%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of ISG Shares
acquired in the combination), 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 are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
AmSouth Bank has contractually agreed to waive
fees and/or reimburse expenses to limit total
annual fund operating expenses to: Class A,
3.00%; Class B, 3.60%; Trust, 2.75% until
October 1, 2001.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $676 $1,148
CLASS B SHARES
Assuming Redemption $812 $1,254
Assuming No Redemption $312 $ 954
TRUST SHARES $227 $ 700
</TABLE>
As an investor in the Mid Cap
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
18
<PAGE> 22
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SMALL CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks capital appreciation by investing primarily
in a diversified portfolio of securities consisting of
common stocks and securities convertible into common stocks
such as convertible bonds and convertible preferred stocks.
Any current income generated from these securities is
incidental.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in common
stocks of companies with market capitalizations at the time
of purchase in the range of companies in the Russell 2000(R)
Growth Index (currently between $50 million and $2 billion).
In managing the Fund's portfolio, the manager seeks smaller
companies with above-average growth potential. Factors the
portfolio manager typically considers in selecting
individual securities include positive changes in earnings
estimates for future growth, higher than market average
profitability, a strategic position in a specialized market,
earnings growth consistently above market, and fundamental
value.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
SMALL COMPANY RISK: Investing in smaller, lessor-known
companies involves greater risk than investing in those that
are more established. A small company's financial well-being
may, for example, depend heavily on just a few products or
services. In addition, investors may have limited
flexibility to buy or sell small company stocks, which tend
to trade less frequently than those of larger firms.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- small company growth
stocks -- will underperform other kinds of investments or
market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
19
<PAGE> 23
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SMALL CAP FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<S> <C>
1999 16.24
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 27.47% 12/31/99
Worst
quarter: 19.70% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ended
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Small Cap
Fund by showing how the Fund has
performed. The bar chart shows how
the performance of the Fund's Class
A shares has varied from year to
year. The table below compares the
performance of Class A shares over
time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Both the bar chart and the table
assume the reinvestment of
dividends and distributions. Class
B shares and Trust shares had not
been offered for a full calendar
year. Of course, past performance
does not indicate how the Fund will
perform in the future.
<TABLE>
<CAPTION>
SINCE
1 5 10 INCEPTION
YEAR YEARS YEARS 3/2/98
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 10.78% N/A N/A 2.34%
CLASS B SHARES
(with applicable Contingent Deferred Sales
Charge) 9.99% N/A N/A 1.84%
TRUST SHARES 16.24% N/A N/A 5.09%
S&P 500(R)INDEX 21.03% N/A N/A 21.81%
</TABLE>
20
<PAGE> 24
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SMALL CAP FUND
This section would normally include a bar chart and a table showing how the
Small Cap Fund has performed and how its performance has varied from year to
year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases 4.50%(2) None None
Maximum Deferred Sales Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 1.20% 1.20% 1.20%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses(5) 0.55% 0.55% 0.45%(6)
TOTAL FUND OPERATING EXPENSES 1.75% 2.50% 1.65%
Fee Waiver and/or Expense Reimbursement N/A (0.15%) (0.15%)
NET EXPENSES(7) 1.75% 2.35% 1.50%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
B Shares, 2.35%; Trust Shares, 1.50% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $620 $ 976 $1,356 $2,420
CLASS B SHARES
Assuming redemption $753 $1,079 $1,531 $2,565
Assuming no redemption $253 $ 779 $1,331 $2,565
TRUST SHARES $168 $ 520 $ 897 $1,955
</TABLE>
As an investor in the Small Cap
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
21
<PAGE> 25
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH EQUITY INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks above average income and capital appreciation
by investing primarily in a diversified portfolio of common
stocks, preferred stocks, and securities that are
convertible into common stocks, such as convertible bonds
and convertible preferred stock.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
income-producing equity securities such as common stocks,
ADRs, and securities convertible into common stocks,
including convertible bonds and convertible preferred
stocks.
In managing the Fund's portfolio, the manager seeks equity
securities believed to represent investment value. In
choosing individual securities, the portfolio manager
emphasizes those common stocks in each sector that have good
value, attractive yield, and dividend growth potential. The
portfolio manager will also consider higher valued companies
that show the potential for growth. Factors that the
portfolio manager considers in selecting equity securities
include industry and company fundamentals, historical price
relationships, and/or underlying asset value. The Fund also
utilizes convertible securities because these securities
typically offer higher yields and good potential for capital
appreciation as well as some downside protection.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that this Fund's
blended investment style will underperform other Funds or
market averages that focus exclusively on either growth or
value.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
22
<PAGE> 26
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH EQUITY INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR TRUST SHARES(1)
<TABLE>
<S> <C>
98 12.42
99 25.15
</TABLE>
Best
quarter: 19.38% 12/31/99
Worst
quarter: -12.57% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Equity Income Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Trust Shares for its
first two full calendar years of
operations. The table below
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (3/20/97)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 19.14% 18.45%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 18.84% 18.85%
TRUST SHARES 25.15% 20.70%
S&P 500(R)INDEX 21.03% 29.16%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
23
<PAGE> 27
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH EQUITY INCOME FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses(5) 0.58% 0.58% 0.48%(6)
TOTAL FUND OPERATING EXPENSES 1.38% 2.13% 1.28%
Fee Waiver and/or Expense
Reimbursement N/A (0.07%) (0.07%)
NET EXPENSES(7) 1.38% 2.06% 1.21%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
B Shares, 2.06%; Trust Shares, 1.21% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $584 $867 $1,171 $2,033
CLASS B SHARES
Assuming redemption $716 $967 $1,344 $2,182
Assuming no redemption $216 $667 $1,114 $2,182
TRUST SHARES $130 $406 $ 702 $1,545
</TABLE>
As an investor in the Equity
Income Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
24
<PAGE> 28
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH BALANCED FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund seeks to obtain long-term capital growth and
produce a reasonable amount of current income through a
moderately aggressive investment strategy.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in a broadly
diversified portfolio of equity and debt securities
consisting primarily of common stocks and bonds.
The Fund normally invests between 45-75% of its assets in
equity securities and at least 25% of its assets in
fixed-income securities. The portion of the Fund's assets
invested in equity and debt securities will vary depending
upon economic conditions, the general level of stock prices,
interest rates and other factors, including the risks
associated with each investment. The Fund's equity
investments consist primarily of common stocks of companies
that the portfolio manager believes are undervalued and have
a favorable outlook. The Fund's fixed-income investments
consist primarily of "high-grade" bonds, notes and
debentures. The average dollar-weighted maturity of the
fixed-income portion of the Fund's portfolio will range from
one to thirty years.
In managing the equity portion of the Fund, the portfolio
manager uses a variety of economic projections, quantitative
techniques, and earnings projections in formulating
individual stock purchase and sale decisions. The portfolio
manager selects investments that he believes have basic
investment value which will eventually be recognized by
other investors.
In managing the fixed income portion of the Fund's
portfolio, the portfolio manager uses a "top down"
investment management approach focusing on a security's
maturity. The manager sets, and continually adjusts, a
target for the interest rate sensitivity of the Fund based
upon expectations about interest rates and other economic
factors. The manager then selects individual securities
whose maturities fit this target and which are deemed to be
the best relative values.
The Fund may also invest in certain other equity and debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 92 or consult the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which the equity portion of this Fund
focuses -- value stocks -- will underperform other kinds of
investments or market averages.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Generally, an increase in the average
maturity of the fixed income portion of the Fund will make
it more sensitive to interest rate risk.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
25
<PAGE> 29
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH BALANCED FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR TRUST SHARES(1)
<TABLE>
<S> <C>
92 8.72
93 14.37
94 0.59
95 23.51
96 9.72
97 20.95
98 13.42
99 1.51
</TABLE>
Best
quarter: 9.21% 6/30/97
Worst
quarter: -5.19% 9/30/99
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Balanced Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over
eight years to demonstrate that the
Fund's value varied at different
times. The table below compares the
Fund's performance over time to
that of the S&P 500(R) Index, a
widely recognized, unmanaged index
of common stocks, and the Lehman
Brothers Government/Corporate Bond
Index, an unmanaged index
representative of the total return
of government and corporate bonds.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class A and Class B
Shares will differ from the Trust
Share returns shown in the bar
chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) -3.23% 12.38% 11.31%
CLASS B SHARES(2)
(with applicable Contingent
Deferred Sales Charge) -3.71% 12.78% 11.70%
TRUST SHARES 1.51% 13.54% 12.02%
S&P 500(R) INDEX 21.03% 28.54% 20.93%
LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX -2.15% 7.61% 6.93%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
2, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
26
<PAGE> 30
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH BALANCED FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service (12b-1)
Fee 0.00% 1.00% 0.00%
Other Expenses(5) 0.57% 0.32% 0.47%(6)
Total Fund Operating Expenses(5) 1.37% 2.12% 1.27%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses are being limited
to 0.56% for Class A Shares and 0.31% for
Class B Shares and 0.46% for Trust Shares.
Total expenses after fee waivers and expense
reimbursements for each class are: Class A
Shares, 1.36%; Class B Shares, 2.11%; and
Trust Shares, 1.26%. Any fee waiver or expense
reimbursement arrangement is voluntary and may
be discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $583 $864 $1,166 $2,022
CLASS B SHARES
Assuming redemption $715 $964 $1,339 $2,261
Assuming no redemption $215 $664 $1,139 $2,261
TRUST SHARES $129 $403 $ 697 $1,534
</TABLE>
As an investor in the Balanced
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
27
<PAGE> 31
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SELECT EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital by investing
primarily in common stocks and securities convertible into
common stocks such as convertible bonds and convertible
preferred stocks. The portfolio manager does not currently
intend to purchase convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in common
stocks of companies with market capitalizations greater than
$2 billion at the time of purchase and that possess a
dominant market share and have a barrier, such as a patent
or well-known brand name, that shields its market share and
profits from competitors.
In managing the Fund's portfolio, the managers continuously
monitor a universe of companies possessing "market power" to
look for opportunities to purchase these stocks at
reasonable prices. "Market power" is a combination of
dominant market share and a barrier that protects that
market share. In selecting individual securities, the
portfolio managers look for companies that appear
undervalued. The managers then conduct a fundamental
analysis of the stock, the industry and the industry
structure. The portfolio managers will then purchase those
companies whose market power, in the managers' opinion, is
intact. As a result, the portfolio managers may focus on a
relatively limited number of stocks (i.e., generally 25 or
less). The Fund is non-diversified.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses - undervalued growth
stocks - will underperform other kinds of investments or
market averages.
NON-DIVERSIFIED RISK: The Fund may invest in a small number
of companies which may increase the volatility of the Fund.
If the companies in which the Fund invests perform poorly,
the Fund could suffer greater losses than if it had been
invested in a greater number of companies.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. However, the
portfolio managers expect that the Fund's annual portfolio
turnover rate will average less than 50% each year. If the
Fund invests in securities with additional risks, its share
price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
28
<PAGE> 32
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SELECT EQUITY FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
99 -9.86
</TABLE>
Best
quarter: 9.02% 6/30/99
Worst
quarter: -13.12% 9/30/99
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Select Equity Fund has
performed and how its performance
has varied from year to year. The
bar chart shows the performance of
the Fund's Trust Shares for its
first full calendar year of
operations. The table below it
compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (9/1/98)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) -14.19% 2.64%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) -14.85% 2.53%
TRUST SHARES -9.86% 6.41%
S&P 500(R) INDEX 21.03% 25.61%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
29
<PAGE> 33
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH SELECT EQUITY FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales Charge
(Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.80% 0.80% 0.80%
Distribution and/or Service
(12b-1) Fee 0.00% 1.00% 0.00%
Other Expenses(5) 1.05% 0.80% 0.95%(6)
Total Fund Operating Expenses(5) 1.85% 2.60% 1.75%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%. 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses are being limited
to 0.35% for Class A Shares and Class B Shares
are being limited to 0.10%, and for Trust
Shares are 0.21%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 1.15%; Class B
Shares, 2.15%; and Trust Shares, 1.01%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $628 $1,000 $1,396 $2,501
CLASS B SHARES
Assuming redemption $763 $1,108 $1,580 $2,747
Assuming no redemption $263 $ 808 $1,380 $2,747
TRUST SHARES $178 $ 551 $ 949 $2,062
</TABLE>
As an investor in the Select
Equity Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load) if
you sell your shares before a
certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
30
<PAGE> 34
AMSOUTH ENHANCED
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN
AND EXPENSES MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce long-term growth of capital by
investing primarily in a diversified portfolio of common
stock and securities convertible into common stocks such as
convertible bonds and convertible preferred stock. The
portfolio manager does not currently intend to purchase
convertible securities.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in a broadly
diversified portfolio of S&P 500 stocks, overweighting
relative to their S&P weights those that the portfolio
manager believes to be undervalued compared to others in the
index. The Fund seeks to maintain risk characteristics
similar to that of the S&P 500 Index and, normally, invests
at least 80% of its assets in common stocks drawn from the
Index.
The portfolio manager's stock selection process utilizes
computer-aided quantitative analysis. The portfolio
manager's computer models use many types of data, but
emphasize technical data such as price and volume
information. Applying these models to stocks within the S&P
500, the portfolio manager hopes to generate more capital
growth than that of the S&P 500. The portfolio manager's
emphasis on technical analyses can result in significant
shifts in portfolio holdings at different times. However,
stringent risk controls at the style, industry and
individual stock levels help ensure the Fund maintains risk
characteristics similar to those of the S&P 500.
The Fund may also invest in certain other equity securities
in addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
MARKET RISK: The possibility that the Fund's stock holdings
will decline in price because of a broad stock market
decline. Markets generally move in cycles, with periods of
rising prices followed by periods of falling prices. The
value of your investment will tend to increase or decrease
in response to these movements.
INVESTMENT STYLE RISK: The possibility that the market
segment on which this Fund focuses -- stocks in the S&P 500
Index which are primarily large cap companies -- will
underperform other kinds of investments or market averages.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower. For more information about these risks, please see
the Additional Investment Strategies and Risks on page 92.
</TABLE>
31
<PAGE> 35
AMSOUTH ENHANCED
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
99 39.47
</TABLE>
Best quarter: 14.44% 12/31/99
Worst quarter: -5.70% 9/30/99
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Enhanced Market Fund
has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Trust
Shares for its first full calendar
year of operations. The table below
it compares the Fund's performance
over time to that of the S&P 500(R)
Index, a widely recognized,
unmanaged index of common stocks.
Of course, past performance does
not indicate how the Fund will
perform in the future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (9/1/98)
<S> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 15.62% 34.50%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 15.17% 35.47%
TRUST SHARES 21.35% 39.47%
S&P 500(R) INDEX 21.03% 26.04%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
32
<PAGE> 36
AMSOUTH ENHANCED
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.45% 0.45% 0.45%
Distribution and/or Service (12b-1)
Fee 0.00% 1.00% 0.00%
Other Expenses(5) 1.09% 0.85% 1.19%(6)
Total Fund Operating Expenses(5) 1.54% 2.30% 1.64%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other Expenses are restated to reflect
current fees. Other expenses are being limited
to 0.45% for Class A Shares and Class B Shares
are being limited to 0.20%, and for Trust
Shares are 0.46%. Total expenses after fee
waivers and expense reimbursements for each
class are: Class A Shares, 0.90%; Class B
Shares, 1.65%; and Trust Shares, 0.91%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $600 $ 915 $1,252 $2,202
CLASS B SHARES
Assuming redemption $733 $1,018 $1,430 $2,445
Assuming no redemption $233 $ 718 $1,230 $2,445
TRUST SHARES $167 $ 517 $ 892 $1,944
</TABLE>
As an investor in the Enhanced
Market Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load) if
you sell your shares before a
certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
33
<PAGE> 37
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH INTERNATIONAL
RISK/RETURN AND EXPENSES EQUITY FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 portfolio manager 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.
For a more complete description of the various securities in
which a Fund may invest, please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS MARKET RISK: 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.
INVESTMENT STYLE RISK: 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.
NON-DIVERSIFIED RISK: 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.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
</TABLE>
34
<PAGE> 38
AMSOUTH INTERNATIONAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES EQUITY FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<S> <C>
98 9.47
99 26.77
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 18.79% 12/31/98
Worst
quarter: -19.33% 9/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ended
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the
International Fund by showing how
the Fund has performed. The bar
chart shows the performance of the
Fund's Class A shares for its first
two full calendar years of
operation. The table below compares
the performance of Class A shares
over time to that of Morgan Stanley
Capital International Europe,
Australia, Far East ("EAFE") Index,
a widely recognized, unmanaged
index of foreign securities
representing major non-U.S. stock
markets. Both the bar chart and the
table assume the reinvestment of
dividends and distributions. Class
B and Trust shares had not been
offered for a full calendar year.
Of course, past performance does
not indicate how the Fund will
perform in the future.
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5 PAST 10
DATE YEAR YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.50% sales charge) 8/15/97 20.73% N/A N/A
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 8/15/97 22.98% N/A N/A
TRUST SHARES 8/15/97 26.72% N/A N/A
EAFE INDEX 7/31/97 20.33% N/A N/A
<CAPTION>
SINCE
INCEPTION
<S> <C>
CLASS A SHARES
(with 4.50% sales charge) 11.19%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 11.99%
TRUST SHARES 13.35%
EAFE INDEX 5.62%
</TABLE>
35
<PAGE> 39
AMSOUTH INTERNATIONAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES EQUITY FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% None
Other Expense(5) 1.21% 1.21% 1.11%(6)
TOTAL FUND OPERATING EXPENSES 2.46% 3.21% 2.36%
Fee Waiver and/or Expense Reimbursement (.15%) (.30%) (.30%)
NET EXPENSES(7) 2.31% 2.91% 2.06%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B Shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) Total expenses after fee waivers and
expense reimbursements for each class through
April 30, 2000 will be as follows: Class A,
1.77%; and Trust, 1.77%. AmSouth Bank has
contractually agreed to waive fees and/or
reimburse expenses to limit total annual fund
operating expenses to: Class A, 2.31%; Class
B, 2.91%; and Trust, 2.06% until October 1,
2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
3 5 10
1 YEAR YEARS YEARS YEARS
CLASS A SHARES $688 $1,182 $1,702 $3,120
CLASS B SHARES
Assuming Redemption $824 $1,289 $1,878 $3,260
Assuming No Redemption $324 $ 989 $1,678 $3,260
TRUST SHARES $239 $ 736 $1,260 $2,696
</TABLE>
As an investor in the
International Equity Fund, you
will pay the following fees
and expenses when you buy and
hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
36
<PAGE> 40
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES OVERVIEW
STRATEGIC PORTFOLIOS
<TABLE>
<S> <C>
These Funds are "funds of funds" which will invest
substantially all of their assets in Trust Shares of other
Funds of the AmSouth 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
</TABLE>
37
<PAGE> 41
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES AGGRESSIVE GROWTH PORTFOLIO
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 six
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>
<TABLE>
<S> <C>
UNDERLYING FUND STRATEGY RANGE
Large Cap Fund 0%-70%
Capital Growth Fund 0%-45%
Small Cap Fund 0%-30%
International Equity Fund 0%-20%
Mid Cap Fund 0%-30%
Value Fund 0%-70%
Prime Money Market Fund 0%-30%
</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>
38
<PAGE> 42
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AGGRESSIVE GROWTH PORTFOLIO
This section would normally include a bar chart and a table showing how the
Aggressive Growth Portfolio has performed and how its performance has varied
from year to year. Because the Fund has not been in operation for a full
calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.20% 0.20% 0.20%
Distribution and/or Service (12b-1)
Fee 0.00% 0.75% None
Other Expenses 0.64% 0.64% 0.59%
TOTAL FUND OPERATING EXPENSES(5) 0.84% 1.59% 0.79%
Fee Waiver and/or Expense
Reimbursement (0.15%) (0.15%) (0.05%)
NET EXPENSES(6) 0.69% 1.45% 0.74%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%,
1%, to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. 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.
(6) The above amounts reflect a reduction in
shareholder servicing fees required by
National Association of Securities Dealers
(NASD) rules. As reduced, the shareholder
servicing fees are .10% for each class. Absent
such reduction, the shareholder servicing fees
would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
AMSOUTH STRATEGIC PORTFOLIOS: AGGRESSIVE
GROWTH PORTFOLIO
<TABLE>
<S> <C>
CLASS A SHARES 2.23%
CLASS B SHARES 2.98%
TRUST SHARES 2.18%
</TABLE>
Actual expenses will differ depending on the
actual allocation of investments in the
Underlying Funds in effect from time to time.
As an investor in the Strategic
Portfolios: Aggressive Growth
Portfolio, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
In addition to the expenses shown
above, if you buy and hold
shares of the AmSouth
Strategic Portfolios:
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:
39
<PAGE> 43
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES AGGRESSIVE GROWTH PORTFOLIO
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $666 $1,116 $1,591 $2,899
CLASS B SHARES
Assuming Redemption $801 $1,221 $1,767 $3,041
Assuming No Redemption $301 $ 921 $1,567 $3,041
TRUST SHARES $221 $ 682 $1,169 $2,513
</TABLE>
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
40
<PAGE> 44
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES GROWTH PORTFOLIO
RISK/RETURN SUMMARY
<TABLE>
<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 seven
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>
<S> <C>
UNDERLYING FUND STRATEGY RANGE
Large Cap Fund 0%-65%
Capital Growth Fund 0%-25%
Equity Income Fund 0%-25%
Small Cap Fund 0%-25%
International Equity Fund 0%-15%
Value Fund 0%-65%
Prime Money Market Fund 0%-20%
Mid Cap Fund 0%-25%
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> 45
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES GROWTH PORTFOLIO
This section would normally include a bar chart and a table showing how the
Growth Portfolio has performed and how its performance has varied from year
to year. Because the Fund has not been in operation for a full calendar year,
the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.20% 0.20% 0.20%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% None
Other Expenses 0.64% 1.59% 0.59%
TOTAL FUND OPERATING EXPENSES(5) 0.84% 1.59% 0.79%
Fee Waiver and/or Expense Reimbursement (.15%) (.15%) (.05%)
NET EXPENSES(6) 0.69% 1.45% 0.74%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. 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.
(6) The above amounts reflect a reduction in
shareholder servicing fees required by NASD
rules. As reduced, the shareholder servicing
fees are .10% for each class. Absent such
reduction, the shareholder servicing fees
would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
AMSOUTH STRATEGIC PORTFOLIOS: GROWTH
PORTFOLIO
<TABLE>
<S> <C>
CLASS A SHARES 2.18%
CLASS B SHARES 2.93%
TRUST SHARES 2.13%
</TABLE>
Actual expenses will differ depending on the
actual allocation of investments in the
Underlying Funds in effect from time to time.
As an investor in the Strategic
Portfolios: Growth Portfolio,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
42
In addition to the expenses shown
above, if you buy and hold shares
of the AmSouth Strategic
Portfolios: 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:
<PAGE> 46
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES GROWTH PORTFOLIO
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $661 $1,101 $1,567 $2,850
CLASS B SHARES
Assuming Redemption $796 $1,207 $1,743 $3,081
Assuming No Redemption $296 $ 907 $1,543 $3,081
TRUST SHARES $216 $ 667 $1,144 $2,462
</TABLE>
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
43
<PAGE> 47
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES GROWTH AND INCOME PORTFOLIO
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 seven
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:
</TABLE>
<TABLE>
<S> <C>
UNDERLYING FUND STRATEGY RANGE
International Equity Fund 0%-15%
Small Cap Fund 0%-20%
Mid Cap Fund 0%-20%
Value Fund 0%-60%
Government Income Fund 0%-60%
Large Cap Fund 0%-60%
Capital Growth Fund 0%-25%
Equity Income Fund 0%-25%
Limited Term Bond Fund 0%-20%
Prime Money Market Fund 0%-20%
</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.
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.
</TABLE>
44
<PAGE> 48
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES GROWTH AND INCOME PORTFOLIO
This section would normally include a bar chart and a table showing how the
Growth and Income Portfolio has performed and how its performance has varied
from year to year. Because the Fund has not been in operation for a full
calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES CLASS A CLASS B TRUST
PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.20% 0.20% 0.20%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses 0.64% 0.64% 0.59%
TOTAL FUND OPERATING EXPENSES(5) 0.84% 1.59% 0.79%
Fee Waiver and/or Expense Reimbursement (0.15%) (0.15%) (0.05%)
NET EXPENSES(6) 0.69% 1.45% 0.74%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. 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.
(6) The above amounts reflect a reduction in
shareholder servicing fees required by NASD
rules. As reduced, the shareholder servicing
fees are .10% for each class. Absent such
reduction, the shareholder servicing fees
would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
AMSOUTH STRATEGIC PORTFOLIOS: GROWTH AND
INCOME PORTFOLIO
<TABLE>
<S> <C>
CLASS A SHARES 2.18%
CLASS B SHARES 2.93%
TRUST SHARES 2.13%
</TABLE>
Actual expenses will differ depending on the
actual allocation of investments in the
Underlying Fund in effect from time to time.
As an investor in the Strategic
Portfolios: Growth and Income
Portfolio, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
45
In addition to the expenses shown
above, if you buy and hold shares
of the AmSouth Strategic
Portfolios: Growth and 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:
<PAGE> 49
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES GROWTH AND INCOME PORTFOLIO
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $661 $1,101 $1,567 $2,850
CLASS B SHARES
Assuming Redemption $796 $1,207 $1,743 $2,993
Assuming No Redemption $296 $ 907 $1,543 $2,993
TRUST SHARES $216 $ 667 $1,144 $2,462
</TABLE>
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
46
<PAGE> 50
DESCRIPTION OF THE FUNDS -- AMSOUTH STRATEGIC PORTFOLIOS:
OBJECTIVES, RISK/RETURN AND EXPENSES MODERATE GROWTH AND INCOME
PORTFOLIO
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 four
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:
</TABLE>
<TABLE>
<S> <C>
UNDERLYING FUND STRATEGY RANGE
Government Income Fund 0%-70%
Limited Term Bond Fund 0%-45%
Large Cap Fund 0%-50%
Capital Growth Fund 0%-15%
Value Fund 0%-50%
Equity Income Fund 0%-15%
Prime Money Market Fund 0%-20%
</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 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.
</TABLE>
47
<PAGE> 51
DESCRIPTION OF THE FUNDS -- AMSOUTH STRATEGIC PORTFOLIOS:
OBJECTIVES, RISK/RETURN AND EXPENSES MODERATE GROWTH AND INCOME
PORTFOLIO
This section would normally include a bar chart and a table showing how the
Moderate Growth and Income Portfolio has performed and how its performance
has varied from year to year. Because the Fund has not been in operation for
a full calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.50%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.20% 0.20% 0.20%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses 0.64% 0.64% 0.59%
TOTAL FUND OPERATING EXPENSES(5) 0.84% 1.59% 0.79%
Fee Waiver and/or Expense
Reimbursement (0.15%) (0.15%) (0.05%)
NET EXPENSES(6) 0.69% 1.45% 0.74%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B shares
automatically convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. 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.
(6) The above amounts reflect a reduction in
shareholder servicing fees required by NASD
rules. As reduced, the shareholder servicing
fees are .10% for each class. Absent such
reduction, the shareholder servicing fees
would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
AMSOUTH STRATEGIC PORTFOLIOS: MODERATE GROWTH
AND INCOME PORTFOLIO
<TABLE>
<S> <C>
CLASS A SHARES 2.03%
CLASS B SHARES 2.78%
TRUST SHARES 1.98%
</TABLE>
Actual expenses will differ depending on the
actual allocation of investments in the
Underlying Funds in effect from time to time.
As an investor in the Strategic
Portfolios: Moderate Growth
and Income Portfolio, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
48
In addition to the expenses shown
above, if you buy and hold shares
of the AmSouth Strategic
Portfolios: Moderate Growth and
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:
<PAGE> 52
DESCRIPTION OF THE FUNDS -- AMSOUTH STRATEGIC PORTFOLIOS:
OBJECTIVES, RISK/RETURN AND EXPENSES MODERATE GROWTH AND INCOME
PORTFOLIO
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $647 $1,058 $1,494 $2,702
CLASS B SHARES
Assuming Redemption $781 $1,162 $1,669 $2,935
Assuming No Redemption $281 $ 862 $1,469 $2,935
TRUST SHARES $201 $ 621 $1,068 $2,306
</TABLE>
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
49
<PAGE> 53
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES CURRENT INCOME PORTFOLIO
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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:
</TABLE>
<TABLE>
<S> <C>
UNDERLYING FUND STRATEGY RANGE
Limited Term Bond Fund 40%-60%
Bond Fund 35%-55%
Prime Money Market Fund 0%-30%
</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 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.
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.
</TABLE>
50
<PAGE> 54
AMSOUTH STRATEGIC PORTFOLIOS:
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES CURRENT INCOME PORTFOLIO
This section would normally include a bar chart and a table showing how the
Current Income Portfolio has performed and how its performance has varied
from year to year. Because the Fund has not been in operation for a full
calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES CLASS A CLASS B TRUST
PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.20% 0.20% 0.20%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses 0.79% 0.79% 0.64%
TOTAL FUND OPERATING EXPENSES(5) 0.99% 1.74% 0.84%
Fee Waiver and/or Expense Reimbursement (0.15%) (0.15%) (0.05%)
NET EXPENSES(6) 0.84% 1.59% 0.79%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth. Approximately
eight years after purchase (seven years in the
case of Shares acquired in the ISG
combination), Class B shares automatically
convert to Class A shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. 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.
(6) The above amounts reflect a reduction in
shareholder servicing fees required by NASD
rules. As reduced, the shareholder servicing
fees are .10% for each class. Absent such
reduction, the shareholder servicing fees
would be: Class A, .25%; Class B, .25%; Trust
Class, .15%.
AMSOUTH STRATEGIC PORTFOLIOS: CURRENT
INCOME PORTFOLIO
<TABLE>
<S> <C>
CLASS A SHARES 1.91%
CLASS B SHARES 2.66%
TRUST SHARES 1.91%
</TABLE>
Actual expenses will differ depending on the
actual allocation of investments in the
Underlying Fund in effect from time to time.
As an investor in the Strategic
Portfolios: Current Income
Portfolio, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
51
In addition to the expenses shown
above, if you buy and hold shares
of the AmSouth Strategic
Portfolios: 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:
<PAGE> 55
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH STRATEGIC PORTFOLIOS:
RISK/RETURN AND EXPENSES CURRENT INCOME PORTFOLIO
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $586 $ 976 $1,390 $2,543
CLASS B SHARES
Assuming Redemption $769 $1,126 $1,610 $2,816
Assuming No Redemption $269 $ 826 $1,410 $2,816
TRUST SHARES $194 $ 600 $1,032 $2,233
</TABLE>
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
52
<PAGE> 56
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSE OVERVIEW
INCOME FUNDS
<TABLE>
<S> <C>
TAXABLE FUNDS The Bond Fund, the Government Income Fund, the Limited Term
Bond Fund, and the Limited Term U.S. Government Fund seek
current income and invest primarily in fixed income
securities, such as U.S. government securities, or
corporate, bank and commercial obligations.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to add a monthly income component to your
portfolio
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing emergency reserves
- uncomfortable with an investment that will fluctuate in
value
TAX-FREE FUNDS The Municipal Bond Fund, Florida Tax-Exempt Fund, the
Tennessee Tax-Exempt Fund and the Limited Term Tennessee
Tax-Exempt Fund seek tax-exempt income and invest primarily
in municipal securities which are exempt from Federal and,
in the case of the Florida Tax-Exempt Fund, Florida
intangible taxes and in the case of the Tennessee Funds,
Tennessee intangible taxes.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- looking to reduce Federal income or Florida or Tennessee
intangible taxes
- seeking monthly Federal tax-exempt dividends
- willing to accept the risks of price and dividend
fluctuations
These Funds may not be appropriate if you are:
- investing through a tax-exempt retirement plan
- uncomfortable with an investment that will fluctuate in
value
</TABLE>
53
<PAGE> 57
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES AMSOUTH BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests in bonds and other
fixed-income securities. These investments include primarily
U.S. corporate bonds and debentures and notes or bonds
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Fund invests in debt securities only
if they are high grade (rated at time of purchase in one of
the three highest rating categories by a nationally
recognized statistical rating organization (an "NRSRO"), or
are determined by the portfolio manager to be of comparable
quality). The Fund also invests in zero-coupon obligations
which are securities which do not provide current income but
represent ownership of future interest and principal
payments on U.S. Treasury bonds.
The Fund may purchase fixed-income securities of any
maturity and although there is no limit on the Fund's
average maturity, it is normally expected to be between five
and ten years. In managing the Fund's portfolio, the manager
uses a "top down" investment management approach focusing on
a security's maturity. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund based upon expectations about interest rates. The
manager then selects individual securities whose maturities
fit this target and which the manager believes are the best
relative values.
The Fund may also invest in certain other debt securities.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
54
<PAGE> 58
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/ RETURN AND
EXPENSES AMSOUTH BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
90 6.92
91 15.32
92 7.30
93 9.86
94 3.23
95 18.41
96 2.56
97 9.21
98 9.40
99 -2.46
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 7.13% 6/30/89
Worst
quarter: -2.39% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Bond Fund has
performed and how its performance
has varied from year to year. The
bar chart gives some indication of
risk by showing changes in the
Fund's yearly performance over ten
years to demonstrate that the
Fund's value varied at different
times. The table below compares the
Fund's performance over time to
that of the Lehman Brothers
Government/ Corporate Bond Index,
an unmanaged index representative
of the total return of government
and corporate bonds. Of course,
past performance does not indicate
how the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
1 5 10 SINCE INCEPTION
YEAR YEARS YEARS (12/31/88)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (6.47%) 6.27% 6.66% 7.20%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) (8.03%) 6.40% 6.88% 7.40%
TRUST SHARES (2.46%) 7.19% 7.13% 7.62%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX 0.16% 7.77% 7.89% (1.94%)
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Performance for the Class B Shares, which commenced operations on September
3, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the
contingent deferred sales change (CDSC). Had the CDSC and higher 12b-1 fees been
incorporated, total return and hypothetical growth figures would have been
lower.
55
<PAGE> 59
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/ RETURN AND
EXPENSES AMSOUTH BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases 4.00%(2) None None
Maximum Deferred Sales Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses(5) 0.53% 0.53% 0.43%(6)
TOTAL FUND OPERATING EXPENSES 1.18% 1.93% 1.08%
Fee Waiver and/or Expense Reimbursement N/A (0.07%) (0.07%)
NET EXPENSES(7) 1.18% 1.86% 1.01%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
B Shares, 1.86%; Trust Shares, 1.01% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $515 $760 $1,023 $1,775
CLASS B SHARES
Assuming redemption $696 $906 $1,242 $1,968
Assuming no redemption $196 $606 $1,042 $1,968
TRUST SHARES $110 $343 $ 595 $1,317
</TABLE>
As an investor in the Bond Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
56
<PAGE> 60
AMSOUTH LIMITED
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES TERM
BOND FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Limited Maturity Fund) seeks
current income consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
short-term fixed income securities with maturities of five
years or less, principally corporate bonds and securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Fund invests in debt securities only
if they are high-grade (rated at the time of purchase in one
of the three highest rating categories by an NRSRO, or are
determined by the portfolio manager to be of comparable
quality).
In managing the Fund's portfolio, the manager uses a "top
down" investment management approach focusing on a
security's maturity. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund based upon expectations about interest rates and other
economic factors. The manager then selects individual
securities whose maturities fit this target and which the
manager believes are the best relative values.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
57
<PAGE> 61
AMSOUTH LIMITED
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES TERM
BOND FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
90 8.52
91 11.94
92 6.03
93 7.16
94 -1.8
95 12.72
96 3.69
97 6.89
98 7.26
99 1.46
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 4.59% 6/30/89
Worst
quarter: -1.41% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Limited Term Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below compares the Fund's
performance over time to that of
Merrill Lynch 1-5 Year
Government/Corporate Bond Index, an
unmanaged index representative of
the total return of short-term
government and corporate bonds. Of
course, past performance does not
indicate how the Fund will perform
in the future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
5 10 SINCE INCEPTION
1 YEAR YEARS YEARS (2/1/89)
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (2.69%) 5.41% 5.84% 6.19%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) (4.21%) 5.79% 6.19% 6.51%
TRUST SHARES 1.46% 6.33% 6.50% 6.62%
MERRILL LYNCH 1-5 YEAR GOVERNMENT/
CORPORATE BOND INDEX 2.19% 6.86% 7.00% 7.38%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Performance for the Class B Shares, which commenced operations on September
2, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales change (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
58
<PAGE> 62
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH LIMITED
RISK/RETURN AND EXPENSES TERM BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases 4.00%(2) None None
Maximum Deferred Sales Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses(5) 0.54% 0.54% 0.44%(6)
TOTAL FUND OPERATING EXPENSES 1.19% 1.94% 1.09%
Fee Waiver and/or Expense Reimbursement N/A (0.11%) (0.11%)
NET EXPENSES(7) 1.19% 1.83% 0.98%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
B Shares, 1.83%; Trust Shares, 0.98% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $516 $763 $1,028 $1,785
CLASS B SHARES
Assuming redemption $697 $909 $1,247 $1,979
Assuming no redemption $197 $609 $1,047 $1,979
TRUST SHARES $111 $347 $ 601 $1,329
</TABLE>
As an investor in the Limited
Term Bond Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
59
<PAGE> 63
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH GOVERNMENT
RISK/RETURN AND EXPENSES INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks current income consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These investments are
principally mortgage-related securities, but may also
include U.S. Treasury obligations.
In managing the Fund's portfolio, the manager uses a "top
down" investment management approach focusing on a
security's maturity. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund based upon expectations about interest rates. The
manager then selects individual securities whose maturities
fit this target and which the manager believes are the best
relative values.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
PREPAYMENT RISK: If a significant number of mortgages
underlying a mortgage backed security are refinanced, the
security may be "prepaid." In this case, investors receive
their principal back and are typically forced to reinvest it
in securities that pay lower interest rates. Rapid changes
in prepayment rates can cause bond prices and yields to be
volatile.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for
longer-term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
60
<PAGE> 64
AMSOUTH GOVERNMENT
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES INCOME FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
[PERFORMANCE BAR CHART AND TABLE]
<TABLE>
<S> <C>
94 -0.39
95 14.32
96 4.05
97 9.39
98 7.26
99 0.74
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 4.53% 6/30/95
Worst
quarter: -1.43% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1, 2)
The chart and table on this page
show how the Government Income Fund
has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over six years to
demonstrate that the Fund's value
varied at different times. The
table below compares the Fund's
performance over time to that of
the Lehman Brothers Mortgage Index,
an unmanaged index generally
representative of the mortgage bond
market as a whole. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS (10/01/93)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (3.35%) 6.14% 4.82%
TRUST SHARES 0.74% 7.05% 5.54%
LEHMAN BROTHERS MORTGAGE INDEX 1.85% 7.98% 6.21%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) This Fund also offers Class B Shares. Class B Shares had not commenced
operations prior to the date of this prospectus.
61
<PAGE> 65
AMSOUTH GOVERNMENT
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES INCOME FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service (12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses(5) 0.69% 0.69% 0.59%(6)
TOTAL FUND OPERATING EXPENSES 1.34% 2.09% 1.24%
Fee Waiver and/or Expense Reimbursement (0.06%) (0.21%) (0.21%)
NET EXPENSES(7) 1.28% 1.88% 1.03%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A Shares, 1.28%; Class B Shares, 1.88%; Trust
Shares, 1.03% until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $531 $808 $1,105 $1,948
CLASS B SHARES
Assuming redemption $712 $955 $1,324 $2,149
Assuming no redemption $212 $655 $1,124 $2,149
TRUST SHARES $126 $393 $ 681 $1,500
</TABLE>
As an investor in the Government
Income Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
62
<PAGE> 66
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH LIMITED TERM
RISK/RETURN AND EXPENSES U.S. GOVERNMENT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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
portfolio manager 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.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS INCOME RISK: 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: 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.
The Fund may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
</TABLE>
63
<PAGE> 67
AMSOUTH LIMITED TERM
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES U.S.
GOVERNMENT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<S> <C>
90 8.11
91 12.7
92 5.51
93 7.04
94 -1.02
95 10.88
96 2.69
97 6.18
98 6.69
99 1.08
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 5.65% 6/30/89
Worst
quarter: -1.41% 3/31/92
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ended
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Limited
Term U.S. Government Fund by
showing how the Fund has performed.
The bar chart shows how the
performance of the Fund's Class A
shares has varied from year to
year. The table below compares the
performance of Class A shares over
time to that of the Merrill Lynch
1-5 Year Government Bond Index, a
recognized, unmanaged index of
short-term U.S. Government
securities. Both the bar chart and
the table assume the reinvestment
of dividends and distributions.
Class B and Trust shares had not
been offered for a full calendar
year. Of course, past performance
does not indicate how the Fund will
perform in the future.
<TABLE>
<CAPTION>
INCEPTION PAST PAST 5 PAST 10 SINCE
DATE YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
(with sales charge imposed) 12/31/86* -2.99% 4.60% 5.47% 5.67%
MERRILL LYNCH 1-5 YEAR GOV'T BOND INDEX -4.58% 4.79% 5.74% 5.89%
</TABLE>
(*) The Limited Term U.S. Government Fund commenced operations on 2/28/97
through a transfer of assets from collective trust fund accounts managed by the
Adviser, using materially equivalent investment objectives, policies and
methodologies as the Fund. The quoted performance of the Fund includes the
performance of these trust accounts for periods prior to the Fund's commencement
of operations, as adjusted to reflect the expenses associated with the Fund. The
trust accounts were not registered with the SEC and were not subject to the
investment restrictions imposed by law on registered mutual funds. If these
trust accounts had been registered, their returns may have been lower.
64
<PAGE> 68
DESCRIPTION OF THE FUNDS -- OBJECTIVES, AMSOUTH LIMITED TERM
RISK/RETURN AND EXPENSES U.S. GOVERNMENT FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses(5) 0.76% 0.76% 0.66%(6)
TOTAL FUND OPERATING EXPENSES 1.41% 2.16% 1.31%
Fee Waiver and/or Expense Reimbursement (0.05%) (0.20%) (0.20%)
NET EXPENSES(7) 1.36% 1.96% 1.11%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven in the case of Shares acquired in the
ISG combination), 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 are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A, 1.36%; Class B, 1.96%: and Trust, 1.11%
until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $538 $828 $1,140 $2,023
CLASS B SHARES
Assuming Redemption $719 $976 $1,359 $2,227
Assuming No Redemption $219 $676 $1,159 $2,227
TRUST SHARES $133 $415 $ 718 $1,579
</TABLE>
This section would normally
include a bar chart and a
table showing how the Limited
Term U.S. Government Fund has
performed and how its
performance has varied from
year to year. Because the Fund
has not been in operation for
a full calendar year, the bar
chart and table are not shown.
As an investor in the Limited
Term U.S. Government Fund, you
will pay the following fees
and expenses when you buy and
hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
65
<PAGE> 69
AMSOUTH MUNICIPAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, BOND FUND
RISK/RETURN AND EXPENSES
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund seeks to produce as high a level of current federal
tax-exempt income, as is consistent with the preservation of
capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in municipal
securities that provide income that is exempt from federal
income tax and not subject to the federal alternative
minimum tax for individuals. Municipal securities are debt
obligations, such as bonds and notes, issued by states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities.
Additionally, the Fund concentrates its investments in
municipal securities issued by the State of Alabama and its
political subdivisions. The Fund invests in debt securities
only if they are high-grade (rated at the time of purchase
in one of the three highest rating categories by an NRSRO,
or are determined by the portfolio manager to be of
comparable quality).
The Fund may purchase securities of any maturity. In
managing the Fund's portfolio, the manager uses a "top down"
investment management approach focusing on a security's
maturity. The manager sets, and continually adjusts, a
target for the interest rate sensitivity of the Fund based
upon expectations about interest rates and other economic
factors. The manager then selects individual securities
whose maturities fit this target, have a certain level of
credit quality, and which the manager believes are the best
relative values.
The Fund may also invest in certain other debt securities in
addition to those described above. For a more complete
description of the various securities in which the Fund may
invest, please see the Additional Investment Strategies and
Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
TAX RISK: The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
CONCENTRATION RISK: By concentrating its investments in
securities issued by Alabama and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Alabama than funds that are more geographically diversified.
Additionally, because of the relatively small number of
issuers of Alabama municipal securities, the Fund is likely
to invest in a limited number of issuers.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
66
<PAGE> 70
AMSOUTH MUNICIPAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, FUND BOND
RISK/RETURN AND EXPENSES
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
98 5.42
99 -1.57
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 3.02% 9/30/98
Worst
quarter: (2.09%) 6/30/98
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Municipal Bond Fund
has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Class A
Shares for its first two full
calendar years of operations. The
table below compares the Fund's
performance over time to that of
the Merrill Lynch 3-7 Year
Municipal Bond Index, an unmanaged
index generally representative of
municipal bonds with intermediate
maturities. Of course, past
performance does not indicate how
the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (07/01/97)
<S> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (5.56%) 3.62%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) N/A 4.17%
TRUST SHARES (1.57%) 8.21%
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND INDEX 0.66% 6.62%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Performance for the Class B Shares, which commenced operations on September
2, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales change (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
67
<PAGE> 71
AMSOUTH MUNICIPAL
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND EXPENSES BOND
FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee(5) 0.65% 0.65% 0.65%
Distribution and Service
(12b-1) Fee 0.00% 0.75% 0.00%
Other Expenses 0.53% 0.53% 0.43%(6)
Total Fund Operating Expenses(5) 1.18% 1.93% 1.08%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $515 $760 $1,023 $1,775
CLASS B SHARES
Assuming redemption $696 $906 $1,242 $1,968
Assuming no redemption $196 $606 $1,042 $1,968
TRUST SHARES $110 $343 $ 595 $1,317
</TABLE>
As an investor in the Municipal
Bond Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the table at right to compare
fees and expenses with those
of other Funds. It illustrates
the amount of fees and
expenses you would pay,
assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
68
<PAGE> 72
AMSOUTH FLORIDA
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Tax-Free Fund) seeks to
produce as high a level of current interest income exempt
from Federal income taxes and Florida intangibles taxes as
is consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in municipal
securities of the State of Florida and its political
subdivisions, that provide income exempt from Federal
personal income tax and Florida intangible personal property
tax. The Fund invests in Florida municipal securities only
if they are high grade (rated at the time of purchase in one
of the three highest rating categories by an NRSRO, or are
determined by the portfolio manager to be of comparable
quality).
Although there is no limit on the Fund's average maturity,
normally it is expected to be between five to ten years. In
managing the Fund's portfolio, the manager uses a "top down"
investment management approach focusing on interest rates
and credit quality. The manager sets, and continually
adjusts, a target for the interest rate sensitivity of the
Fund's portfolio based on expectations about interest rate
movements. The manager then selects securities consistent
with this target based on their individual characteristics.
The Fund is non-diversified and, therefore, may concentrate
its investments in a limited number of issuers. The Fund may
also invest in certain other debt securities in addition to
those described above. For a more complete description of
the various securities in which the Fund may invest, please
see the Additional Investment Strategies and Risks on page
92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates. Interest rate risk is generally high for
longer-term bonds and low for shorter-term bonds.
STATE SPECIFIC RISK: By concentrating its investments in
securities issued by Florida and its municipalities, the
Fund may be more vulnerable to unfavorable developments in
Florida than funds that are more geographically diversified.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities, such as bonds. The lower a security's rating,
the greater its credit risk.
LIQUIDITY RISK: The risk that certain securities may be
difficult or impossible to sell at the time and the price
that would normally prevail in the market.
NON-DIVERSIFIED RISK: Because the Fund is non-diversified,
it may invest a greater percentage of its assets in a
particular issuer compared with other funds. Accordingly,
the Fund's portfolio may be more sensitive to changes in the
market value of a single issuer or industry.
INCOME RISK: The possibility that the Fund's income will
decline due to a decrease in interest rates. Income risk is
generally high for shorter-term bonds and low for longer-
term bonds.
If the Fund invests in securities with additional risks, its
share price volatility accordingly could be greater and its
performance lower. For more information about these risks,
please see the Additional Investment Strategies and Risks on
page 92.
</TABLE>
69
<PAGE> 73
AMSOUTH FLORIDA
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
95 11.09
96 3.60
97 6.69
98 5.44
99 -1.24
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 4.40% 3/31/95
Worst
quarter: -1.82% 6/30/99
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Florida Tax-Exempt
Fund has performed and how its
performance has varied from year to
year. The bar chart shows the
performance of the Fund's Trust
Shares for its first five full
calendar years of operations. The
table below compares the Fund's
performance over time to that of
the Merrill Lynch 3-7 Year
Municipal Bond Index, an unmanaged
index generally representative of
the intermediate-term municipal
bonds. Of course, past performance
does not indicate how the Fund will
perform in the future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE
1 5 INCEPTION
YEAR YEARS (09/30/94)
<S> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (5.29%) 4.12% 3.71%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) -6.77% 4.49% 4.22%
TRUST SHARES -1.24% 5.03% 4.57%
MERRILL LYNCH 3-7 YEAR MUNICIPAL BOND INDEX 66.00% 5.55% 5.14%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions. For current
performance information including the Fund's 30-day yield, call 1-800-451-8382.
(2) Performance for the Class B Shares, which commenced operations on September
2, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales change (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
70
<PAGE> 74
AMSOUTH FLORIDA
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(EXPENSES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales Charge
(Load) None 5.00%(3) None
Redemption Fee(4) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service
(12b-1) Fee 0.00% 1.00% 0.00%
Other Expenses(5) 0.63% 0.37% 0.53%(6)
Total Fund Operating Expenses(5) 1.28% 2.02% 1.18%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) Lower sales charges are available
depending upon the amount invested. For
investments of $1 million or more, a
contingent deferred sales charge ("CDSC") is
applicable to redemptions within one year of
purchase. See "Distribution Arrangements."
(3) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Management fees paid by the Fund are being
limited to 0.30%. Additionally, shareholder
servicing fees for Class A Shares are being
limited to 0.10%. Other Expenses are restated
to reflect current fees. Other expenses for
Class A Shares are being limited to 0.46% and
0.21% for Class B Shares. Total expenses after
fee waivers and expense reimbursements for
each class are: Class A Shares, 0.61%; Class B
Shares, 1.51%; and Trust Shares 0.66%. Any fee
waiver or expense reimbursement arrangement is
voluntary and may be discontinued at any time.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $525 $790 $1,074 $1,883
CLASS B SHARES
Assuming redemption $705 $934 $1,288 $2,158
Assuming no redemption $205 $634 $1,088 $2,158
TRUST SHARES $120 $375 $ 649 $1,432
</TABLE>
As an investor in the Florida
Tax-Exempt Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
71
<PAGE> 75
AMSOUTH TENNESSEE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 portfolio manager. The portfolio manager
evaluates municipal obligations based on credit quality,
financial outlook and yield potential. Although the Fund
concentrates its assets in Tennessee municipal obligations,
the portfolio manager 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.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS The Fund's investments in municipal obligations will be
subject primarily to interest rate and credit risk.
INTEREST RATE 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.
CREDIT RISK: 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.
STATE-SPECIFIC RISK: 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.
NON-DIVERSIFIED RISK: 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.
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 may trade securities actively, which could increase
its transaction costs (thereby lowering its performance) and
may increase the amount of taxes that you pay. If the Fund
invests in securities with additional risks, its share price
volatility accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
</TABLE>
72
<PAGE> 76
AMSOUTH TENNESSEE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<S> <C>
90 5.67
91 9.31
92 5.46
93 10.25
94 -8.57
95 13.39
96 1.39
97 7.13
98 4.25
99 -3.07
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 5.91% 3/31/95
Worst
quarter: -8.12% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Tennessee
Tax-Exempt Fund by showing how the
Fund has performed. The bar chart
shows how the performance of the
Fund's Class A shares has varied
from year to year. The table below
compares the performance of Class A
and Trust shares over time to that
of the Lehman Brothers Municipal
10-Year Index, a recognized,
unmanaged index of investment grade
municipal obligations. Both the bar
chart and the table assume the
reinvestment of dividends and
distributions. Class B shares had
not been offered for a full
calendar year. Of course, past
performance does not indicate how
the Fund will perform in the
future.
<TABLE>
<CAPTION>
INCEPTION 1 5 10 SINCE
DATE YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) 12/31/80* 6.91% 3.63% 3.91% 6.02%
CLASS B SHARES
(with applicable contingent deferred sales
charge) (8.33%) 3.94% 4.24% 6.20%
TRUST SHARES 10/3/97 (2.83%) 4.58% 4.39% 6.28%
LEHMAN BROTHERS
MUNICIPAL 10-YEAR INDEX 9/30/97 6.11% 6.22% 8.26% 7.59%
</TABLE>
(*)The Tennessee Tax-Exempt Fund commenced operations on 3/28/94 through a
transfer of assets from collective trust fund accounts managed by the Adviser,
using materially equivalent investment objectives, policies and methodologies as
the Fund. The quoted performance of the Fund includes the performance of these
trust accounts for periods prior to the Fund's commencement of operations, as
adjusted to reflect the expenses associated with the Fund. The trust accounts
were not registered with the SEC and were not subject to the investment
restrictions imposed by law on registered mutual funds. If these trust accounts
had been registered, their returns may have been lower.
73
<PAGE> 77
AMSOUTH TENNESSEE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TAX-EXEMPT FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (FEES CLASS A CLASS B TRUST
PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (FEES CLASS A CLASS B TRUST
PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expense(5) 0.67% 0.67% 0.57%(6)
TOTAL FUND OPERATING EXPENSES 1.32% 2.07% 1.22%
Fee Waiver and/or Expense Reimbursement (0.05%) (0.20%) (0.20%)
NET EXPENSES(7) 1.27% 1.87% 1.02%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if such Class B
shares are sold within six years of purchase,
which will decline as follows: 4%, 3%, 3%, 2%,
2%, 1% to 0% in the seventh year. For all
other B Shares, the CDSC declines over a six
year period as follows: 5%, 4%, 3%, 3%, 2%, 1%
to 0%. Approximately eight years after
purchase (seven years in the case of Shares
acquired in the ISG combination), Class B
shares automatically convert to Class A
shares.
(4) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(5) Other expenses are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A, 1.27%; Class B, 1.87% and Trust, 1.02%
until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $529 $802 $1,095 $1,927
CLASS B SHARES
Assuming Redemption $710 $949 $1,314 $2,118
Assuming No Redemption $210 $649 $1,114 $2,118
TRUST SHARES $124 $387 $ 670 $1,477
</TABLE>
As an investor in the Tennessee
Tax-Exempt Fund, you will pay
the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
74
<PAGE> 78
AMSOUTH LIMITED TERM
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TENNESSEE TAX-EXEMPT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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
portfolio manager 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 portfolio manager. The portfolio manager
evaluates municipal obligations based on credit quality,
financial outlook and yield potential. Although the Fund
concentrates its assets in Tennessee municipal obligations,
the portfolio manager strives to diversify the portfolio
across sectors and issuers within Tennessee.
For a more complete description of the various securities in
which the Fund may invest, please see the Additional
Investment Strategies and Risks on page 92 or consult the
SAI.
PRINCIPAL INVESTMENT RISKS The Fund's investments in municipal obligations will be
subject primarily to interest rate and credit risk.
INTEREST RATE 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.
CREDIT RISK: 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.
STATE-SPECIFIC RISK: 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.
</TABLE>
75
<PAGE> 79
AMSOUTH LIMITED TERM
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TENNESSEE TAX-EXEMPT FUND
NON-DIVERSIFIED RISK: 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.
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 may trade securities actively, which could
increase its transaction costs (thereby lowering its
performance) and may increase the amount of taxes that
you pay. If the Fund invests in securities with
additional risks, its share price volatility
accordingly could be greater and its performance
lower.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
76
<PAGE> 80
AMSOUTH LIMITED TERM
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TENNESSEE TAX-EXEMPT FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<S> <C>
90 6.13
91 8.14
92 4.61
93 6.38
94 -2.62
95 8.40
96 2.17
97 5.42
98 3.76
99 -1
</TABLE>
The bar chart above does not reflect any
applicable sales charges which would reduce
returns.
Best
quarter: 3.53% 12/31/90
Worst
quarter: -2.94% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Limited
Term Tennessee Tax-Exempt Fund by
showing how the Fund has performed.
The bar chart shows how the
performance of the Fund's Class A
shares has varied from year to
year. The table below compares the
performance of Class A shares over
time to that of the Lehman Brothers
Municipal 1-5 Year Index, a
recognized, unmanaged index of
investment grade municipal
obligations. Both the bar chart and
the table assume the reinvestment
of dividends and distributions.
Class B and Trust shares had not
been offered for a full calendar
year. Of course, past performance
does not indicate how the Fund will
perform in the future.
<TABLE>
<CAPTION>
SINCE
1 5 10 INCEPTION
YEAR YEARS YEARS 12/31/86*
<S> <C> <C> <C> <C>
CLASS A SHARES
(with 4.00% sales charge) (4.95%) 2.86% 3.65% 3.81%
CLASS B SHARES
(with applicable Contingent Deferred Sales
Charge) (6.64%) 2.97% 3.89% 3.98%
</TABLE>
(*)The Limited Term Tennessee Tax-Exempt Fund commenced operations on 2/28/97
through a transfer of assets from collective trust fund accounts managed by the
Adviser, using materially equivalent investment objectives, policies and
methodologies as the Fund. The quoted performance of the Fund includes the
performance of these trust accounts for periods prior to the Fund's commencement
of operations, as adjusted to reflect the expenses associated with the Fund. The
trust accounts were not registered with the SEC and were not subject to the
investment restrictions imposed by law on registered mutual funds. If these
trust accounts had been registered, their returns may have been lower.
77
<PAGE> 81
AMSOUTH LIMITED TERM
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES TENNESSEE TAX-EXEMPT FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge
(Load) on Purchases 4.00%(2) None None
Maximum Deferred Sales
Charge (Load) None 5.00%(3) None
Redemption Fee(4) 0.00% 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.65% 0.65% 0.65%
Distribution and/or Service
(12b-1) Fee 0.00% 0.75% None
Other Expenses(5) 1.00% 1.00% 0.90%(6)
TOTAL FUND OPERATING EXPENSES 1.65% 2.40% 1.55%
Fee Waiver and/or Expense Reimbursement (0.05%) (0.20%) (0.20%)
NET EXPENSES(7) 1.60% 2.20% 1.35%
</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 B Shares acquired in the combination
of AmSouth Funds with ISG Funds, waivers are
in place on the CDSC charged if Class B shares
are sold within six years of purchase, which
will decline as follows: 4%, 3%, 3%, 2%, 2%,
1% to 0% in the seventh year. For all other B
Shares, the CDSC declines over a six year
period as follows: 5%, 4%, 3%, 3%, 2%, 1%, to
0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years for Shares acquired in the ISG
combination), 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 are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are in effect.
(6) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(7) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A, 1.60%; Class B, 2.20%; and Trust 1.35%
until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
3 5 10
1 YEAR YEARS YEARS YEARS
CLASS A SHARES $561 $ 900 $1,261 $2,276
CLASS B SHARES
Assuming Redemption $743 $1,048 $1,480 $2,463
Assuming No Redemption $243 $ 748 $1,280 $2,463
TRUST SHARES $158 $ 490 $ 845 $1,845
</TABLE>
As an investor in the Limited
Term Tennessee Tax-Exempt
Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
78
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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
<PAGE> 82
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES OVERVIEW
MONEY MARKET FUNDS
<TABLE>
<S> <C>
These Funds seek current income with liquidity and stability
of principal by investing primarily in short-term debt
securities. The Funds seek to maintain a stable price of
$1.00 per share.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for
a higher degree of safety
- in the case of the Tax-Exempt Money Market Fund, seeking
Federal tax-exempt income
These Funds may not be appropriate if you are:
- seeking high total return
- pursuing a long-term goal or investing for retirement
</TABLE>
79
<PAGE> 83
AMSOUTH PRIME
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Prime Obligations Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests only in U.S.
dollar-denominated, "high-quality" short-term debt
securities, including the following:
- obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities
- certificates of deposit, time deposits, bankers'
acceptances and other short-term securities issued by
domestic or foreign banks or their subsidiaries or
branches
- domestic and foreign commercial paper and other short-term
corporate debt obligations, including those with floating or
variable rates of interest
- obligations issued or guaranteed by one or more foreign
governments or their agencies or instrumentalities,
including obligations of supranational entities
- asset-backed securities
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as commercial paper. The lower a security's
rating, the greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
80
<PAGE> 84
AMSOUTH PRIME
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
90 7.86
91 5.77
92 3.39
93 2.61
94 3.72
95 5.5
96 4.92
97 5.09
98 4.98
99 4.6
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 2.35% 6/30/89
Worst
quarter: 0.63% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Prime Money Market
Fund has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
The returns for Class A Shares and
Class B Shares will differ from the
Trust Shares returns shown in the
bar chart because of differences in
expenses of each class. The table
assumes that Class B shareholders
redeem all of their fund shares at
the end of the period indicated.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/19/91)
<S> <C> <C> <C> <C>
CLASS A SHARES 4.49% 4.94% 4.80% 5.28%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) 3.56% N/A N/A 3.67%
TRUST SHARES 4.60% 5.02% 4.83% 5.31%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Performance for the Class B Shares, which commenced operations on September
2, 1997, is based on the historical performance of the Class A Shares (without
sales charge) prior to that date. Class A Shares performance does not reflect
the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the
CDSC and higher 12b-1 fees been incorporated, total return and hypothetical
growth figures would have been lower.
81
<PAGE> 85
AMSOUTH PRIME
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum Sales Charge (Load) on
Purchases None None None
Maximum Deferred Sales Charge (Load) None 5.00%(2) None
Redemption Fee(3) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management Fee 0.40% 0.40% 0.40%
Distribution and/or Service (12b-1)
Fee 0.00% 0.75% 0.00%
Other Expenses(4) 0.53% 0.53% 0.43%(5)
TOTAL FUND OPERATING EXPENSES 0.93% 1.68% 0.83%
Fee Waiver and/or Expense
Reimbursement (0.16%) (0.16%) (0.16%)
NET EXPENSES(6) 0.77% 1.52% 0.67%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A CDSC on Class B Shares declines over six
years starting with year one and ending in
year seven from: 5%, 4%, 3%, 3%, 2%, 1%.
(3) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(4) Other expenses are restated to reflect
current fees.
(5) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(6) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A Shares, 0.66%; Trust Shares, 0.66% through
April 30, 2000, and thereafter will be: Class
A Shares, 0.77%; Class B Shares, 1.52%; Trust
Shares, 0.67% until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $ 95 $296 $ 515 $1,143
CLASS B SHARES
Assuming redemption $671 $830 $1,113 $1,694
Assuming no redemption $171 $530 $ 913 $1,694
TRUST SHARES $ 85 $265 $ 460 $1,025
</TABLE>
As an investor in the Prime Money
Market Fund, you will pay the
following fees and expenses
when you buy and hold shares.
Shareholder transaction fees
are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets,
and are reflected in the share
price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
82
<PAGE> 86
AMSOUTH U.S. TREASURY
DESCRIPTION OF THE FUNDS -- OBJECTIVES, RISK/RETURN AND
EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth U.S. Treasury Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests exclusively in
short-term U.S. dollar-denominated obligations issued by the
U.S. Treasury ("U.S. Treasury Securities"), separately
traded component parts of those securities called STRIPs,
and repurchase agreements collateralized by U.S. Treasury
Securities.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
83
<PAGE> 87
AMSOUTH U.S. TREASURY
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
90 7.64
91 5.48
92 3.32
93 2.54
94 3.55
95 5.3
96 4.69
97 4.75
98 4.6
99 4.17
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 2.23% 6/30/89
Worst
quarter: 0.62% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the U.S. Treasury Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
CLASS A SHARES 4.06% 4.62% 4.56% 5.02%
TRUST SHARES 4.17% 4.70% 4.60% 5.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1999, the Fund's 7-day yield for Class A Shares was 4.24% and
for Trust Shares was 4.34%. Without fee waivers and expense reimbursements, the
Fund's yield would have been 4.09% for Class A Shares for this time period. For
current yield information on the Fund, call 1-800-451-8382. The Fund's yield
appears in The Wall Street Journal each Thursday.
84
<PAGE> 88
AMSOUTH U.S. TREASURY
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum Sales Charge (Load) on
Purchases None None
Maximum Deferred Sales Charge (Load) None None
Redemption Fee(2) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management Fee 0.40% 0.40%
Distribution and/or Service (12b-1) Fee 0.00% 0.00%
Other Expenses(3) 0.57% 0.47%(4)
Total Fund Operating Expenses 0.97% 0.87%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Shareholder servicing for Class A Shares
were limited to 0.10%. Other Expenses are
restated to reflect current fees. Other
expenses are being limited to 0.56% for Class
A Shares and 0.31% for Class B Shares. Total
expenses after fee waivers and expense
reimbursements for Class A Shares is 0.81%;
and Trust Shares, 0.86%. Any fee waiver or
expense reimbursement arrangement is voluntary
and may be discontinued at any time.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $99 $309 $536 $1,190
TRUST SHARES $89 $278 $482 $1,073
</TABLE>
As an investor in the U.S.
Treasury Money Market Fund,
you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
85
<PAGE> 89
AMSOUTH TREASURY RESERVE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 portfolio manager
generally evaluates investments based on interest rate
sensitivity.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS INTEREST RATE RISK: 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.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
86
<PAGE> 90
AMSOUTH TREASURY RESERVE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR CLASS A SHARES(1)
<TABLE>
<S> <C>
93 2.06
94 4.05
95 5.41
96 4.78
97 4.78
98 4.68
99 4.38
</TABLE>
Best
quarter: 1.36% 6/30/95
Worst
quarter: -0.60% 9/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
The bar chart and table on this
page provide some indication of the
risks of investing in the Treasury
Money Market Fund by showing how
the Fund has performed and how its
performance has varied from year to
year. Both the bar chart and the
table assume the reinvestment of
dividends and distributions. Of
course, past performance does not
indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
INCEPTION 1 5 SINCE
DATE YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
CLASS A SHARES 10/1/92* 4.38% 4.80% 4.30%
TRUST SHARES 7/1/96 4.39% 4.94% 4.39%
</TABLE>
As of December 31, 1999, the Fund's 7-day yield for Class A Shares was 4.42% and
for Trust Shares was 4.42%. Without fee waivers and expense reimbursements, the
Fund's yield would have been 4.17% for Trust Shares for this time period. For
current yield information on the Fund, call 1-800-852-0045. The Fund's yield
appears in The Wall Street Journal each Thursday.
(*)The Treasury Money Market Fund commenced operations on 3/29/94 through a
transfer of assets from collective trust fund accounts managed by the Adviser,
using materially equivalent investment objectives, policies and methodologies as
the Fund. The quoted performance of the Fund includes the performance of these
trust accounts for periods prior to the Fund's commencement of operations, as
adjusted to reflect the expenses associated with the Fund. The trust accounts
were not registered with the SEC and were not subject to the investment
restrictions imposed by law on registered mutual funds. If these trust accounts
had been registered, their returns may have been lower.
87
<PAGE> 91
AMSOUTH TREASURY RESERVE
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum Sales Charge (Load) on
Purchases None None
Maximum Deferred Sales Charge (Load) None None
Redemption Fee(2) 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management Fee 0.40% 0.40%
Distribution and/or Service (12b-1) Fee 0.00% None
Other Expenses(3) 0.57% 0.47%(4)
TOTAL FUND OPERATING EXPENSES(3) 0.97% 0.87%
Fee Waiver and/or Expense Reimbursement (0.25%) (0.23%)
NET EXPENSES(5) 0.72% 0.62%
</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 are restated to reflect
current fees. The expenses noted above do not
reflect any fee waivers or expense
reimbursement arrangements that are or were in
effect.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(5) Total expenses after fee waivers and
expense reimbursements through April 30, 2000
are as follows: Class A, .60%; and Trust
Class, .60% AmSouth Bank has contractually
agreed to waive fees and/or reimburse expenses
to limit total annual fund operating expenses
to: Class A, .72%; and Trust Class, .62% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $99 $309 $536 $1,190
TRUST SHARES $89 $278 $482 $1,073
</TABLE>
As an investor in the Treasury
Reserve Money Market Fund, you
will pay the following fees
and expenses when you buy and
hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load)
if you sell your shares before
a certain period of time has
elapsed. This is called a
Contingent Deferred Sales
Charge.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
88
<PAGE> 92
AMSOUTH TAX-EXEMPT
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the Amsouth Tax-Exempt Fund) seeks as
high a level of current interest income exempt from federal
income taxes as is consistent with the preservation of
capital and relative stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
short-term municipal securities that provide income that is
exempt from federal income tax and not subject to the
federal alternative minimum tax for individuals. Short-term
municipal securities are debt obligations, such as bonds and
notes, issued by states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities which, generally have remaining maturities
of one year or less. Municipal securities purchased by the
Fund may include rated and unrated variable and floating
rate tax-exempt notes which may have a stated maturity in
excess of one year but which will be subject to a demand
feature permitting the Fund to demand payment within a year.
The Fund may also invest up to 10% of its total assets in
the securities of money market mutual funds which invest
primarily in obligations exempt from federal income tax.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
The Fund may also invest in certain other short-term debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 92 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as municipal notes. The lower a security's
rating, the greater its credit risk.
TAX RISK: The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 92.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
89
<PAGE> 93
AMSOUTH TAX-EXEMPT
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR TRUST SHARES(1)
<TABLE>
<S> <C>
91 3.91
92 2.59
93 1.92
94 2.33
95 3.44
96 3.03
97 3.2
98 2.99
99 2.8
</TABLE>
The performance information shown above is
based on a calendar year. The Fund's total
return from 1/1/99 to 9/30/99 was 2.01%.
Best
quarter: 1.40% 12/31/90
Worst
quarter: 0.44% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Tax-Exempt Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over nine years to
demonstrate that the Fund's value
varied at different times. The
table below shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (12/19/91)
<S> <C> <C> <C>
CLASS A SHARES 2.70% 3.02% 3.02%
TRUST SHARES 2.80% 3.09% 3.06%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1999, the Fund's 7-day yield for Class A Shares was 3.74% and
for Trust Shares was 3.84%. Without fee waivers and expense reimbursements, the
Fund's yield would have been 3.39% and 3.64% for this time period. For current
yield information on the Fund, call 1-800-451-8382. The Fund's yield appears in
The Wall Street Journal each Thursday.
90
<PAGE> 94
AMSOUTH TAX-EXEMPT
DESCRIPTION OF THE FUNDS -- OBJECTIVES,
RISK/RETURN AND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum Sales Charge (Load) on
Purchases None None
Maximum Deferred Sales Charge (Load) None None
Redemption Fee(2) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management Fee 0.40% 0.40%
Distribution and/or Service (12b-1) Fee 0.00% 0.00%
Other Expenses(3) 0.53% 0.43%(4)
TOTAL FUND OPERATING EXPENSES 0.93% 0.83%
Fee Waiver and/or Expense Reimbursement (0.03%) (0.03%)
NET EXPENSES(5) 0.90% 0.80%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(5) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A Shares, 0.90%; Trust Shares, 0.80% until
October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $95 $296
TRUST SHARES $85 $265
</TABLE>
As an investor in the Tax-Exempt
Money Market Fund, you will
pay the following fees and
expenses when you buy and hold
shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the 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
- redemption at the end of each
time period
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
91
<PAGE> 95
[LOGO]
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
CAPITAL APPRECIATION FUNDS
VALUE FUND -- The Fund will normally invest at least 80% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, and warrants, and short-term money market instruments.
GROWTH FUND -- The Fund will normally invest at least 65% of its total assets
in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks. The Fund may also invest
up to 35% of the value of its assets in preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments.
CAPITAL GROWTH 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 debt (also known as junk bonds) and the
payment of principal and interest may be affected at any time by adverse
economic changes.
LARGE CAP 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.
MID CAP 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.
SMALL CAP FUND -- The Fund will normally invest at least 80% of its total
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization that are equivalent to the capitalization of the companies in
the Russell 2000(R) Growth Index at the time of purchase. The Fund may invest
up to 20% of the value of its total assets in common stocks and securities
convertible into common stocks of companies with a market capitalization of
greater than $2 billion determined at the time of the purchase, preferred
stocks, corporate bonds, notes, and warrants, and short-term money market
instruments.
EQUITY INCOME FUND -- The Fund will normally invest at least 65% of its total
assets in income producing equity securities such as common stocks, preferred
stocks, and securities convertible into common stocks, such as convertible
bonds and convertible preferred stocks. The Fund may also invest up to 35% of
the value of its total assets in corporate bonds, notes, and warrants, and
short-term money market instruments or conducting substantial business.
92
<PAGE> 96
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
BALANCED FUND -- The Fund will normally invest in equity securities
consisting of common stocks but may also invest in other equity-type
securities such as warrants, preferred stocks and convertible debt
instruments.
As a fundamental policy, the Fund will invest at least 25% of its total
assets in fixed-income securities. Fixed-income securities include debt
securities, preferred stock and that portion of the value of securities
convertible into common stock, including convertible preferred stock and
convertible debt, which is attributable to the fixed-income characteristics
of those securities. The Fund's debt securities will consist of high grade
securities, which are those securities rated in one of the three highest
rating categories by a nationally recognized statistical rating organization
(an "NRSRO") at the time of purchase, or if not rated, found by the Advisor
under guidelines established by the Trust's Board of Trustees to be of
comparable quality. If the rating of any debt securities held by the Fund
falls below the third highest rating the Fund will not have to dispose of
those obligations and may continue to hold them if the portfolio manager
considers it to be appropriate.
SELECT EQUITY FUND -- The Fund will normally invest at least 65% of its
assets in common stocks and securities convertible into common stocks such as
convertible bonds and convertible preferred stock of companies with market
capitalization greater than $2 billion at the time of purchase. The Fund may
also invest up to 35% of the value of its total assets in common stocks and
securities convertible into common stocks of companies with market
capitalizations less than $2 billion, preferred stocks, corporate bonds,
notes, and warrants, and short-term money market instruments. Stock futures
and option contracts, stock index futures and index option contracts may be
used to hedge cash and maintain exposure to the U.S. equity market.
ENHANCED MARKET FUND -- The Fund will normally invest at least 80% of its
total assets in equity securities drawn from the S&P 500 Index. The Fund may
invest up to 20% of its total assets in equity securities not held in the S&P
500, corporate bonds, notes, and warrants, and short-term money market
instruments. Stock futures and option contracts, stock index futures and
index option contracts may be used to hedge cash and maintain exposure to the
U.S. equity market.
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.
INTERNATIONAL EQUITY, MID CAP, CAPITAL GROWTH AND LARGE CAP FUNDS -- While
these Funds 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.
GROWTH FUND, EQUITY INCOME FUND, SELECT EQUITY FUND: TEMPORARY DEFENSIVE
MEASURES -- If deemed appropriate under the circumstances, the Growth Fund,
Equity Income Fund, and Select Equity Fund may each increase its holdings in
short-term money market instruments to over 35% of its total assets.
Similarly, the Enhanced Market Fund, Value Fund
93
<PAGE> 97
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
and Small Cap Fund may each increase its holdings in short-term money market
instruments to over 20% of its total assets. Each Capital Appreciation Fund
may hold uninvested cash pending investment.
STRATEGIC PORTFOLIOS
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:
BENCHMARK PERCENTAGES
<TABLE>
<CAPTION>
MODERATE
AGGRESSIVE GROWTH AND GROWTH AND 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.
INCOME FUNDS
BOND FUND -- The Fund will invest at least 65% of its total assets in bonds
(including debentures). For temporary defensive purposes, the Fund may hold
more than 35% of its total assets in cash and cash equivalents. "Cash
equivalents" are short-term, interest-bearing instruments or deposits known
as money market instruments.
LIMITED TERM BOND FUND -- The Fund will normally invest at least 65% of its
total assets in bonds (including debentures), notes and other debt securities
which have a stated or remaining maturity of five years or less or which have
an unconditional redemption feature that will permit the Fund to require the
issuer of the security to redeem the security within five years from the date
of purchase by the Fund or for which the Fund has acquired an unconditional
"put" to sell the security within five years from the date of purchase by the
Fund. The remainder of the Fund's assets may be invested in bonds (including
debentures), notes and other debt securities which have a stated or remaining
maturity of greater than five years, cash, cash equivalents, and money-market
instruments. For temporary defensive purposes, the Fund may invest more than
35% of its total assets in cash, cash equivalents and corporate bonds with
remaining maturities of less than 1 year.
If the Fund acquires a debt security with a stated or remaining maturity in
excess of five years, the Fund may acquire a "put" with respect to the
security. Under a "put", the Fund would have the right to sell the debt
security within a specified period of time at a specified minimum price. The
Fund will only acquire puts from dealers, banks and broker-dealers which the
Advisor has determined are creditworthy. A put will be sold, transferred, or
assigned by the Fund only with the underlying debt security. The Fund will
acquire puts solely to shorten the maturity of the underlying debt security.
GOVERNMENT INCOME FUND -- The Fund invests at least 65% of its total assets
in obligations issued or guaranteed by the U.S. government or its agencies
and instrumentalities. Up to 35% of the Fund's total assets may be invested
in other types of debt securities, preferred stocks and options. Under normal
market conditions, the Fund will invest up to 80% of its total assets in
mortgage-related securities issued or guaranteed by the U.S. government or
its agencies and
94
<PAGE> 98
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
instrumentalities, such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related securities
issued by nongovernmental entities which are rated, at the time of purchase,
in one of the three highest rating categories by an NRSRO or, if unrated,
determined by its portfolio manager to be of comparable quality.
LIMITED TERM 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.
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.
MUNICIPAL BOND FUND -- As a fundamental policy, the Fund will normally invest
at least 80% of its net assets in Municipal Securities and in securities of
money market mutual funds which invest primarily in obligations exempt from
federal income tax. Additionally, as a fundamental policy, the Fund will
invest, under normal market conditions, at least 65% of the its total assets
in bonds.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum tax ("Taxable Obligations").
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. Taxable obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit, demand and time deposits, bankers' acceptances of
selected banks, and commercial paper meeting the Tax-Free Funds' quality
standards (as described in the SAI) for tax-exempt commercial paper.
The Fund may invest 25% or more of its total assets in bonds, notes and
warrants generally issued by or on behalf of the State of Alabama and its
political subdivisions, the interest on which, in the opinion of the issuer's
bond counsel at the time of issuance, is exempt from both federal income tax
and Alabama personal income tax and is not treated as a preference item for
purposes of the federal alternative minimum tax for individuals.
FLORIDA TAX-EXEMPT FUND -- As a fundamental policy, the Fund will normally
invest at least 80% of its net assets in Florida Municipal Securities.
Florida municipal securities include bonds, notes and warrants generally
issued by or on behalf of the State of Florida and its political
subdivisions, the interest on which, in the opinion of the issuer's bond
counsel at the time of issuance, is exempt from federal income tax, is not
subject to the federal alternative minimum tax for individuals, and is exempt
from the Florida intangible personal property tax.
Under normal market conditions, the Fund may invest up to 20% of net assets
in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal
alternative minimum
95
<PAGE> 99
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
tax ("Taxable Obligations"). For purposes of the 20% basket the Fund may also
invest in municipal securities of states other than Florida.
For temporary defensive purposes, the Fund may increase its holdings in
Taxable Obligations to over 20% of its net assets and hold uninvested cash
reserves pending investment. The Fund may also increase its holdings in
municipal securities of states other than Florida to over 20% of its net
assets in such situations. Taxable obligations may include obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities (some
of which may be subject to repurchase agreements), certificates of deposit,
demand and time deposits, bankers' acceptances of selected banks, and
commercial paper meeting the Tax-Free Funds' quality standards (as described
in the SAI) for tax-exempt commercial paper.
The Florida Tax-Exempt Fund is a non-diversified fund and may concentrate its
investments in the securities of a limited number of issuers. Thus, the
Florida Tax-Exempt Fund generally may invest up to 25% of its total assets in
the securities of each of any two issuers.
TENNESSEE TAX-EXEMPT FUND AND 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 of 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.
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.
96
<PAGE> 100
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
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.
MONEY MARKET FUNDS
TREASURY RESERVE 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.
As a money market fund, the AmSouth Treasury Reserve 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.
TAX-EXEMPT MONEY MARKET FUND -- As a fundamental policy, under normal market
conditions at least 80% of the Fund's total assets will be invested in
municipal securities and in securities of money market mutual funds which
invest primarily in obligations exempt from federal income tax. It is also a
fundamental policy that the Fund may invest up to 20% of its total assets in
obligations, the interest on which is either subject to regular federal
income tax or treated as a preference item for purposes of the federal
alternative minimum tax for individuals ("Taxable Obligations"). For
temporary defensive purposes, however, the Fund may increase its short-term
Taxable Obligations to over 20% of its total assets and hold uninvested cash
reserves pending investment. Taxable Obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit and bankers' acceptances of selected banks, and
commercial paper.
97
<PAGE> 101
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
The Fund will invest only in those municipal securities and other obligations
which are considered by the portfolio manager to present minimal credit
risks. In addition, investments will be limited to those obligations which,
at the time of purchase, (i) possess one of the two highest short-term
ratings from an NRSRO in the case of single-rated securities or (ii) possess,
in the case of multiple-rated securities, one of the two highest short-term
ratings by at least two NRSROs; or (iii) do not possess a rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under the guidelines
adopted by the Trustees.
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. The following
table describes the securities and techniques the Funds use, as well as the
main risks they pose. Equity securities are subject mainly to market risk.
Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. Following the table is a more complete discussion of risk. You may
also consult the Statement of Additional Information for additional details
regarding these and other permissible investments.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
Balanced Fund 1
Growth Fund 2
Enhanced Market Fund 3
Value Fund 4
Equity Income Fund 5
Select Equity Fund 6
Small Cap Fund 7
Bond Fund 8
Government Income Fund 9
Limited Term Bond Fund 10
Florida Tax-Exempt Fund 11
Municipal Bond Fund 12
Prime Money Market Fund 13
U.S. Treasury Money Market Fund 14
Tax-Exempt Money Market Fund 15
International Equity Fund 16
Mid Cap Fund 17
Capital Growth Fund 18
Large Cap Fund 19
Limited Term U.S. Government Fund 20
Tennessee Tax-Exempt Fund 21
Limited Term Tennessee Tax-Exempt Fund 22
Treasury Reserve Money Market Fund 23
</TABLE>
98
<PAGE> 102
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
AMERICAN DEPOSITARY RECEIPTS (ADRS): ADRs are foreign shares 1-7,16-19 Market
of a company held by a U.S. bank that issues a receipt Political
evidencing ownership. Foreign Investment
ASSET-BACKED SECURITIES: Securities secured by company 8,13,18 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Interest Rate
Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 2,4,7,8,13,15, Credit
on and accepted by a commercial bank. Maturities are 16-19,21,22 Liquidity
generally six months or less. Market
Interest Rate
BONDS: Interest-bearing or discounted government or 8-12,20-22 Interest Rate
corporate securities that obligate the issuer to pay the Market
bondholder a specified sum of money, usually at specific Credit
intervals, and to repay the principal amount of the loan at
maturity. The Funds will only purchase bonds that are high
grade (rated at the time of purchase) in one of the three
highest rating categories by a nationally recognized
statistical rating organizations, or, if not rated,
determined to be of comparable quality by the Adviser.
CALL AND PUT OPTIONS: A call option gives the buyer the 1,3,5,6,8, Management
right to buy, and obligates the seller of the option to 16-19 Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 2,8,11,13,15, Market
stated maturity. 16,14,21,22 Credit
Liquidity
Interest Rate
COMMERCIAL PAPER: Secured and unsecured short-term 1-13,15, Credit
promissory notes issued by corporations and other entities. 16-19,21,22 Liquidity
Maturities generally vary from a few days to nine months. Market
Interest Rate
COMMON STOCK: Shares of ownership of a company. 1-7,16-19 Market
CONVERTIBLE SECURITIES: Bonds or preferred stock that 1-7,16-19 Market
convert to common stock. Credit
DEMAND FEATURES: Securities that are subject to puts and 1,2,8-13,15, Market
standby commitments to purchase the securities at a fixed 16-19,21,22 Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
DERIVATIVES: Instruments whose value is derived from an 1-13,15, Management
underlying contract, index or security, or any combination 16-19,21,22 Market
thereof, including futures, options (e.g., put and calls), Interest Rate
options on futures, swap agreements, and some Credit
mortgage-backed securities. Liquidity
Leverage
FOREIGN SECURITIES: Stocks issued by foreign companies, as 1-7,10, Market
well as commercial paper of foreign issuers and obligations 16-19,21,22 Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Foreign Investment
</TABLE>
99
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ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
FUNDING AGREEMENTS: Also known as guaranteed investment 13,16-19, Liquidity
contracts, an agreement where a Fund invests an amount of 21,22 Credit
cash with an insurance company and the insurance company Market
credits such investment on a monthly basis with guaranteed Interest Rate
interest which is based on an index. These agreements
provide that the guaranteed interest will not be less than a
certain minimum rate. These agreements also provide for
adjustment of the interest rate monthly and are considered
variable rate instruments. Funding Agreements are considered
illiquid investments, and, together with other instruments
in the Fund which are not readily marketable, may not exceed
10% of the Fund's net assets.
FUTURES AND RELATED OPTIONS: A contract providing for the 6,8,10, Management
future sale and purchase of a specified amount of a 16-19,21,22 Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
HIGH-YIELD/HIGH-RISK/DEBT SECURITIES: 6,18 Credit
High-yield/High-risk/debt securities are securities that are Market
rated below investment grade by the primary rating agencies Liquidity
(e.g., BB or lower by Standard & Poor's and Ba or lower by Interest Rate
Moody's).
These securities are considered speculative and involve
greater risk of loss than investment grade debt securities.
Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and
"junk bonds."
INVESTMENT COMPANY SECURITIES: Shares of investment 15,16-20,23 Market
companies. A Fund may invest up to 5% of its assets in the
shares of any one registered investment company, but may not
own more than 3% of the securities of any one registered
investment company or invest more than 10% of its assets in
the securities of other registered investment companies.
These registered investment companies may include money
market funds of AmSouth Funds and shares of other registered
investment companies for which the Adviser or a Sub-Adviser
to a Fund or any of their affiliates serves as investment
adviser, administrator or distributor.
The Money Market Funds may only invest in shares of other
investment companies with similar objectives.
MONEY MARKET INSTRUMENTS: Investment-grade, U.S. 1-13,15 Market
dollar-denominated debt securities that have remaining Credit
maturities of one year or less. These securities may include
U.S. government obligations, commercial paper and other
short-term corporate obligations, repurchase agreements
collateralized with U.S. government securities, certificates
of deposit, bankers' acceptances, and other financial
institution obligations. These securities may carry fixed or
variable interest rates.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1,8,9,13,18,20 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate mortgage Credit
investment conduits. Regulatory
MUNICIPAL SECURITIES: Securities issued by a state or 11,12,15,21,22 Market
political subdivision to obtain funds for various public Credit
purposes Municipal securities include private activity bonds Political
and industrial development bonds, as well as general Tax
obligation bonds, tax anticipation notes, bond anticipation Regulatory
notes, revenue anticipation notes, project notes, other Interest Rate
short-term tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities (single family
revenue bonds).
</TABLE>
100
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ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
There are two general types of municipal
bonds: General-obligations bonds, which are secured by the
taxing power of the issuer and revenue bonds, which take
many shapes and forms but are generally backed by revenue
from a specific project or tax. These include, but are not
limited, to certificates of participation (COPs); utility
and sales tax revenues; tax increment or tax allocations;
housing and special tax, including assessment district and
community facilities district (Mello-Roos) issues which are
secured by specific real estate parcels; hospital revenue;
and industrial development bonds that are secured by a
private company.
PREFERRED STOCKS: Preferred Stocks are equity securities 1-7,16-19 Market
that generally pay dividends at a specified rate and have
preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting
rights.
REPURCHASE AGREEMENTS: The purchase of a security and the 1-8,13,15, Market
simultaneous commitment to return the security to the seller 16-20,23 Leverage
at an agreed upon price on an agreed upon date. This is
treated as a loan by a fund.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 2,3,6,7,8, Market
simultaneous commitment to buy the security back at an 13-15,23 Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-13,15, Market
Fund's total assets. In return the Fund will receive cash, 16,23 Leverage
other securities, and/or letters of credit. Liquidity
Credit
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 11-13,15, Liquidity
exchange for the deposit of funds. 16-19,21,22 Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury investment 8-13,15 Market
growth receipts, and certificates of accrual of Treasury 16-20,23
securities.
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-3,6-13, Market
agencies and instrumentalities of the U.S. government. These 15,16-20,23 Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac. Interest Rate
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, separately 1-3,6-15, Market
traded registered interest and principal securities, and 16-20,23
coupons under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured demand notes 13,15 Credit
that permit the indebtedness to vary and provide for Liquidity
periodic adjustments in the interest rate according to the Interest Rate
terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary
market in these notes, the Fund may demand payment of
principal and accrued interest at specified intervals.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 2,8,13,15, Credit
interest rates which are reset daily, weekly, quarterly or 16-19,21,22 Liquidity
some other period and which may be payable to the Fund on Market
demand. Interest Rate
WARRANTS: Securities, typically issued with preferred stock 1-7,16-19 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-13,15, Market
contract to purchase securities at a fixed price for 16-20,23 Leverage
delivery at a future date. Liquidity
Credit
</TABLE>
101
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ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
---------- --------- ---------
<S> <C> <C>
ZERO-COUPON DEBT OBLIGATIONS: Bonds and other debt that pay 1-13,15, Credit
no interest, but are issued at a discount from their value 16-20,23 Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their Interest Rate
maturity value.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "Risk/Return Summary and Fund Expenses." Because of these risks,
the value of the securities held by the Funds may fluctuate, as will the
value of your investment in the Funds. Certain investments and Funds are more
susceptible to these risks than others.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INTEREST RATE RISK. The risk that debt prices overall will decline over
short or even long periods due to rising interest rates. A rise in interest
rates typically causes a fall in values while a fall in rates typically
causes a rise in values. Interest rate risk should be modest for shorter-term
securities, moderate for intermediate-term securities, and high for
longer-term securities. Generally, an increase in the average maturity of the
Fund will make it more sensitive to interest rate risk. The market prices of
securities structured as zero coupon or pay-in-kind securities are generally
affected to a greater extent by interest rate changes. These securities tend
to be more volatile than securities which pay interest periodically.
INVESTMENT STYLE RISK. The risk that returns from a particular class or
group of stocks (e.g., value, growth, small cap, large cap) will trail
returns from other asset classes or the overall stock market. Groups or asset
classes of stocks tend to go through cycles of doing better -- or
worse -- than common stocks in general. These periods can last for periods as
long as several years. Additionally, a particular asset class or group of
stocks could fall out of favor with the market, causing the Fund to
underperform funds that focus on other types of stocks.
LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may be
embedded directly in the characteristics of other securities.
HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the Portfolio also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
Hedges are sometimes subject to imperfect matching between the derivative
and underlying security, and there can be no assurance that a Portfolio's
hedging transactions will be effective.
SPECULATIVE. To the extent that a derivative is not used as a hedge, the
Portfolio is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivatives original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Portfolio management or performance. This includes the
risk of missing out on an investment opportunity because the assets necessary
to take advantage of it are tied up in less advantageous investments.
102
<PAGE> 106
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
PRE-PAYMENT/CALL RISK. The risk that the principal repayment of a security
will occur at an unexpected time. Prepayment risk is the chance that the
repayment of a mortgage will occur sooner than expected. Call risk is the
possibility that, during times of declining interest rates, a bond issuer
will "call" -- or repay -- higher yielding bonds before their stated
maturity. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments and calls generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid or called, a Fund
may have to reinvest in securities with a lower yield. In this event, the
Fund would experience a decline in income -- and the potential for taxable
capital gains. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss. Prepayment/call risk
is generally low for securities with a short-term maturity, moderate for
securities with an intermediate-term maturity, and high for securities with a
long-term maturity.
REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
SMALL COMPANY RISK. Stocks of small-capitalization companies are more risky
than stocks of larger companies and may be more vulnerable than larger
companies to adverse business or economic developments. Many of these
companies are young and have a limited track record. Small cap companies may
also have limited product lines, markets, or financial resources. Securities
of such companies may be less liquid and more volatile than securities of
larger companies or the market averages in general and, therefore, may
involve greater risk than investing in larger companies. In addition, small
cap companies may not be well-known to the investing public, may not have
institutional ownership, and may have only cyclical, static, or moderate
growth prospects. If a Fund concentrates on small-capitalization companies,
its performance may be more volatile than that of a fund that invests
primarily in larger companies.
TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
103
<PAGE> 107
[LOGO]
FUND MANAGEMENT
THE INVESTMENT ADVISER
AmSouth Bank, (AmSouth or the "Adviser"), is the adviser for the Funds.
AmSouth is the bank affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of September 30, 1999 of $20 billion and
operated 276 banking offices in Alabama, Florida, Georgia and Tennessee.
AmSouth has provided investment management services through its Trust
Investment Department since 1915. As of June 30, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary management and
provided custody services for an additional $21 billion in securities.
AmSouth is the largest provider of trust services in Alabama and its Trust
Natural Resources and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real estate interests.
Through its portfolio management team, AmSouth makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 07/31/99
<S> <C>
------------------------------
Value Fund 0.80%
------------------------------
Growth Fund 0.80%
------------------------------
Capital Growth Fund(1) 0.80%
------------------------------
Large Cap Fund(1) 0.80%
------------------------------
Mid Cap Fund(1) 1.00%
------------------------------
Small Cap Fund 1.20%
------------------------------
Equity Income Fund 0.80%
------------------------------
Balanced Fund 0.80%
------------------------------
Select Equity Fund 0.80%
------------------------------
Enhanced Market Fund 0.45%
------------------------------
International Equity Fund(1) 1.25%
------------------------------
Aggressive Growth Portfolio(1) 0.20%
------------------------------
Growth Portfolio(1) 0.20%
------------------------------
Growth and Income Portfolio(1) 0.20%
------------------------------
Moderate Growth and Income Portfolio(1) 0.20%
------------------------------
Current Income Portfolio(1) 0.20%
------------------------------
Bond Fund 0.50%
------------------------------
Limited Term Bond Fund 0.50%
------------------------------
Government Income Fund 0.30%
------------------------------
Limited Term U.S. Government Fund(1) 0.65%
------------------------------
Municipal Bond Fund 0.40%
------------------------------
Florida Tax-Exempt Fund 0.30%
------------------------------
Tennessee Tax-Exempt Fund(1) 0.65%
------------------------------
Limited Term Tennessee Tax-Exempt Fund(1) 0.65%
------------------------------
Prime Money Market Fund 0.40%
------------------------------
U.S. Treasury Money Market Fund 0.40%
------------------------------
Treasury Reserve Money Market Fund(1) 0.40%
------------------------------
Tax-Exempt Money Market Fund 0.20%
-------------------------------------------------------------------------
</TABLE>
(1) This new Fund commenced operations as an AmSouth Fund immediately
following the ISG/AmSouth combination occurring on March 13, 2000. The figure
shown reflects the fee paid as of the end of the fiscal year of the
predecessor Fund (12/31/99).
104
<PAGE> 108
FUND MANAGEMENT
THE INVESTMENT SUB-ADVISERS
GROWTH FUND. Peachtree Asset Management ("Peachtree" or "Sub-Advisor")
serves as investment sub-advisor to the Growth Fund, pursuant to a
Sub-Advisory Agreement with AmSouth. Under the Sub-Advisory Agreement,
Peachtree manages the Fund, selects investments, and places all orders for
purchases and sales of securities, subject to the general supervision of the
Trust's Board of Trustees and AmSouth in accordance with the Fund's
investment objectives, policies and restrictions.
Peachtree is a division of SSB Citi Fund Management LLC, which is an indirect
wholly-owned subsidiary of Citigroup, Inc. Peachtree has performed advisory
services since 1994 for institutional clients, and has its principal offices
at 303 Peachtree Street, N.E., Atlanta, GA 30308. SSB Citi Fund Management
LLC and its predecessors have been providing investment advisory services to
mutual funds since 1968. As of July 31, 1999, SSB Citi Fund Management LLC
had aggregate assets under management of approximately $114 billion.
ENHANCED MARKET FUND AND SELECT EQUITY FUND. OakBrook Investments, LLC
("OakBrook") serves as investment sub-adviser to the Enhanced Market Fund and
the Select Equity Fund pursuant to a Sub-Advisory Agreement with AmSouth.
Under the Sub-Advisory Agreement, OakBrook manages the Funds, selects
investments, and places all orders for purchases and sales of securities,
subject to the general supervision of the Trust's Board of Trustees and
AmSouth in accordance with each Fund's investment objective, policies, and
restrictions.
OakBrook is 50% owned by AmSouth and 50% owned by Neil Wright, Janna Sampson
and Peter Jankovskis. OakBrook was organized in February, 1998 to perform
advisory services for investment companies and other institutional clients
and has its principal offices at 701 Warrenville Road, Suite 135, Lisle, IL
60532.
The following table sets forth the performance data relating to the
historical performance of two institutional funds, the Multiple Fund
Investment Trust for the Employee Benefit Plans Large Cap Equity Growth Fund
(the "Large Cap Fund") and the Multiple Fund Investment Trust for the
Employee Benefit Plans Enhanced S&P 500 Equity Fund (the "Enhanced S&P
Fund"), since the dates indicated, that have investment objectives, policies,
strategies and risks substantially similar to those of the AmSouth Select
Equity Fund and the AmSouth Enhanced Market Fund, respectively.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Select Equity Fund, and, as such, have the primary responsibility for the
day-to-day portfolio management of the Fund. From November 1, 1993 to
February 25, 1998, Dr. Wright was the portfolio manager of the Large Cap
Fund, a commingled investment fund managed by ANB Investment Management and
Trust Company ("ANB") for employee benefit plan accounts. Dr. Wright received
the same portfolio management assistance and support in managing the Large
Cap Fund from Ms. Sampson and Dr. Jankovskis that he receives from them in
managing the Select Equity Fund. This data is provided to illustrate the past
performance of Dr. Neil Wright in managing a substantially similar account as
measured against a specified market index and does not represent the
performance of the Select Equity Fund. Investors should not consider this
performance data as an indication of future performance of the Select Equity
Fund.
Dr. Wright, Ms. Sampson, and Dr. Jankovskis are the portfolio managers for
the Enhanced Market Fund, and, as such, have the primary responsibility for
the day-to-day portfolio management of the Fund. From December 1, 1994 to
February 25, 1998, Dr. Wright, Ms. Sampson, and Dr. Jankovskis were the
portfolio managers of the Enhanced S&P Fund, a commingled investment fund
managed by ANB for employee benefit plan accounts. This data is provided to
illustrate the past performance of Dr. Neil Wright, Ms. Sampson, and Dr.
Jankovskis in managing a substantially similar account as measured against a
specified market index and does not represent the performance of the Enhanced
Market Fund. Investors should not consider this performance data as an
indication of future performance of the Enhanced Market Fund.
The performance data shown below relating to the institutional accounts was
calculated on a total return basis and includes all dividends and interest,
accrued income and realized and unrealized gains and losses. The returns of
the Large Cap Fund reflect the deduction of an investment advisory fee of
1.00%, the returns of the Enhanced S&P Fund reflect the deduction of an
investment advisory fee of .50%, and both accounts reflect deductions of
brokerage commissions, execution costs, and custodial fees paid by ANB's
institutional private accounts, without provision for federal or state income
taxes. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns.
The institutional private accounts were not subject to the same types of
expenses to which the Select Equity Fund and the Enhanced Market Fund are
subject nor to the diversification requirements, specific tax restrictions
and investment
105
<PAGE> 109
FUND MANAGEMENT
limitations imposed on the Fund by the Investment Company Act or Subchapter M
of the Internal Revenue Code. Consequently, the performance results for the
institutional accounts could have been adversely affected if the accounts had
been regulated as investment company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Select Equity
Fund and the Enhanced Market Fund or an individual investor investing in such
Funds. The investment results were not calculated pursuant to the methodology
established by the SEC that will be used to calculate the Select Equity
Fund's and the Enhanced Market Fund's performance results. Investors should
also be aware that the use of a methodology different from that used below to
calculate performance would result in different performance data. All
information set forth in the table below relies on data supplied by OakBrook
or from statistical services, reports or other sources believed by OakBrook
to be reliable. However, except as otherwise indicated, such information has
not been verified and is unaudited.
<TABLE>
<CAPTION>
ENHANCED S&P 500
YEAR LARGE CAP FUND S&P FUND INDEX(1)
---- ------------------ ------------ ------------
<S> <C> <C> <C>
1993(2) 2.62% -- .30%
1994 4.39% -- 1.37%
1994(3) -- 1.24% 1.45%
1995 31.26% 35.49% 37.43%
1996 19.34% 25.86% 23.14%
1997 37.36% 33.00% 33.34%
1998(4) 1.44% 1.10% 1.11%
Since inception(5) 22.12% -- 21.90%
Since inception(6) -- 30.47% 30.35%
</TABLE>
(1) The S&P 500 Index is an unmanaged index which measures the performance of
500 stocks representative of the U.S. equity market.
(2) Total return for the period from November 1, 1993 through December 31,
1993. Returns have not been annualized.
(3) Total return for the period from December 1, 1994 through December 31,
1994. Returns have not been annualized.
(4) Total return for the period from January 1, 1998, through January 31,
1998. Returns have not been annualized.
(5) Annualized total return for the Large Cap Fund is for the period from
November 1, 1993 through January 31, 1998.
(6) Annualized total return for the Enhanced S&P Fund is for the period from
December 1, 1994 through January 31, 1998.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
EQUITY INCOME FUND. Rockhaven Asset Management, LLC ("Rockhaven") serves as
investment sub-adviser to the Equity Income Fund pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Rockhaven manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objective,
policies, and restrictions.
Rockhaven is 50% owned by AmSouth and 50% owned by Mr. Christopher H. Wiles.
Rockhaven was organized in 1997 to perform advisory services for investment
companies and has its principal offices at 100 First Avenue, Suite 1050,
Pittsburgh, PA 15222.
Mr. Wiles is the portfolio manager of the Equity Income Fund and has primary
responsibility for the day-to-day portfolio management of the Fund. From
August 1, 1991 to January 31, 1997, he was the portfolio manager of the
Federated Equity Income Fund.
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<PAGE> 110
FUND MANAGEMENT
The cumulative total return for the Class A Shares of the Federated Equity
Income Fund from August 1, 1991 through January 31, 1997 was 139.82%, absent
the imposition of a sales charge. The cumulative total return for the same
period for the Standard & Poor's Composite Stock Price Index ("S&P 500
Index") was 135.09%. The cumulative total return for the Class B Shares of
the Federated Equity Income Fund from September 27, 1994 (date of initial
public offering) through January 31, 1997 was 62.64%, absent the imposition
of a contingent deferred sales charge. The cumulative total return for the
same period for the S&P 500 Index was 79.69%. At January 31, 1997, the
Federated Equity Income Fund had approximately $970 million in net assets. As
portfolio manager of the Federated Equity Income Fund, Mr. Wiles had full
discretionary authority over the selection of investments for that fund.
Average annual total returns for the one-year, three-year, and five-year
periods ended January 31, 1997 and for the entire period during which Mr.
Wiles managed the Class A Shares of the Federated Equity Income Fund and for
the one-year and since inception period for the Class B Shares of the
Federated Equity Income Fund compared with the performance of the S&P 500
Index and the Lipper Equity Income Fund Index were:
PRIOR PERFORMANCE OF CLASS A SHARES AND CLASS B SHARES OF THE FEDERATED
EQUITY INCOME FUND
<TABLE>
<CAPTION>
LIPPER
FEDERATED EQUITY S&P 500 EQUITY INCOME
INCOME FUND(+*) INDEX(@) FUND INDEX(#)
---------------------- ----------- -----------------
<S> <C> <C> <C>
CLASS A SHARES
(absent imposition of sales charge)
One Year 23.26% 26.34% 19.48%
Three Years 17.03% 20.72% 15.09%
Five Years 16.51% 17.02% 14.73%
August 1, 1991 through 17.25% 16.78% 14.99%
January 31, 1997
CLASS B SHARES
(absent imposition of Federated Equity
Income Fund's maximum sales charge)
One Year 16.48%
Three Years 14.85%
Five Years 15.20%
August 1, 1991 through January 31, 1997 16.05%
CLASS B SHARES
(absent imposition of contingent deferred
sales charge)
One Year 22.26% 26.34% 19.48%
September 27, 1994 through January 31, 1997 23.15% 28.44% 20.65%
CLASS B SHARES
(assuming imposition of the Federated Equity
Income Fund's maximum contingent deferred
sales charge)
One Year 16.76%
September 27, 1994 through January 31, 1997 22.79%
</TABLE>
(+) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(*) During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Class A Shares (the shares most similar to the
Class A Shares of the AmSouth Equity Income Fund) of the Federated Equity
Income Fund ranged from 0.95% to 1.05% of the fund's average daily net
assets. During the period from September 27, 1994 through January 31, 1997
the operating expense ratio for the Class B Shares of the Federated Equity
Income Fund ranged from 1.80% to 1.87% of the fund's average daily net
assets. The operating expenses of the Class A Shares and Class B Shares of
the Federated Equity Income Fund were lower than the projected operating
expenses of the Class A Shares and Class B Shares, respectively, of the
AmSouth Equity Income Fund. If the actual operating expenses of the AmSouth
Equity Fund are higher than the historical operating expenses of the
Federated Equity Income Fund, this could negatively affect performance.
(@) The S&P 500 Index is an unmanaged index of common stocks that is
considered to be generally representative of the United States stock market.
The Index is adjusted to reflect reinvestment of dividends.
(#) The Lipper Equity Income Fund Index is an unmanaged index. The Index is
adjusted to reflect re-investment of dividends.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
107
<PAGE> 111
FUND MANAGEMENT
The Federated Equity Income Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Equity Income Fund. Share prices and investment returns will fluctuate
reflecting market conditions, as well as changes in company-specific
fundamentals of portfolio securities.
Christopher Wiles was the Federated Equity Income Fund's portfolio manager
from August 1, 1991 to January 31, 1997. Mr. Wiles joined Federated Investors
in 1990 and served as a Vice President of the fund's investment advisor from
1992 and Senior Vice President from October, 1996 to January 31, 1997. Mr.
Wiles served as Assistant Vice President of the Fund's investment advisor in
1991. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
SMALL CAP FUND. Sawgrass Asset Management, LLC ("Sawgrass") serves as
investment sub-adviser to the Small Cap Fund, pursuant to a Sub-Advisory
Agreement with AmSouth. Under the Sub-Advisory Agreement, Sawgrass manages
the Fund, selects investments, and places all orders for purchases and sales
of securities, subject to the general supervision of the Trust's Board of
Trustees and AmSouth in accordance with the Fund's investment objectives,
policies and restrictions.
Sawgrass is 50% owned by AmSouth and 50% owned by Sawgrass Asset Management,
Inc. Sawgrass Asset Management, Inc. is controlled by Mr. Dean McQuiddy, Mr.
Brian Monroe and Mr. Andrew Cantor. Sawgrass was organized in January, 1998
to perform advisory services for investment companies and other institutional
clients and has its principal offices at 4337 Pablo Oaks Court, Jacksonville,
FL 32224.
The following tables set forth the performance data relating to the
historical performance of an institutional fund (the Employee Benefit Small
Capitalization Fund) and a mutual fund (the Emerald Small Capitalization
Fund), since the dates indicated, that have investment objectives, policies,
strategies and risks substantially similar to those of the AmSouth Small Cap
Fund. Mr. Dean McQuiddy, a Principal of Sawgrass, is the portfolio manager
for the Small Cap Fund, and, as such, has the primary responsibility for the
day-to-day portfolio management of the Fund. From January 1, 1987 to December
31, 1997, he was the portfolio manager of the Employee Benefit Small
Capitalization Fund, a common trust fund managed by Barnett Bank for employee
benefit plan accounts. On January 4, 1994, the Employee Benefits Small
Capitalization Fund transferred the majority of its assets to the Emerald
Small Capitalization Fund. Mr. McQuiddy was the portfolio manager for the
Emerald Small Capitalization Fund from its inception through December 31,
1997. This data is provided to illustrate the past performance of Mr.
McQuiddy in managing substantially similar accounts as measured against a
specified market index and does not represent the performance of the Small
Cap Fund. Investors should not consider this performance data as an
indication of future performance of the Small Cap Fund.
The performance data shown below relating to the institutional account was
calculated on a total return basis and includes all dividends and interest,
accrued income and realized and unrealized gains and losses. The returns of
the institutional account reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by Barnett's institutional
private account, without provision for federal or state income taxes.
Custodial fees of the institutional account, if any, were not included in the
calculation. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in
performance returns. The yearly returns of the institutional fund are
calculated by geometrically linking the monthly returns.
The institutional private account was not subject to the same types of
expenses to which the Small Cap Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Fund by the Investment Company Act or Subchapter M of the Internal
Revenue Code. Consequently, the performance results for the institutional
account could have been adversely affected if the account had been regulated
as investment company under the federal securities laws.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results presented below are unaudited and are not intended to
predict or suggest the returns that might be experienced by the Small Cap
Fund or an individual investor investing in such Fund. The investment results
were not calculated pursuant to the methodology established by the SEC that
will be used to calculate the Small Cap Fund's performance results. Investors
should also be aware that the use of a methodology different from that used
below to calculate performance could result in different performance data.
108
<PAGE> 112
FUND MANAGEMENT
All information set forth in the tables below relies on data supplied by
Sawgrass or from statistical services, reports or other sources believed by
Sawgrass to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
<TABLE>
<CAPTION>
SAWGRASS SMALL CAP RUSSELL 2000(R)
YEAR COMPOSITE GROWTH INDEX(1)
---- ---------------------- -----------------
<S> <C> <C>
1988 11.73% 20.37%
1989 12.64% 20.17%
1990 (13.35)% (17.41)%
1991 56.66% 51.19%
1992 21.94% 7.77%
1993 20.99% 13.36%
1994 0.99% (2.43)%
1995 37.79% 31.04%
1996 11.72% 11.43%
1997 13.49% 12.86%
Last 5 Years(2) 16.38% 12.76%
Last 10 Years(2) 16.09% 13.50%
</TABLE>
(1) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
(2) Through December 31, 1997.
PRIOR PERFORMANCE OF RETAIL SHARES AND CLASS B SHARES OF THE EMERALD SMALL
CAPITALIZATION FUND
The cumulative total return for the Retail Shares of the Emerald Small
Capitalization Fund from March 1, 1994 through December 31, 1997 was 56.78%
absent the imposition of a sales charge and was 49.72% including the
imposition of a sales charge. The cumulative total return for the same period
for the Russell 2000(R) Growth Index was 57.31%. The cumulative total return
for the Class B Shares of the Emerald Small Capitalization Fund from March 1,
1994 through March 11, 1996 was 39.85% absent the imposition of a contingent
deferred sales charge and was 34.25% including the imposition of a contingent
deferred sales charge. The cumulative total return for the same period for
the Russell 2000(R) Growth Index was 29.71%. At December 31, 1997, the
Emerald Small Capitalization Fund had approximately $180 million in assets.
As portfolio manager of the Emerald Small Capitalization Fund, Mr. McQuiddy
had full discretionary authority over the selection of investments for that
fund. Average annual total returns for the Retail Shares for the one-year,
three-year and since inception through December 31, 1997 period (the entire
period during which Mr. McQuiddy managed the Retail Shares of the Emerald
Small Capitalization Fund) and for the one-year and since inception through
March 11, 1996 period for the Class B Shares, compared with the performance
of the Russell 2000(R) Growth Index were:
<TABLE>
<CAPTION>
EMERALD SMALL RUSSELL 2000(R)
CAPITALIZATION GROWTH
FUND(1) INDEX(2)
------------------ -----------------
<S> <C> <C>
RETAIL SHARES
(absent imposition of sales charges)
One Year 12.62% 12.86%
Three Years 18.39% 18.12%
Since Inception 12.41% 12.55%
RETAIL SHARES
(absent imposition of the Emerald Small
Capitalization Fund's maximum sales charge)
One Year 7.55% 12.86%
Three Years 16.58% 18.12%
Since Inception 10.17% 12.55%
</TABLE>
109
<PAGE> 113
FUND MANAGEMENT
<TABLE>
<CAPTION>
EMERALD SMALL RUSSELL 2000(R)
CAPITALIZATION GROWTH
FUND(1) INDEX(2)
------------------ -----------------
<S> <C> <C>
CLASS B SHARES
(absent imposition of sales charges)
One Year 8.02% 12.86%
Since Inception 18.26% 13.89%
CLASS B SHARES
(assuming imposition of the Emerald Small
Capitalization Fund's maximum contingent
deferred sales charge)
One Year 4.99% 12.86%
Since Inception 15.87% 13.89%
</TABLE>
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(2) The Russell 2000(R) Growth Index is an unmanaged index which measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index with
higher price-to-book ratios and higher forecasted growth values.
During the period from March 1, 1994 through December 31, 1997, the operating
expense ratio of the Retail Shares (the shares most similar to the Class A
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 1.73% to 2.50% of the Fund's average daily net assets.
During the period from March 1, 1994 through March 11, 1996, the operating
expense ratio of the Class B Shares (the shares most similar to the Class B
Shares of the AmSouth Small Cap Fund) of the Emerald Small Capitalization
Fund ranged from 2.50% to 3.29% of the Fund's average daily net assets. If
the actual operating expenses of the AmSouth Small Cap Fund are higher than
the historical operating expenses of the Emerald Small Capitalization Fund,
this could negatively affect performance.
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
The Emerald Small Capitalization Fund is a separate fund and its historical
performance is not indicative of the potential performance of the AmSouth
Small Cap Fund, Share prices and investment returns will fluctuate reflecting
market conditions, as well as change in company-specific fundamentals of
portfolio securities.
INTERNATIONAL EQUITY FUND -- Lazard Asset Management, located at 30
Rockefeller Plaza, New York, New York 10117, serves as 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 totalling approximately $71 billion as of December 31, 1998.
MID CAP FUND -- Bennett Lawrence Management, LLC, located at 757 Third
Avenue, New York, New York 10017, serves as sub-investment adviser to the Mid
Cap Fund. Bennett Lawrence Management provides discretionary investment
management services to client discretionary accounts with assets totalling
approximately $950 million as of December 31,1998.
PORTFOLIO MANAGERS
The primary portfolio manager for each Fund is as follows:
BALANCED FUND AND VALUE FUND -- Pedro Verdu, CFA, has been the portfolio
manager for the Value Fund and Balanced Fund since their inception. Mr. Verdu
has twenty-nine years of experience as an analyst and portfolio manager; he
is currently Senior Vice President and Trust Investment Officer in charge of
equity investments at AmSouth.
GROWTH FUND -- Dennis A. Johnson, CFA, has been the portfolio manager for the
Capital Growth Fund since its inception. Mr. Johnson, who has been employed
by Peachtree since 1994, is President and Chief Investment Officer of
Peachtree. From 1989 to 1994, Mr. Johnson was Vice President and Portfolio
Manager at Trusco Capital, the investment management subsidiary of Trust
Company Bank, Atlanta, Georgia.
EQUITY INCOME FUND -- Christopher H. Wiles has been the portfolio manager for
the Equity Income Fund since its inception. Mr. Wiles is the President and
Chief Investment Officer of Rockhaven. From August 1, 1991 to January 31,
1997, he was the portfolio manager of the Federated Equity Income Fund. Mr.
Wiles joined Federated Investors in 1990
110
<PAGE> 114
FUND MANAGEMENT
and served as a Vice President of the fund's investment advisor from 1992 and
Senior Vice President from October, 1996 to January 31, 1997.
SMALL CAP FUND -- Mr. Dean McQuiddy, CFA, has been the portfolio manager for
the Small Cap Fund since its inception. Mr. McQuiddy, who has been employed
by Sawgrass since 1998, is a Principal and the Director of Equity Investing
of Sawgrass. From 1983 to 1988, Mr. McQuiddy was portfolio manager at Barnett
Capital Advisors, Inc. Mr. McQuiddy holds membership in the Association of
Management and Research. He has 17 years of investment experience.
SELECT EQUITY FUND AND ENHANCED MARKET FUND -- The Select Equity Fund and
Enhanced Market Fund are managed by a team of investment professionals, all
of whom take an active part in the decision making process. Dr. Neil Wright,
Ms. Janna Sampson and Dr. Peter Jankovskis are the team members and have been
the portfolio managers of the Enhanced Market Fund and Select Equity Fund
since their inception. Each of the portfolio managers has been with OakBrook
since 1998. Dr. Wright is OakBrook's President and Chief Investment Officer.
From 1993 to 1997, Dr. Wright was the Chief Investment Officer of ANB
Investment Management & Trust Co. ("ANB"). Ms. Sampson is OakBrook's Director
of Portfolio Management. From 1993 to 1997, she was Senior Portfolio Manager
for ANB. Dr. Jankovskis is OakBrook's Director of Research. From 1992 to
1996, he was an Investment Strategist for ANB and from 1996 to 1997 he was
the Manager of Research for ANB.
BOND FUND -- The Bond Fund is co-managed by Brian B. Sullivan, CFA, and John
P. Boston, CFA. Mr. Sullivan has been the portfolio manager for the Bond Fund
since 1992. Mr. Sullivan has been a portfolio manager at the Advisor since
1984, and is currently Senior Vice President and Senior Trust Investment
Officer at AmSouth. Mr. Boston has co-managed the Bond Fund with Mr. Sullivan
since 1999. Mr. Boston has been associated with AmSouth Trust Investment
Group for over five years and is currently Senior Vice President and Trust
Investment Officer in charge of taxable fixed income investments.
FLORIDA TAX-EXEMPT FUND -- Steven L. Cass is the portfolio manager for the
Florida Tax-Exempt Fund. Mr. Cass has been associated with AmSouth's Trust
Investment Group since October, 1995 and is currently Assistant Vice
President and Trust Investment Officer. Prior to joining AmSouth, Mr. Cass
was a registered representative and insurance agent employed by First of
America Securities.
GOVERNMENT INCOME FUND AND LIMITED TERM BOND FUND -- John P. Boston, CFA, has
been the portfolio manager for the Limited Term Bond Fund since August, 1995,
and of the Government Income Fund since inception. Mr. Boston has been
associated with AmSouth's Trust Investment Group for over five years and is
currently Senior Vice President and Trust Investment Officer in charge of
taxable fixed-income investments.
MUNICIPAL BOND FUND -- Dorothy E. Thomas, CFA, is the portfolio manager for
the Municipal Bond Fund. Ms. Thomas has been associated with AmSouth's Trust
Investment Group for over sixteen years and is currently Senior Vice
President and Trust Investment Officer in charge of tax-free fixed income
investments.
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 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 CAPITAL GROWTH FUND -- Charles E. Winger, Jr. Mr. Winger has been the
Capital Growth 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.
AMSOUTH LARGE CAP FUND -- Ronald E. Lindquist. Mr. Lindquist, who has over 30
years' experience as a portfolio manager, has been the Large Cap 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
111
<PAGE> 115
FUND MANAGEMENT
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.
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as each Fund's administrator. Management and
administrative services of ASC include providing office space, equipment and
clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services. ASC is a
wholly owned subsidiary of BISYS Fund Services ("BISYS").
BISYS, whose address is also 3435 Stelzer Road, Columbus, Ohio 43219-3035,
serves as the distributor of each Fund's shares. BISYS may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
112
<PAGE> 116
[LOGO]
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
Class A Shares and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have
it invested, and whether you plan to make additional investments. Your
financial representative can help you decide which share class is best for
you.
CLASS A SHARES
- Capital Appreciation Funds Strategic Portfolios, and Income
Funds: Front-end sales charges, as described below.
Money Market Funds: No sales charges
- Shareholder servicing fees of 0.25% of average daily net assets.
CLASS B SHARES
- No front-end sales charge; all your money goes to work for you right away.
- All Class B Shares pay a shareholder servicing fee of 0.25% of average
daily net assets. With respect to all Funds that participated in the
ISG/AmSouth combination, this fee is in the form of a separate non-Rule
12b-1 fee. With respect to all other AmSouth Funds, the fee is a component
of a 1.00% Rule 12b-1 fee. All Funds that participated in the ISG/AmSouth
combination bear a Rule 12b-1 fee of 0.75%. Despite the above described
differences in the legal character of shareholder servicing fees, all B
Shares are subject to the same 1.00% aggregate fees for distribution and
shareholder services.
- A deferred sales charge, as described below.
- Automatic conversion to Class A Shares after eight years, thus reducing
future annual expenses.
- Maximum investment for all Class B purchases: $250,000.
- PRIME MONEY MARKET FUND: Class B Shares of the Prime Money Market Fund are
only available through exchange of Class B Shares of another AmSouth Fund
or if you participate in the Automatic Exchange program (see page 80).
For actual past expenses of each share class, see the fund-by-fund
information earlier in this prospectus.
Because 12b-1 fees are paid on an ongoing basis, Class B shareholders could
end up paying more expenses over the long term than if they had paid a sales
charge.
TRUST SHARES
- No sales charges.
- No Distribution and service (12b-1) fees.
- Available only to the following investors:
- investors for whom AmSouth acts in a fiduciary, advisory, custodial,
agency or similar capacity through an account with its Trust Department;
- investors who purchase Shares of a Fund through a 401(k) plan or a 403(b)
plan which by its terms permits purchases of Shares;
- orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies;
- investors who purchase through financial institutions approved by the
Distributor; and
- investors who provide an AmSouth Fund with its initial seed capital. All
other investors are eligible to purchase Class A Shares or Class B Shares
only.
- shareholder servicing fee of up to 0.15% of average daily net assets.
113
<PAGE> 117
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
-------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by adding
the total value of the Fund's
investments and other assets,
subtracting its liabilities and
then dividing that figure by
the number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
-------------------------------
Number of Shares
Outstanding
Generally, for other than the
Money Market Funds, you can
find the Fund's NAV daily in
The Wall Street Journal and
other newspapers. NAV is
calculated separately for each
class of shares.
-------------------------------
MONEY MARKET FUNDS
Per share net asset value (NAV) for each Fund is determined and its shares are
priced twice a day. The NAV for the Prime
Money Market Fund, the Treasury Reserve
Money Market Fund, and the U.S. Treasury
Money Market Fund is determined at 1:00
p.m. Eastern time and at the close of
regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern
time on days the Exchange and the Federal
Reserve Bank of Atlanta are open. The NAV
for the Tax-Exempt Money Market Fund is
determined at 12:00 p.m. Eastern time and
at the close of regular trading on the New
York Stock Exchange.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is received.
This is what is known as the offering
price.
Each Fund uses the amortized cost method of valuing its investments, which does
not take into account unrealized gains or
losses. For further information regarding
the methods used in valuing the Fund's
investments, please see the SAI.
OTHER FUNDS
Per share net asset value (NAV) for each Fund is determined and its shares are
priced at the close of regular trading on
the New York Stock Exchange, normally at
4:00 p.m. Eastern time on days the
Exchange and the Federal Reserve Bank of
Atlanta are open.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by
the Fund less any applicable sales charge
as noted in the section on "Distribution
Arrangements/Sales Charges." This is what
is known as the offering price. For
further information regarding the methods
used in valuing the Fund's investments,
please see the SAI.
The Fund's securities are generally valued at current market prices. If market
quotations are not available, prices will
be based on fair value as determined by
the Fund's Trustees. For further
information regarding the methods used in
valuing the Fund's investments, please see
the SAI.
114
<PAGE> 118
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
You may purchase Funds through
the Distributor or through
banks, brokers and other
investment representatives,
which may charge additional
fees and may require higher
minimum investments or impose
other limitations on buying
and selling shares.
Additionally, banks, brokers
and other financial
institutions and
representatives may use shares
of the Money Market Funds in
"sweep" programs whereby the
accounts of a participating
customer of the financial
institution or representative
is automatically "swept" into
shares of one of the Money
Market Funds. If you purchase
shares through an investment
representative, that party is
responsible for transmitting
orders by close of business
and may have an earlier
cut-off time for purchase and
sale requests. Consult your
investment representative or
institution for specific
information.
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Class A or Class B
----------------------------------------------------------
Regular $1,000 $0
----------------------------------------------------------
Automatic Investment Plan $1,000 $50
----------------------------------------------------------
Trust
----------------------------------------------------------
Regular $1,000 $0
----------------------------------------------------------
Retirement $250 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that
do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement. The Distributor may reject
a purchase order if it considers it in
the best interest of the Fund and its
shareholders.
----------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of
taxable dividends, capital gains
distributions and redemptions paid to
shareholders who have not provided the
Fund with their certified taxpayer
identification number in compliance with
IRS rules. To avoid this, make sure you
provide your correct Tax Identification
Number (Social Security Number for most
investors) on your account application.
----------------------------------------
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
You may purchase Trust Shares by
following the procedures
established by the Distributor in
connection with the requirements
of qualified accounts maintained
by AmSouth Bank or other
financial institutions approved
by the Distributor. These
procedures may include sweep
arrangements where an account is
"swept" automatically no less
frequently than weekly into Trust
Shares of a Money Market Fund.
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in the Account Application, you can elect to
receive your distributions in cash
(check) or have distributions
(capital gains and dividends)
reinvested in another AmSouth Fund
without a sales charge. You must
maintain the minimum balance in each
Fund into which you plan to reinvest
dividends or the reinvestment will be
suspended and your dividends paid to
you. The Fund may modify or terminate
this reinvestment option without
notice. You can change or terminate
your participation in the
reinvestment option at any time.
115
<PAGE> 119
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Income dividends are usually paid monthly. Capital gains are distributed at
least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
-----------------------------------------------------------------------------
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT -- CLASS A SHARES AND CLASS
B SHARES
BY REGULAR MAIL
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases, follow the instructions below.
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "AmSouth Funds."
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
- AmSouth Funds/Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
4. Send to: AmSouth Funds
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road, Columbus, OH 43219.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a U. S. Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-451-8382. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-451-8382 to arrange a transfer from your bank account.
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.
QUESTIONS?
Call 800-451-8382 or your
investment representative.
116
<PAGE> 120
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
For initial investment:
Fax the completed application, along with a request for a confirmation number
to 1-800-451-8382. Follow the instructions below after receiving your
confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
AmSouth Bank
Routing Number: ABA #044000024
DDA#
Include:
Your name
Your confirmation number
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 1-800-451-8382 TO ADVISE
US OF THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK.
--------------------------------------
YOU CAN ADD TO YOUR ACCOUNT BY USING
THE CONVENIENT OPTIONS DESCRIBED
BELOW. THE FUND RESERVES THE RIGHT TO
CHANGE OR ELIMINATE THESE PRIVILEGES
AT ANY TIME WITH 60 DAYS NOTICE.
--------------------------------------
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in
the Funds from your bank account,
through payroll deduction or from your
federal employment, Social Security or
other regular government checks.
Automatic investments can be as little
as $50, once you've invested the
$1,000 minimum required to open the
account.
To invest regularly from your bank
account:
- Complete the Automatic Investment
Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and
account number
- The amount you wish to invest
automatically (minimum $50)
- How often you want to invest
(every month, 4 times a year,
twice a year or once a year)
- Attach a voided personal check.
To invest regularly from your paycheck
or government check:
Call 1-800-451-8382 for an enrollment
form or consult the SAI for additional
information.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A Shares than for Class B Shares, because
Class A Shares have lower distribution expenses. Income dividends are usually
paid monthly. Capital gains are distributed at least annually.
Distributions are made on a per share basis regardless of how long you've
owned your shares. Therefore, if you invest shortly before the distribution
date, some of your investment will be returned to you in the form of a
distribution.
-----------------------------------------------------------------------------
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in the Account Application, you can elect to
receive your distributions in
cash (check) or have
distributions (capital gains and
dividends) reinvested in another
AmSouth Fund without a sales
charge. You must maintain the
minimum balance in each Fund into
which you plan to reinvest
dividends or the reinvestment
will be suspended and your
dividends paid to you. The Fund
may modify or terminate this
reinvestment option without
notice. You can change or
terminate your participation in
the reinvestment option at any
time.
117
<PAGE> 121
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is received by
the Fund, its transfer agent,
or your investment
representative. Normally you
will receive your proceeds
within a week after your
request is received. See
section on "General Policies
on Selling Shares below."
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
1. Call 1-800-451-8382 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on
Selling Shares -- Verifying Telephone Redemptions" below.)
BY MAIL
1. Call 1-800-451-8382 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: AmSouth Funds, P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE (SEE "GENERAL POLICIES ON SELLING SHARES - REDEMPTIONS
IN WRITING REQUIRED" BELOW.)
1. See instruction 1 above.
2. Send to AmSouth Funds, c/o BISYS Fund Services, Attn: T.A. Operations,
3435 Stelzer Road, Columbus, OH 43219
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also
known as redeeming shares or a redemption of
shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B Shares, you will be charged a fee for any shares that
have not been held for a sufficient length of
time. These fees will be deducted from the
money paid to you. See the section on
"Distribution Arrangements/Sales Charges"
below for details.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser
and/or broker may have transaction minimums
and/or transaction times which will affect
your redemption. For all other sales
transactions, follow the instructions below.
118
<PAGE> 122
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must indicate this option on your application.
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
Call 1-800-451-8382 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Your bank may charge for this service.
Call 1-800-451-8382 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 7 days.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $25. To activate this
feature:
- Make sure you have 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.
REDEMPTION BY CHECK WRITING
PRIME MONEY MARKET FUND ONLY
You may write checks in amounts of $1,000 or more on your account in the
Prime Money Market Fund. To obtain checks, complete the signature card
section of the account application or contact the Fund to obtain a signature
card. Dividends and distributions will continue to be paid up to the day the
check is presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum
required account balance in the Prime Money Market Fund of $1,000 and you may
not close your Fund account by writing a check.
119
<PAGE> 123
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing and obtain a signature guarantee if:
- The check is not being mailed to the address on your account; or
- The check is not being made payable to the owner of the account.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50, the Fund may ask you to increase your
balance. If it is still below $50 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the appropriate Fund.
120
<PAGE> 124
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A Shares are sold at their public offering price. This price equals NAV
plus the initial sales charge, if applicable. Therefore, part of the money
you invest will be used to pay the sales charge. The remainder is invested in
Fund shares. The sales charge decreases with larger purchases. There is no
sales charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
FOR THE CAPITAL APPRECIATION FUNDS, THE AGGRESSIVE GROWTH PORTFOLIO, GROWTH
PORTFOLIO, GROWTH AND INCOME PORTFOLIO, AND MODERATE GROWTH AND INCOME
PORTFOLIO
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
YOUR AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $49,999 4.50% 4.71%
------------------------------------------------------------------------
$50,000 up to $99,999 4.00% 4.17%
------------------------------------------------------------------------
$100,000 up to $249,999 3.00% 3.09%
------------------------------------------------------------------------
$250,000 up to $499,999 2.00% 2.04%
------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00%
</TABLE>
FOR THE INCOME FUNDS AND THE CURRENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
YOUR AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT
<S> <C> <C>
Up to $99,999 4.00% 4.17%
------------------------------------------------------------------------
$100,000 up to $249,999 3.00% 3.09%
------------------------------------------------------------------------
$250,000 up to $499,999 2.00% 2.04%
------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00%
</TABLE>
FOR THE MONEY MARKET FUNDS
No sales charges.
(1) There is no initial sales charge on purchases of $1 million or more.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of the
purchase price will be charged to the shareholder if shares are redeemed in
the first year after purchase. This charge will be based on the lower of your
cost for the shares or their NAV at the time of redemption. There will be no
CDSC on reinvested distributions. The Distributor will provide additional
compensation in an amount up to 1.00% of the offering price of Class A Shares
of the Funds for sales of $1 million to $3 million. For sales over $3
million, the amount of additional compensation will be negotiated.
121
<PAGE> 125
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE*
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
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.
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 B Shares acquired in the combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC, charged if such 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. These shares will automatically convert to
Class A Shares of the same Fund after seven years from the end of the month
of purchase.
122
<PAGE> 126
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A Shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced
sales charges under the following circumstances.
- LETTER OF INTENT. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
- RIGHTS OF ACCUMULATION. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- COMBINATION PRIVILEGE. Combine accounts of multiple Funds (excluding the
Money Market Funds) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
The following qualify for waivers of sales charges:
- Shares purchased by investment representatives through fee-based
investment products or accounts.
- Shares purchased with proceeds from redemptions from another mutual fund
complex within 30 days after redemption, if you paid a front end sales
charge for those shares.
- Shares purchased upon the reinvestment of dividend and capital gain
distributions.
- Shares purchased by investors through a payroll deduction plan.
- Shares purchased by officers, directors, trustees, employees, retired
employees, and their immediate family members of AmSouth Bancorporation,
its affiliates and BISYS Fund Services and its affiliates and the
sub-advisers of the Funds and their affiliates.
- Shares purchased by employees and their immediate family members of
dealers who have an agreement with the Distributor.
- Shares purchased by former Plan Participants using proceeds from
distributions of AmSouth Bank 401(K) plans.
The Distributor may also waive the sales charge at anytime in its own
discretion. Consult the SAI for more details concerning sales charges
waivers.
REINSTATEMENT PRIVILEGE
If you have sold Class A Shares and decide to reinvest in the Fund
within a 90 day period, you will not be charged the applicable sales
charge on amounts up to the value of the shares you sold. You must
provide a written request for reinstatement and payment within 90 days
of the date your instructions to sell were processed.
123
<PAGE> 127
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The CDSC will be waived under certain circumstances, including the following:
- Redemptions from accounts following the death or disability of the
shareholder.
- Returns of excess contributions to retirement plans.
- Distributions of less than 10% of the annual account value under a
Systematic Withdrawal Plan.
- Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
DISTRIBUTION AND SERVICE (12B-1) FEES AND SHAREHOLDER SERVICING FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Fund's shares and/or for providing shareholder services.
Shareholder servicing fees compensate financial institutions that provide
shareholder services to their customers and account holders. 12b-1 and
shareholder servicing fees are paid from Fund assets on an ongoing basis, and
will increase the cost of your investment.
- The 12b-1 and shareholder servicing fees vary by share class as follows:
- Trust Shares pay a shareholder servicing fee of up to 0.15% of the
average daily net assets of a Fund.
- Class A Shares pay a non-Rule 12b-1 shareholder servicing fee of up to
.25% of the average daily net assets of a Fund.
- All Class B Shares pay a shareholder servicing fee of 0.25% of average
daily net assets. With respect to all Funds that participated in the
ISG/AmSouth combination, this fee is in the form of a separate non-Rule
12b-1 fee. With respect to all other AmSouth Funds, the fee is a
component of a 1.00% Rule 12b-1 fee. All Funds that participated in the
ISG/AmSouth combination bear a Rule 12b-1 fee of 0.75%. Despite the
above-described differences in the legal character of shareholder
servicing fees, all B Shares are subject to the same 1.00% aggregate
fees for distribution and shareholder services. These aggregate fees
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.
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.
124
<PAGE> 128
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in
one Fund for shares of the same
class of another AmSouth Fund,
usually without paying additional
sales charges (see "Notes"
below). You must meet the minimum
investment requirements for the
Fund into which you are
exchanging. Exchanges from one
Fund to another are taxable.
Class A Shares may also be
exchanged for Trust Shares of the
same Fund if you become eligible
to purchase Trust Shares. No
transaction fees are currently
charged for exchanges.
AUTOMATIC EXCHANGES -- CLASS A
SHARES AND CLASS B SHARES
You can use the Funds' Automatic
Exchange feature to purchase
shares of the Funds at regular
intervals through regular,
automatic redemptions from the
AmSouth Prime Money Market Fund.
To participate in the Automatic
Exchange:
- Complete the appropriate
section of the Account
Application.
- Keep a minimum of $10,000 in
the AmSouth Prime Money
Market Fund and $1,000 in the
Fund whose shares you are
buying.
To change the Automatic Exchange
instructions or to discontinue
the feature, you must send a
written request to AmSouth Funds,
P.O. Box 182733, Columbus, Ohio
43218-2733.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to AmSouth Funds, P.O. Box
182733, Columbus OH 43218-2733, or by
calling 1-800-451-8382. Please provide the
following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be
limited to four exchanges from a Fund
during a calendar year.
NOTES ON EXCHANGES
- When exchanging Trust Shares of a Fund for Class A Shares of a Fund, you
will be exempt from any applicable sales charge.
- 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.
125
<PAGE> 129
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Please consult your tax adviser regarding your specific questions about
federal, state and local income taxes. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.
Each Fund distributes any net investment income monthly and any net realized
capital gains at least once a year. All distributions will be automatically
reinvested in additional Fund Shares unless you request to receive all
distributions in cash.
Generally, for federal income tax purposes, Fund distributions are taxable as
ordinary income, except that distributions of long-term capital gains will be
taxed as such regardless of how long you have held your shares. Distributions
are taxable whether you received them in cash or in additional shares.
Distributions are also taxable to you even if they are paid from income or
gains earned by the Fund before your investment (and thus were included in
the price you paid).
For the Florida Tax-Exempt Fund, Municipal Bond Fund, Tennessee Tax-Exempt
Fund, Limited Term Tennessee Tax-Exempt Fund, and Tax-Exempt Money Market
Fund, the income dividends that you receive are expected to be exempt from
federal income taxes and, in the case of the Florida Tax-Exempt Fund, Florida
intangible taxes and in the case of the Tennessee Tax-Exempt Fund and the
Limited Term Tennessee Tax-Exempt Fund, Tennessee personal income taxes.
However, if you receive social security or railroad retirement benefits, you
should consult your tax adviser to determine what effect, if any, an
investment in the Florida Tax-Exempt Fund, Municipal Bond Fund, Tennessee
Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt Fund, or Tax-Exempt Money
Market Fund may have on the federal taxation of your benefits. In addition,
an investment in the Florida Tax-Exempt Fund, Municipal Bond Fund, Tennessee
Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt Fund, or Tax-Exempt Money
Market Fund may result in liability for federal alternative minimum tax, both
for individual and corporate shareholders.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would be
decreased. Shareholders generally will not be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate a Fund's
recognition of ordinary income and may affect the timing or amount of a
Fund's distributions.
Any gain resulting from the sale or exchange of your Fund Shares (even if the
income from which is tax exempt) will generally be subject to tax. You should
consult your tax adviser for more information on your own tax situation,
including possible state and local taxes.
AmSouth Funds will send you a statement each year showing the tax status of
all your distributions.
- For each Fund, other than the Florida Tax-Exempt Fund, Municipal Bond Fund,
Tennessee Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt Fund, and
Tax-Exempt Money Market Fund, the dividends and short-term capital gains
that you receive are considered ordinary income for tax purposes. For the
Florida Tax-Exempt Fund, Municipal Bond Fund, Tennessee Tax-Exempt Fund,
Limited Term Tennessee Tax-Exempt Fund, and Tax-Exempt Money Market Fund,
any short-term capital gains that you receive are taxable to you as
ordinary dividend income for Federal income tax purposes.
- Any distributions of net long-term capital gains by a Fund are taxable to
you as long-term capital gains for tax purposes, no matter how long you've
owned shares in the Fund.
- Generally, the Funds' advisers do not consider taxes when deciding to buy
or sell securities. Capital gains are realized from time to time as
by-products of ordinary investment activities. Distributions may vary
considerably from year to year.
- If you sell or exchange shares, any gain or loss you have is a taxable
event. This means that you may have a capital gain to report as income, or
a capital loss to report as a deduction, when you complete your federal
income tax return.
- Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account
such as an IRA or a qualified employee benefit plan. (Non-U.S. investors may
be subject to U.S. withholding and estate tax.)
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
126
<PAGE> 130
[LOGO]
OTHER INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or, if shorter, the period of the
Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information pertaining
to the Capital Growth Fund, Large Cap Fund, Mid Cap Fund, International
Equity Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth and Income
Portfolio, Moderate Growth and Income Portfolio, Current Income Portfolio,
Limited Term U.S. Government Fund, Tennessee Tax-Exempt Fund, Limited Term
Tennessee Tax-Exempt Fund, and U.S. Treasury Money Market Fund has been
audited by KPMG LLP. The other information included herein, has been audited
by PriceWaterhouseCoopers LLP. The reports of KPMG LLP and
PriceWaterhouseCoopers LLP, along with the Fund's financial statements, are
incorporated by reference in the SAI, which is available upon request.
127
<PAGE> 131
VALUE FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY EQUITY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------------------ --------------
A SHARES B SHARES TRUST A SHARES (a)
------------ ---------- -------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $24.60 $24.55 $24.57 $23.35
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.20 0.02 0.26 0.21
Net realized and unrealized gains (losses)
from investments 3.11 3.10 3.16 2.54
----------------------------------------------------------------------------------------------------
Total from Investment Activities 3.31 3.12 3.42 2.75
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.19) (0.06) (0.25) (0.25)
Net realized gains from investment
transactions (2.47) (2.47) (2.47) (1.25)
----------------------------------------------------------------------------------------------------
Total Distributions (2.66) (2.53) (2.72) (1.50)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $25.25 $25.14 $25.27 $24.60
----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.92% 14.03% 15.43% 12.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $70,740 $12,394 $960,660 $73,165
Ratio of expenses to average net assets 1.33% 2.08% 1.08% 1.19%
Ratio of net investment income to average
net assets 0.82% 0.05% 1.07% 0.89%
Ratio of expenses to average net assets* 1.34% 2.09% 1.09% 1.19%
Portfolio Turnover(e) 17.65% 17.65% 17.65% 16.95%
<CAPTION>
YEAR ENDED
JULY 31, 1998
----------------------------
B SHARES (b) TRUST (a)
-------------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $23.15 $22.51
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.09 0.28
Net realized and unrealized gains (losses)
from investments 2.68 3.31
-------------------------------------------------------------------------------------------
Total from Investment Activities 2.77 3.59
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.12) (0.28)
Net realized gains from investment
transactions (1.25) (1.25)
----------------------------------------------------------------------------------------------------
Total Distributions (1.37) (1.53)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $24.55 $24.57
----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 12.49%(c) 12.46%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $7,929 $947,575
Ratio of expenses to average net assets 2.11%(d) 1.09%(d)
Ratio of net investment income to average
net assets 0.26%(d) 1.26%(c)
Ratio of expenses to average net assets* 2.11%(d) 1.10%(c)
Portfolio Turnover(e) 16.95% 16.95%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations) to
July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of
Premier Shares for the period from September 2, 1997 to July 31, 1998.
Total return for the Premier Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 16.52%.
128
<PAGE> 132
OTHER INFORMATION ABOUT THE FUNDS VALUE FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.62 $ 16.75 $ 14.82
-----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.30 0.33 0.33
Net realized and unrealized gains (losses)
from investments 6.77 1.48 2.39
-----------------------------------------------------------------------------------
Total from Investment Activities 7.07 1.81 2.72
-----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.30) (0.33) (0.32)
Net realized gains from investment
transactions (1.04) (0.61) (0.47)
-----------------------------------------------------------------------------------
Total Distributions (1.34) (0.94) (0.79)
-----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.35 $ 17.62 $ 16.75
-----------------------------------------------------------------------------------
Total Return (excludes sales charge) 42.35% 11.09% 19.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 974,985 $ 374,622 $ 275,757
Ratio of expenses to average net assets 1.06% 1.02% 1.03%
Ratio of net investment income to average
net assets 1.52% 1.86% 2.17%
Ratio of expenses to average net assets* 1.10% 1.11% 1.11%
Portfolio Turnover 24.47% 19.11% 19.46%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
129
<PAGE> 133
GROWTH FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY CAPITAL GROWTH FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1999
---------------------------------
A SHARES B SHARES TRUST
-------- ------------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.62 $11.54 $ 11.65
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.06) (0.12) (0.02)
Net realized and unrealized gains (losses)
from investments 2.57 2.52 2.57
--------------------------------------------------------------------------------
Total from Investment Activities 2.51 2.40 2.55
--------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- --
Net realized gains from investment
transactions (0.09) (0.09) (0.09)
--------------------------------------------------------------------------------
Total Distributions (0.09) (0.09) (0.09)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.04 $13.85 $ 14.11
--------------------------------------------------------------------------------
Total Return (excludes sales charge) 21.76% 20.96% 22.05%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $14,040 $7,463 $18,055
Ratio of expenses to average net assets 1.23% 1.97% 0.96%
Ratio of net investment income to average
net assets (0.50)% (1.26)% (0.28)%
Ratio of expenses to average net assets* 1.74% 2.48% 1.47%
Portfolio Turnover (e) 79.30% 79.30% 79.30%
<CAPTION>
AUGUST 3, 1997
TO JULY 31, 1998 (f)
------------------------------------------------
A SHARES (a) B SHARES (b) TRUST (a)(f)
------------ ---------------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 9.82 $ 9.55
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.03) (0.06) --
Net realized and unrealized gains (losses)
from investments 1.65 1.78 2.10
--------------------------------------------------------------------------------
Total from Investment Activities 1.62 1.72 2.10
--------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- --
Net realized gains from investment
transactions -- -- --
--------------------------------------------------------------------------------
Total Distributions -- -- --
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.62 $11.54 $11.65
--------------------------------------------------------------------------------
Total Return (excludes sales charge) 16.20%(c) 17.52%(c) 16.50%(g)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $9,720 $3,477 $2,824
Ratio of expenses to average net assets 1.40%(d) 2.05%(d) 0.99%(d)
Ratio of net investment income to average
net assets (0.42)%(d) (1.10)%(d) 0.00%(d)
Ratio of expenses to average net assets* 2.37%(d) 3.11%(d) 2.05%(d)
Portfolio Turnover (e) 77.26% 77.26% 77.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations.
(g) Represents total return based on the activity of Classic Shares for the
period from August 4, 1997 to September 1, 1997 and the activity of
Premier Shares for the period from September 2, 1997 to July 31, 1998.
Total return for the Premier Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 21.99%.
130
<PAGE> 134
OTHER INFORMATION ABOUT THE FUNDS CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------- DECEMBER 31,
1999 1998 1997 1996 (a)
------- ------ ------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.20 $12.80 $11.32 $ 10.00
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.04) (0.01) 0.06 --
Net realized and unrealized gains (losses)
from investments 2.97 3.89 3.40 1.32
---------------------------------------------------------------------------------------
Total from Investment Activities 2.93 3.88 3.46 1.32
---------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- (0.06) --
Net realized gains (2.76) (2.48) (1.92) --
---------------------------------------------------------------------------------------
Total Distributions (2.76) (2.48) (1.98) --
---------------------------------------------------------------------------------------
Net change in asset value 0.17 1.40 1.48 1.32
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.37 $14.20 $12.80 $ 11.32
---------------------------------------------------------------------------------------
Total Return (excludes sales charge) 21.85% 32.05% 30.79% 13.20%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $10,310 $4,631 $ 858 $49,008
Ratio of expenses to average net assets 1.32% 1.28% 0.93% 1.20%(c)
Ratio of net investment income to average
net assets (0.33)% (0.19)% 0.42% (0.02)%(c)
Ratio of expenses to average net assets* 1.33% 1.29% 1.18% 1.39%(c)
Portfolio Turnover** 178% 152% 116% 69%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from April 1, 1996 (commencement of operations) through
December 31, 1996.
(b) Not annualized.
(c) Annualized.
131
<PAGE> 135
OTHER INFORMATION ABOUT THE FUNDS CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 + 1998 (a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.92 $13.10
------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.14) (0.05)
Net realized and unrealized gains (losses) from
investments 2.91 3.35
------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.77 3.30
------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net realized gains (2.76) (2.48)
------------------------------------------------------------------------------------------------------------
Total Distributions (2.76) (2.48)
------------------------------------------------------------------------------------------------------------
Net change in asset value 0.01 0.82
------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.93 $13.92
------------------------------------------------------------------------------------------------------------
Total Return (excludes redemption charge) 21.11% 26.86%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $7,704 $2,854
Ratio of expenses to average net assets 1.92% 2.04%(c)
Ratio of net investment income to average net assets (0.93)% (0.95)%(c)
Ratio of expenses to average net assets* 1.93% (d)
Portfolio Turnover** 178% 152%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
+ Net investment income (loss) is based on average shares outstanding during
the period.
(a) For the period from February 5, 1998 (commencement of operations) through
December 31, 1998.
(b) Not annualized.
(c) Annualized.
(d) There were no fee reductions for this period.
132
<PAGE> 136
OTHER INFORMATION ABOUT THE FUNDS CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------------------ DECEMBER 31,
1999 1998 1998 (a)
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.09 $ 12.69 $ 14.51
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.01) 0.01 0.02
Net realized and unrealized gains (losses) from
investments 2.95 3.88 0.10
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.94 3.89 0.12
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- (0.01) (0.02)
Net realized gains (2.76) (2.48) (1.92)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.76) (2.49) (1.94)
-----------------------------------------------------------------------------------------------------------------------------
Net change in asset value 0.18 1.40 (1.82)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.27 $ 14.09 12.69
-----------------------------------------------------------------------------------------------------------------------------
Total Return 22.09% 32.40% 0.88%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $241,810 $173,542 $141,761
Ratio of expenses to average net assets 1.07% 1.02% 0.58%(c)
Ratio of net investment income to average net
assets (0.09)% 0.07% 0.80%(c)
Ratio of expenses to average net assets* 1.08% 1.03% 0.99%(c)
Portfolio Turnover** 178% 152% 116%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
(b) Not annualized.
(c) Annualized.
133
<PAGE> 137
OTHER INFORMATION ABOUT THE FUNDS LARGE CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED FEBRUARY 28,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1999 1998 (a) 1998 1997 1996 1995
------------ ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.55 $ 23.01 16.68 $ 14.49 $ 11.41 $ 10.87
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.03 0.05 0.11 0.14 0.16 0.16
Net realized and unrealized gains (losses)
from investments 5.07 5.79 6.48 2.54 3.63 0.71
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.10 5.84 6.59 2.68 3.79 0.87
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.03) (0.05) (0.11) (0.14) (0.17) (0.16)
Net realized gains (4.60) (1.25) (0.15) (0.35) (0.54) (0.17)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (4.63) (1.30) (0.26) (0.49) (0.71) (0.33)
----------------------------------------------------------------------------------------------------------------------
Net change in asset value 0.47 4.54 6.33 2.19 3.08 0.54
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 28.02 $ 27.55 $ 23.01 $ 16.68 $ 14.49 $ 11.41
----------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 18.85% 25.83%(b) 39.74% 18.79% 33.73% 8.23%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $79,211 $57,772 $715,631 $490,392 $385,145 $259,998
Ratio of expenses to average net assets 1.04% 1.03%(c) 0.99% 0.92% 0.94% 0.95%
Ratio of net investment income to average
net assets 0.12% 0.21%(c) 0.54% 0.95% 1.24% 1.54%
Ratio of expenses to average net assets* 1.39% 1.03%(c) (d) (d) (d) (d)
Portfolio Turnover** 15% 3% 6% 7% 15% 1%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from March 1, 1998 through December 31, 1998. In
conjunction with the reorganization of the ISG Funds, the Fund changed
its fiscal year end to December 31.
(b) Not annualized.
(c) Annualized.
(d) There were no fee reductions in this period.
134
<PAGE> 138
OTHER INFORMATION ABOUT THE FUNDS LARGE CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
-------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 + 1998 (a)
------------ -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.54 $25.98
-------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.23) --
Net realized and unrealized gains (losses) from
investments 5.04 1.56
-------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.81 1.56
-------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net realized gains (4.60) --
-------------------------------------------------------------------------------------------------------------
Total Distributions (4.60) --
-------------------------------------------------------------------------------------------------------------
Net change in asset value 0.21 1.56
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.75 $27.54
-------------------------------------------------------------------------------------------------------------
Total Return (excludes redemption charge) 17.78% 6.02%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $18,584 $ 100
Ratio of expenses to average net assets 1.98% 1.10%(c)
Ratio of net investment income to average net assets (0.79)% (0.23)%(c)
Ratio of expenses to average net assets* 2.00% 2.11%(c)
Portfolio Turnover** 15% 3%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
+ Net investment income (loss) is based on average shares outstanding during
the period.
(a) For the period from December 15, 1998 (commencement of operations)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
135
<PAGE> 139
OTHER INFORMATION ABOUT THE FUNDS LARGE CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
-------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
------------ -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.54 $ 25.52
-------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.03 --
Net realized and unrealized gains (losses) from
investments 5.07 2.02
-------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.10 2.02
-------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.03) --
Net realized gains (4.60) --
-------------------------------------------------------------------------------------------------------------
Total Distributions (4.63) --
-------------------------------------------------------------------------------------------------------------
Net change in asset value 0.47 2.02
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 28.01 $ 27.54
-------------------------------------------------------------------------------------------------------------
Total Return 18.84% 7.92%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $706,313 $786,462
Ratio of expenses to average net assets 1.04% 1.04%(c)
Ratio of net investment income to average net assets 0.11% 0.20%(c)
Ratio of expenses to average net assets* 1.14% 1.09%(c)
Portfolio Turnover** 15% 3%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from December 14, 1998 (commencement of operations)
through December 13, 1998.
(b) Not annualized.
(c) Annualized.
136
<PAGE> 140
OTHER INFORMATION ABOUT THE FUNDS MID CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)+
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.14)
Net realized and unrealized gains (losses) from
investments 7.47
------------------------------------------------------------------------
Total from Investment Activities 7.33
------------------------------------------------------------------------
Net change in asset value 7.33
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.33
------------------------------------------------------------------------
Total Return (excludes sales charge) 73.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,357
Ratio of expenses to average net assets 2.28%(c)
Ratio of net investment income to average net assets (1.62)%(c)
Ratio of expenses to average net assets* 2.29%(c)
Portfolio Turnover** 20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
+ Net investment income (loss) is based on average shares outstanding during
the period.
(a) For the period from May 4, 1999 (commencement of operations) through
December 31, 1999.
(b) Not annualized.
(c) Annualized.
137
<PAGE> 141
OTHER INFORMATION ABOUT THE FUNDS MID CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
---------------
PERIOD ENDED
DECEMBER 31,
1999 (a)+
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.19)
Net realized and unrealized gains (losses) from
investments 7.47
-------------------------------------------------------------------------
Total from Investment Activities 7.28
-------------------------------------------------------------------------
Net change in asset value 7.28
-------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.28
-------------------------------------------------------------------------
Total Return (excludes redemption charge) 72.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,177
Ratio of expenses to average net assets 2.86%(c)
Ratio of net investment income to average net assets (2.17)%(c)
Ratio of expenses to average net assets* 2.86%(c)
Portfolio Turnover** 20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
+ Net investment income (loss) is based on average shares outstanding during
the period.
(a) For the period from May 4, 1999 (commencement of operations) through
December 31, 1999.
(b) Not annualized.
(c) Annualized.
138
<PAGE> 142
OTHER INFORMATION ABOUT THE FUNDS MID CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
--------------------
PERIOD ENDED
DECEMBER 31,
1999 (a)+
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.12)
Net realized and unrealized gains (losses) from
investments 7.49
------------------------------------------------------------------------------
Total from Investment Activities 7.37
------------------------------------------------------------------------------
Net change in asset value 7.37
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.37
------------------------------------------------------------------------------
Total Return 73.70%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $37,186
Ratio of expenses to average net assets 2.18%(c)
Ratio of net investment income to average net assets (1.47)%(c)
Ratio of expenses to average net assets* 2.18%(c)
Portfolio Turnover** 20%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
+ Net investment income (loss) is based on average shares outstanding during
the period.
(a) For the period from May 4, 1999 (commencement of operations) through
December 31, 1999.
(b) Not annualized.
(c) Annualized.
139
<PAGE> 143
OTHER INFORMATION ABOUT THE FUNDS SMALL CAP FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1999
-----------------------------------------
A SHARES B SHARES TRUST
------------ ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.14 $ 9.11 $ 9.15
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.10) (0.14) (0.03)
Net realized and unrealized gains (losses)
from investments (0.64) (0.66) (0.68)
----------------------------------------------------------------------------------------
Total from Investment Activities (0.74) (0.80) (0.71)
----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.40 $ 8.31 $ 8.44
----------------------------------------------------------------------------------------
Total Return (excludes sales charge) (8.10)% (8.78)% (7.76)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 1,073 $ 929 $ 21,777
Ratio of expenses to average net assets 1.66% 2.41% 1.39%
Ratio of net investment income to average
net assets (1.07)% (1.83)% (0.82)%
Ratio of expenses to average net assets* 2.68% 3.42% 2.38%
Portfolio Turnover(e) 208.13% 208.13% 208.13%
<CAPTION>
MARCH 2, 1998
TO JULY 31, 1998 (a)
-----------------------------------------
A SHARES (b) B SHARES TRUST
-------------- -------------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.97 $ 10.00 $10.00
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.03) (0.04) (0.02)
Net realized and unrealized gains (losses)
from investments (0.80) (0.85) (0.83)
----------------------------------------------------------------------------------------
Total from Investment Activities (0.83) (0.89) (0.85)
----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.14 $ 9.11 $ 9.15
----------------------------------------------------------------------------------------
Total Return (excludes sales charge) (8.31)%(c) (8.90)%(c) (8.48)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 1,372 $ 871 $5,072
Ratio of expenses to average net assets 1.78%(d) 2.54%(d) 1.50%(d)
Ratio of net investment income to average
net assets (0.92)%(d) (1.69)%(d) (0.52)%(d)
Ratio of expenses to average net assets* 4.23%(d) 4.98%(d) 3.94%(d)
Portfolio Turnover(e) 70.64% 70.64% 70.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) For the period from March 3, 1998 (commencement of operations) through
July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
140
<PAGE> 144
OTHER INFORMATION ABOUT THE FUNDS EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
--------------------------------------- --------------
A SHARES B SHARES TRUST A SHARES (a)
------------ ---------- ----------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.89 $ 11.86 $ 11.89 $ 11.72
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.17 0.07 0.19 0.24
Net realized and unrealized gains (losses)
from investments 1.46 1.47 1.47 0.59
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.63 1.54 1.66 0.83
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.16) (0.09) (0.19) (0.25)
Net realized gains from investment
transactions (0.26) (0.26) (0.26) (0.41)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.35) (0.45) (0.66)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.10 $ 13.05 $ 13.10 $ 11.89
-------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 14.17% 13.34% 14.43% 7.29%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 21,526 $ 7,919 $ 10,908 $ 26,686
Ratio of expenses to average net assets 1.41% 2.16% 1.16% 1.42%
Ratio of net investment income to average
net assets 1.37% 0.61% 1.59% 2.03%
Ratio of expenses to average net assets* 1.58% 2.33% 1.33% 1.57%
Portfolio Turnover(e) 133.74% 133.74% 133.74% 83.26%
<CAPTION>
YEAR ENDED
JULY 31, 1998
-----------------------------
B SHARES (b) TRUST (a)
-------------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.60 $ 11.35
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.15 0.25
Net realized and unrealized gains (losses)
from investments 0.68 0.95
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.83 1.20
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.16) (0.25)
Net realized gains from investment
transactions (0.41) (0.41)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.66)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.86 $ 11.89
-------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.26%(c) 7.54%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 7,733 $ 8,087
Ratio of expenses to average net assets 2.19%(d) 1.19%(d)
Ratio of net investment income to average
net assets 1.29%(d) 2.34%(d)
Ratio of expenses to average net assets* 2.35%(d) 1.35%(d)
Portfolio Turnover(e) 83.26% 83.26%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of
Premier Shares for the period from September 2, 1997 to July 31, 1998.
Total return for the Premier Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 10.82%.
141
<PAGE> 145
OTHER INFORMATION ABOUT THE FUNDS EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
MARCH 20, 1997
TO JULY 31, 1997 (f)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.07
Net realized and unrealized gains (losses) from
investments 1.71
--------------------------------------------------------------------------------------------
Total from Investment Activities 1.78
--------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.06)
Net realized gains from investment transactions --
--------------------------------------------------------------------------------------------
Total Distributions (0.06)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.72
--------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 17.81%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 22,273
Ratio of expenses to average net assets 1.30%(d)
Ratio of net investment income to average net assets 2.13%(d)
Ratio of expenses to average net assets* 1.51%(d)
Portfolio Turnover(e) 27.38%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 3, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations.
142
<PAGE> 146
OTHER INFORMATION ABOUT THE FUNDS BALANCED FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------------------- --------------
A SHARES B SHARES TRUST A SHARES (a)
------------ ---------- --------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.19 $ 15.16 $ 15.18 $ 15.21
-----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.29 0.44 0.38
Net realized and unrealized gains (losses)
from investments 0.93 0.95 0.95 0.98
-----------------------------------------------------------------------------------------------------
Total from Investment Activities 1.34 1.24 1.39 1.36
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.40) (0.30) (0.44) (0.41)
Net realized gains from investment
transactions (1.20) (1.20) (1.20) (0.97)
-----------------------------------------------------------------------------------------------------
Total Distributions (1.60) (1.50) (1.64) (1.38)
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.93 $ 14.90 $ 14.93 $ 15.19
-----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 9.40% 8.66% 9.74% 9.54%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 43,223 $ 10,131 $ 319,016 $ 46,814
Ratio of expenses to average net assets 1.34% 2.09% 1.09% 1.24%
Ratio of net investment income to average
net assets 2.67% 1.93% 2.93% 2.77%
Ratio of expenses to average net assets* 1.35% 2.10% 1.10% 1.24%
Portfolio Turnover(e) 23.24% 23.24% 23.24% 25.40%
<CAPTION>
YEAR ENDED
JULY 31, 1998
----------------------------
B SHARES (b) TRUST (a)
-------------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.99 $ 14.77
-----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.28 0.41
Net realized and unrealized gains (losses)
from investments 1.15 1.38
-----------------------------------------------------------------------------------------------------
Total from Investment Activities 1.43 1.79
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.29) (0.41)
Net realized gains from investment
transactions (0.97) (0.97)
-----------------------------------------------------------------------------------------------------
Total Distributions (1.26) (1.38)
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.16 $ 15.18
-----------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 10.07%(c) 9.73%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 5,309 $ 329,626
Ratio of expenses to average net assets 2.12%(d) 1.10%(d)
Ratio of net investment income to average
net assets 1.83%(d) 2.95%(d)
Ratio of expenses to average net assets* 2.12%(d) 1.10%(d)
Portfolio Turnover(e) 25.40% 25.40%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 2, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Represents total return based on the activity of Classic Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of
Premier Shares for the period from September 2, 1997 to July 31, 1998.
Total return for the Premier Shares for the period from September 2, 1997
(commencement of operations) through July 31, 1998 was 12.70%.
143
<PAGE> 147
OTHER INFORMATION ABOUT THE FUNDS BALANCED FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.03 $ 12.76 $ 11.81
------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.48 0.47 0.47
Net realized and unrealized gains (losses)
from investments 2.78 0.58 1.24
------------------------------------------------------------------------------------
Total from Investment Activities 3.26 1.05 1.71
------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.50) (0.47) (0.46)
Net realized gains from investment
transactions (0.58) (0.31) (0.30)
------------------------------------------------------------------------------------
Total Distributions (1.08) (0.78) (0.76)
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.21 $ 13.03 $ 12.76
------------------------------------------------------------------------------------
Total Return (excludes sales charge) 26.42% 8.37% 15.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 372,769 $ 338,425 $ 295,509
Ratio of expenses to average net assets 1.05% 0.98% 0.94%
Ratio of net investment income to average
net assets 3.49% 3.61% 3.91%
Ratio of expenses to average net assets* 1.10% 1.11% 1.12%
Portfolio Turnover 25.00% 20.47% 16.97%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
144
<PAGE> 148
OTHER INFORMATION ABOUT THE FUNDS SELECT EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1999 (f)
-------------------------------------
A SHARES (a) B SHARES (b) TRUST (f)
------------ ------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.98 $ 11.52
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.04 0.02 0.04
Net realized and unrealized gains
(losses) from investments 1.91 1.86 0.38
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.95 1.88 0.42
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.05) (0.01) (0.03)
In excess of net investment income (0.01) (0.01) (0.01)
Net realized gains from investment
transactions (0.01) (0.01) (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.03) (0.05)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.88 $ 11.83 $ 11.89
-----------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 19.44%(c) 18.83%(c) 3.63%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 10,258 $ 1,933 $ 10,420
Ratio of expenses to average net assets 1.13%(d) 1.99%(d) 0.99%(d)
Ratio of net investment income to
average net assets 0.43%(d) (0.49)%(d) 0.65%(d)
Ratio of expenses to average net assets* 1.81%(d) 2.58%(d) 1.58%(d)
Portfolio Turnover(e) 9.72% 9.72% 9.72%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 1, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from September 2, 1998 (commencement of operations)
through July 31, 1999.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) For the period December 3, 1998 (commencement of operations) through July
31, 1999.
145
<PAGE> 149
OTHER INFORMATION ABOUT THE FUNDS ENHANCED MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1999 (f)
-------------------------------------
A SHARES (a) B SHARES (b) TRUST (f)
------------ ------------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.30 $12.18
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.09 0.03 0.07
Net realized and unrealized gains
(losses) from investments 3.89 3.55 1.71
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.98 3.58 1.78
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.09) (0.03) (0.07)
Net realized gains from investment
transactions (0.03) (0.03) (0.03)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.06) (0.10)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.86 $13.82 $13.86
-----------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 39.93%(c) 34.85%(c) 14.71%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $14,365 $6,132 $14,273
Ratio of expenses to average net assets 0.88%(d) 1.73%(d) 0.74%(d)
Ratio of net investment income to
average net assets 0.79%(d) (0.12)%(d) 0.90%(d)
Ratio of expenses to average net
assets* 1.52%(d) 2.28%(d) 1.29%(d)
Portfolio Turnover(e) 36.03% 36.03% 36.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 1, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from September 2, 1998 (commencement of operations)
through July 31, 1999.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) For the period December 1996 (commencement of operations) through July
31, 1999.
146
<PAGE> 150
OTHER INFORMATION ABOUT THE FUNDS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, FEBRUARY 28,
1999 1998 (a) 1998 (b)
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.58 $ 10.46 $ 10.00
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.02 0.03 (0.02)
Net realized and unrealized gains (losses) from
investments and foreign currencies 2.81 0.12 0.49
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.83 0.15 0.47
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.07) (0.03) --
In excess of net investment income (0.07) -- (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.03) (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Net change in asset value 2.69 0.12 0.46
NET ASSET VALUE, END OF PERIOD $ 13.27 $ 10.58 $ 10.46
-----------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 26.77% 1.42%(c) 4.71(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 1,033 $ 149 $ 26,533
Ratio of expenses to average net assets 1.59% 1.81%(d) 1.77%(d)
Ratio of net investment income to average net
assets 0.26% 0.71%(d) (0.48%(d)
Ratio of expenses to average net assets* 2.12% 2.16%(d) 2.27%(d)
Portfolio Turnover** 40% 62% 21%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from March 1, 1998 through December 31, 1998. In
conjunction with the reorganization of the ISG Funds, the Fund changed
its year end to December 31.
(b) For the period from August 15, 1997 (commencement of operations) through
February 28, 1998.
(c) Not annualized.
(d) Annualized.
147
<PAGE> 151
OTHER INFORMATION ABOUT THE FUNDS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
---------------
YEAR ENDED
DECEMBER 31,
1999 (a)
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.66
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.02)
Net realized and unrealized gains (losses) from
investments
and foreign currencies 2.69
-------------------------------------------------------------------------
Total from Investment Activities 2.67
-------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.06)
In excess of net investment income (0.06)
-------------------------------------------------------------------------
Total Distributions (0.12)
-------------------------------------------------------------------------
Net change in asset value 2.55
-------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.21
-------------------------------------------------------------------------
Total Return (excludes sales charge) 25.98%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) 228
Ratio of expenses to average net assets 2.45%(c)
Ratio of net investment income to average net assets (0.54)%(c)
Ratio of expenses to average net assets* 2.73%(c)
Portfolio Turnover** 40%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 2, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
148
<PAGE> 152
OTHER INFORMATION ABOUT THE FUNDS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.58 $ 10.05
------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.08 (0.01)
Net realized and unrealized gains (losses) from
investments and foreign currencies 2.75 0.54
------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.83 0.53
------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment income (0.07) --
In excess of net investment income (0.07) --
------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) --
------------------------------------------------------------------------------------------------------------
Net change in asset value 2.69 0.53
------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.27 $ 10.58
------------------------------------------------------------------------------------------------------------
Total Return 26.72% 5.27%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $46,104 $27,977
Ratio of expenses to average net assets 1.56% 1.61%(c)
Ratio of net investment income to average net assets 0.80% (1.47)%(c)
Ratio of expenses to average net assets* 1.84% 1.89%(c)
Portfolio Turnover** 40% 62%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from December 14, 1998 (commencement of operations)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
149
<PAGE> 153
OTHER INFORMATION ABOUT THE FUNDS AGGRESSIVE GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.09
Net realized and unrealized gains (losses) from
investments with affiliates 1.60
------------------------------------------------------------------------
Total from Investment Activities 1.69
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.11)
Net realized gains (0.04)
------------------------------------------------------------------------
Total Distributions (0.15)
------------------------------------------------------------------------
Net change in asset value 1.54
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.54
------------------------------------------------------------------------
Total Return (excludes sales charge) 16.92%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 450
Ratio of expenses to average net assets 0.96%(c)
Ratio of net investment income to average net assets 1.65%(c)
Ratio of expenses to average net assets* 6.10%(c)
Portfolio Turnover** 95%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 13, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
150
<PAGE> 154
OTHER INFORMATION ABOUT THE FUNDS AGGRESSIVE GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.03
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.07
Net realized and unrealized gains (losses) from
investments with affiliates 1.50
------------------------------------------------------------------------
Total from Investment Activities 1.57
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.09)
Net realized gains (0.04)
------------------------------------------------------------------------
Total Distributions (0.13)
------------------------------------------------------------------------
Net change in asset value 1.44
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.47
------------------------------------------------------------------------
Total Return (excludes redemption charge) 15.70%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 456
Ratio of expenses to average net assets 1.52%(c)
Ratio of net investment income to average net assets 0.92%(c)
Ratio of expenses to average net assets* 7.86%(c)
Portfolio Turnover** 95%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 27, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
151
<PAGE> 155
OTHER INFORMATION ABOUT THE FUNDS AGGRESSIVE GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
--------------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.05
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.12
Net realized and unrealized gains (losses) from
investments with affiliates 1.52
------------------------------------------------------------------------------
Total from Investment Activities 1.64
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.12)
Net realized gains (0.04)
------------------------------------------------------------------------------
Total Distributions (0.16)
------------------------------------------------------------------------------
Net change in asset value 1.48
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.53
------------------------------------------------------------------------------
Total Return 16.31%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $18,847
Ratio of expenses to average net assets 0.73%(c)
Ratio of net investment income to average net assets 3.23%(c)
Ratio of expenses to average net assets* 2.10%(c)
Portfolio Turnover** 95%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 28, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
152
<PAGE> 156
OTHER INFORMATION ABOUT THE FUNDS GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.93
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.14
Net realized and unrealized gains (losses) from
investments 0.73
------------------------------------------------------------------------
Total from Investment Activities 0.87
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.14)
Net realized gains (0.08)
------------------------------------------------------------------------
Total Distributions (0.22)
------------------------------------------------------------------------
Net change in asset value 0.65
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.58
------------------------------------------------------------------------
Total Return (excludes sales charge) 8.85%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 164
Ratio of expenses to average net assets 0.94%(c)
Ratio of net investment income to average net assets 2.44%(c)
Ratio of expenses to average net assets* 9.41%(c)
Portfolio Turnover** 76%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 15, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
153
<PAGE> 157
OTHER INFORMATION ABOUT THE FUNDS GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.84
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.12
Net realized and unrealized gains (losses) from
investments 0.81
------------------------------------------------------------------------
Total from Investment Activities 0.93
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.12)
Net realized gains (0.08)
------------------------------------------------------------------------
Total Distributions (0.20)
------------------------------------------------------------------------
Net change in asset value 0.73
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.57
------------------------------------------------------------------------
Total Return (excludes sales charge) 9.48%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 998
Ratio of expenses to average net assets 1.55%(c)
Ratio of net investment income to average net assets 2.14%(c)
Ratio of expenses to average net assets* 6.75%(c)
Portfolio Turnover** 76%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 15, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
154
<PAGE> 158
OTHER INFORMATION ABOUT THE FUNDS GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
--------------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.16
Net realized and unrealized gains (losses) from
investments with affiliates 0.69
------------------------------------------------------------------------------
Total from Investment Activities 0.85
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.16)
Net realized gains (0.08)
------------------------------------------------------------------------------
Total Distributions (0.24)
------------------------------------------------------------------------------
Net change in asset value 0.61
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.61
------------------------------------------------------------------------------
Total Return 8.59%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $11,372
Ratio of expenses to average net assets 0.73%(c)
Ratio of net investment income to average net assets 4.82%(c)
Ratio of expenses to average net assets* 3.14%(c)
Portfolio Turnover** 76%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 1, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
155
<PAGE> 159
OTHER INFORMATION ABOUT THE FUNDS GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.10
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.11
Net realized and unrealized gains (losses) from
investments with affiliates 0.41
------------------------------------------------------------------------
Total from Investment Activities 0.52
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.11)
Net realized gains (0.03)
------------------------------------------------------------------------
Total Distributions (0.14)
------------------------------------------------------------------------
Net change in asset value 0.38
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.48
------------------------------------------------------------------------
Total Return (excludes redemption charge) 5.21%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 535
Ratio of expenses to average net assets 0.95%(c)
Ratio of net investment income to average net assets 2.44%(c)
Ratio of expenses to average net assets* 2.27%(c)
Portfolio Turnover** 57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from March 8, 1999 (commencement of operations) through
December 31, 1999.
(b) Not annualized.
(c) Annualized.
156
<PAGE> 160
OTHER INFORMATION ABOUT THE FUNDS GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.08
Net realized and unrealized gains (losses) from
investments with affiliates 0.53
------------------------------------------------------------------------
Total from Investment Activities 0.61
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.08)
Net realized gains (0.03)
------------------------------------------------------------------------
Total Distributions (0.11)
------------------------------------------------------------------------
Net change in asset value 0.50
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.50
------------------------------------------------------------------------
Total Return (excludes redemption charge) 6.10%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,725
Ratio of expenses to average net assets 1.52%(c)
Ratio of net investment income to average net assets 1.74%(c)
Ratio of expenses to average net assets* 4.26%(c)
Portfolio Turnover** 57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 27, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
157
<PAGE> 161
OTHER INFORMATION ABOUT THE FUNDS GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
--------------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.13
Net realized and unrealized gains (losses) from
investments with affiliates 0.69
------------------------------------------------------------------------------
Total from Investment Activities 0.82
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.13)
Net realized gains (0.03)
------------------------------------------------------------------------------
Total Distributions (0.16)
------------------------------------------------------------------------------
Net change in asset value 0.66
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.51
------------------------------------------------------------------------------
Total Return 8.40%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $86,700
Ratio of expenses to average net assets 0.70%(c)
Ratio of net investment income to average net assets 3.43%(c)
Ratio of expenses to average net assets* 0.98%(c)
Portfolio Turnover** 57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions/reimbursements had not occurred, the ratios would
have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 8, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
158
<PAGE> 162
OTHER INFORMATION ABOUT THE FUNDS MODERATE GROWTH AND INCOME
PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.17
Net realized and unrealized gains (losses) from
investments with affiliates 0.16
------------------------------------------------------------------------
Total from Investment Activities 0.33
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.17)
Net realized gains (0.06)
------------------------------------------------------------------------
Total Distributions (0.23)
------------------------------------------------------------------------
Net change in asset value 0.10
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.96
------------------------------------------------------------------------
Total Return (excludes sales charge) 3.37%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 172
Ratio of expenses to average net assets 0.93%(c)
Ratio of net investment income to average net assets (3.32)%(c)
Ratio of expenses to average net assets* 9.78%(c)
Portfolio Turnover** 124%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 9, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
159
<PAGE> 163
OTHER INFORMATION ABOUT THE FUNDS MODERATE GROWTH AND INCOME
PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
---------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.13
Net realized and unrealized gains (losses) from
investments with affiliates 0.02
-------------------------------------------------------------------------
Total from Investment Activities 0.15
-------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.13)
Net realized gains (0.06)
-------------------------------------------------------------------------
Total Distributions (0.19)
-------------------------------------------------------------------------
Net change in asset value 0.04
-------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.96
-------------------------------------------------------------------------
Total Return (excludes sales charge) 1.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 941
Ratio of expenses to average net assets 1.54%(c)
Ratio of net investment income to average net assets 2.80%(c)
Ratio of expenses to average net assets* 6.90%(c)
Portfolio Turnover** 124%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 28, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
160
<PAGE> 164
OTHER INFORMATION ABOUT THE FUNDS MODERATE GROWTH AND INCOME
PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88
----------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.20
Net realized and unrealized gains (losses) from
investments with affiliates 0.16
----------------------------------------------------------------------
Total from Investment Activities 0.36
----------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.20)
Net realized gains (0.06)
----------------------------------------------------------------------
Total Distributions (0.26)
----------------------------------------------------------------------
Net change in asset value 0.10
----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.98
----------------------------------------------------------------------
Total Return 3.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $21,384
Ratio of expenses to average net assets 0.73%(c)
Ratio of net investment income to average net assets 4.46%(c)
Ratio of expenses to average net assets* 1.87%(c)
Portfolio Turnover** 124%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 10, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
161
<PAGE> 165
OTHER INFORMATION ABOUT THE FUNDS CURRENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.32
Net realized and unrealized gains (losses) from
investments
with affiliates (0.48)
------------------------------------------------------------------------
Total from Investment Activities (0.16)
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.32)
------------------------------------------------------------------------
Total Distributions (0.32)
------------------------------------------------------------------------
Net change in asset value (0.48)
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.40
------------------------------------------------------------------------
Total Return (excludes sales charge) (1.63)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 3
Ratio of expenses to average net assets 1.01%(c)
Ratio of net investment income to average net assets 4.66%(c)
Ratio of expenses to average net assets* 28.50%(c)
Portfolio Turnover** 96%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 23, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
162
<PAGE> 166
OTHER INFORMATION ABOUT THE FUNDS CURRENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
--------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87
------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.27
Net realized and unrealized gains (losses) from
investments
with affiliates (0.43)
------------------------------------------------------------------------
Total from Investment Activities (0.16)
------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.27)
------------------------------------------------------------------------
Total Distributions (0.27)
------------------------------------------------------------------------
Net change in asset value (0.43)
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.44
------------------------------------------------------------------------
Total Return (excludes sales charge) (1.66)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ --
Ratio of expenses to average net assets 1.51%(c)
Ratio of net investment income to average net assets 4.07%(c)
Ratio of expenses to average net assets* 31.04%(c)
Portfolio Turnover** 96%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from March 17, 1999 (commencement of operations) through
December 31, 1999.
(b) Not annualized.
(c) Annualized.
163
<PAGE> 167
OTHER INFORMATION ABOUT THE FUNDS CURRENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
------------
PERIOD ENDED
DECEMBER 31,
1999 (a)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41
Net realized and unrealized gains (losses) from
investments
with affiliates (0.55)
----------------------------------------------------------------------
Total from Investment Activities (0.14)
----------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.41)
----------------------------------------------------------------------
Total Distributions (0.41)
----------------------------------------------------------------------
Net change in asset value (0.55)
----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.45
----------------------------------------------------------------------
Total Return (excludes sales charge) (1.41)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 645
Ratio of expenses to average net assets 0.68%(c)
Ratio of net investment income to average net assets 4.88%(c)
Ratio of expenses to average net assets* 27.99%(c)
Portfolio Turnover** 96%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from January 25, 1999 (commencement of operations)
through December 31, 1999.
(b) Not annualized.
(c) Annualized.
164
<PAGE> 168
OTHER INFORMATION ABOUT THE FUNDS BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------------------------- -----------------------------
A SHARES B SHARES TRUST A SHARES (a) B SHARES (b)
------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.05 $11.04 $ 11.05 $10.92 $10.88
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.61 0.50 0.61 1.41 0.46
Net realized and unrealized gains (losses)
from investments (0.32) (0.31) (0.30) (0.62) 0.24
--------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.29 0.19 0.31 0.79 0.70
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.58) (0.50) (0.60) (0.63) (0.51)
Net realized gains from investment
transactions (0.13) (0.13) (0.13) (0.03) (0.03)
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.63) (0.73) (0.66) (0.54)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.63 $10.60 $ 10.63 $11.05 $11.04
--------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.58% 1.58% 2.68% 7.45% 6.58%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $7,070 $2,521 $380,226 $7,032 $ 442
Ratio of expenses to average net assets 0.81% 1.71% 0.71% 0.73% 1.74%(d)
Ratio of net investment income to average
net assets 5.46% 4.63% 5.57% 5.78% 4.75%(d)
Ratio of expenses to average net assets* 1.20% 1.95% 0.95% 0.95% 1.99%(d)
Portfolio Turnover(e) 18.26% 18.26% 18.26% 40.41% 40.41%
<CAPTION>
YEAR ENDED
JULY 31, 1998
--------------
TRUST (a)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.72
---------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.57
Net realized and unrealized gains (losses)
from investments 0.38
--------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.95
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.59)
Net realized gains from investment
transactions (0.03)
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.05
--------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.54%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $327,930
Ratio of expenses to average net assets 0.73%(d)
Ratio of net investment income to average
net assets 5.72%(d)
Ratio of expenses to average net assets* 0.97%(d)
Portfolio Turnover(e) 40.41%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) For the period from September 16, 1997 (commencement of operations)
through July 31, 1998.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Trust Shares for the period from September 2, 1997 (commencement of
operations) through July 31, 1998 was 9.03%.
165
<PAGE> 169
OTHER INFORMATION ABOUT THE FUNDS BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------
1997 1996 1995
------------ ---------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.83 $ 10.59
------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.65 0.65 0.69
Net realized and unrealized gains (losses)
from investments 0.42 (0.18) 0.28
------------------------------------------------------------------------------------------
Total from Investment Activities 1.07 0.47 0.97
------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.69) (0.65) (0.69)
Net realized gains from investment
transactions -- (0.11) (0.04)
------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.76) (0.73)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.92 $ 10.54 $ 10.83
------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 10.48% 4.40% 9.70%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 311,881 $ 132,737 $ 94,671
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets 6.10% 6.12% 6.63%
Ratio of expenses to average net assets* 0.98% 0.98% 0.98%
Portfolio Turnover 34.62% 9.60% 17.70%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
166
<PAGE> 170
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
------------------------------------------- -----------------------------
A SHARES B SHARES (c) TRUST A SHARES (a) TRUST (a)
---------- -------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.43 $10.58 $ 10.43 $10.42 $ 10.34
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.57 0.27 0.59 0.85 0.55
Net realized and unrealized gains (losses)
from investments (0.15) (0.30) (0.16) (0.25) 0.10
--------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.42 (0.03) 0.43 0.60 0.65
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.56) (0.28) (0.57) (0.59) (0.56)
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.28) (0.57) (0.59) (0.56)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.29 $10.27 $ 10.29 $10.43 $ 10.43
--------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.01% (0.33)%(b) 4.14% 5.94% 6.04%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $2,716 $1,599 $109,554 $3,531 $106,953
Ratio of expenses to average net assets 0.81% 1.69%(d) 0.71% 0.74% 0.73%(d)
Ratio of net investment income to average
net assets 5.49% 4.61%(d) 5.60% 5.65% 5.70%(d)
Ratio of expenses to average net assets* 1.23% 1.96%(d) 0.98% 0.96% 0.98%(d)
Portfolio Turnover(e) 39.15% 39.15% 39.15% 39.31% 39.31%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
(b) Not annualized.
(c) For the period from January 21, 1999 (commencement of operations) through
July 31, 1999.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Trust Shares for the period from September 2, 1997 (commencement of
operations) through July 31, 1998 was 6.37%.
167
<PAGE> 171
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.31 $ 10.41 $ 10.23
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.58 0.58 0.58
Net realized and unrealized gains (losses)
from investments 0.14 (0.10) 0.17
------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.48 0.75
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.61) (0.57) (0.57)
Net realized gains from investment
transactions -- (0.01) --
In excess of net realized gains -- -- --
------------------------------------------------------------------------------
Total Distributions (0.61) (0.58) (0.57)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.42 $ 10.31 $ 10.41
------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.25% 4.74% 7.65%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 138,675 $ 46,005 $ 59,798
Ratio of expenses to average net assets 0.77% 0.76% 0.80%
Ratio of net investment income to average
net assets 5.65% 5.48% 5.69%
Ratio of expenses to average net assets* 1.02% 0.99% 1.03%
Portfolio Turnover 64.89% 29.56% 38.11%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
168
<PAGE> 172
OTHER INFORMATION ABOUT THE FUNDS GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
----------------- ------------------------
A SHARES TRUST A SHARES (a) TRUST (a)
-------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 9.87 $ 9.75 $ 9.66
------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.54 0.54 0.63 0.59
Net realized and unrealized gains (losses)
from investments (0.28) (0.26) 0.09 0.17
------------------------------------------------------------------------------------------------
Total from Investment Activities 0.26 0.28 0.72 0.76
------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.52) (0.53) (0.53) (0.49)
In excess of net investment income -- -- (0.06) (0.06)
------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.53) (0.59) (0.55)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.62 $ 9.62 $ 9.88 $ 9.87
------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.62% 2.72% 7.58% 7.58%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $5,436 $3,150 $8,176 $2,521
Ratio of expenses to average net assets 0.70% 0.60% 0.71% 0.63%(d)
Ratio of net investment income to average
net assets 5.35% 5.44% 5.95% 5.72%(e)
Ratio of expenses to average net assets* 1.90% 1.65% 1.77% 1.80%(e)
Portfolio Turnover(c) 26.85% 26.85% 34.89% 34.89%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Trust Shares for the period from September 2, 1997 (commencement of
operations) through July 31, 1998 was 8.04%.
(d) Annualized.
169
<PAGE> 173
OTHER INFORMATION ABOUT THE FUNDS GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.40 $ 9.54 $ 9.48
-----------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.58 0.66 0.68
Net realized and unrealized gains (losses)
from investments 0.35 (0.20) 0.08
-----------------------------------------------------------------------------
Total from Investment Activities 0.93 0.46 0.76
-----------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.58) (0.59) (0.70)
In excess of net investment income -- (0.01) --
-----------------------------------------------------------------------------
Total Distributions (0.58) (0.60) (0.70)
-----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 9.40 $ 9.54
-----------------------------------------------------------------------------
Total Return (excludes sales charge) 10.21% 4.91% 8.43%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 11,622 $ 15,752 $ 16,679
Ratio of expenses to average net assets 0.69% 0.65% 0.58%
Ratio of net investment income to average
net assets 5.98% 6.81% 7.18%
Ratio of expenses to average net assets* 1.29% 1.10% 1.19%
Portfolio Turnover(c) 2.96% 78.31% 27.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) Not annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Trust Shares for the period from September 2, 1997 (commencement of
operations) through July 31, 1998 was 8.04%.
(e) Annualized.
170
<PAGE> 174
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
1999 1998 1997 (a)
---------- ---------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.25 $10.12 $ 10.00
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.50 0.53 0.42
Net realized and unrealized gains (losses)
from investments (0.39) 0.14 0.12
-------------------------------------------------------------------------------------
Total from Investment Activities 0.11 0.67 0.54
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.50) (0.53) (0.42)
Net realized gains (0.01) (0.01) --
-------------------------------------------------------------------------------------
Total Distributions (0.51) (0.54) (0.42)
-------------------------------------------------------------------------------------
Net change in asset value (0.40) 0.13 0.12
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.85 $10.25 $ 10.12
-------------------------------------------------------------------------------------
Total Return (excludes sales charge) 1.08% 6.69%(c) 5.54%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $3,571 $2,437 $20,103
Ratio of expenses to average net assets 0.98% 1.02% 1.00%(c)
Ratio of net investment income to average
net assets 4.93% 5.16% 5.34%(c)
Ratio of expenses to average net assets* 1.40% 1.54% 1.62%(c)
Portfolio turnover** 17% 86% 52%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 28, 1997 (commencement of operations)
through December 31, 1997.
(b) Not annualized.
(c) Annualized.
171
<PAGE> 175
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.26 $10.12
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.35
Net realized and unrealized gains (losses) from
investments (0.39) 0.15
-------------------------------------------------------------------------------------
Total from Investment Activities 0.02 0.50
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.41) (0.35)
Net realized gains (0.01) (0.01)
-------------------------------------------------------------------------------------
Total Distributions (0.42) (0.36)
-------------------------------------------------------------------------------------
Net change in asset value (0.40) 0.14
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.86 $10.26
-------------------------------------------------------------------------------------
Total Return (excludes sales charge) 0.22% 4.98%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 462 $ 430
Ratio of expenses to average net assets 1.83% 1.97%(c)
Ratio of net investment income to average net assets 4.06% 4.01%(c)
Ratio of expenses to average net assets* 1.99% 2.24%(c)
Portfolio turnover** 17% 86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from March 3, 1998 (commencement of operations) through
December 31, 1998.
(b) Not annualized.
(c) Annualized.
172
<PAGE> 176
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
---------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.29
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.50 0.03
Net realized and unrealized gains (losses) from
investments (0.39) (0.04)
-------------------------------------------------------------------------------------
Total from Investment Activities 0.11 (0.01)
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.50) (0.03)
Net realized gains (0.01) --
-------------------------------------------------------------------------------------
Total Distributions (0.51) (0.03)
-------------------------------------------------------------------------------------
Net change in asset value (0.40) (0.04)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.85 $ 10.25
-------------------------------------------------------------------------------------
Total Return (excludes sales charge) 1.08% (0.14%)(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $42,281 $46,344
Ratio of expenses to average net assets 0.98% 0.69%(c)
Ratio of net investment income to average net assets 4.94% 5.29%(c)
Ratio of expenses to average net assets* 1.14% 0.96%(c)
Portfolio turnover** 17% 86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from December 14, 1998 (commencement of operations)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
173
<PAGE> 177
OTHER INFORMATION ABOUT THE FUNDS MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
---------------------------------------- ---------------------------------
A SHARES CLASS B (f) TRUST A SHARES (b) TRUST (b)
------------ -------------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.13 $10.28 $ 10.14 $10.15 $ 10.04
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.14 0.42 0.86 0.39
Net realized and unrealized gains (losses)
from investments (0.17) (0.41) (0.18) (0.43) 0.14
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.24 (0.27) 0.24 0.43 0.53
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.39) (0.14) (0.40) (0.42) (0.40)
Net realized gains from investment
transactions (0.11) -- (0.11) (0.03) (0.03)
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.14) (0.51) (0.45) (0.43)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.87 $10.13 $ 10.14
---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.31% (2.60)%(c) 2.30% 4.30% 4.49%(g)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $2,694 $ 16 $321,293 $2,689 $326,464
Ratio of expenses to average net assets 0.71% 1.60%(d) 0.61% 0.62% 0.64%(d)
Ratio of net investment income to average
net assets 4.01% 3.17%(d) 4.11% 4.26% 4.23%(d)
Ratio of expenses to average net assets* 1.20% 1.87%(d) 0.95% 0.92% 0.97%(d)
Portfolio Turnover(e) 20.74% 20.74% 20.74% 28.75% 28.75%
<CAPTION>
JULY 1, 1997
JULY 31, 1997 (a)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.04
Net realized and unrealized gains (losses)
from investments 0.15
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.19
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.04)
Net realized gains from investment
transactions --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.04)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15
---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 1.86%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $337,933
Ratio of expenses to average net assets 0.71%(d)
Ratio of net investment income to average
net assets 4.31%(d)
Ratio of expenses to average net assets* 1.04%(d)
Portfolio Turnover(e) 1.59%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) For the period from February 3, 1999 (commencement of operations) through
July 31, 1999.
(g) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998.
174
<PAGE> 178
FLORIDA TAX-EXEMPT FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY FLORIDA TAX-FREE FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
--------------------------------------- -----------------------------
A SHARES CLASS B (f) TRUST A SHARES (a) TRUST (a)
------------ -------------- ------- --------------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.45 $10.52 $ 10.46 $ 10.50 $ 10.39
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.41 0.12 0.43 0.45 0.41
Net realized and unrealized gains (losses)
from investments (0.18) (0.30) (0.20) 0.01 0.14
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.23 (0.18) 0.23 0.46 0.55
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.40) (0.14) (0.41) (0.44) (0.41)
Net realized gains from investment
transactions (0.06) -- (0.06) (0.07) (0.07)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.14) (0.47) (0.51) (0.48)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.22 $10.20 $ 10.22 $ 10.45 $ 10.46
----------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 2.06% (1.77)%(b) 2.16% 4.46% 4.66%(g)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $12,195 $ 569 $63,548 $ 8,883 $55,369
Ratio of expenses to average net assets 0.59% 1.49%(c) 0.49% 0.55% 0.49%(c)
Ratio of net investment income to average
net assets 4.00% 3.06%(c) 4.10% 4.24% 4.30%(c)
Ratio of expenses to average net assets* 1.26% 2.00%(c) 1.01% 1.06% 1.04%(c)
Portfolio Turnover(d) 34.33% 34.33% 34.33% 29.55% 29.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from March 16, 1999 (commencement of operations) through
July 31, 1999.
(g) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Florida Tax-Free Fund Trust Shares for the period from September 2,
1997 (commencement of operations).
175
<PAGE> 179
FLORIDA TAX-EXEMPT FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY FLORIDA TAX-FREE FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
JULY 31, 1994 TO
-------------------------- JULY 31
1997 1996 1995 (e)
------- ------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.32 $ 10.32 $ 10.00
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.45 0.45 0.34
Net realized and unrealized gains (losses) from
investments 0.24 (0.01) 0.30
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.44 0.64
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.48) (0.45) (0.32)
Net realized gains from investment transactions (0.01) (0.01) --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.46) (0.32)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.50 $ 10.30 $ 10.32
---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 6.89% 4.24% 6.53%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $53,688 $48,869 $48,333
Ratio of expenses to average net assets 0.57% 0.59% 0.70%(c)
Ratio of net investment income to average net assets 4.36% 4.33% 4.16%(c)
Ratio of expenses to average net assets* 1.06% 1.04% 1.01%(c)
Portfolio Turnover(d) 24.05% 12.21% 2.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective September 2, 1997, the Fund's existing shares, which were
previously unclassified, were designated either A Shares or Trust Shares.
For reporting purposes, past performance numbers (prior to September 2,
1997) are being reflected as A Shares.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
(f) For the period from March 16, 1999 (commencement of operations) through
July 31, 1999.
(g) Represents total return based on the activity of A Shares for the period
from August 1, 1997 to September 1, 1997 and the activity of Trust Shares
for the period from September 2, 1997 to July 31, 1998. Total return for
the Florida Tax-Free Fund Trust Shares for the period from September 2,
1997 (commencement of operations).
176
<PAGE> 180
OTHER INFORMATION ABOUT THE FUNDS TENNESSEE TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 10.18 $ 9.90 $ 10.19 $ 9.40
------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) 0.33 0.35 0.44 0.42 0.45
Net realized and unrealized gains (losses)
from investments (0.64) 0.08 0.25 (0.29) 0.79
------------------------------------------------------------------------------------------------
Total from Investment Activities (0.31) 0.43 0.69 0.13 1.24
------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.33) (0.35) (0.41) (0.42) (0.45)
Net realized gains -- (0.07) -- -- --
------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.42) (0.41) (0.42) (0.45)
------------------------------------------------------------------------------------------------
Net change in asset value (0.64) 0.01 0.28 (0.29) 0.79
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 10.19 $ 10.18 $ 9.90 $ 10.19
------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (3.07)% 4.25% 7.13% 1.39% 13.40%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 3,324 $ 2,919 $ 1,669 $ 88,084 $ 94,143
Ratio of expenses to average net assets 1.25% 1.20% 0.84% 0.86% 0.87%
Ratio of net investment income to average
net assets 3.34% 3.37% 4.13% 4.29% 4.52%
Ratio of expenses to average net assets* 1.26% 1.20% 1.09% 1.11% 1.12%
Portfolio turnover** 64% 155% 253% 219% 188%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
177
<PAGE> 181
OTHER INFORMATION ABOUT THE FUNDS TENNESSEE TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
---------------- --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 10.22
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.27 0.26
Net realized and unrealized gains (losses) from
investments (0.64) 0.06
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.37) 0.32
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.27) (0.26)
Net realized gains -- (0.07)
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (0.33)
------------------------------------------------------------------------------------------------------------------
Net change in Asset Value (0.64) (0.01)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.57 $ 10.21
------------------------------------------------------------------------------------------------------------------
Total Return (excludes redemption charge) (3.65)% 3.17%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,288 $ 1,397
Ratio of expenses to average net assets 1.84% 1.95%(c)
Ratio of net investment income to average
net assets 2.72% 2.50%(c)
Ratio of expenses to average net assets* 1.85% (d)
Portfolio Turnover** 64% 155%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 24, 1998 (commencement of operations)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
(d) There were no reductions in this period.
178
<PAGE> 182
OTHER INFORMATION ABOUT THE FUNDS TENNESSEE TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
--------------------------- DECEMBER 31,
1999 1998 1997 (a)
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 10.18 $ 10.05
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.35 0.37 0.10
Net realized and unrealized gains (losses)
from investments (0.64) 0.08 0.13
-----------------------------------------------------------------------------------------
Total from Investment Activities (0.29) 0.45 0.23
-----------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.35) (0.37) (0.10)
Net realized gains -- (0.07) --
-----------------------------------------------------------------------------------------
Total Distributions (0.35) (0.44) (0.10)
-----------------------------------------------------------------------------------------
Net change in asset value (0.64) 0.01 0.13
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 10.19 $ 10.18
-----------------------------------------------------------------------------------------
Total Return (excludes sales charge) (2.83)% 4.52% 2.35%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $75,537 $91,687 $100,742
Ratio of expenses to average net assets 1.00% 0.95% 0.56%(c)
Ratio of net investment income to average
net assets 3.57% 3.65% 4.22%(c)
Ratio of expenses to average net assets* 1.00% 0.95% 0.87%(c)
Portfolio turnover** 64% 155% 253%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from October 3, 1997 (commencement of operations) through
December 31, 1997.
(b) Not annualized.
(c) Annualized.
179
<PAGE> 183
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM TENNESSEE TAX-EXEMPT
FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
1999 1998 1997 (a)
---------- ---------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 10.13 $ 10.00
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.30 0.32 0.29
Net realized and unrealized gains (losses)
from investments (0.40) 0.06 0.13
-------------------------------------------------------------------------------------
Total from Investment Activities (0.10) 0.38 0.42
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.30) (0.32) (0.29)
Net realized gains -- (0.08) --
In excess of net realized gains (0.02) -- --
-------------------------------------------------------------------------------------
Total Distributions (0.32) (0.40) (0.29)
-------------------------------------------------------------------------------------
Net change in asset value (0.42) (0.02) 0.13
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 10.11 $ 10.13
-------------------------------------------------------------------------------------
Total Return (excludes sales charge) (1.00)% 3.76% 4.26%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $19,361 $19,439 $ 22,893
Ratio of expenses to average net assets 1.08% 1.05% 0.98%(c)
Ratio of net investment income to average
net assets 3.07% 3.11% 3.48%(c)
Ratio of expenses to average net assets* 1.55% 1.52% 1.52%(c)
Portfolio turnover** 52% 189% 179%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 28, 1997 (commencement of operations)
through December 31, 1997.
(b) Not annualized.
(c) Annualized.
180
<PAGE> 184
OTHER INFORMATION ABOUT THE FUNDS LIMITED TERM TENNESSEE TAX-EXEMPT
FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 (a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $10.18
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.22 0.20
Net realized and unrealized gains (losses) from
investments (0.40) --
-------------------------------------------------------------------------------------
Total from Investment Activities (0.18) 0.20
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.22) (0.20)
Net realized gains -- (0.08)
In excess of net realized gains (0.02) --
-------------------------------------------------------------------------------------
Total Distributions (0.24) (0.28)
-------------------------------------------------------------------------------------
Net change in asset value (0.42) (0.08)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.68 $10.10
-------------------------------------------------------------------------------------
Total Return (excludes redemption charge) (1.84)% 1.94%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 612 $ 732
Ratio of expenses to average net assets 1.93% 2.05%(c)
Ratio of net investment income to average net assets 2.21% 2.02%(c)
Ratio of expenses to average net assets* 2.15% 2.27%(c)
Portfolio turnover** 52% 189%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(a) For the period from February 3, 1998 (commencement of operations)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
181
<PAGE> 185
PRIME MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY PRIME OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------------------------------
1999 1998
------------------------------------ --------------------------------------
A SHARES B SHARES TRUST A SHARES B SHARES (a) TRUST
------------ ---------- -------- ---------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.044 0.035 0.045 0.049 0.005 0.050
----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.044) (0.035) (0.045) (0.049) (0.005) (0.050)
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------------------------------
Total Return 4.48% 3.55% 4.59% 4.99% 0.49%(b) 5.09%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $136,078 $ 224 $536,899 $116,960 $ 1 $479,974
Ratio of expenses to average net assets 0.78% 1.69% 0.68% 0.79% 1.85%(c) 0.69%
Ratio of net investment income to average
net assets 4.40% 3.39% 4.51% 4.88% 3.83%(c) 4.98%
Ratio of expenses to average net assets* 0.94% 1.70% 0.69% 0.95% 1.88%(c) 0.70%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from June 15, 1998 (commencement of operations) through
July 31, 1998.
(b) Not annualized.
(c) Annualized.
182
<PAGE> 186
OTHER INFORMATION ABOUT THE FUNDS PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------------------
1997 1996 1995
----------------------- -------------------------- --------
A SHARES TRUST A SHARES (a) TRUST (a)
------------ -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.048 0.049 0.016 0.050 0.050
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.048) (0.049) (0.016) (0.050) (0.050)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------------------
Total Return 4.90% 5.00% 5.07%(b) 5.10% 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $111,027 $416,966 $125,075 $478,542 $617,673
Ratio of expenses to average net assets 0.78% 0.68% 0.81%(c) 0.71% 0.69%
Ratio of net investment income to average
net assets 4.79% 4.89% 4.61%(c) 5.00% 5.04%
Ratio of expenses to average net assets* 0.93% (d) 0.96%(c) (d) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) to July 31,
1996 was 1.55%.
(c) Annualized.
(d) There were no waivers during the period.
183
<PAGE> 187
U.S. TREASURY MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY U.S. TREASURY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------
1999 1998
-------------------------- --------------------------
A SHARES TRUST A SHARES TRUST
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $1.000 $ 1.000
------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.040 0.041 0.046 0.047
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.040) (0.041) (0.046) (0.047)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $1.000 $ 1.000
------------------------------------------------------------------------------------------------------
Total Return 4.06% 4.16% 4.67% 4.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $4,390 $320,847 $8,070 $352,055
Ratio of expenses to average net assets 0.79% 0.69% 0.80% 0.70%
Ratio of net investment income to average
net assets 4.03% 4.10% 4.57% 4.67%
Ratio of expenses to average net assets* 0.95% 0.70% 0.95% 0.70%
<CAPTION>
YEAR ENDED JULY 31,
--------------------------
1997
--------------------------
A SHARES TRUST
---------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000
------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.045 0.046
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.045) (0.046)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000
------------------------------------------------------------------------------------------------------
Total Return 4.60% 4.70%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $9,885 $309,361
Ratio of expenses to average net assets 0.79% 0.69%
Ratio of net investment income to average
net assets 4.50% 4.60%
Ratio of expenses to average net assets* 0.94% (a)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) There were no waivers during the period.
184
<PAGE> 188
OTHER INFORMATION ABOUT THE FUNDS U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------
1996 1996 1995
--------------- ------------- --------
A SHARES (a) Trust (a)
--------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.015 0.048 0.048
------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.015) (0.048) (0.048)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------
Total Return 4.90%(b) 4.93% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $12,263 $368,162 $322,939
Ratio of expenses to average net assets 0.82%(c) 0.71% 0.70%
Ratio of net investment income to average
net assets 4.44%(c) 4.82% 4.81%
Ratio of expenses to average net assets* 0.97%(c) (d) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) to July 31,
1996 was 1.49%.
(c) Annualized.
(d) There were no waivers during the period.
185
<PAGE> 189
OTHER INFORMATION ABOUT THE FUNDS TREASURY RESERVE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 1.000 $ 1.000
-------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.043 0.046 0.047 0.047 0.053
-------------------------------------------------------------------------------------------------
Total from Investment Activities 0.043 0.046 0.047 0.047 0.053
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.043) (0.046) (0.047) (0.047) (0.053)
-------------------------------------------------------------------------------------------------
Total Distributions (0.043) (0.046) (0.047) (0.047) (0.053)
-------------------------------------------------------------------------------------------------
Net change in asset value -- -- -- -- --
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.38% 4.68% 4.78% 4.78% 5.41%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $143,208 $167,475 $77,065 $78,308 $168,430
Ratio of expenses to average net assets 0.60% 0.77% 0.75% 0.56% 0.50%
Ratio of net investment income to average
net assets 4.28% 4.56% 4.68% 4.72% 5.28%
Ratio of expenses to average net assets* 0.70% 0.78% (a) 0.74% 0.75%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
(a) There were no fee reductions in this period.
186
<PAGE> 190
OTHER INFORMATION ABOUT THE FUNDS TREASURY RESERVE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
---------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------------ DECEMBER 31,
1999 1998 1997 1996 (a)
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 1.000
--------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.043 0.048 0.049 0.024
--------------------------------------------------------------------------------------------
Total from Investment Activities 0.043 0.048 0.049 0.024
--------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.043) (0.048) (0.049) (0.024)
--------------------------------------------------------------------------------------------
Total Distributions (0.043) (0.048) (0.049) (0.024)
--------------------------------------------------------------------------------------------
Net change in asset value -- -- -- --
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------
Total Return 4.39% 4.93% 5.05% 2.43%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $341,803 $308,979 $114,175 $109,698
Ratio of expenses to average net assets 0.59% 0.53% 0.50% 0.52%(c)
Ratio of net investment income to average
net assets 4.31% 4.78% 4.94% 4.78%(c)
Ratio of expenses to average net assets* 0.60% (d) (d) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
(a) For the period from July 1, 1996 (commencement of operations) through
December 31, 1996.
(b) Not annualized.
(c) Annualized.
(d) There were no fee reductions in this period.
187
<PAGE> 191
TAX-EXEMPT MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY TAX-EXEMPT FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------------------------
1999 1999 1998 1998 1997 1997
------------ ------- --------------- ------- ---------- -------
A SHARES TRUST A SHARES TRUST A SHARES TRUST
------------ ------- --------------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.026 0.027 0.030 0.031 0.030 0.031
------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.026) (0.027) (0.030) (0.031) (0.030) (0.031)
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------------------------
Total Return 2.66% 2.76% 3.03% 3.13% 3.04% 3.15%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $22,844 $73,880 $28,657 $62,084 $ 27,926 $55,429
Ratio of expenses to average net assets 0.59% 0.49% 0.60% 0.50% 0.62% 0.52%
Ratio of net investment income to average
net assets 2.64% 2.71% 2.97% 3.07% 3.00% 3.10%
Ratio of expenses to average net assets* 0.98% 0.73% 0.98% 0.73% 0.97% 0.72%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
188
<PAGE> 192
OTHER INFORMATION ABOUT THE FUNDS TAX-EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------
1996 1995
-------------------------------- -------
A SHARES (a) Trust (a)
---------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.010 0.031 0.032
---------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.010) (0.031) (0.032)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------
Total Return 3.12%(b) 3.15% 3.22%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $17,116 $43,611 $57,640
Ratio of expenses to average net assets 0.68%(c) 0.54% 0.54%
Ratio of net investment income to average
net assets 2.82%(c) 3.11% 3.15%
Ratio of expenses to average net assets* 1.03%(c) 0.74% 0.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the A Shares for the
period from April 1, 1996 to July 31, 1996. Total return for the A Shares
for the period April 1, 1996 (commencement of operations) through July
31, 1996 was 0.95%.
(c) Annualized.
189
<PAGE> 193
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OH 43219
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operational and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Reports and the SAI, prospectuses of other members of
the AmSouth Funds family, or request other information and discuss your
questions about the Funds by contacting a broker or bank that sells the Funds.
Or contact the Funds at:
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
INTERNET: HTTP://WWW.AMSOUTHFUNDS.COM
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or by calling 1-202-942-8090, or by electronic
request, by emailing the SEC at the following address: [email protected].
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-5551. ASOP31300ABT
<PAGE> 194
AmSouth Funds
Prospectus
MONEY MARKET FUNDS
CLASS A SHARES
CLASS B SHARES
TRUST SHARES
INSTITUTIONAL SHARES
MARCH 13, 2000
As with all mutual funds, the
Securities and Exchange Commission
has not approved or disapproved these
Fund shares or determined whether
this prospectus is truthful or
complete. Anyone who tells you
otherwise is committing a crime.
[AmSouth Funds Logo]
<PAGE> 195
AMSOUTH FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
[LOGO]
Carefully review this Important 2 Overview
section, which summarizes each 3 Money Market Funds
Fund's investments, risks, past Retail Money Market Fund
performance, and fees. 4 Prime Money Market Fund
7 U.S. Treasury Money Market Fund
10 Tax-Exempt Money Market Fund
13 Treasury Reserve Money Market Fund
Institutional Money Market Fund
16 Institutional Prime Obligations Money Market Fund
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
[LOGO]
Review this section for 18 Applicable to All Funds
information on investment
strategies and risks.
FUND MANAGEMENT
[LOGO]
Review this section for details on 24 The Investment Adviser
the people and organization who 24 The Distributor and Administrator
oversee the Funds.
SHAREHOLDER INFORMATION
[LOGO]
Review this section for details on 25 Choosing a Share Class
how shares are valued, how to 26 Pricing of Fund Shares
purchase, sell and exchange 27 Purchasing and Adding to Your Shares
shares, related charges and 31 Selling Your Shares
payments of dividends and 33 General Policies on Selling Shares
distributions. 34 Distribution Arrangements/Sales Charges
35 Distribution and Service (12b-1)
Fees and Shareholder Servicing Fees
36 Exchanging Your Shares
37 Dividends, Distributions and Taxes
OTHER INFORMATION ABOUT THE FUNDS
[LOGO]
38 Financial Highlights
</TABLE>
<PAGE> 196
[LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
<TABLE>
<S> <C>
THE FUNDS AmSouth Funds is a mutual fund family that offers different
classes of shares in separate investment portfolios
("Funds"). The Funds have individual investment goals and
strategies. This prospectus gives you important information
about the Class A Shares, Class B Shares and Trust Shares of
the Retail Money Market Funds and the Class I Shares, Class
II Shares and Class III Shares of the Institutional Money
Market Fund (the Retail Money Market Funds and Institutional
Money Market Fund are collectively the "Money Market Funds")
that you should know before investing. Please read this
prospectus and keep it for future reference.
Each of the Funds in this prospectus is a mutual fund. A
mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities
like stocks and bonds. Before you look at specific Funds,
you should know a few general basics about investing in
mutual funds.
ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1 PER SHARE, AS WITH OTHER INVESTMENTS, YOU
COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND. YOUR
INVESTMENT IN A FUND IS NOT A DEPOSIT OR AN OBLIGATION OF
AMSOUTH BANK, ITS AFFILIATES, OR ANY BANK. IT IS NOT INSURED
BY THE FDIC OR ANY GOVERNMENT AGENCY.
Each Fund has its own investment goal and strategies for
reaching that goal. However, it cannot be guaranteed that a
Fund will achieve its goal. Before investing, make sure that
the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way
that the manager believes will help the Fund achieve its
goal. A manager's judgments about the stock markets, economy
and companies, or selecting investments may cause a Fund to
underperform other funds with similar objectives.
</TABLE>
2
<PAGE> 197
RISK/RETURN SUMMARY AND FUND EXPENSES OVERVIEW
MONEY MARKET FUNDS
<TABLE>
<S> <C>
These Funds seek current income with liquidity and stability
of principal by investing primarily in short-term debt
securities. The Funds seek to maintain a stable price of
$1.00 per share.
WHO MAY WANT TO INVEST Consider investing in these Funds if you are:
- seeking preservation of capital
- investing short-term reserves
- willing to accept lower potential returns in exchange for
a higher degree of safety
- in the case of the Tax-Exempt Money Market Fund, seeking
Federal tax-exempt income
These Funds may not be appropriate if you are:
- seeking high total return
- pursuing a long-term goal or investing for retirement
</TABLE>
3
<PAGE> 198
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Prime Obligations Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests only in U.S.
dollar-denominated, "high-quality" short-term debt
securities, including the following:
- obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities
- certificates of deposit, time deposits, bankers'
acceptances and other short-term securities issued by
domestic or foreign banks or their subsidiaries or
branches
- domestic and foreign commercial paper and other short-term
corporate debt obligations, including those with floating or
variable rates of interest
- obligations issued or guaranteed by one or more foreign
governments or their agencies or instrumentalities,
including obligations of supranational entities
- asset-backed securities
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 18 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 18.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
4
<PAGE> 199
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR TRUST SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1990 7.86
91 5.77
92 3.39
93 2.61
94 3.72
95 5.50
96 4.92
97 5.09
98 4.98
99 4.60
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 2.35% 6/30/89
Worst
quarter: 0.63% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Prime Money Market
Fund has performed and how its
performance has varied from year to
year. The bar chart gives some
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/19/91)
<S> <C> <C> <C> <C>
CLASS A SHARES 4.49% 4.94% 4.80% 5.28%
CLASS B SHARES(2)
(with applicable Contingent Deferred Sales
Charge) N/A N/A N/A 3.67%
TRUST SHARES 4.60% 5.02% 4.83% 5.31%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
(2) Class B Shares commenced operations on September 2, 1997. Performance prior
to that date is represented by performance of Class A Shares, as adjusted for
the distribution/service (12b-1) fees of Class B Shares.
As of December 31, 1999, the Fund's 7-day yield for Class A Shares, Class B
Shares and Trust Shares was 4.90%, 3.96% and 5.00% respectively. Without fee
waivers and expense reimbursements, the Fund's yield would have been 4.75% for
Class A Shares, for this time period. For current yield information on the Fund,
call 1-800-451-8382. The Fund's yield appears in The Wall Street Journal each
Thursday.
5
<PAGE> 200
AMSOUTH PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A
(FEES PAID BY YOU DIRECTLY)(1) SHARES CLASS B
Maximum sales charge (load) on
purchases None None
Maximum deferred sales charge
(load) None 5.00%(2)
Redemption fee(3) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.40% 0.40%
Distribution and/or service (12b-
1) fee 0.00% 0.75%
Other expenses(4) 0.53% 0.53%
TOTAL FUND OPERATING EXPENSES(4) 0.93% 1.68%
Fee waiver and/or expense
reimbursement 0.16% 0.16%
NET EXPENSES(6) 0.77% 1.52%
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge
(load) None
Redemption fee(3) 0%
ANNUAL FUND OPERATING EXPENSES TRUST
(FEES PAID FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution and/or service (12b-
1) fee 0.00%
Other expenses(4) 0.43%(5)
TOTAL FUND OPERATING EXPENSES(4) 0.83%
Fee waiver and/or expense
reimbursement 0.16%
NET EXPENSES(6) 0.67%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) For former Class B Shares acquired in the
combination of AmSouth Funds with ISG Funds,
waivers are in place on the CDSC as follows:
4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other
Class B Shares, the CDSC declines over a
six-year period as follows: 5%, 4%, 3%, 3%,
2%, 1% to 0% in the seventh and eighth year.
Approximately eight years after purchase
(seven years in the case of Shares acquired in
the ISG combination), Class B Shares
automatically convert to Class A Shares.
(3) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(4) Other expenses are restated to reflect
current fees.
(5) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(6) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to Class
A 0.66%; Trust 0.66% through April 30, 2000,
and thereafter will be Class A 0.77%; Class B,
1.52%; Trust Shares 0.67% until October 1,
2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $ 95 $296 $ 515 $1,143
CLASS B SHARES
Assuming redemption $671 $830 $1,113 $1,694
Assuming no redemption $171 $580 $ 913 $1,694
Trust Shares $ 85 $265 $ 460 $1,025
</TABLE>
As an investor in the Prime Money
Market Fund, you will pay the
following fees and expenses when
you buy and hold shares.
Shareholder transaction fees are
paid from your account. Annual
Fund operating expenses are paid
out of Fund assets, and are
reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a
back end sales charge (load) if
you sell your shares before a
certain period of time has
elapsed. This is called a
Contingent Deferred Sales Charge.
Use the 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
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
6
<PAGE> 201
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth U.S. Treasury Fund) seeks
current income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests exclusively in
short-term U.S. dollar-denominated obligations issued by the
U.S. Treasury ("U.S. Treasury Securities"), separately
traded component parts of those securities called STRIPs,
and repurchase agreements collateralized by U.S. Treasury
Securities.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 18 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 18.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
7
<PAGE> 202
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR TRUST SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1990 7.64
91 5.48
92 3.32
93 2.54
94 3.55
95 5.30
96 4.69
97 4.75
98 4.60
99 4.17
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 2.23% 6/30/89
Worst
quarter: 0.62% 6/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the U.S. Treasury Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/19/91)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
CLASS A SHARES 4.06% 4.62% 4.56% 5.02%
- -----------------------------------------------------------------------------------------
TRUST SHARES 4.17% 4.70% 4.60% 5.06%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1999, the Fund's 7-day yield for Class A and Trust Shares was
4.24% and 4.34%, respectively. Without fee waivers and expense reimbursements,
the Fund's yield would have been 4.09% for Class A Shares for this time period.
For current yield information on the Fund, call 1-800-451-8382. The Fund's yield
appears in The Wall Street Journal each Thursday.
8
<PAGE> 203
AMSOUTH U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases None None
Maximum deferred sales charge
(load) None None
Redemption fee(2) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.40% 0.40%
Distribution and/or service
(12b-1) fee 0.00% 0.00%
Other expenses(3) 0.57% 0.48%(4)
Total Fund operating expenses(3) 0.97% 0.87%
</TABLE>
(1) AmSouth Bank may charge your account fees
for automatic investment and other cash
management services provided in connection
with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees. Other expenses are being limited
to 0.35% for Class A Shares and 0.31% for
Trust Shares. Total expenses after fee waivers
and expense reimbursements for Class A Shares
are 0.81% and for Trust Shares are 0.70%. Any
fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $99 $309 $536 $1,190
TRUST SHARES $89 $278 $482 $1,073
</TABLE>
As an investor in the U.S.
Treasury Money Market Fund, you
will pay the following fees and
expenses when you buy and hold
shares. Shareholder transaction
fees are paid from your account.
Annual Fund operating expenses
are paid out of Fund assets, and
are reflected in the share price.
Use the 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
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
9
<PAGE> 204
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Tax-Exempt Fund) seeks as
high a level of current interest income exempt from federal
income taxes as is consistent with the preservation of
capital and relative stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests primarily in
short-term municipal securities that provide income that is
exempt from federal income tax and not subject to the
federal alternative minimum tax for individuals. Short-term
municipal securities are debt obligations, such as bonds and
notes, issued by states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities which, generally have remaining maturities
of one year or less. Municipal securities purchased by the
Fund may include rated and unrated variable and floating
rate tax-exempt notes which may have a stated maturity in
excess of one year but which will be subject to a demand
feature permitting the Fund to demand payment within a year.
The Fund may also invest up to 10% of its total assets in
the securities of money market mutual funds which invest
primarily in obligations exempt from federal income tax.
When selecting securities for the Fund's portfolio, the
manager first considers safety of principal and the quality
of an investment. The manager then focuses on generating a
high-level of income. The manager generally evaluates
investments based on interest rate sensitivity selecting
those securities whose maturities fit the Fund's interest
rate sensitivity target and which the manager believes to be
the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
The Fund may also invest in certain other short-term debt
securities in addition to those described above. For a more
complete description of the various securities in which the
Fund may invest, please see the Additional Investment
Strategies and Risks on page 18 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
TAX RISK. The risk that the issuer of the securities will
fail to comply with certain requirements of the Internal
Revenue Code, which would cause adverse tax consequences.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 18.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
10
<PAGE> 205
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR TRUST SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1991 3.91
92 2.59
93 1.92
94 2.33
95 3.44
96 3.03
97 3.2
98 2.99
99 2.8
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 1.40% 12/31/90
Worst
quarter: 0.44% 3/31/94
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Tax-Exempt Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over nine years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS (12/19/91)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
CLASS A SHARES 2.70% 3.02% 3.02%
- ------------------------------------------------------------------------------
TRUST SHARES 2.80% 3.09% 3.06%
- ------------------------------------------------------------------------------
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1999, the Fund's 7-day yield for Class A and Trust Shares was
3.74% and 3.84%, respectively. Without fee waivers and expense reimbursements,
the Fund's yield would have been 3.39% and 3.64%, respectively, for this time
period. For current yield information on the Fund, call 1-800-451-8382. The
Fund's yield appears in The Wall Street Journal each Thursday.
11
<PAGE> 206
AMSOUTH TAX-EXEMPT
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases None None
Maximum deferred sales charge (load) None None
Redemption fee(2) 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.40% 0.40%
Distribution and/or service (12b-1) fee 0.00% 0.00%
Other expenses(3) 0.53% 0.43%(4)
TOTAL FUND OPERATING EXPENSES(3) 0.93% 0.83%
Fee waiver and/or expense reimbursement 0.03% 0.03%
NET EXPENSES(5) 0.90% 0.80%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge their customer's
account fees for automatic investment and
other cash management services provided in
connection with investment in the Funds.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) Other expenses are restated to reflect
current fees.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(5) AmSouth Bank has contractually agreed to
waive fees and/or reimburse expenses to limit
total annual fund operating expenses to: Class
A, 0.90%; Trust Shares 0.80% until October 1,
2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $95 $296 $515 $1,143
TRUST SHARES $83 245 $460 $1,025
</TABLE>
As an investor in the Tax-Exempt
Money Market Fund, you will pay
the following fees and expenses
when you buy and hold shares.
Shareholder transaction fees are
paid from your account. Annual
Fund operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the 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
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
12
<PAGE> 207
AMSOUTH TREASURY RESERVE
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
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 To pursue this goal, 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 portfolio manager
generally evaluates investments based on interest rate
sensitivity.
For a more complete description of the securities in which
the Fund may invest, please see Additional Investment
Strategies and Risks on page 18 or consult the SAI.
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the Fund's yield
will decrease due to a decrease in interest rates or that
the value of the Fund's investments will decline due to an
increase in interest rates.
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.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 18.
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 investments at $1.
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
13
<PAGE> 208
AMSOUTH TREASURY RESERVE
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
93 2.06
94 4.05
95 5.41
96 4.78
97 4.78
98 4.68
99 4.39
</TABLE>
The performance information shown above is
based on a calendar year.
Best
quarter: 1.36% 6/30/95
Worst
quarter: -0.06% 9/30/93
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)(1)
The chart and table on this page
show how the Treasury Reserve Money
Market Fund has performed and how
its performance has varied from
year to year. The bar chart gives
some indication of risk by showing
changes in the Fund's yearly
performance over seven years to
demonstrate that the Fund's value
varied at different times. The
table below it shows the Fund's
performance over time. Of course,
past performance does not indicate
how the Fund will perform in the
future.
<TABLE>
<CAPTION>
1 5 SINCE INCEPTION
YEAR YEARS 10/1/92*
<S> <C> <C> <C>
CLASS A SHARES 4.38% 4.80% 4.30%
TRUST SHARES 4.39% 4.94% 4.39%
</TABLE>
(1) Both charts assume reinvestment of dividends and distributions.
As of December 31, 1999, the Fund's 7-day yield for Class A and Trust Shares was
4.42% and 4.32%, respectively. Without fee waivers and expense reimbursements,
the Fund's yield would have been 4.17% for Trust Shares for this time period.
For current yield information on the Fund, call 1-800-451-8382. The Fund's yield
appears in The Wall Street Journal each Thursday.
* The Treasury Reserve Money Market Fund commenced operations on 3/29/94 through
a transfer of assets from collective trust fund accounts managed by the Adviser,
using materially equivalent investment objectives, policies and methodologies as
the Fund. The quoted performance of the Fund includes the performance of these
trust accounts for periods prior to the Fund's commencement of operations, as
adjusted to reflect the expenses associated with the Fund. The trust accounts
were not registered with the SEC and were not subject to the investment
restrictions imposed by law on registered mutual funds. If these trust accounts
had been registered, their returns may have been lower.
14
<PAGE> 209
AMSOUTH TREASURY RESERVE
RISK/RETURN SUMMARY AND FUND EXPENSES MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A TRUST
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES
Maximum sales charge (load) on
purchases None None
Maximum deferred sales charge (load) None None
Redemption fee(2) 0.00% 0.00%
ANNUAL FUND OPERATING EXPENSES CLASS A TRUST
(FEES PAID FROM FUND ASSETS) SHARES SHARES
Management fee 0.40% 0.40%
Distribution and/or service (12b-1)
fee 0.00% None
Other expenses(3) 0.57% 0.47%(4)
TOTAL FUND OPERATING EXPENSES(3) 0.97% 0.87%
Fee waiver and/or expense
reimbursement 0.23% 0.23%
NET EXPENSES(5) 0.72% 0.62%
</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 are restated to reflect
current fees.
(4) The above amount includes a shareholder
servicing fee that will become effective on
March 13, 2000.
(5) Total expenses after fee waivers and
expense reimbursements through April 30, 2000
are as follows: Class A, 0.60% and Trust
Shares, 0.60% AmSouth Bank has contractually
agreed to waive fees and/or reimburse expenses
to limit total annual fund operating expenses
to: Class A, 0.72%; and Trust Shares, 0.62%
until October 1, 2001.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $99 $309 $536 $1,190
TRUST SHARES $89 $278 $482 $1,073
</TABLE>
As an investor in the AmSouth
Treasury Reserve Money Market
Fund, you will pay the following
fees and expenses when you buy
and hold shares. Shareholder
transaction fees are paid from
your account. Annual Fund
operating expenses are paid out
of Fund assets, and are reflected
in the share price.
Use the 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
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
15
<PAGE> 210
AMSOUTH INSTITUTIONAL PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES OBLIGATIONS MONEY MARKET FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund (formerly the AmSouth Institutional Prime
Obligations Fund) seeks current income with liquidity and
stability of principal.
PRINCIPAL INVESTMENT STRATEGIES To pursue this goal, the Fund invests only in U.S.
dollar-denominated, "high-quality" short-term debt
securities, including the following:
- obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities
- certificates of deposit, time deposits, bankers'
acceptances and other short-term securities issued by
domestic or foreign banks or their subsidiaries or
branches
- domestic and foreign commercial paper and other short-term
corporate debt obligations, including those with floating or
variable rates of interest
- obligations issued or guaranteed by one or more foreign
governments or their agencies or instrumentalities,
including obligations of supranational entities
- asset-backed securities
- repurchase agreements collateralized by the types of
securities listed above
"High-quality" debt securities are those obligations which,
at the time of purchase, (i) possess the highest short-term
rating from at least two nationally recognized statistical
rating organizations (an "NRSRO") (for example, commercial
paper rated "A-1" by Standard & Poor's Corporation and "P-1"
by Moody's Investors Service, Inc.) or one NRSRO if only
rated by one NRSRO or (ii) if unrated, are determined by the
portfolio manager to be of comparable quality.
When selecting securities for the Fund's portfolio, the
portfolio manager first considers safety of principal and
the quality of an investment. The manager then focuses on
generating a high-level of income. The manager generally
evaluates investments based on interest rate sensitivity
selecting those securities whose maturities fit the Fund's
interest rate sensitivity target and which the manager
believes to be the best relative values.
The Fund will maintain an average weighted portfolio
maturity of 90 days or less and will limit the maturity of
each security in its portfolio to 397 days or less.
For a more complete description of the securities in which
the Fund may invest, please see the Additional Investment
Strategies and Risks on page 18 or consult the Statement of
Additional Information ("SAI").
PRINCIPAL INVESTMENT RISKS Your investment in the Fund may be subject to the following
principal risks:
INTEREST RATE RISK: The possibility that the value of the
Fund's investments will decline due to an increase in
interest rates or that the Fund's yield will decrease due to
a decrease in interest rates.
CREDIT RISK: The possibility that an issuer cannot make
timely interest and principal payments on its debt
securities such as bonds. The lower a security's rating, the
greater its credit risk.
For more information about these risks, please see the
Additional Investment Strategies and Risks on page 18.
An investment in the Fund is not a deposit or an obligation
of AmSouth Bank, its affiliates, or any bank, and it is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the
Fund.
</TABLE>
16
<PAGE> 211
AMSOUTH INSTITUTIONAL PRIME
RISK/RETURN SUMMARY AND FUND EXPENSES OBLIGATIONS MONEY MARKET FUND
This section would normally include a bar chart and a table showing how the
Institutional Prime Obligations Money Market Fund has performed and how its
performance has varied from year to year. Because the Fund has not been in
operation for a full calendar year, the bar chart and table are not shown.
FEES AND EXPENSES
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS I CLASS II CLASS III
(FEES PAID BY YOU DIRECTLY)(1) SHARES SHARES SHARES
Maximum sales charge
(load) on purchases None None None
Maximum deferred sales charge
(load) None None None
Redemption fee(2) 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES CLASS I CLASS II CLASS III
(FEES PAID FROM FUND ASSETS) SHARES SHARES SHARES
Management fee(3) 0.20% 0.20% 0.20%
Distribution and/or
service (12b-1) fee 0.00% 0.25% 0.50%
Other expenses(3) 0.27% 0.29% 0.29%
Total Fund operating expenses(3) 0.47% 0.74% 0.99%
</TABLE>
(1) AmSouth Bank or other financial
institutions may charge you account fees for
automatic investment and other cash management
services provided in connection with
investment in the Fund.
(2) A wire transfer fee of $7.00 will be
deducted from the amount of your redemption if
you request a wire transfer.
(3) During the period ended July 31, 1999,
management fees paid by the Fund were limited
to 0.07%. Other expenses are restated to
reflect current fees. Other expenses for each
class are being limited to 0.17%, 0.19%, and
0.19% for Class I, Class II and Class III
Shares, respectively. Total expenses after fee
waivers and expense reimbursements for each
class are: Class I Shares, 0.24%; Class II
Shares, 0.51%; and Class III Shares, 0.76%.
Any fee waiver or expense reimbursement
arrangement is voluntary and may be
discontinued at any time.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS I SHARES $ 48 $151 $263 $ 591
CLASS II SHARES $ 76 $237 $411 $ 918
CLASS III SHARES $101 $315 $547 $1,213
</TABLE>
As an investor in the
Institutional Prime Obligations
Money Market Fund, you will pay
the following fees and expenses
when you buy and hold shares.
Shareholder transaction fees are
paid from your account. Annual
Fund operating expenses are paid
out of Fund assets, and are
reflected in the share price.
Use the 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
- redemption at the end of each
period
- no changes in the Fund's
operating expenses
Because actual returns and
operating expenses will be
different, this example is for
comparison only.
17
<PAGE> 212
[LOGO]
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
MONEY MARKET FUNDS
TAX-EXEMPT MONEY MARKET FUND -- As a fundamental policy, under normal market
conditions at least 80% of the Fund's total assets will be invested in
municipal securities and in securities of money market mutual funds which
invest primarily in obligations exempt from federal income tax. It is also a
fundamental policy that the Fund may invest up to 20% of its total assets in
obligations, the interest on which is either subject to regular federal
income tax or treated as a preference item for purposes of the federal
alternative minimum tax for individuals ("Taxable Obligations"). For
temporary defensive purposes, however, the Fund may increase its short-term
Taxable Obligations to over 20% of its total assets and hold uninvested cash
reserves pending investment. Taxable Obligations may include obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities (some of which may be subject to repurchase agreements),
certificates of deposit and bankers' acceptances of selected banks, and
commercial paper.
The Fund will invest only in those municipal securities and other obligations
which are considered by the portfolio manager to present minimal credit
risks. In addition, investments will be limited to those obligations which,
at the time of purchase, (i) possess one of the two highest short-term
ratings from an NRSRO in the case of single-rated securities or (ii) possess,
in the case of multiple-rated securities, one of the two highest short-term
ratings by at least two NRSROs; or (iii) do not possess a rating (i.e., are
unrated) but are determined by the Advisor to be of comparable quality to the
rated instruments eligible for purchase by the Fund under the guidelines
adopted by the Trustees.
AMSOUTH TREASURY RESERVE 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.
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.
As a money market fund, the 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. 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.
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. The following
table describes the securities and techniques the Fund uses, as well as the
main risks they pose. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be
subject to additional risks. You may also consult the Statement of Additional
Information for additional detail regarding these and other permissible
investments. Following the table is a more complete discussion of risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
Prime Money Market Fund 1
U.S. Treasury Money Market Fund 2
Tax-Exempt Money Market Fund 3
Treasury Reserve Money Market Fund 4
Institutional Prime Obligations Money Market Fund 5
</TABLE>
18
<PAGE> 213
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
ASSET-BACKED SECURITIES: Securities secured by company 1,5 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Interest Rate
Regulatory
Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1,3,5 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
Interest Rate
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1,3,5 Market
stated maturity. Credit
Liquidity
Interest Rate
COMMERCIAL PAPER: Secured and unsecured short-term 1,3,5 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
Interest Rate
DEMAND FEATURES: Securities that are subject to puts and 1,3,5 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
DERIVATIVES: Instruments whose value is derived from an 1,3,5 Management
underlying contract, index or security, or any combination Market
thereof, including futures, options (e.g., put and calls), Credit
options on futures, swap agreements, and some Interest Rate
mortgage-backed securities. Liquidity
Leverage
FOREIGN SECURITIES: Commercial paper of foreign issuers and 1,5 Market
obligations of foreign banks, overseas branches of U.S. Political
banks and supranational entities. Liquidity
Foreign Investment
FUNDING AGREEMENTS: Also known as guaranteed investment 1,5 Liquidity
contracts, an agreement where a Fund invests an amount of Credit
cash Credit with an insurance company and the insurance Market
company credits such investment on a monthly basis with Interest Rate
guaranteed interest which is based on an index. These
agreements provide that the guaranteed interest will not be
less than a certain minimum rate. These agreements also
provide for adjustment of the interest rate monthly and are
considered variable rate instruments. Funding Agreements are
considered illiquid investments, and, together with other
instruments in the Fund which are not readily marketable,
may not exceed 10% of the Fund's net assets.
</TABLE>
19
<PAGE> 214
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other registered 1-5 Market
investment companies with similar investment objectives. A
Fund may invest up to 5% of its assets in the shares of any
one registered investment company, but may not own more than
3% of the securities of any one registered investment
company or invest more than 10% of its assets in the
securities of other registered investment companies. As a
shareholder of an investment company, a Fund will indirectly
bear investment management fees of that investment company,
which are in addition to the management fees the Fund pays
its own Adviser.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1,5 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations and real estate mortgage Credit
investment conduits. Regulatory
MUNICIPAL SECURITIES: Securities issued by a state or 3 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as general Tax
obligation bonds, tax anticipation notes, bond anticipation Regulatory
notes, revenue anticipation notes, project notes, other Interest Rate
short-term tax-exempt obligations, municipal leases, and
Obligations of municipal housing authorities (single Family
revenue bonds).
There are two general types of municipal bonds:
General-obligation bonds, which are secured by the taxing
power of the issuer and revenue bonds, which take many
shapes and forms but are generally backed by revenue from a
specific project or tax. These include, but are not limited,
to certificates of participation (COPs); utility and sales
tax revenues; tax increment or tax allocations; housing and
special tax, including assessment district and community
facilities district (Mello-Roos) issues which are secured by
specific real estate parcels; hospital revenue; and
industrial development bonds that are secured by a private
company.
REPURCHASE AGREEMENTS: The purchase of a security and the 1-5 Market
simultaneous commitment to return the security to the seller Leverage
at an agreed upon price on an agreed upon date. This is
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-5 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1, Market
Fund's total assets. In return the Fund will receive cash, 3-5 Leverage
other securities, and/or letters of credit. Liquidity
Credit
TAX-EXEMPT COMMERCIAL PAPER: Commercial paper issued by 3 Credit
governments, and/or letters of credit. Liquidity
Market
Tax
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1,3,5 Liquidity
exchange for the deposit of funds. Credit
Market
TREASURY RECEIPTS: Treasury receipts, Treasury investment 1,3,5 Market
growth receipts, and certificates of accrual of Treasury
securities.
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 3-5 Market
agencies and instrumentalities of the U.S. government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac. The Interest Rate
Treasury Reserve Money Market Fund will only invest in such
securities if they are backed by the full faith and credit
of the United States
</TABLE>
20
<PAGE> 215
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
<TABLE>
<CAPTION>
INSTRUMENT CODE TYPE RISK TYPE
---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, separately 1-5 Market
traded registered interest and principal securities, and
coupons under bank entry safekeeping.
VARIABLE AMOUNT MASTER DEMAND NOTES: Unsecured demand notes 1,3,5 Credit
that permit the indebtedness to vary and provide Liquidity Liquidity
for periodic adjustments in the interest rate according to Interest Rate
the terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer,
they are not normally traded. Although there is no secondary
market in these notes, the Fund may demand payment of
principal and accrued interest at specified intervals.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1,3,5 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand. Interest Rate
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1,3,5 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
ZERO-COUPON DEBT OBLIGATIONS: Bonds and other debt that pay 1,3,5 Credit
no interest, but are issued at a discount from their value Interest Rate
at maturity. When held to maturity, their entire return Market
equals the difference between their issue price and their
maturity value.
</TABLE>
21
<PAGE> 216
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "What are the main risks of investing in this Fund?". Because of
these risks, the value of the securities held by the Funds may fluctuate, as
will the value of your investment in the Funds. Certain investments and Funds
are more susceptible to these risks than others.
CREDIT RISK. The risk that the issuer of a security, or the counter party to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to actual
default as its credit status deteriorates and the probability of default
rises.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INTEREST RATE RISK. The risk that debt prices overall will decline over
short or even long periods due to rising interest rates. A rise in interest
rates typically causes a fall in values while a fall in rates typically
causes a rise in values. Interest rate risk should be modest for shorter-term
securities, moderate for intermediate-term securities, and high for
longer-term securities. Generally, an increase in the average maturity of the
Fund will make it more sensitive to interest rate risk. The market prices of
securities structured as zero coupon or pay-in-kind securities are generally
affected to a greater extent by interest rate changes. These securities tend
to be more volatile than securities which pay interest periodically.
LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may be
embedded directly in the characteristics of other securities.
HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
Portfolio also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment and vice versa.
Hedges are sometimes subject to imperfect matching between the derivative
and underlying security, and there can be no assurance that a Portfolio's
hedging transactions will be effective.
SPECULATIVE. To the extent that a derivative is not used as a hedge, the
Portfolio is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivative's original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
22
<PAGE> 217
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest
rates typically causes a fall in values, while a fall in rates typically
causes a rise in values. However, if held to maturity, the face value of the
security is recovered. Finally, key information about a security or market
may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
PRE-PAYMENT/CALL RISK. The risk that the principal repayment of a security
will occur at an unexpected time. Prepayment risk is the chance that the
repayment of a mortgage will occur sooner than expected. Call risk is the
possibility that, during times of declining interest rates, a bond issuer
will "call" -- or repay -- higher yielding bonds before their stated
maturity. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments and calls generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid or called, a Fund
may have to reinvest in securities with a lower yield. In this event, the
Fund would experience a decline in income -- and the potential for taxable
capital gains. Further, with early prepayment, a Fund may fail to recover any
premium paid, resulting in an unexpected capital loss. Prepayment/call risk
is generally low for securities with a short-term maturity, moderate for
securities with an intermediate-term maturity, and high for securities with a
long-term maturity.
REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
23
<PAGE> 218
[LOGO]
FUND MANAGEMENT
THE INVESTMENT ADVISER
AmSouth Bank, (AmSouth or the "Adviser"), is the adviser for the Funds.
AmSouth is the bank affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region. AmSouth
Bancorporation reported assets as of September 30, 1999 of $20 billion and
operated 276 banking offices in Alabama, Florida, Georgia and Tennessee.
AmSouth has provided investment management services through its Trust
Investment Department since 1915. As of June 30, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary management and
provided custody services for an additional $21 billion in securities.
AmSouth is the largest provider of trust services in Alabama and its Trust
Natural Resources and Real Estate Department is a major manager of
timberland, mineral, oil and gas properties and other real estate interests.
Through its portfolio management team, AmSouth makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Funds' investment programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 07/31/99
<S> <C>
-------------------------------
Prime Money Market Fund 0.40%
-------------------------------
U.S. Treasury Money Market Fund 0.40%
-------------------------------
Tax-Exempt Money Market Fund 0.20%
-------------------------------
Institutional Prime Obligations Money Market Fund 0.20%
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 12/31/99
<S> <C>
-------------------------------
Treasury Reserve Money Market Fund* 0.40%
-------------------------------------------------------------------------------------
</TABLE>
*AmSouth Treasury Reserve Money Market Fund consolidated with the ISG
Treasury Money Market Fund on March 13, 2000. For financial reporting
purposes the ISG Treasury Money Market Fund was the accounting survivor. The
investment advisory fee reflects fees paid to First American National Bank,
an affiliate of AmSouth, as adviser to the ISG Funds.
THE DISTRIBUTOR AND ADMINISTRATOR
ASO Services Company ("ASC"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as each Fund's administrator. Management and
administrative services of ASC include providing office space, equipment and
clerical personnel to the Fund and supervising custodial, auditing,
valuation, bookkeeping, legal and dividend dispersing services. ASC is a
wholly owned subsidiary of BISYS Fund Services ("BISYS").
BISYS, whose address is also 3435 Stelzer Road, Columbus, Ohio 43219-3035
serves as the distributor of each Fund's shares. BISYS may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
24
<PAGE> 219
[LOGO]
SHAREHOLDER INFORMATION
CHOOSING A SHARE CLASS
Class A Shares, Class B Shares, Trust Shares, Class I Shares, Class II Shares
and Class III Shares have different expenses and other characteristics,
allowing you to choose the class that best suits your needs. Trust Shares and
Class I Shares are only available to financial institutions, fiduciary
clients of AmSouth Bank and certain other qualified investors. Class II and
Class III Shares are only available to certain sweep program participants.
Class A and Class B Shares are available to all other shareholders. In
choosing a class, 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
- No sales charges
- Shareholder servicing fee of 0.25% of average daily net assets.
CLASS B SHARES
- No front-end sales charge; all your money goes to work for you right away.
- All Class B Shares pay a shareholder servicing fee of 0.25% of average
daily net assets. With respect to all Funds that participated in the
ISG/AmSouth combination, this fee is in the form of a separate non-Rule
12b-1 fee. With respect to all other AmSouth Funds, the fee is a component
of a 1.00% Rule 12b-1 fee. All Funds that participated in the ISG/AmSouth
combination bear a Rule 12b-1 fee of 0.75%. Despite the above described
differences in the legal character of shareholder servicing fees, all B
Shares are subject to the same 1.00% aggregate fees for distribution and
shareholder services.
- A deferred sales charge, as described below.
- Automatic conversion to Class A Shares after eight years, thus reducing
future annual expenses.
- Maximum investment for all Class B purchases: $250,000.
TRUST SHARES
- No sales charge.
- Shareholder servicing fee of 0.15% of average daily net assets.
- Available only to the following investors:
- investors for whom AmSouth acts in a fiduciary, advisory, custodial,
agency or similar capacity through an account with its Trust Department;
- investors who purchase Shares of a Fund through a 401(k) plan or a 403(b)
plan which by its terms permits purchases of Shares;
- orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies;
- investors who purchase through financial institutions approved by the
Distributor; and
- investors who provide an AmSouth Fund with its initial seed capital. All
other investors are eligible to purchase Class A Shares or Class B Shares
only.
CLASS I SHARES
- No sales charges.
- No Distribution and service (12b-1) fees.
- Minimum Initial Investment: $3 million
- Offered only to:
- Customers of AmSouth Bank for whom AmSouth Bank acts in a fiduciary,
advisory, custodial, agency, or similar capacity; and
- Fiduciary customers of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
CLASS II SHARES
- No sales charges.
- Distribution and service (12b-1) fees of 0.25% of average daily net assets.
- Offered as a cash sweep vehicle to institutional or corporate customers of
AmSouth Bank and of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
CLASS III SHARES
- No sales charges.
- Distribution and service (12b-1) fees of 0.50% of average daily net assets.
- Offered as a cash sweep vehicle to institutional or corporate customers of
AmSouth Bank and of other financial institutions approved by the
Distributor (Sweep Program Participant(s)).
For actual past expenses of each share class, see the fund-by-fund
information earlier in this prospectus.
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.
25
<PAGE> 220
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
------------------------------
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of the
Fund's investments and other
assets, subtracting its
liabilities and then dividing
that figure by the number of
outstanding shares of the
Fund:
NAV =
Total Assets - Liabilities
------------------------------
Number of Shares
Outstanding
NAV is calculated separately
for each class of shares.
------------------------------
Per share net asset value (NAV) for each Fund is determined and its shares are
priced twice a day. The NAV for the Prime Money Market Fund, the U.S. Treasury
Money Market Fund and the Treasury Reserve Money Market Fund is determined at
1:00 p.m. Eastern time and at the close of regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern time on days the Exchange and the
Federal Reserve Bank of Atlanta are open. The NAV for the Tax-Exempt Money
Market Fund is determined at 12:00 p.m. Eastern time and at the close of regular
trading on the New York Stock Exchange. The NAV for the Institutional Money
Market Fund is determined and its shares are priced twice a day at 2:00 p.m.
Eastern time and at the close of regular trading on the New York Stock Exchange.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund. This is what is known as
the offering price.
Each Fund uses the amortized cost method of valuing its investments, which does
not take into account unrealized gains or losses. For further information
regarding the methods used in valuing the Fund's investments, please see the
SAI.
26
<PAGE> 221
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Class A or Class B
---------------------------------------------------------
Regular $1,000 $0
---------------------------------------------------------
Automatic Investment Plan $1,000 $50
---------------------------------------------------------
Trust
---------------------------------------------------------
Regular $1,000 $0
---------------------------------------------------------
Retirement $250 $50
---------------------------------------------------------
Class I $3,000,000 $0
---------------------------------------------------------
Class II N/A N/A
---------------------------------------------------------
Class III N/A N/A
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that
do not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement. The Distributor may reject
a purchase order if it considers it in
the best interest of the Fund and its
shareholders.
You may purchase Funds through
the Distributor or through banks,
brokers and other investment
representatives, which may charge
additional fees and may require
higher minimum investments or
impose other limitations on
buying and selling shares.
Additionally, banks, brokers and
other financial institutions and
representatives may use shares of
the Money Market Funds in "sweep"
programs whereby the accounts of
a participating customer of the
financial institution or
representative is automatically
"swept" into shares of one of the
Money Market Funds. If you
purchase shares through an
investment representative, that
party is: responsible for
transmitting orders by close of
business and may have an earlier
cut-off time for purchase and
sale requests. Consult your
investment representative or
institution for specific
information.
-----------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------
27
<PAGE> 222
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
RETAIL MONEY MARKET FUNDS -- CLASS A AND B SHARES
BY REGULAR MAIL
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases, follow the instructions below.
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "AmSouth Funds."
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
- AmSouth Funds/Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: AmSouth Funds
P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
4. Send to: AmSouth Funds
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road, Columbus, OH 43219.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a U. S. Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-451-8382. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-451-8382 to arrange a transfer from your bank account.
QUESTIONS?
Call 800-451-8382 or your
investment representative.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an electronic purchase or sale, the transaction is made
through the Automated Clearing House (ACH) and may take up to eight days to
clear. There is generally no fee for ACH transactions.
28
<PAGE> 223
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
For initial investment:
Fax the completed application, along with a request for a confirmation number
to 1-800-451-8382. Follow the instructions below after receiving your
confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
AmSouth Bank
Routing Number: ABA #044000024
DDA#
Include:
Your name
Your confirmation number
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 1-800-451-8382 TO ADVISE
US OF THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK.
--------------------------------------
YOU CAN ADD TO YOUR ACCOUNT BY USING
THE CONVENIENT OPTIONS DESCRIBED
BELOW. THE FUND RESERVES THE RIGHT TO
CHANGE OR ELIMINATE THESE PRIVILEGES
AT ANY TIME WITH 60 DAYS NOTICE.
--------------------------------------
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in
the Funds from your bank account,
through payroll deduction or from your
federal employment, Social Security or
other regular government checks.
Automatic investments can be as little
as $50, once you've invested the
$1,000 minimum required to open the
account.
To invest regularly from your bank
account:
- Complete the Automatic Investment
Plan portion on your Account
Application.
Make sure you note:
- Your bank name, address and
account number
- The amount you wish to invest
automatically (minimum $50)
- How often you want to invest
(every month, 4 times a year,
twice a year or once a year)
- Attach a voided personal check.
To invest regularly from your paycheck
or government check:
Call 1-800-451-8382 for an enrollment
form or consult the SAI for additional
information.
RETAIL MONEY MARKET FUNDS -- (TRUST SHARES) AND INSTITUTIONAL MONEY MARKET
FUND
You may purchase Trust Shares and Institutional Money Market Fund Shares by
following the procedures established by the Distributor in connection with
the requirements of qualified accounts maintained by AmSouth Bank or other
financial institutions approved by the Distributor. These procedures may
include sweep arrangements where an account is "swept" automatically no less
frequently than weekly into a Money Market Fund.
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in the Account Application, you can elect to
receive your distributions in cash (check) or have distributions (capital gains
and dividends) reinvested in another AmSouth 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.
29
<PAGE> 224
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
When purchasing Trust Shares or Institutional Money Market Fund Shares
through AmSouth Bank or an approved financial institution, simply tell
AmSouth or your financial institution that you wish to purchase shares of the
Funds and they will take care of the necessary documentation.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends will vary among each class of shares, because each share class has
different 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.
-----------------------------------------------------------------------------
30
<PAGE> 225
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
You may sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is received by
the Fund, its transfer agent,
or your investment
representative. Normally you
will receive your proceeds
within a week after your
request is received. See
section on "General Policies
on Selling Shares below."
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
1. Call 1-800-451-8382 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on
Selling Shares -- Verifying Telephone Redemptions" below.)
BY MAIL
1. Call 1-800-451-8382 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: AmSouth Funds, P.O. Box 182733, Columbus, OH 43218-2733
BY OVERNIGHT SERVICE (SEE "GENERAL POLICIES ON SELLING SHARES -- REDEMPTIONS
IN WRITING REQUIRED" BELOW.)
1. See instruction 1 above.
2. Send to AmSouth Funds, c/o BISYS Fund Services, Attn: T.A. Operations,
3435 Stelzer Road, Columbus, OH 43219
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B Shares, you will be charged a fee for any shares that have
not been held for a sufficient length of time. These fees will be deducted from
the money paid to you. See the section on z
"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.
31
<PAGE> 226
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must indicate this option on your application.
The Fund will charge a $7 wire transfer fee for each wire transfer request.
Note: Your financial institution may also charge a separate fee.
Call 1-800-451-8382 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Your bank may charge for this service.
Call 1-800-451-8382 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 7 days.
REDEMPTION BY CHECK WRITING
PRIME MONEY MARKET FUND ONLY
You may write checks in amounts of $1,000 or more on your account in the
Prime Money Market Fund. To obtain checks, complete the signature card
section of the account application or contact the Fund to obtain a signature
card. Dividends and distributions will continue to be paid up to the day the
check is presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum
required account balance in the Prime Money Market Fund of $1,000 and you may
not close your Fund account by writing a check.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your 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.
32
<PAGE> 227
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing and obtain a signature guarantee if:
- The check is not being mailed to the address on your account; or
- The check is not being made payable to the owner of the account.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
For the Institutional Money Market Fund, if the value of Class I shares in
your account falls below $3 million, the Fund may ask you to increase your
balance. If it is still below $3 million after 60 days, the Fund may convert,
at net asset value, your Class I Shares to Trust Shares. For all other Funds,
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.
33
<PAGE> 228
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CLASS A, TRUST, CLASS I, CLASS II AND CLASS III SHARES
No sales charge.
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE*
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
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.
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 Class B Shares acquired in the combination of AmSouth Funds with ISG
Funds, waivers are in place on the CDSC, charged if such 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. These shares will automatically convert
to Class A Shares of the same Fund after seven years from the end of the
month of purchase.
34
<PAGE> 229
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The CDSC will be waived under certain circumstances, including the following:
- Redemptions from accounts following the death or disability of the
shareholder.
- Returns of excess contributions to retirement plans.
- Distributions of less than 10% of the annual account value under a
Systematic Withdrawal Plan.
- Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
DISTRIBUTION AND SERVICE (12B-1) FEES AND SHAREHOLDER SERVICING FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Fund's shares and/or for providing shareholder services.
Shareholder servicing fees compensate financial institutions that provide
shareholder services to their customers and account holders. 12b-1 and
shareholder servicing fees are paid from Fund assets on an ongoing basis, and
will increase the cost of your investment.
- The 12b-1 and shareholder servicing fees vary by share class as follows:
- Class A Shares pay a non-Rule 12b-1 shareholder servicing fee of up to
0.25% of the average daily net assets of a Fund.
- Class B Shares
-- All Class B Shares pay a shareholder servicing fee of 0.25% of
average daily net assets. With respect to all Funds that participated
in the ISG/AmSouth combination, this fee is in the form of a separate
non-Rule 12b-1 fee. With respect to all other AmSouth Funds, the fee
is a component of a 1.00% Rule 12b-1 fee. All Funds that participated
in the ISG/AmSouth combination bear a Rule 12b-1 fee of 0.75%.
Despite the above described differences in the legal character of
shareholder servicing fees, all B Shares are subject to the same
1.00% aggregate fees for distribution and shareholder services. These
aggregate fees 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.
- Trust Shares pay a shareholder servicing fee of up to 0.15% of the
average daily net assets of a Fund.
- Class II Shares pay a 12b-1 fee of up to 0.25% of the average daily net
assets of a Fund.
- Class III Shares pay a 12b-1 fee of up to 0.50% of the average daily net
assets of the applicable Fund. This will cause expenses for Class III
Shares to be higher and dividends to be lower than for Class II Shares.
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.
35
<PAGE> 230
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your shares in
one Fund for shares of the same
class of another AmSouth Fund,
usually without paying additional
sales charges if applicable (see
"Notes" below). You must meet the
minimum investment requirements
for the Fund into which you are
exchanging. Class A Shares may
also be exchanged for Trust
Shares of the same Fund if you
become eligible to purchase Trust
Shares. Trust Shares may also be
exchanged for Class A Shares of
another Fund if you are no longer
eligible to purchase Trust
Shares.
Shares of an Institutional Money
Market Fund may not be exchanged
for Trust Shares, Class A Shares
or Class B Shares of the other
AmSouth Funds. Exchanges from one
Fund to another are taxable. No
transaction fees are charged for
exchanges.
AUTOMATIC EXCHANGES
You can use the Funds' Automatic
Exchange feature to purchase
shares of the Funds at regular
intervals through regular,
automatic redemptions from the
AmSouth Prime Money Market Fund.
To participate in the Automatic
Exchange:
- Complete the appropriate
section of the Account
Application.
- Keep a minimum of $10,000 in
the AmSouth Prime Money
Market Fund and $1,000 in the
Fund whose shares you are
buying.
To change the Automatic Exchange
instructions or to discontinue
the feature, you must send a
written request to AmSouth Funds,
P.O. Box 182733, Columbus, Ohio
43218-2733.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to AmSouth Funds, P.O. Box
182733, Columbus OH 43218-2733, or by
calling 1-800-451-8382. Please provide the
following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited to four exchanges from a Fund
during a calendar year.
NOTES ON EXCHANGES
- - The registration and tax identification numbers of the two accounts must be
identical.
- - The Exchange Privilege may be changed or eliminated at any time upon a 60-day
notice to shareholders.
- - Be sure to read carefully the Prospectus of any Fund into which you wish to
exchange shares.
- - When exchanging Trust Shares of a Fund for Class A Shares of a Fund, you will
be exempt from any applicable sales charge.
36
<PAGE> 231
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Please consult your tax adviser regarding your specific questions about
federal, state and local income taxes. Below we have summarized some
important tax issues that affect the Funds and their shareholders. This
summary is based on current tax laws, which may change.
Each Fund distributes any net investment income monthly (and net realized
capital gains, if any) at least once a year. All distributions will be
automatically reinvested in additional Fund Shares unless you request to
receive all distributions in cash.
Generally, for federal income tax purposes, Fund distributions are taxable as
ordinary income, (except that distributions of long-term capital gains, if
any, will be taxed as such regardless of how long you have held your shares).
Distributions are taxable whether you received them in cash or in additional
shares. Distributions are also taxable to you even if they are paid from
income or gains earned by the Fund before your investment (and thus were
included in the price you paid).
For the Tax-Exempt Money Market Fund, the income dividends that you receive
are expected to be exempt from federal income taxes. However, if you receive
social security or railroad retirement benefits, you should consult your tax
adviser to determine what effect, if any, an investment in the Tax-Exempt
Money Market Fund may have on the federal taxation of your benefits. In
addition, an investment in the Tax-Exempt Money Market Fund may result in
liability for federal alternative minimum tax, both for individual and
corporate shareholders.
A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, a Fund's yield on those securities would be
decreased. Shareholders generally will not be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, a Fund's investments in
foreign securities or foreign currencies may increase or accelerate a Fund's
recognition of ordinary income and may affect the timing or amount of a
Fund's distributions.
Any gain resulting from the sale or exchange of your Fund Shares (even if the
income from which is tax exempt) will generally be subject to tax. You should
consult your tax adviser for more information on your own tax situation,
including possible state and local taxes.
AmSouth Funds will send you a statement each year showing the tax status of
all your distributions.
- For each Fund, other than the Tax-Exempt Money Market Fund, the dividends
and short-term capital gains that you receive are considered ordinary
income for tax purposes. For the Tax-Exempt Money Market Fund, any
short-term capital gains that you receive are taxable to you as ordinary
dividend income for Federal income tax purposes.
- Any distributions of net long-term capital gains by a Fund are taxable to
you as long-term capital gains for tax purposes, no matter how long
you've owned shares in the Fund.
- Generally, the Fund's advisers do not consider taxes when deciding to buy
or sell securities. Capital gains are realized from time to time as
by-products of ordinary investment activities. Distributions may vary
considerably from year to year.
- If you sell or exchange shares, any gain or loss you have is a taxable
event. This means that you may have a capital gain to report as income,
or a capital loss to report as a deduction, when you complete your
federal income tax return.
- Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.
- Foreign governments may withhold taxes on dividends and interest paid,
while imposing taxes on other payments or gains, with respect to foreign
securities.
The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account
such as an IRA or a qualified employee benefit plan. (Non-U.S. investors may
be subject to U.S. withholding and estate tax.)
You should consult your tax adviser for more information on your own tax
situation, including possible state and local taxes.
More information about taxes is in our Statement of Additional
Information.
37
<PAGE> 232
[LOGO]
PRIME MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY PRIME OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or, if shorter, the period of the
Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the SAI, which is
available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------
1999 1998
----------------------- -------------------------
CLASS A CLASS B CLASS A CLASS B (a)
----------- --------- --------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.044 0.035 0.049 0.005
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.044) (0.035) (0.049) (0.005)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------
Total Return 4.48% 3.55% 4.99% 0.49%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $136,078 $ 224 $116,960 $ 1
Ratio of expenses to average net assets 0.78% 1.69% 0.79% 1.85%(c)
Ratio of net investment income to average
net assets 4.40% 3.39% 4.88% 3.83%(c)
Ratio of expenses to average net assets* 0.94% 1.70% 0.95% 1.88%(c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from June 15, 1998 (commencement of operations) through
July 31, 1998.
(b) Not annualized.
(c) Annualized.
38
<PAGE> 233
OTHER INFORMATION ABOUT THE FUNDS PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------
1997 1996 1995
----------- ------------- --------
CLASS A CLASS A (a)
----------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.048 0.016 0.050
-------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.048) (0.016) (0.050)
-------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------
Total Return 4.90% 5.07%(b) 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $111,027 $125,075 $617,673
Ratio of expenses to average net assets 0.78% 0.81%(c) 0.69%
Ratio of net investment income to average
net assets 4.79% 4.61%(c) 5.04%
Ratio of expenses to average net assets* 0.93% 0.96%(c) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering Class A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Class A Shares
for the period from April 1, 1996 to July 31, 1996. Total return for the
Class A Shares for the period April 1, 1996 (commencement of operations)
to July 31, 1996 was 1.55%.
(c) Annualized.
(d) There were no waivers during the period.
39
<PAGE> 234
OTHER INFORMATION ABOUT THE FUNDS PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- --------
TRUST TRUST TRUST TRUST (a)
-------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.045 0.050 0.049 0.050 0.050
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.045) (0.050) (0.049) (0.050) (0.050)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Total Return 4.59% 5.09% 5.00%(e) 5.10% 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $536,899 $479,974 $416,966 $478,542 $617,673
Ratio of expenses to average net assets 0.68% 0.69% 0.68%(b) 0.71% 0.69%
Ratio of net investment income to average
net assets 4.51% 4.98% 4.89%(b) 5.00% 5.04%
Ratio of expenses to average net assets* 0.69% 0.70% (c) (c) (c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering Class A Shares.
(b) Annualized.
(c) There were no waivers during the period.
(d) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Class A Shares
for the period from April 1, 1996 to July 31, 1996. Total return for the
Class A Shares for the period April 1, 1996 (commencement of operations)
to July 31, 1996 was 1.55%.
(e) Represents total return based on the activity of Class A Shares for the
period from August 1, 1997 to September 1, 1997 and the activity of Trust
Shares for the period from September 2, 1997 to July 31, 1998.
40
<PAGE> 235
U.S. TREASURY MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY U.S. TREASURY FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ----------- ---------
CLASS A CLASS A CLASS A CLASS A (a)
------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.040 0.046 0.045 0.015 0.048
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.040) (0.046) (0.045) (0.015) (0.048)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Total Return 4.06% 4.67% 4.60% 4.90%(b) 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 4,390 $ 8,070 $ 9,885 $ 12,263 $ 322,939
Ratio of expenses to average net assets 0.79% 0.80% 0.79% 0.82%(c) 0.70%
Ratio of net investment income to average
net assets 4.03% 4.57% 4.50% 4.44%(c) 4.81%
Ratio of expenses to average net assets* 0.95% 0.95% 0.94% 0.97%(c) (c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering Class A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Class A Shares
for the period from April 1, 1996 to July 31, 1996. Total return for the
Class A Shares for the period April 1, 1996 (commencement of operations)
to July 31, 1996 was 1.49%.
(c) Annualized.
(d) There were no waivers during the period.
41
<PAGE> 236
OTHER INFORMATION ABOUT THE FUNDS U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- --------
TRUST TRUST TRUST TRUST (a)
-------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.041 0.047 0.046 0.048 0.048
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.041) (0.047) (0.046) (0.048) (0.048)
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------------------------
Total Return 4.16% 4.77% 4.70% 4.93% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $320,847 $352,055 $309,361 $368,162 $322,939
Ratio of expenses to average net assets 0.69% 0.70% 0.69% 0.71% 0.70%
Ratio of net investment income to average
net assets 4.10% 4.67% 4.60% 4.82% 4.81%
Ratio of expenses to average net assets* 0.70% 0.70% (a) (a) (a)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) There were no waivers during the period.
42
<PAGE> 237
TAX-EXEMPT MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY TAX-EXEMPT FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ----------- --------
CLASS A CLASS A CLASS A CLASS A (a)
-------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.026 0.030 0.030 0.010 0.032
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.026) (0.030) (0.030) (0.010) (0.032)
------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------------
Total Return 2.66% 3.03% 3.04% 3.12%(b) 3.22%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 22,844 $ 28,657 $ 27,926 $ 17,116 $ 57,640
Ratio of expenses to average net assets 0.59% 0.60% 0.62% 0.68%(c) 0.54%
Ratio of net investment income to average
net assets 2.64% 2.97% 3.00% 2.82%(c) 3.15%
Ratio of expenses to average net assets* 0.98% 0.98% 0.97% 1.03%(c) 0.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering Class A Shares.
(b) Represents total return for the Trust Shares for the period from August
1, 1995 to March 31, 1996 plus the total return for the Class A Shares
for the period from April 1, 1996 to July 31, 1996. Total return for the
Class A Shares for the period April 1, 1996 (commencement of operations)
through July 31, 1996 was 0.95%.
(c) Annualized.
43
<PAGE> 238
OTHER INFORMATION ABOUT THE FUNDS TAX-EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- --------- -------
TRUST TRUST TRUST TRUST (a)
------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.027 0.031 0.031 0.031 0.032
------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.027) (0.031) (0.031) (0.031) (0.032)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------------------------------------------------
Total Return 2.76% 3.13% 3.15% 3.15% 3.22%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $73,880 $62,084 $55,429 $43,611 $57,640
Ratio of expenses to average net assets 0.49% 0.50% 0.52% 0.54% 0.54%
Ratio of net investment income to average
net assets 2.71% 3.07% 3.10% 3.11% 3.15%
Ratio of expenses to average net assets* 0.73% 0.73% 0.72% 0.74% 0.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were
previously unclassified, were designated as Trust Shares, and the Fund
commenced offering Class A Shares.
44
<PAGE> 239
OTHER INFORMATION ABOUT THE FUNDS TREASURY RESERVE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
CLASS A CLASS A CLASS A CLASS A CLASS A
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.043 0.046 0.047 0.047 0.053
--------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.043 0.046 0.047 0.047 0.053
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.043) (0.046) (0.047) (0.047) (0.053)
--------------------------------------------------------------------------------------------------------
Total Distributions (0.043) (0.046) (0.047) (0.047) (0.053)
--------------------------------------------------------------------------------------------------------
Net change in asset value -- -- -- -- --
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.38% 4.69% 4.76% 4.76% 5.41%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 143,208 $ 167,475 $ 77,065 $ 78,308 $ 168,430
Ratio of expenses to average net assets 0.60% 0.77% 0.75% 0.68% 0.68%
Ratio of net investment income to average
net assets 4.28% 4.58% 4.68% 4.72% 5.28%
Ratio of expenses in average net assets* 0.70% 0.78% (a) 0.74% 0.75%
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
(a) There were no fee reductions in this period.
45
<PAGE> 240
OTHER INFORMATION ABOUT THE FUNDS TREASURY RESERVE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
TRUST SHARES
---------------------------------------------
PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------ ------------
1999 1998 1997 1996(a)
-------- -------- -------- ------------
TRUST TRUST TRUST TRUST
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.043 0.046 0.049 0.024
--------------------------------------------------------------------------------------------
Total from Investment Activities 0.043 0.046 0.049 0.024
--------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.043) (0.046) (0.049) (0.024)
--------------------------------------------------------------------------------------------
Total Distributions (0.043) (0.045) (0.049) (0.024)
--------------------------------------------------------------------------------------------
Net change in asset value -- -- -- --
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------------------
Total Return 4.38% 4.93% 5.05% 2.43%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $341,304 $309,979 $114,276 $109,698
Ratio of expenses to average net assets 0.59% 0.63% 0.80% 0.62%(c)
Ratio of net investment income to average
net assets 4.31% 4.78% 4.94% 4.72%(c)
Ratio of expenses in average net assets* 0.60% (d) (d) (d)
</TABLE>
* During the period, certain fees were voluntarily reduced/reimbursed. If
such voluntary fee reductions/reimbursements had not occurred, the ratios
would have been as indicated.
(a) For the period from July 1, 1996 (commencement of operations) through
December 31, 1996.
(b) Not annualized.
(c) Annualized.
(d) There were no fee reductions in this period.
46
<PAGE> 241
INSTITUTIONAL PRIME OBLIGATIONS MONEY MARKET FUND
OTHER INFORMATION ABOUT THE FUNDS (FORMERLY THE INSTITUTIONAL PRIME
OBLIGATIONS FUND)
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1999
--------------------------------------------------------------------------
CLASS I (a) CLASS II (b) CLASS III (c)
----------- ------------ -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.042 0.020 0.018
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.042) (0.020) (0.018)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
Total Return (d) 4.31%(d) 1.96%(d) 1.84%(d)
RATIOS SUPPLEMENTAL DATA:
Net Assets at end of period (000) $69,458 $26,000 $13,575
Ratio of expenses to average net assets 0.22%(e) 0.49%(e) 0.74%(e)
Ratio of net investment income to average net
assets 4.82%(e) 4.45%(e) 4.22%(e)
Ratio of expenses to average net assets* 0.45%(e) 0.72%(e) 0.97%(e)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from September 15, 1998 (commencement of operations)
through July 31, 1999.
(b) For the period from February 19, 1999 (commencement of operations)
through July 31, 1999.
(c) For the period from February 22, 1999 (commencement of operations)
through July 31, 1999.
(d) Not annualized.
(e) Annualized.
47
<PAGE> 242
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operational and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Reports and the SAI, prospectuses of other members of
the AmSouth Funds family, or request other information and discuss your
questions about the Funds by contacting a broker or bank that sells the Funds.
Or contact the Funds at:
AMSOUTH FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-451-8382
INTERNET: HTTP://WWW.AMSOUTHFUNDS.COM
You can review the Funds' reports and SAIs at the Public Reference Room of the
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- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or by calling 1-202-942-8090, or by electronic
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- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-5551. ASOP31300MM
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AMSOUTH FUNDS
Statement of Additional Information
March 13, 2000
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This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of the AmSouth Value Fund, the AmSouth Growth
Fund, the AmSouth Capital Growth Fund, the AmSouth Large Cap Fund, the AmSouth
Mid Cap Fund, the AmSouth Small Cap Fund, the AmSouth Equity Income Fund, the
AmSouth Balanced Fund, the AmSouth Select Equity Fund, the AmSouth Enhanced
Market Fund, the AmSouth International Equity Fund, the AmSouth Strategic
Portfolios: Aggressive Growth Portfolio, the AmSouth Strategic Portfolios:
Growth Portfolio, the AmSouth Strategic Portfolios: Growth and Income Portfolio,
the AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio, the
AmSouth Strategic Portfolios: Current Income Portfolio, the AmSouth Bond Fund,
the AmSouth Limited Term Bond Fund, the AmSouth Government Income Fund, the
AmSouth Limited Term U.S. Government Fund, the AmSouth Municipal Bond Fund, the
AmSouth Florida Tax-Exempt Fund, the AmSouth Tennessee Tax-Exempt Fund, the
AmSouth Limited Term Tennessee Tax-Exempt Fund, the AmSouth Prime Money Market
Fund, the AmSouth U.S. Treasury Money Market Fund, the AmSouth Treasury Reserve
Money Market Fund, the AmSouth Tax-Exempt Money Market Fund, and the AmSouth
Prime Obligations Money Market Fund (each a "Fund" and collectively the
"Funds"), each dated March 13, 2000. This Statement of Additional Information is
incorporated by reference in its entirety into each Prospectus. A copy of each
Fund's Prospectus may be obtained by writing to AmSouth Funds at P.O. Box
182733, Columbus, Ohio 43218-2733, or by telephoning toll free (800) 451-8382.
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TABLE OF CONTENTS
<TABLE>
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Page
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AMSOUTH FUNDS ....................................................................... 1
INVESTMENT OBJECTIVES AND POLICIES .................................................. 2
Additional Information on Portfolio Instruments ............................ 3
Investment Restrictions .................................................... 35
Additional Investment Restrictions ......................................... 39
Portfolio Turnover ......................................................... 42
VALUATION ........................................................................... 44
Valuation of the Money Market Funds and the Institutional Money Market Fund 44
Valuation of the Capital Appreciation Funds and the Income Funds ........... 45
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ...................................... 45
Purchase of Shares ......................................................... 46
Matters Affecting Redemption ............................................... 49
Taxes ...................................................................... 50
Additional Tax Information ................................................. 53
Additional Tax Information Concerning the Tax-Exempt Fund, the
Tax-Free Funds, the Tennessee Tax-Exempt Fund, and the Limited Term
Tennessee Tax-Exempt Fund ........................................................... 56
MANAGEMENT OF THE TRUST ............................................................. 60
Officers ................................................................... 62
Portfolio Transactions ..................................................... 68
Glass-Steagall Act ......................................................... 71
Administrator .............................................................. 72
Expenses ................................................................... 74
Sub-Administrators ......................................................... 74
Distributor ................................................................ 75
Custodian .................................................................. 81
Transfer Agent and Fund Accounting Services ................................ 81
Independent Accountants .................................................... 81
Legal Counsel .............................................................. 81
PERFORMANCE INFORMATION ............................................................. 82
Yields of the Money Market Funds ........................................... 82
Yield of the Capital Appreciation Funds, the Income Funds and the
Tax-Free Funds .................................................... 84
Calculation of Total Return ................................................ 86
Performance Comparisons .................................................... 95
ADDITIONAL INFORMATION............................................................... 96
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Organization and Description of Shares ..................................... 96
Shareholder Liability ...................................................... 97
Miscellaneous .............................................................. 97
FINANCIAL STATEMENTS ................................................................ 101
APPENDIX ............................................................................ 102
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH FUNDS
AmSouth Funds (the "Trust") is an open-end management investment company.
The Trust consists of twenty-nine series of units of beneficial interest
("Shares"), each representing interests in one of twenty-nine separate
investment portfolios (each a "Fund"): the AmSouth Value Fund (formerly the
AmSouth Equity Fund)(the "Value Fund"), the AmSouth Growth Fund (formerly the
AmSouth Capital Growth Fund)(the "Growth Fund"), the AmSouth Small Cap Fund (the
"Small Cap Fund"), the AmSouth Equity Income Fund (the "Equity Income Fund"),
the AmSouth Balanced Fund (the "Balanced Fund"), the AmSouth Select Equity Fund
(the "Select Equity Fund"), and the AmSouth Enhanced Market Fund (the "Enhanced
Market Fund" and these seven Funds being collectively referred to as the "former
AmSouth Capital Appreciation Funds"), the AmSouth Capital Growth Fund (the
"Capital Growth Fund"), the AmSouth Large Cap Fund (the "Large Cap Fund"), the
AmSouth Mid Cap Fund (the "Mid Cap Fund"), and the International Equity Fund
(the "International Equity Fund" and these four Funds being collectively
referred to as the "former ISG Capital Appreciation Funds"), the AmSouth
Strategic Portfolios: Aggressive Growth Portfolio (the "Aggressive Growth
Portfolio"), the AmSouth Strategic Portfolios: Growth Portfolio (the "Growth
Portfolio"), the AmSouth Strategic Portfolios: Growth and Income Portfolio (the
"Growth and Income Portfolio, the AmSouth Strategic Portfolios: Moderate Growth
and Income Portfolio (the "Moderate Growth and Income Portfolio"), the AmSouth
Strategic Portfolios: Current Income Portfolio (the "Current Income Portfolio"
and these five Funds being collectively referred to as the "Strategic
Portfolios"), the AmSouth Bond Fund (the "Bond Fund"), the AmSouth Limited Term
Bond Fund (formerly the AmSouth Limited Maturity Fund)(the "Limited Term Bond
Fund"), the AmSouth Government Income Fund (the "Government Income Fund"), the
AmSouth Municipal Bond Fund (the "Municipal Bond Fund"), the AmSouth Florida
Tax-Exempt Fund (formerly the AmSouth Florida Tax-Free Fund)(the "Florida Fund"
and these five Funds being collectively referred to as the "the former AmSouth
Income 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 "former ISG Income Funds"), the AmSouth Prime
Money Market Fund (formerly the AmSouth Prime Obligations Fund) (the "Prime
Money Market Fund"), the AmSouth U.S. Treasury Money Market Fund (formerly the
AmSouth U.S. Treasury Fund)(the "U.S. Treasury Fund"), the AmSouth Tax-Exempt
Money Market Fund (the "Tax-Exempt Fund"), the AmSouth Treasury Reserve Money
Market Fund (the "Treasury Reserve Fund" and these four Funds being collectively
referred to as the "Money Market Funds"), and the AmSouth Institutional Prime
Obligations Money Market Fund (formerly the AmSouth Institutional Prime
Obligations Fund)(the "Institutional Prime Obligations Fund" or the
"Institutional Money Market Fund"). The former AmSouth Capital Appreciation
Funds and the former ISG Capital Appreciation Funds are also collectively
referred to herein as the "Capital Appreciation Funds."
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The former AmSouth Income Funds and the former ISG Income Funds are also
collectively referred to herein as the "Income Funds." The Florida Fund and the
Municipal Bond Fund are also collectively referred to herein as the "Tax-Free
Funds." The Tennessee Tax-Exempt Fund and the Limited Term Tennessee Tax-Exempt
Fund are also collectively referred to herein as the "former ISG Tax-Free
Funds." The Funds, except for the U.S. Treasury Fund, the Tax-Exempt Fund, the
Treasury Reserve Fund, and the Institutional Prime Obligations Fund, offer three
classes of Shares: Trust Shares (formerly Premier Shares), Class A Shares
(formerly Classic Shares), and Class B Shares. The U.S. Treasury Fund, the
Treasury Reserve Fund, and the Tax-Exempt Fund offer two classes of Shares:
Trust Shares and Class A Shares. The Institutional Prime Obligations Fund and
the Institutional U.S. Treasury Fund offer three classes of Shares: Class I
Shares, Class II Shares, and Class III Shares. Much of the information contained
in this Statement of Additional Information expands on subjects discussed in the
Prospectuses. This Statement of Additional Information relates to all Funds.
Capitalized terms not defined herein are defined in the Prospectuses. No
investment in Shares of a Fund should be made without first reading that Fund's
Prospectus.
ISG Merger. In March, 2000, the Funds of the Trust merged with the ISG Funds
pursuant to an Agreement and Plan of Reorganization. Except for the folowing
Funds listed below, AmSouth Funds are considered to be the surviving funds for
accounting purposes. The following list shows the name of the former ISG Funds
that are considered to be the surviving funds for accounting purposes and the
current name of such Funds:
<TABLE>
<CAPTION>
NAME OF FORMER ISG FUND AMSOUTH FUNDS' NAME
<S> <C>
ISG Current Income Portfolio Current Income Portfolio
ISG Treasury Money Market Fund Treasury Reserve Money Market Fund
ISG Moderate Growth & Income Portfolio Moderate Growth and Income Portfolio
ISG Growth & Income Portfolio Growth and Income Portfolio
ISG Growth Portfolio Growth Portfolio
ISG Aggressive Growth Portfolio Aggressive Growth Portfolio
ISG Mid-Cap Fund Mid Cap Fund
ISG Large-Cap Equity Fund Large Cap Fund
ISG International Equity Fund International Equity Fund
ISG Capital Growth Fund Capital Growth Fund
ISG Tennessee Tax-Exempt Fund Tennessee Tax-Exempt Fund
</TABLE>
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<TABLE>
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ISG Limited Term Tennessee Tax-Exempt Fund Limited Term Tennessee Tax-Exempt Fund
ISG Limited Term U.S. Government Fund Limited Term U.S. Government Fund
</TABLE>
These 13 Funds are collectively referred to as the PREDECESSOR FUNDS. Individual
Predecessor Fund are identified in this Statement of Additional Information by
their AmSouth Funds' name.
INVESTMENT OBJECTIVES AND POLICIES
Strategic Portfolios
Each Strategic Portfolio 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 and Growth and Current
Growth Growth Income Income Income
Underlying Fund Portfolio Portfolio Portfolio Portfolio Portfolio
- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Value Fund 0-70% 0-65% 0-60% 0-50% 0%
Large Cap Fund 0-70% 0-65% 0-60% 0-50% 0%
Capital Growth Fund 0-45% 0-25% 0-25% 0-15% 0%
Equity Income Fund 0% 0-25% 0-25% 0-15% 0%
Mid Cap 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 Term Bond Fund 0% 0% 0-20% 0-45% 40-60%
Prime Money Market 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.
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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 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.
Additional Information on Portfolio Instruments
The following policies supplement the investment objectives, restrictions
and policies of each Fund as set forth in the respective Prospectus for that
Fund.
High Quality Investments With Regard to the Money Market Funds and the
Institutional Money Market Fund. As noted in the Prospectuses for the Money
Market Funds and the Institutional Money Market Fund, each such Fund may invest
only in obligations determined by AmSouth Bank, Birmingham, Alabama ("AmSouth")
the investment adviser to the Trust ("Adviser") to present minimal credit risks
under guidelines adopted by the Trust's Trustees.
With regard to the Prime Money Market Fund and the Institutional Prime
Obligations Fund, investments will be limited to those obligations which, at the
time of purchase, (i) possess the highest short-term ratings from at least two
nationally recognized statistical ratings organizations ("NRSROs"); or (ii) do
not possess a rating, (i.e., are unrated) but are determined by the Adviser to
be of comparable quality to the rated instruments eligible for purchase by the
Fund under guidelines adopted by the Trustees. With regard to the Tax-Exempt
Fund, investments will be limited to those obligations which, at the time of
purchase, (i) possess one of the two highest short-term ratings from an NRSRO;
or (ii) possess, in the case of multiple-rated securities, one of the two
highest short-term ratings by at least two NRSROs; or (iii) do not possess a
rating, (i.e., are unrated) but are determined by the Adviser to be of
comparable quality to the rated instruments eligible for purchase by the Fund
under the guidelines adopted by the Trustees. For purposes of these investment
limitations, a security that has not received a rating will be deemed to possess
the rating assigned to an outstanding class of the issuer's short-term debt
obligations if determined by the Adviser to be comparable in priority and
security to the obligation selected for purchase by a Fund. (The above-
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described securities which may be purchased by the Prime Money Market Fund and
the Tax-Exempt Fund are hereinafter referred to as "Eligible Securities.")
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, (i.e., are
unrated) but are determined by the Adviser to be of comparable quality;
provided, however, that where the demand feature would be readily exercisable in
the event of a default in payment of principal or interest on the underlying
security, the obligation may be acquired based on the rating possessed by the
demand feature or, if the demand feature does not possess a rating, a
determination of comparable quality by the Adviser. A security which at the time
of issuance had a maturity exceeding 397 days but, at the same time of purchase,
has a remaining maturity of 397 days or less, is not considered an Eligible
Security if it does not possess a high quality rating and the long-term rating,
if any, is not within the two highest rating categories of an NRSRO.
The Prime Money Market Fund and the Institutional Prime Obligations Fund
will not invest more than 5% of its total assets in the securities of any one
issuer, except that the Fund may invest up to 25% of its total assets in the
securities of a single issuer for a period of up to three business days. If a
percentage limitation is satisfied at the time of purchase, a later increase in
such percentage resulting from a change in the Fund's net asset value or a
subsequent change in a security's qualification as an Eligible Security will not
constitute a violation of the limitation. In addition, there is no limit on the
percentage of the Fund's assets that may be invested in obligations issued or
guaranteed by the U.S. government, its agencies, and instrumentalities and
repurchase agreements fully collateralized by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), the
Adviser may be required promptly to dispose of an obligation held in a Fund's
portfolio in the event of certain developments that indicate a diminishment of
the instrument's credit quality, such as where an NRSRO downgrades an obligation
below the second highest rating category, or in the event of a default relating
to the financial condition of the issuer.
The Appendix to this Statement of Additional Information identifies each
NRSRO that may be utilized by the Adviser with regard to portfolio investments
for the Funds and provides a description of relevant ratings assigned by each
such NRSRO. A rating by an NRSRO may be utilized only where the NRSRO is neither
controlling, controlled by, or under common control with the issuer of, or any
issuer, guarantor, or provider of credit support for, the instrument.
Bankers' Acceptances and Certificates of Deposit. All of the Funds, except
the U.S. Treasury Fund, the Treasury Reserve Fund, and the Limited Term U.S.
Government Fund, may invest in bankers' acceptances, certificates of deposit,
and demand and time deposits. Bankers' acceptances are negotiable drafts or
bills of
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exchange typically drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. The Prime Money Market Fund and
the Institutional Prime Obligations Fund will not invest in excess of 10% of its
net assets in time deposits, including ETDs and CTDs but not including
certificates of deposit, with maturities in excess of seven days which are
subject to penalties upon early withdrawal.
Bankers' acceptances will be those guaranteed by domestic and foreign
banks, if at the time of purchase, such banks have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements). Certificates of deposit and demand and
time deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of purchase they have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements) or (b) the principal amount of the
instrument is insured in full by the Federal Deposit Insurance Corporation.
Commercial Paper. Each Fund, except for the U.S. Treasury Fund, the
Treasury Reserve Fund, and the Limited Term U.S. Government Fund, may invest in
commercial paper. Commercial paper consists of unsecured promissory notes issued
by corporations. Issues of commercial paper normally have maturities of less
than nine months and fixed rates of return.
Each Fund except the U.S. Treasury Fund, the Treasury Reserve Fund, the
Limited Term U.S. Government Fund, the Tax-Exempt Fund, and the Tax-Free Funds
may invest in (i) Canadian Commercial Paper, which is commercial paper issued by
a Canadian corporation or a Canadian counterpart of a U.S. corporation, and (ii)
Europaper, which is U.S. dollar-denominated commercial paper of an issue located
in Europe.
High Yield Securities. The Equity Income Fund, and to a limited extent the
Capital Growth Fund, may invest in high yield convertible securities. High yield
securities are securities that are rated below investment grade by an NRSRO
(e.g., "BB" or lower by S&P and "Ba" or lower by Moody's). The Capital Growth
Fund may invest in securities rated as low as Ba by Moody's or BB by S&P, Fitch,
or Duff. Other terms used to describe such securities include "lower rated
bonds," "non-investment grade bonds" and "junk bonds." Generally, lower rated
debt securities provide a higher yield than higher rated debt securities of
similar maturity, but are subject to a greater degree of risk with respect to
the ability of the issuer to meet its principal and interest obligations.
Issuers of high yield securities may not be as strong financially as those
issuing higher rated securities. The securities are regarded as predominantly
speculative. The market value of high yield securities may fluctuate more than
the market value of higher rated securities, since high yield securities tend to
reflect short-term corporate and market developments to a
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greater extent than higher rated securities, which fluctuate primarily in
response to the general level of interest rates, assuming that there has been no
change in the fundamental interest rates, assuming that there has been no change
in the fundamental quality of such securities. The market prices of fixed income
securities generally fall when interest rates rise. Conversely, the market
prices of fixed-income securities generally rise when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Equity Income Fund more difficult, at
least in the absence of price concessions. Reduced liquidity also could
adversely affect the Equity Income Fund's ability to accurately value high yield
securities. Issuers of high yield securities also are more vulnerable to real or
perceived economic changes (for instance, an economic downturn or prolonged
period of rising interest rates), political changes or adverse developments
specific to the issuer. Adverse economic, political or other developments may
impair the issuer's ability to service principal and interest obligations, to
meet projected business goals and to obtain additional financing, particularly
if the issuer is highly leveraged. In the event of a default, the Equity Income
Fund would experience a reduction of its income and could expect a decline in
the market value of the defaulted securities.
Insurance Company Funding Agreements. The former ISG Capital Appreciation
Funds, the Bond Fund, the Limited Term Bond Fund, the former ISG Tax-Free Funds,
the Prime Money Market Fund, and the Institutional Prime Obligations Fund may
invest in funding agreements ("Funding Agreements"), also known as guaranteed
investment contracts, issued by insurance companies. Pursuant to such
agreements, these Funds invest an amount of cash with an insurance company and
the insurance company credits such investment on a monthly basis with guaranteed
interest which is based on an index. The Funding Agreements provide that this
guaranteed interest will not be less than a certain minimum rate. These Funds
will only purchase a Funding Agreement (i) when the Adviser has determined,
under guidelines established by the Board of Trustees, that the Funding
Agreement presents minimal credit risks to the Fund and is of comparable quality
to instruments that are rated high quality by a nationally recognized
statistical rating organization that is not an affiliated person, as defined in
the 1940 Act, of the issuer, on any insurer, guarantor, provider of credit
support for the instrument and (ii) if it may receive all principal of and
accrued interest on a Funding Agreement at any time upon thirty days' written
notice. Because these Funds may not receive the principal amount of a Funding
Agreement from the insurance company on seven days' notice or less, the Funding
Agreement is considered an illiquid investment, and, together with other
instruments in such Fund which are not readily marketable, will not exceed 15%
of such Fund's net assets in the case of the Bond Fund, the Limited Term Bond
Fund, the International Equity Fund, the Large Cap Fund, and the Mid Cap Fund,
and 10% of such Funds net assets in the case of the Prime Money Market Fund, the
Capital
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Growth Fund, the Tennessee Tax-Exempt Fund, and the Limited Term Tennessee
Tax-Exempt Fund. In determining average weighted portfolio maturity, a Funding
Agreement will be deemed to have a maturity equal to 30 days, representing the
period of time remaining until the principal amount can be recovered through
demand.
Variable Amount Master Demand Notes. Variable amount master demand notes,
in which the Prime Money Market Fund, the Institutional Prime Obligations Fund,
the Capital Appreciation Funds, the former AmSouth Income Funds, and the former
ISG Tax-Free Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, a Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Funds to dispose of a
variable amount master demand note if the issuer defaulted on its payment
obligations or during periods when the Funds are not entitled to exercise their
demand rights, and the Funds could, for this or other reasons, suffer a loss to
the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes must satisfy the
same criteria as set forth above for commercial paper. The Adviser or
Sub-Adviser will consider the earning power, cash flow, and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand. Where necessary to
ensure that a note is of "high quality," a Fund will require that the issuer's
obligation to pay the principal of the note be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend. In determining the
dollar-weighted average portfolio maturity, a variable amount master demand note
will be deemed to have a maturity equal to the period of time remaining until
the principal amount can be recovered from the issuer through demand.
Variable and Floating Rate Notes and Bonds. The former ISG Capital
Appreciation Funds, the Tax-Exempt Fund, the Bond Fund, the Limited Term Bond
Fund, the Tax-Free Funds, and the former ISG Tax-Free Funds may acquire variable
and floating rate notes and bonds, subject to each Fund's investment objective,
policies and restrictions. A variable rate note is one whose terms provide "for
the readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the Adviser under guidelines established by the Trust's
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments
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eligible for purchase under the Fund's investment policies. In making such
determinations, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuers of such notes (such issuers include financial,
merchandising, bank holding and other companies) and will continuously monitor
their financial condition. Although there may be no active secondary market with
respect to a particular variable or floating rate note purchased by a Fund, the
Fund may resell the note at any time to a third party. The absence of an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable or floating rate note in the event the issuer of the note defaulted on
its payment obligations and the Fund could, as a result or for other reasons,
suffer a loss to the extent of the default. Variable or floating rate notes may
be secured by bank letters of credit or drafts.
For purposes of these Funds, the maturities of the variable and floating
rate notes will be determined in accordance with Rule 2a-7 under the 1940 Act.
Participation Interests and Trust Receipts. (Former ISG Capital Appreciation
Funds, former ISG 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 Trustees, 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
Trustees, 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
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security, as needed to provide liquidity to meet redemptions, or to maintain or
improve the quality of its investment portfolio.
Zero Coupon Obligations. The Bond Fund, Limited Term Bond Fund, the former
ISG Capital Appreciation Funds, the former ISG Income Funds, the Treasury
Reserve Fund, and the Tax-Exempt Fund may acquire zero-coupon obligations
evidencing ownership of future interest and principal payments on U.S. Treasury
bonds. Such zero-coupon obligations pay no current interest and are typically
sold at prices greatly discounted from par value, with par value to be paid to
the holder at maturity. The return on a zero-coupon obligation, when held to
maturity, equals the difference between the par value and the original purchase
price. Zero-coupon obligations have greater price volatility than coupon
obligations and such obligations will be purchased when the yield spread, in
light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the Bond Fund's total assets, and
the Limited Term Bond Fund and the Tennessee Tax-Exempt Fund will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 25% of the value of the Limited Term Bond Fund's total assets. The former
ISG Capital Appreciation Funds and the former ISG Tax-Free Funds also may invest
in zero coupon securities issued by corporations and financial institutions
which constitute a proportionate ownership of the issuer's pool of underlying
U.S. Treasury securities.
An increase in interest rates will generally reduce the value of the
investments in the Income Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Adviser may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Adviser will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
Foreign Investment. All of the Funds, except the U.S. Treasury Fund, the
Treasury Reserve Fund, the former ISG Income Funds, and the Tax-Free Funds, may,
subject to their investment objectives, restrictions and policies, invest in
certain obligations or securities of foreign issuers. Permissible investments
include Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar
denominated certificates of deposit issued by branches of foreign and domestic
banks located outside the United States, Yankee Certificates of Deposit ("Yankee
CDs") which are certificates of deposit issued by a U.S. branch of a foreign
bank denominated in U.S. dollars and held in the United States, Eurodollar Time
Deposits ("ETD's") which are U.S. dollar denominated deposits in a foreign
branch of a U.S. bank or a foreign bank, Canadian Time Deposits ("CTD's") which
are U.S. dollar denominated certificates of deposit issued by Canadian offices
of major Canadian Banks, and American Depository Receipts ("ADRs") which are
foreign shares of a company held by a U.S. bank which issues a receipt
evidencing ownership. Investments in
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securities issued by foreign branches of U.S. banks, foreign banks, or other
foreign issuers, including ADRs and securities purchased on foreign securities
exchanges, may subject the Funds to investment risks that differ in some
respects from those related to investment in obligations of U.S. domestic
issuers or in U.S. securities markets. Such risks include future adverse
political and economic developments, possible seizure, currency blockage,
nationalization or expropriation of foreign investments, less stringent
disclosure requirements, the possible establishment of exchange controls or
taxation at the source, and the adoption of other foreign governmental
restrictions. Additional risks include currency exchange risks, less publicly
available information, the risk that companies may not be subject to the
accounting, auditing and financial reporting standards and requirements of U.S.
companies, the risk that foreign securities markets may have less volume and
therefore many securities traded in these markets may be less liquid and their
prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations are
often subject to accounting treatment and engage in business practices different
from those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks. A Fund will acquire such securities only when the Adviser or
Sub-Adviser believes the risks associated with such investments are minimal.
Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation with capital, surplus, and undivided profits of not less than
$100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which the Adviser or Sub-Adviser
deems creditworthy under guidelines approved by the Board of Trustees, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price would generally equal the price
paid by the Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest) and the Adviser or Sub-Adviser
will monitor the collateral's value to ensure that it equals or exceeds the
repurchase price (including accrued interest). In addition, securities subject
to repurchase agreements will be held in a segregated account.
If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that the proceeds from a sale of the underlying portfolio securities were less
than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Fund were delayed pending court action.
Additionally, if the seller should be involved in bankruptcy or insolvency
proceedings, a Fund may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if the Fund is treated as an
unsecured creditor and required to return the underlying security to the
seller's estate. Securities subject to repurchase agreements will be
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held by the Trust's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in each Prospectus, each Fund,
except the former ISG Capital Appreciation Funds and the former ISG Income
Funds, may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the Fund's investment restrictions.
Pursuant to such an agreement, a Fund would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
the securities at a mutually agreed-upon date and price. Each Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. Such assets will include U.S. government securities or other liquid
high quality debt securities in the case of the Money Market Funds, the
Institutional Money Market Fund, and the former AmSouth Income Funds or other
liquid, high-grade debt securities, in the case of the former AmSouth Capital
Appreciation Funds. Reverse repurchase agreements involve the risk that the
market value of the securities sold by a Fund may decline below the price at
which a Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by a Fund under the 1940 Act.
U.S. Government Obligations. The U.S. Treasury Fund will invest
exclusively in bills, notes and bonds issued by the U.S. Treasury. Such
obligations are supported by the full faith and credit of the U.S. government.
Each of the other Funds may invest in such obligations and in other obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities.
Such other obligations may include those such as GNMA and the Export-Import Bank
of the United States, which are supported by the full faith and credit of the
U.S. government; others, such as those of FNMA, which are supported by the right
of the issuer to borrow from the Treasury; others which are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations; and still others, such as those of the Federal Farm Credit Banks or
FHLMC, which are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial support
to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. A Fund will invest in the obligations of such
agencies and instrumentalities only when the Adviser or Sub-Adviser believes
that the credit risk with respect thereto is minimal.
The principal governmental (i.e., backed by the full faith and credit of
the U.S. government) guarantor of mortgage-related securities is GNMA. GNMA is a
wholly-owned U.S. government corporation within the Department of Housing and
Urban Development. GNMA is authorized to guarantee, with the full faith and
credit of the U.S. government, the timely payment of principal and interest on
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securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
U.S. government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
government-sponsored corporations owned entirely by private stockholders.
Pass-through securities issued by FNMA and FHLMC are guaranteed as to timely
payment of principal and interest by FNMA and FHLMC but are not backed by the
full faith and credit of the U.S. government.
When-Issued or Forward Commitment Securities. As discussed in the
Prospectuses, each Fund except the Prime Money Market Fund, the Institutional
Prime Obligations Fund, and the U.S. Treasury Fund may purchase securities on a
when-issued basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When a Fund agrees to purchase securities on a
when-issued basis, the Fund's custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy the
purchase commitment, and in such a case, the Fund may be required subsequently
to place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Securities purchased on a "when-issued" basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Each of the former AmSouth Capital
Appreciation Funds expects that commitments to purchase "when-issued" securities
will not exceed 25% of the value of its total assets under normal market
conditions, and that a commitment to purchase "when-issued" securities will not
exceed 60 days. In addition, because a Fund will set aside cash or liquid
portfolio securities to satisfy its purchase commitments in the manner described
above, a Fund's liquidity and the ability of the Adviser or Sub-Adviser to
manage it might be affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its total assets.
When a Fund engages in when-issued transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the Fund
incurring a loss or missing the opportunity to obtain a price considered to be
advantageous. No Fund intends to purchase when-issued securities for speculative
purposes but only in furtherance of its investment objective.
Asset-Backed Securities. The Bond Fund, the Limited Term Bond Fund, the
Institutional Prime Obligations Fund, the Capital Growth Fund, and the Prime
Money Market Fund may invest in securities backed by automobile receivables and
credit-card receivables and other securities backed by other types of
receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as
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flow-through instruments represent ownership interests in a fixed pool of
receivables. CARS structured as pay-through notes are debt instruments supported
by the cash flows from the underlying assets. CARS may also be structured as
securities with fixed payment schedules which are generally issued in
multiple-classes. Cash-flow from the underlying receivables is directed first to
paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period, typically 18 months. The CARD'S principal balance
remains constant during this period, while any cardholder repayments or new
borrowings flow to the issuer's participation. Once the principal amortization
phase begins, the balance declines with paydowns on the underlying portfolio.
CARDS have monthly payment schedules, weighted-average lives of 18-24 months and
stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. The Bond Fund and the Limited Term Bond Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three highest rating categories by an NRSRO or, if unrated, found by the
Adviser under guidelines established by the Trust's Board of Trustees to be of
comparable quality. Asset-backed securities purchased by the Institutional Prime
Obligations Fund will be subject to the same quality requirements as other
securities purchased by the Fund.
Mortgage-Related Securities. Mortgage-related securities have mortgage
obligations backing such securities, including among others, conventional thirty
year fixed rate mortgage obligations, graduated payment mortgage obligations,
fifteen year mortgage obligations, and adjustable rate mortgage obligations. All
of these mortgage obligations can be used to create pass-through securities. A
pass-
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through security is created when mortgage obligations are pooled together and
undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. Accelerated prepayments have an adverse impact on yields for
pass-throughs purchased at a premium (i.e., a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-throughs purchased at a discount. The Government
Income Fund may purchase mortgage-related securities at a premium or at a
discount.
Mortgage-Related Securities Issued By Nongovernmental Entities. The
Government Income Fund and the Capital Growth Fund may invest in
mortgage-related securities issued by nongovernmental entities. Commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issues also create pass-through
pools of conventional residential mortgage loans. Such issuers may also be the
originators of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. Pools created by such nongovernmental issuers
generally offer a higher rate of interest than government and government-related
pools because there are not direct or indirect government guarantees of payments
in the former pools. However, timely payment of interest and principal of these
pools is supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. The insurance and guarantees
are issued by government entities, private insurers and the mortgage poolers.
Such insurance and guarantees and the creditworthiness of the issuers thereof
will be considered in determining whether a mortgage-related security meets the
Government Income Fund's investment quality standards. There can be no assurance
that the private insurers can meet their obligations under the policies. The
Government Income Fund may buy mortgage-related securities without insurance or
guarantees if through an examination of the loan experience and practices of the
poolers the Adviser determines that the securities meet the Government Income
Fund's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The Government Income Fund and the Capital Growth Fund
will not purchase mortgage-related securities or any other assets which in the
Adviser's opinion are illiquid, if as a result, more than 15% of the value of
the Government Income Fund's or more than 10% of the value of the Capital Growth
Fund's net assets will be illiquid.
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Collateralized Mortgage Obligations. Mortgage-related securities in which
the Government Income Fund, the Limited Term U.S. Government Fund, and the
Capital Growth Fund may invest may also include collateralized mortgage
obligations ("CMOs"). CMOs are debt obligations issued generally by finance
subsidiaries or trusts that are secured by mortgage-backed certificates,
including, in many cases, certificates issued by government-related guarantors,
including GNMA, FNMA and FHLMC, together with certain funds and other
collateral. Although payment of the principal of and interest on the
mortgage-backed certificates pledged to secure the CMOs may be guaranteed by
GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the issuer and are
not insured or guaranteed by GNMA, FHLMC, FNMA or any other governmental agency,
or by any other person or entity. The issuers of the CMOs typically have no
significant assets other than those pledged as collateral for the obligations.
The staff of the Securities and Exchange Commission has determined that certain
issuers of CMOs are investment companies for purposes of the 1940 Act.
CMOs may include Stripped Mortgage Securities. Such securities are
derivative multiclass mortgage securities issued by agencies or
instrumentalities of the U.S. government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Stripped Mortgage Securities are usually structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of Stripped Mortgage
Security will have one class receiving all of the interest from the mortgage
assets (the interest-only or "IO" class), while the other class will receive all
of the principal (the principal-only or "PO" class). The yield to maturity on an
IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the securities' yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated AAA or Aaa.
The Stripped Mortgage Securities held by the Funds will be considered
liquid securities only under guidelines established by the Trust's Board of
Trustees, and the Fund will not purchase a Stripped Mortgage Security that is
illiquid if, as a result thereof, more than 15% of the value of the Fund's net
assets would be invested in such securities and other illiquid securities.
In reliance on a recent staff interpretation, the Funds' investment in
certain qualifying CMOs, including CMOs that have elected to be treated as Real
Estate Mortgage Investment Conduits (REMICs), are not subject to the 1940 Act's
limitation on acquiring interests in other investment companies. In order to be
able to rely on the staff's interpretation, the CMOs and REMICs must be
unmanaged, fixed-asset issuers, that (a) invest primarily in mortgaged-backed
securities, (b) do not issue redeemable securities, (c) operate under general
exemptive orders exempting them from all provisions of the 1940 Act, and (d) are
not registered or
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regulated under the 1940 Act as investment companies. To the extent that the
Funds select CMOs or REMICs that do not meet the above requirements, the Funds'
investment in such securities will be subject to the limitations on its
investment in investment company securities. See "Investment Company Securities"
in this Statement of Additional Information.
The Fund expect that governmental, government-related or private entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may be different from
customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with the Funds' investment objective, policies and quality standards, consider
making investments in such new types of securities.
Convertible Securities. Each of the Capital Appreciation Funds may invest
in convertible securities. Convertible securities are fixed-income securities
which may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. Each Fund other
than the Balanced Fund may invest in convertible securities rated "BBB" or
higher by an NRSRO at the time of investment, or if unrated, of comparable
quality. The Equity Income Fund may invest in convertible securities rated "BB"
or lower by an NRSRO at the time of investment, or if unrated, of comparable
quality. The Balanced Fund may invest in convertible securities rated "A" or
higher by an NRSRO or, if unrated, of comparable quality. If a convertible
security falls below these minimum ratings after a Fund has purchased it, a Fund
is not required to drop the convertible bond from its portfolio, but will
consider appropriate action. The investment characteristics of each convertible
security vary widely, which allows convertible securities to be employed for
different investment objectives.
Securities which are rated "BB" or lower by Standard & Poor's or "Ba" or
lower by Moody's either have speculative characteristics or are speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligations. A description of the rating categories is contained in
the Appendix to the Statement of Additional Information. There is no lower limit
with respect to rating categories for convertible securities in which the Equity
Income Fund may invest.
Corporate debt obligations that are not determined to be investment-grade
are high-yield, high-risk bonds, typically subject to greater market
fluctuations and greater risk of loss of income and principal due to an issuer's
default. To a greater extent than investment-grade securities, lower rated
securities tend to reflect short-term corporate, economic and market
developments, as well as investor perceptions or the issuer's credit quality.
Because investments in lower rated securities involve
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greater investment risk, achievement of the Equity Income Fund's investment
objective may be more dependent on the Sub-Adviser's credit analysis than would
be the case if the Fund were investing in higher rated securities. High yield
securities may be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade securities. A projection
of an economic downturn, for example, could cause a decline in high yield prices
because the advent of a recession could lessen the ability of a highly leveraged
company to make principal and interest payments on its debt securities. In
addition, the secondary trading market for high yield securities may be less
liquid than the market for higher grade securities. The market prices of debt
securities also generally fluctuate with changes in interest rates so that the
Fund's net asset value can be expected to decrease as long-term interest rates
rise and to increase as long-term rates fall. In addition, lower rated
securities may be more difficult to dispose of or to value than high-rated,
lower-yielding securities. The Sub-Adviser attempts to reduce the risks
described above through diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
Convertible bonds and convertible preferred stocks are fixed-income
securities that generally retain the investment characteristics of fixed-income
securities until they have been converted but also react to movements in the
underlying equity securities. The holder is entitled to receive the fixed-income
of a bond or the dividend preference of a preferred stock until the holder
elects to exercise the conversion privilege. Usable bonds are corporate bonds
that can be used in whole or in part, customarily at full face value, in lieu of
cash to purchase the issuer's common stock. When owned as part of a unit along
with warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities, and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar non-convertible securities of the same
company. The interest income and dividends from convertible bonds and preferred
stocks provide a stable stream of income with generally higher yields than
common stocks, but lower than non-convertible securities of similar quality.
The Funds will exchange or convert the convertible securities held in
portfolio into shares of the underlying common stock in instances in which, in
the opinion of the Adviser or Sub-Adviser, the investment characteristics of the
underlying common shares will assist a Fund in achieving its investment
objectives. Otherwise, a Fund will hold or trade the convertible securities. In
selecting convertible securities for a Fund, the Adviser or Sub-Adviser
evaluates the investment characteristics of the convertible security as a
fixed-income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the Adviser or Sub-Adviser considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment
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alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
As with all debt securities, the market values of convertible securities
tend to increase when interest rates decline and, conversely, tend to decline
when interest rates increase.
Calls. The Capital Appreciation Funds, the Bond Fund, the Limited Term
Bond Fund and the Government Income Fund may write (sell) "covered" call options
and purchase options to close out options previously written by it. Such options
must be issued by the Options Clearing Corporation and may or may not be listed
on a National Securities Exchange. The purpose of writing covered call options
is to generate additional premium income for a Fund. This premium income will
serve to enhance the Fund's total return and will reduce the effect of any price
decline of the security involved in the option. Covered call options will
generally be written on securities which, in the Adviser's or Sub-Adviser's
opinion, are not expected to make any major price moves in the near future but
which, over the long term, are deemed to be attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a security
at a specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, he or she may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him or her to deliver the
underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure his or her obligation to deliver
the underlying security in the case of a call option, a writer is required to
deposit in escrow the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation. The Funds will write only covered
call options. This means that a Fund will only write a call option on a security
which it already owns.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Funds will not do), but
capable of enhancing a Fund's total return. When writing a covered call option,
a Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but retains
the risk of loss should the price of the security decline. Unlike when a Fund
owns securities not subject to an option, these Funds will not have any control
over when they may be required to sell the underlying securities, since they may
be assigned an exercise notice at any time prior to the expiration of their
obligation as a writer. If a call option which the Fund has written expires, the
Fund will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, the
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Fund will realize a gain or loss from the sale of the underlying security. The
security covering the call will be maintained in a segregated account of the
Fund's custodian. The Funds will consider a security covered by a call to be
"pledged" as that term is used in its policy which limits the pledging or
mortgaging of its assets.
The premium received is the market value of an option. The premium a Fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Adviser or Sub-Adviser, in determining
whether a particular call option should be written on a particular security,
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options. The premium
received by a Fund for writing covered call options will be recorded as a
liability in the Fund's statement of assets and liabilities. This liability will
be adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The liability will be extinguished upon expiration
of the option, the purchase of an identical option in the closing transaction,
or delivery of the underlying security upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security from being called, or
to permit the sale of the underlying security. Furthermore, effecting a closing
transaction will permit a Fund to write another call option on the underlying
security with either a different exercise price or expiration date or both. If a
Fund desires to sell a particular security from its portfolio on which it has
written a call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. There is, of course, no assurance
that the Fund will be able to effect such closing transactions at a favorable
price. If a Fund cannot enter into such a transaction, it may be required to
hold a security that it might otherwise have sold, in which case it would
continue to be at market risk on the security. This could result in higher
transaction costs. A Fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by the Funds will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase transaction
if the cost of the transaction is less or more than the premium received from
the writing of the option. Because increases in the market price of a call
option will generally
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reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation of the underlying security owned by a Fund.
Puts. The Tax-Exempt Fund and the Tax-Free Funds may acquire "puts" with
respect to Municipal Securities held in their portfolios, the Balanced Fund, the
Bond Fund, and the Limited Term Bond Fund may acquire "puts" with respect to
debt securities held in their portfolios, and the former ISG Capital
Appreciation Funds, the Enhanced Market Fund and Select Equity Fund may acquire
"puts" with respect to equity securities held in their portfolios. A put is a
right to sell a specified security (or securities) within a specified period of
time at a specified exercise price. The Funds may sell, transfer, or assign a
put only in conjunction with the sale, transfer, or assignment of the underlying
security or securities.
The amount payable to a Fund upon its exercise of a "put" is normally (i)
the Fund's acquisition cost of the securities subject to the put (excluding any
accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate the reinvestment of assets
at a rate of return more favorable than that of the underlying security. Puts
may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the Tax-Exempt Fund's assets pursuant to Rule 2a-7 under
the 1940 Act. See "Variable and Floating Rate Notes" and "Valuation of the Prime
Money Market Fund, the U.S. Treasury Fund and the Tax-Exempt Fund" in this
Statement of Additional Information.
The Limited Term Bond Fund will acquire puts solely to shorten the
maturity of the underlying debt security.
The Tax-Exempt Fund, the Tax-Free Funds, the Limited Term Bond Fund, the
former ISG Capital Appreciation Funds, the Balanced Fund, the Enhanced Market
Fund, and the Select Equity Fund will generally acquire puts only where the puts
are available without the payment of any direct or indirect consideration.
However, if necessary or advisable, a Fund may pay for puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to the puts (thus reducing the yield to maturity otherwise available for
the same securities).
The Funds intend to enter into puts only with dealers, banks, and
broker-dealers which, in the Adviser's opinion, present minimal credit risks.
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The former ISG Capital Appreciation Funds may write covered put options in
respect of specific securities in which the Funds may invest and write covered
call and put option contracts. 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.
Futures Contracts and Related Options. The Enhanced Market Fund, the
Select Equity Fund, the Small Cap Fund, the former ISG Capital Appreciation
Funds, and the former ISG Tax-Free Funds may invest in futures contracts and
options thereon (interest rate futures contracts or index futures contracts, as
applicable) to commit funds awaiting investment, to maintain cash liquidity or
for other hedging purposes. The value of a Fund's contracts may equal or exceed
100% of the Fund's total assets, although a Fund will not purchase or sell a
futures contract unless immediately afterwards the aggregate amount of margin
deposits on its existing futures positions plus the amount of premiums paid for
related futures options entered into for other than bona fide hedging purposes
is 5% or less of its net assets.
Futures contracts obligate a Fund, at maturity, to take or make delivery
of securities, the cash value of a securities index or a stated quantity of a
foreign currency. A Fund may sell a futures contract in order to offset an
expected decrease in the value of its portfolio positions that might otherwise
result from a market decline or currency exchange fluctuation. A Fund may do so
either to hedge the value of its securities portfolio as a whole, or to protect
against declines occurring prior to sales of securities in the value of the
securities to be sold. In addition, a Fund may utilize futures contracts in
anticipation of changes in the composition of its holdings or in currency
exchange rates.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments to maintain its required margin. In such situations, if
a Fund has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to do so. In
addition, a Fund may be required to make delivery of the instruments underlying
the futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on a Fund's ability to effectively
hedge.
When a Fund purchases an option on a futures contract, it has the right to
assume a position as a purchaser or a seller of a futures contract at a
specified exercise price during the option period. When a Fund sells an option
on a futures contract, it becomes obligated to sell or buy a futures contract if
the option is exercised. In connection with a Fund's position in a futures
contract or related
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option, a Fund will create a segregated account of liquid assets or will
otherwise cover its position in accordance with applicable SEC requirements.
Successful use of futures by the Funds is also subject to an adviser's or
sub-adviser's ability to correctly predict movements in the direction of the
market. For example, if a Fund has hedged against the possibility of a decline
in the market adversely affecting securities held by it and securities prices
increase instead, a Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have approximately
equal offsetting losses in its futures positions. In addition, in some
situations, if a Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market. A
Fund may have to sell securities at a time when it may be disadvantageous to do
so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
Utilization of futures transactions by a Fund involves the risk of loss by
a Fund of margin deposits in the event of bankruptcy of a broker with whom a
Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement, during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions
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of normal trading activity, which could at times make it difficult or impossible
to liquidate existing positions or to recover excess variation margin payments.
Investment Company Securities. Each Capital Appreciation Fund and Income
Fund may invest up to 5% of the value of its total assets in the securities of
any one money market mutual fund including Shares of the AmSouth Prime Money
Market Fund, the AmSouth U.S. Treasury Fund and the Treasury Reserve Fund (the
"AmSouth Money Market Funds"), and the AmSouth Institutional Prime Obligations
Fund (the "AmSouth Institutional Money Market Fund"); the former ISG Capital
Appreciation Funds, the former ISG Income Funds, and the Treasury Reserve Money
Market Fund may invest in securities issued by other investment companies which
principally invest in securities of the type in which such Fund invests; and the
Prime Money Market Fund, the Institutional Prime Obligations Fund, and the
Tax-Exempt Fund may invest in the securities of other money market funds that
have similar policies and objectives provided that no more than 10% of a Fund's
total assets may be invested in the securities of money market mutual funds in
the aggregate. In order to avoid the imposition of additional fees as a result
of investments by the Funds in the AmSouth Money Market Funds or the AmSouth
Institutional Money Market Fund, the Adviser and the Administrator will reduce
that portion of their usual service fees from each Fund by an amount equal to
their service fees from the AmSouth Money Market Funds or the AmSouth
Institutional Money Market Fund that are attributable to those Fund investments.
The Adviser and the Administrator will promptly forward such fees to the Funds.
Each Fund will incur additional expenses due to the duplication of expenses as a
result of investing in securities of other unaffiliated money market mutual
funds.
Securities Lending. In order to generate additional income, each Fund may,
from time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities which are not affiliated directly or
indirectly with the Trust. While the lending of securities may subject a Fund to
certain risks, such as delays or the inability to regain the securities in the
event the borrower were to default on its lending agreement or enter into
bankruptcy, the Fund will receive 100% collateral in the form of cash or other
liquid securities. This collateral will be valued daily by the Adviser or
Sub-Adviser and should the market value of the loaned securities increase, the
borrower will furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Funds
or the borrower at any time. While the Funds do not have the right to vote
securities on loan, the Funds intend to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. The
Funds will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser or Sub-Adviser has determined are creditworthy
under guidelines established by the Trust's Board of Trustees.
Short-Term Trading. Each Capital Appreciation Fund and the Government
Income Fund may engage in the technique of short-term trading. Such trading
involves the selling of securities held for a short time, ranging from several
months to less than a day. The object of such short-term trading is to increase
the potential
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for capital appreciation and/or income of the Fund in order to take advantage of
what the Adviser or Sub-Adviser believes are changes in market, industry or
individual company conditions or outlook. Any such trading would increase the
turnover rate of a Fund and its transaction costs.
Short-Selling. (International Equity Fund and, to a limited extent,
Capital Growth Fund, and the former ISG Income Funds) In these transactions the
Fund sells a security it does not own in anticipation of a decline in the market
value of the security. To complete the transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund is obligated to replace the
security borrowed by purchasing it subsequently at the market price at the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund, which would result in a loss or gain,
respectively. Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. Each of these Funds, other
than the International Equity Fund, will limit its short sales to those that are
"against the box," a transaction in which the Fund enters into a short sale of a
security which it owns. The proceeds of the short sale will be held by a broker
until the settlement date at which time the Fund delivers the security to close
the short position. The Fund receives the net proceeds from the short sale. At
no time will any of these Funds have more than 15% of the value of its net
assets in deposits on short sales against the box.
Municipal Securities. Under normal market conditions, the Tax-Exempt Fund
and the Municipal Bond Fund will be primarily invested in bonds (and in the case
of the Tax-Exempt Fund, notes) issued by or on behalf of states (including the
District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is exempt from federal income tax
("Municipal Securities"). Under normal market conditions, the Tax-Exempt Fund
will invest at least 80% of its total assets, the Municipal Bond Fund will
invest at least 80% of its net assets, and the Florida Fund may invest up to 20%
of its net assets in Municipal Securities, the interest on which is not treated
as a preference item for purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from both federal income tax and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax. Interest on
private activity bonds (and industrial development bonds) is fully tax-exempt
only if the bonds fall within certain defined categories of qualified private
activity bonds and meet the requirements specified in those respective
categories. Regardless of whether they qualify for tax-exempt status, private
activity bonds may subject both individual and corporate investors to
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tax liability under the alternative minimum tax. However, private activity bonds
will only be considered Municipal Securities if they do not have this effect
regarding individuals.
Municipal Securities may also include General Obligation Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, Tax Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Project Notes are issued by a state or local housing agency and are sold
by the Department of Housing and Urban Development. While the issuing agency has
the primary obligation with respect to its Project Notes, they are also secured
by the full faith and credit of the United States through agreements with the
issuing authority which provide that, if required, the federal government will
lend the issuer an amount equal to the principal of and interest on the Project
Notes.
As described in the Prospectuses of the Tax-Exempt Fund, the Municipal
Bond Fund and the Florida Fund (collectively, the "Tax-Free Funds"), the two
principal classifications of Municipal Securities consist of "general
obligation" and "revenue" issues. A Fund permitted to invest in Municipal
Securities may also acquire "moral obligation" issues, which are normally issued
by special purpose authorities. If the issuer of moral obligation bonds is
unable to meet its debt service obligations from current revenues, it may draw
on a reserve fund, the restoration of which is a moral commitment but not a
legal obligation of the state or municipality that created the issuer. There
are, of course, variations in the quality of Municipal Securities, both within a
particular classification and between classifications, and the yields on
Municipal Securities depend upon a variety of factors, including general money
market conditions, the financial condition of the issuer, general conditions of
the municipal bond market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. The ratings of NRSROs represent
their opinions as to the quality of Municipal Securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and Municipal Securities with the same maturity, interest rate and
rating may have different yields, while Municipal Securities of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to purchases by the Tax-Exempt Fund, an issue of Municipal Securities
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Tax-Exempt Fund. Neither event would under all
circumstances require the elimination of such an obligation from the Fund's
investment portfolio. However, the obligation generally would be retained only
if such retention was determined by the Board of Trustees to be in the best
interests of the Fund.
Municipal Securities purchased by the Tax-Exempt Fund may include rated
and unrated variable and floating rate tax-exempt notes, which may have a stated
maturity in excess of one year but which will, in such event, be subject to a
demand feature that will permit the Tax-Exempt Fund to demand payment of the
principal
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of the note either (i) at any time upon not more than thirty days' notice or
(ii) at specified intervals not exceeding one year and upon no more than thirty
days' notice. There may be no active secondary market with respect to a
particular variable or floating rate note. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to the
Tax-Exempt Fund will approximate their par value.
An issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
Opinions relating to the validity of Eligible Municipal Securities and to
the exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Tax-Free
Funds nor the Adviser will review the proceedings relating to the issuance of
Eligible Municipal Securities or the basis for such opinions.
Although the Tax-Exempt Fund and Municipal Bond Fund do not presently
intend to do so on a regular basis, each may invest more than 25% of its total
assets in Municipal Securities that are related in such a way that an economic,
business, or political development or change affecting one such security would
likewise affect the other Municipal Securities. An example of such securities
are obligations the repayment of which is dependent upon similar types of
projects. Such investments would be made only if deemed necessary or appropriate
by the Adviser. To the extent that the Fund's assets are concentrated in
Municipal Securities that are so related, the Fund will be subject to the
peculiar risks presented by such securities, such as negative developments in a
particular industry, to a greater extent than it would be if the Fund's assets
were not so concentrated.
The Tax-Free Funds may acquire "puts" with respect to Eligible Municipal
Securities held in their portfolios. Under a put, the Funds would have the right
to sell a specified Eligible Municipal Security within a specified period of
time at a specified price to a third party. A put would be sold, transferred, or
assigned only with the underlying Eligible Municipal Security. The Funds will
acquire puts solely to facilitate portfolio liquidity, shorten the maturity of
the underlying Eligible Municipal Securities, or permit the investment of the
Funds' at a more favorable rate of return. The Funds expect that they will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, the
Funds may pay for a put separately in cash. The aggregate price of a security
subject to a put may be higher than the price which otherwise would be paid for
the security without such an option, thereby increasing the security's cost and
reducing its yield.
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Tax-Free Funds. The Tax-Free Funds may also invest in master demand notes
in order to satisfy short-term needs or, if warranted, as part of its temporary
defensive investment strategy. Such notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a U.S. commercial bank acting as agent
for the payees of such notes. Master demand notes are callable on demand by the
Funds, but are not marketable to third parties. Master demand notes are direct
lending arrangements between the Fund and the issuer of such notes. The Adviser
will review the quality of master demand notes at least quarterly, and will
consider the earning power, cash flow and debt-to-equity ratios indicating the
borrower's ability to pay principal together with accrued interest on demand.
While master demand notes are not typically rated by credit rating agencies,
issuers of such notes must satisfy the same criteria for the Funds set forth
above for commercial paper.
The Tax-Free Funds may acquire rated and unrated variable and floating
rate notes. Variable and floating rate notes are frequently not rated by credit
rating agencies; however, unrated variable and floating rate notes purchased by
the Funds will be determined by the Adviser under guidelines established by the
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Funds' investment policies. There
may be no active secondary market with respect to a particular variable or
floating rate note. Nevertheless, the periodic readjustments of their interest
rates tend to assure that their value to the Funds will approximate their par
value.
The Tax-Free Funds may acquire zero coupon obligations. Such zero-coupon
obligations pay no current interest and are typically sold at prices greatly
discounted from par value, with par value to be paid to the holder at maturity.
The return on a zero-coupon obligation, when held to maturity, equals the
difference between the par value and the original purchase price. Zero-coupon
obligations have greater price volatility than coupon obligations and such
obligations will be purchased when the yield spread, in light of the
obligation's duration, is considered advantageous. The Funds will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 20% of the value of the Florida Fund's total assets and 25% of the
Municipal Bond Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, the Adviser may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Adviser will consider
many factors besides current yield, including the preservation of capital,
maturity, and yield to maturity.
Former ISG Tax-Free Funds. Municipal Securities bear fixed, floating or
variable rates of interest, which are determined in some instances by formulas
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under which the Municipal Security'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 Securities are
subject to redemption at a date earlier than their stated maturity pursuant to
call options, which may be separated from the related Municipal Securities 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.
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 Securities. 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 "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
Trustees 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 Security (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
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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 Security'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 Security, 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 Securities 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 Securities 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.
The Municipal Bond Fund -- Concentration in Alabama Issuers. The Municipal
Bond Fund may invest 25% or more of its total assets in bonds, notes and
warrants generally issued by or on behalf of the State of Alabama and its
political subdivisions, the interest on which, in the opinion of the issuer's
bond counsel at the time of issuance, is exempt form both federal income tax and
Alabama personal income tax and is not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Alabama Municipal
Securities"). Because of the relatively small number of issuers of Alabama
Municipal Securities, the Fund is more likely to invest a higher percentage of
its assets in the securities of a single issuer. This concentration involves an
increased risk of loss if the issuer is unable to make interest or principal
payments or if the market value of such securities were to decline.
Concentration of this nature may cause greater fluctuation in the net asset
value of the Fund's Shares.
General Economic Characteristics of Alabama. Alabama ranks twenty-third in
the nation in total population, with over four million residents in 1998. Its
economy has historically been based primarily on agriculture, textiles, mineral
extraction and iron and steel production, although the state has diversified
into health care related industries and other service-oriented sectors. Overall
job growth rate was 0.2% in 1998. Alabama's per capita income in 1998 was
$21,442, 81.2% of U.S. per capita income. Currently Alabama's general
obligations are rated Aa3 by Moody's and AA by Standard and Poor's.
BALANCED BUDGET AND PRO-RATION PROCEDURES. Section 213 of the Constitution
of Alabama, as amended, requires that annual financial operations of Alabama
must be on a balanced budget. The Constitution also prohibits the state
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from incurring general obligation debt unless authorized by an amendment to the
Constitution. Amendments to the Constitution have generally been adopted through
a procedure that requires each amendment to be proposed by a favorable vote of
three-fifths of all the members of each house of the Legislature and thereafter
approved by a majority of the voters of the state voting in a statewide
election.
Alabama has statutory budget provisions which create a proration procedure
in the event that estimated budget resources in a fiscal year are insufficient
to pay in full all appropriations for such fiscal year. The Alabama state budget
is composed of two funds - the General Fund and the Education Fund. Proration of
either Fund is possible in any fiscal year, and proration may have a material
adverse effect on entities dependent on state funding, including certain issuers
of Alabama Municipal Securities held in the Alabama Fund.
Court decisions have indicated that certain state expenses necessary for
essential functions of government are not subject to proration under applicable
law. The Supreme Court of Alabama has held that the debt prohibition contained
in the constitutional amendment does not apply to obligations incurred for
current operating expenses payable during the current fiscal year, debts
incurred by separate public corporations, or state debt incurred to repel
invasion or suppress insurrection. The state may also make temporary loans not
exceeding $300,000 to cover deficits in the state treasury. Limited obligation
debt may be authorized by the legislature without amendment to the Constitution.
The state has followed the practice of financing certain capital improvement
programs - principally for highways, education and improvements to the State
Docks - through the issuance of limited obligation bonds payable solely out of
certain taxes and other revenues specifically pledged for their payment and not
from the general revenues of the state.
GENERAL OBLIGATION WARRANTS. Municipalities and counties in Alabama
traditionally have issued general obligation warrants to finance various public
improvements. Alabama statutes authorizing the issuance of such interest-bearing
warrants do not require an election prior to issuance. On the other hand, the
Constitution of Alabama (Section 222) provides that general obligation bonds may
not be issued without an election.
The Supreme Court of Alabama validated certain general obligation warrants
issued by the City of Hoover, reaffirming that such obligations did not require
an election under Section 222 of the Constitution of Alabama. In so holding, the
Court found that warrants are not "bonds" within the meaning of Section 222.
According to the Court, warrants are not negotiable instruments and transferees
of warrants cannot be holders in due course. Therefore, a transferee of warrants
is subject to all defenses that the issuer of such warrants may have against the
transferor.
County boards of education may borrow money by issuing interest-bearing
warrants payable solely out of such board's allocated or apportioned share of
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specified tax. The county board's apportioned share of such tax may be
diminished upon the establishment of a city school system, which could
jeopardize the payment of the county board's warrants.
LIMITED TAXING AUTHORITY. Political subdivisions of the state have limited
taxing authority. Ad valorem taxes may be levied only as authorized by the
Alabama Constitution. In order to increase the rate at which any ad valorem tax
is levied above the limit otherwise provided in the Constitution, the proposed
increase must be proposed by the governing body of the taxing authority after a
public hearing, approved by an act of the Alabama Legislature and approved at an
election within the taxing authority's jurisdiction. In addition, the Alabama
Constitution limits the total amount of state, county, municipal and other ad
valorem taxes that may be imposed on any class of property in any one tax year.
This limitation is expressed in terms of a specified percentage of the market
value of such property.
Specific authorizing legislation is required for the levy of taxes by
local governments. In addition, the rate at which such taxes are levied may be
limited to the authorizing legislation or judicial precedent. For example, the
Alabama Supreme Court has held that sales and use taxes, which usually comprise
a significant portion of the revenues for local governments, may not be levied
at rates that are confiscatory or unreasonable. The total sales tax (state and
local) in some jurisdictions is 9%. State and local governments in Alabama are
more dependent on general and special sales taxes than are state and local
governments in many states. Because sales taxes are less stable sources of
revenue than are property taxes, state and local governments in Alabama may be
subject to shortfalls in revenue due to economic cycles.
PRIORITY FOR ESSENTIAL GOVERNMENTAL FUNCTIONS. Numerous decisions of the
Alabama Supreme Court hold that a governmental unit may first use its taxes and
other revenues to pay the expenses of providing necessary governmental services
before paying debt service on its bonds, warrants or other indebtedness.
CHALLENGE TO EDUCATION FUNDING. On January 10, 1997, the Alabama Supreme
Court affirmed a lower court ruling which held that an unconstitutional
disparity exists among Alabama's public school districts because, among other
things, of an inequitable distribution of tax funds among the school districts.
In order to comply with the ruling, the Alabama Legislature continues to
restructure the public educational system in Alabama, subject to review by the
state courts. Any reallocation of funds between school districts arising out of
this restructuring could impair the ability of certain districts to service
debt.
The Florida Fund -- Diversification and Concentration. The Florida Fund is
a non-diversified fund under the 1940 Act and may concentrate its investments in
the securities of a limited number of issuers. Under the Internal Revenue Code
of 1986, as amended (the "Code"), the Florida Fund generally may not invest in a
manner such that at the end of each fiscal quarter (i) more than 25% of its
total assets are represented by securities of any one issuer (other than U.S.
government securities) and (ii) with respect to 50% of its total assets, more
than 5% of its total assets are represented by the securities of any one issuer
(other than U.S. government
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securities). Thus, the Florida Fund generally may invest up to 25% of its total
assets in the securities of each of any two issuers. Because of the relatively
small number of issuers of Florida Municipal Securities, the Florida Fund is
more likely to invest a higher percentage of its assets in the securities of a
single issuer than an investment company that invests in a broad range of
tax-exempt securities. This concentration involves an increased risk of loss if
the issuer is unable to make interest or principal payments or if the market
value of such securities were to decline. Concentration of this nature may cause
greater fluctuation in the net asset value of the Florida Fund's shares.
General Economic Characteristics of Florida. Florida ranks fourth in the
nation in total population, with over 12.9 million residents in 1990, and has
been one of the fastest growing states in the nation. Historically, tourism,
agriculture, construction and manufacturing have constituted the most important
sectors of the state's economy. Construction activity slows during periods of
high interest rates or cyclical downturns. The service sector employs the
largest number of people in Florida. While wages in the service sector tend to
be lower than in manufacturing and other sectors of the economy, the service
sector traditionally has been less sensitive to business cycles. Currently,
Florida's general obligations are rated Aa3 by Moody's and AA by Standard and
Poor's.
The southern and central portions of Florida's economy, in particular,
rely heavily on tourism and are sensitive to changes in the tourism industry.
For example, tourism in Florida has been adversely affected by publicity
regarding violent crimes against tourists, particularly tourists from abroad.
Gasoline price hikes and/or shortages from an oil embargo or other oil shortage
could severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
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SOURCES OF STATE AND LOCAL REVENUES. Florida's Constitution prohibits
deficit spending by the state for governmental operations. Florida does not have
a personal income tax. An amendment to the state's Constitution would be
required in order to institute an income tax, and passage of such an amendment
is believed to be unlikely due to the relatively large number of retirees living
in the state as well as to the general unpopularity of tax increases in the
current political climate. A two-thirds approval of voters voting in an election
is now required for the addition of any new taxes to the Florida Constitution.
The principal sources of state revenues are a 6% sales tax, state lottery, motor
fuels tax, corporate income tax, and miscellaneous other revenue sources,
including beverage tax and licenses, cigarette tax, documentary stamp taxes and
an intangible tax. Dependence on the sales tax may subject state revenues to
more volatility than would be the case if Florida had a personal income tax,
with sales tax collections adversely affected during recessions and periods when
tourism declines.
Taxation by units of government other than the state is permitted only to
the extent that Florida's legislature enacts enabling legislation. The principal
sources of county and municipal government revenues are ad valorem property
taxes, state revenue sharing, and miscellaneous other revenue sources, including
utilities services fees and local option fees. The principal sources of revenues
for Florida's school districts are ad valorem property taxes and state revenue
sharing, including revenues from a state lottery. The state Constitution imposes
millage limits, including a 10-mill limit each on county, municipal and school
ad valorem taxes. Effective January 1, 1995, Florida's voters amended the state
Constitution to limit annual increases in the assessed value of homestead
property to the lesser of 3% of the prior year's assessment or the percentage
change in the Consumer Price Index during the preceding calendar year. The
limitation on increases in assessment of homestead property could eventually
lead to ratings revisions that could have a negative impact on the prices of
obligations funded with this source of taxation. However, the effect of the
limit will be tempered by reassessments of homestead property at market value
when sold.
Units of state and local government in Florida will continue to face
spending pressures due to infrastructure needs for an expanding population,
especially in view of growth management laws enacted by Florida's legislature.
These laws include concurrency requirements that impose building moratoriums
unless roads and other infrastructure are added concurrently with additional
commercial or residential developments.
TYPES OF INDEBTEDNESS. The two principal types of indebtedness issued by
state or local units of government in Florida are "general obligation bonds" and
"revenue bonds." General obligation bonds are secured by a pledge of the full
faith, credit and taxing power of the governmental entity issuing the bonds.
They can be issued in Florida only after a referendum in which the voters in the
jurisdictional limits of the jurisdiction issuing the bonds approve their
issuance. Revenue bonds are payable only from the revenues derived from a
facility or class of facilities or, in some cases, from the proceeds of a
special tax or other specific
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revenue source. Revenue bonds are not secured by the full faith, credit and
taxing power of the governmental issuer.
MARKET RISK CAUSED BY INTANGIBLE TAX CONSIDERATIONS. As a normal policy,
on January 1 of each calendar year the Florida Fund intends to own only assets
which are exempt from the Florida Intangible Tax. Accordingly, it is possible
that the Florida Fund, in disposing of non-exempt assets to meet this policy
objective, might sustain losses which might not otherwise be incurred absent
this policy of avoiding the Florida Intangible Tax.
Tennessee Municipal Securities. (Tennessee Tax-Exempt Fund and Limited
Term Tennessee Tax-Exempt Fund) The average dollar-weighted credit rating of the
Municipal Securities 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 Security 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 Securities 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 Securities 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 Securities
which, while not rated, are determined by the Adviser to be of comparable
quality to the rated securities in which the Fund may invest.
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 Securities. 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
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expanded TennCare enrollment to all children without access to health insurance.
The reduction in retirement contributions sufficient to fund contingency
appropriations for a compound cost-of-living retirement adjustment, a 3.6%
retirement adjustment, and a 1.5% salary increase for state employees, teachers
and higher education was confirmed effective January 1, 1998. The General
Assembly approved $60.8 million in general obligation bonds (excluding highway
bonds), of which $24.8 million was for higher education projects, to fund part
of the $93.1 million capital projects program.
A budget transfer of $43 million from the Tennessee Housing Development
Agency dedicated tax revenues, reserves and other funds was made as of June 30,
1998, to the State's General Fund. Such transfer did not impact the ratings on
the Agency's outstanding debt.
The Governor's $15.4 billion budget for fiscal year 1998-99 was amended
and approved April 29, 1998. The budget includes a 1,049 reduction in then
existing staff positions and an increase of 406 positions necessary for
recommended improvements. The base budget includes a $57.1 million reduction in
expenditures from General Fund taxes ($66.2 million from all tax sources). The
improvement budget of $370 million from General Fund taxes includes $66.3
million for the Basic Education Program for public schools; $20.3 million for
higher education operating budgets; $67.8 million for TennCare; $21 million for
new prison beds and operating requirements; and a 2% salary increase effective
January 1, 1999. The Governor recommended and the General Assembly passed $265.5
million in general obligation bonds (excluding highway bonds), of which $196.2
million is for higher education projects, to fund part of the $322.7 million
capital projects program.
On February 8, 1999, the Funding Board reported to the Governor and the
Chairmen of the Finance, Ways & Means Committees of the Tennessee General
Assembly its revised consensus revenue estimates for fiscal year 1998-99 and the
first estimates for fiscal year 1999-2000, which became the basis for the fiscal
year 1998-99 revised estimates and the estimates for fiscal year 1999-2000. The
growth estimates for fiscal year 1998-99 for the General Fund taxes range from
2.25% to 2.75% and for all tax collections range from 2.5% to 3.0%. The budget
document for fiscal year 1999-2000 estimates growth of 2.43% in 1998-99 which is
$69.8 million less than the budgeted estimate. The shortfall is offset by fiscal
year 1997-98's surplus and available reserves in the current year.
Revenue collections for the six months of August 1998 through January 1999
increased by 3.36% over the same period last year. General Fund collections are
$2.6 billion which is $20.2 million less than budgeted. The undercollection was
in the franchise and excise taxes.
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
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Tax Bill of $406 million in General Fund revenue consisting of $40.6 million to
the Reserve for Revenue Fluctuations and $365.4 million to fund the 1999-2000
budget.
The $16.568 billion budget recommended for fiscal year 1999-2000 includes
no growth in positions. The base budget includes $42.3 million to fund
supplemental appropriations. The improvement budget of $416 million from general
fund taxes includes $68.9 million for the Basic Education Program for public
schools; $25.6 million for higher education operating budgets; $142.3 million
for TennCare; $13.6 million for new prison beds and local jail beds; $20 million
for state employee compensation issues; and $26 million for a 1.7% salary
increase effective January 1, 2000 for state employees, teachers and higher
education employees. The Governor recommended $166.5 million in general
obligation bonds (excluding highway bonds), of which $75.9 million is for higher
education projects, to fund part of the $246.9 million capital projects program.
INVESTMENT RESTRICTIONS - FORMER AMSOUTH CAPITAL APPRECIATION FUNDS, FORMER
AMSOUTH INCOME FUNDS, MONEY MARKET FUNDS (EXCEPT THE TREASURY RESERVE FUND),
INSTITUTIONAL FUND
The following investment restrictions may be changed with respect to a
particular Fund only by a vote of a majority of the outstanding voting Shares of
that Fund (as defined under "ADDITIONAL INFORMATION - Miscellaneous" in this
Statement of Additional Information).
THE PRIME MONEY MARKET FUND AND THE INSTITUTIONAL PRIME OBLIGATIONS
FUND MAY NOT:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Prime Money
Market Fund's or the Institutional Prime Obligations Fund's total assets would
be invested in such issuer, except that 25% or less of the value of the Prime
Money Market Fund's or the Institutional Prime Obligations Fund's total assets
may be invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of
the Prime Money Market Fund's or the Institutional Prime Obligations Fund's
total assets at the time of purchase to be invested in securities of one or more
issuers conducting their principal business activities in the same industry,
provided that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, bank
certificates of deposit or bankers' acceptances issued by a domestic bank or by
a U.S. branch of a foreign bank provided that such U.S. branch is subject to the
same regulation as U.S. banks, and repurchase agreements secured by bank
instruments or obligations of the U.S. government or its agencies or
instrumentalities; (b) wholly owned finance companies will be considered to be
in the industries of their parents if their
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activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
THE U.S. TREASURY FUND MAY NOT:
1. Purchase securities other than bills, notes, and bonds issued by the
U.S. Treasury, certain of which securities may be subject to repurchase
agreements collateralized by the underlying U.S. Treasury obligation.
THE TAX-EXEMPT FUND MAY NOT:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the
Tax-Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax-Exempt
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the
total amortized cost value of the Tax-Exempt Fund's assets would be subject to
puts from the same institution (except that (i) up to 25% of the value of the
Tax-Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax-Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the
event of a default in payment of principal and interest on the underlying
security or securities if, immediately after that acquisition, the amortized
cost value of the security or securities underlying that put, when aggregated
with the amortized cost value of any other securities issued or guaranteed by
the issuer of the put, would exceed 10% of the total amortized cost value of the
Tax-Exempt Fund's assets.
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THE BOND FUND, THE LIMITED TERM BOND FUND, THE GOVERNMENT INCOME FUND,
THE MUNICIPAL BOND FUND AND THE FORMER AMSOUTH CAPITAL APPRECIATION FUNDS MAY
NOT:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. This investment restriction does not apply
to the Select Equity Fund.
THE FORMER AMSOUTH INCOME FUNDS AND THE FORMER AMSOUTH CAPITAL
APPRECIATION FUNDS MAY NOT:
1. Purchase any securities which would cause more than 25% of the value of
such Income Fund's or Capital Appreciation Fund's total assets at the time of
purchase to be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that (a) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, and repurchase agreements
secured by obligations of the U.S. government or its agencies or
instrumentalities; (b) for the Bond Fund, the Limited Term Bond Fund, the
Florida Fund, and the Municipal Bond Fund there is no limitation with respect to
Municipal Securities, which, for purposes of this limitation only, do not
include private activity bonds that are backed only by the assets and revenues
of a non-governmental user; (c) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (d)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
THE TAX-FREE FUNDS MAY NOT:
1. Write or sell puts, calls, straddles, spreads, or combinations thereof
except that the Funds may acquire puts with respect to Eligible Municipal
Securities and sell those puts in conjunction with a sale of those Eligible
Municipal Securities.
THE MONEY MARKET FUNDS, THE INSTITUTIONAL MONEY MARKET FUND, THE FORMER
AMSOUTH INCOME FUNDS, AND THE FORMER AMSOUTH CAPITAL APPRECIATION FUNDS MAY NOT:
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1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing (33 1/3% with respect to the Select Equity Fund); or
mortgage, pledge, or hypothecate any assets, except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of such Fund's total assets at the time of its
borrowing (33 1/3% with respect to the Select Equity Fund). A Fund will not
purchase securities while borrowings (including reverse repurchase agreements)
in excess of 5% of its total assets are outstanding.
2. Make loans, except that each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies, may lend Fund
securities in accordance with its investment objective and policies, and may
enter into repurchase agreements.
NONE OF THE FUNDS MAY:
1. Purchase securities on margin, sell securities short, participate on a
joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that a Fund may
be deemed to be an underwriter under certain securities laws in the disposition
of "restricted securities" acquired in accordance with such Fund's investment
objectives, restrictions and policies;
2. Purchase or sell commodities, commodity contracts (including futures
contracts with respect to each Fund other than the Small Cap, Enhanced Market
and Select Equity Funds, which may purchase futures contracts), oil, gas or
mineral exploration or development programs, or real estate (although
investments by all of the Funds except the U.S. Treasury Fund in marketable
securities of companies engaged in such activities and in securities secured by
real estate or interests therein are not hereby precluded and investment in real
estate investment trusts are permitted for the Growth Fund, the Small Cap Fund,
the Equity Income Fund, the Enhanced Market Fund and the Select Equity Fund);
3. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; provided, however, that the former AmSouth Capital
Appreciation Funds and the former AmSouth Income Funds may purchase securities
of a money market fund, including securities of both the Prime Money Market Fund
and the U.S. Treasury Fund (and in the case of the Tax-Free Funds, securities of
the Tax-Exempt Fund) and the Tax-Exempt Fund, the Institutional Prime
Obligations Fund, and the Prime Money Market Fund may purchase securities of a
money market fund which invests primarily in high quality short-term obligations
exempt from federal income tax, if, with respect to each such Fund, immediately
after such purchase, the acquiring Fund, does not own in the aggregate (i) more
than 3% of the acquired company's outstanding voting securities, (ii) securities
issued by the acquired company having an aggregate value in excess
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of 5% of the value of the total assets of the acquiring Fund, or (iii)
securities issued by the acquired company and all other investment companies
(other than Treasury stock of the acquiring Fund) having an aggregate value in
excess of 10% of the value of the acquiring Fund's total assets;
4. Invest in any issuer for purposes of exercising control or management;
5. Purchase or retain securities of any issuer if the officers or Trustees
of the Trust or the officers or directors of its investment adviser owning
beneficially more than one-half of 1% of the securities of such issuer together
own beneficially more than 5% of such securities; and
6. Invest more than 10% of total assets in the securities of issuers which
together with any predecessors have a record of less than three years of
continuous operation.
The Prime Money Market Fund, the Institutional Prime Obligations Fund, and
the U.S. Treasury Fund may not buy common stocks or voting securities, or state,
municipal, or private activity bonds. The Money Market Funds, the Institutional
Money Market Fund, and the Tax-Free Funds may not write or purchase call
options. None of the Funds (except the Enhanced Market and Select Equity Fund)
may write put options. The Prime Money Market Fund, the U.S. Treasury Fund, the
Value Fund, the Institutional Prime Obligations Fund, the Growth Fund and the
Equity Income Fund may not purchase put options. The Tax-Exempt Fund and the
Tax-Free Funds may not invest in private activity bonds where the payment of
principal and interest are the responsibility of a company (including its
predecessors) with less than three years of continuous operation. As a
non-fundamental investment restriction with respect to the Small Cap Fund only,
the Small Cap Fund may not write or purchase put options.
If any percentage restriction described above is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
Additional Investment Restrictions
The following investment restriction is non-fundamental and may be changed
by a vote of the majority of the Board of Trustees: No Fund will invest more
than 15% of its net assets in securities that are restricted as to resale, or
for which no readily available market exists, including repurchase agreements
providing for settlement more than seven days after notice.
INVESTMENT RESTRICTIONS - FORMER ISG CAPITAL APPRECIATION FUNDS, STRATEGIC
PORTFOLIOS, FORMER ISG INCOME FUNDS, TREASURY RESERVE FUND
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
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investment restrictions numbered 1 through 5 as fundamental policies, and only
the Funds so indicated have adopted investment restrictions numbered 6 through 9
as additional fundamental policies. These restrictions cannot be changed, as to
a Fund, without approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting securities. Each Fund, except as
otherwise indicated, has adopted investment restrictions numbered 10 through 13
as non-fundamental policies which may be changed by vote of a majority of the
Trust's Trustees at any time.
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, Capital Growth, 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 Treasury
Reserve Money Market Fund in marketable securities of companies engaged in such
activities and in securities secured by real estate or interests therein are not
hereby precluded and investment in real estate investment trusts are permitted
for the Mid Cap, Capital Growth, and Large Cap Funds).
2. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
emergency purposes in amounts up to 33_% of the value of its total assets at the
time of such borrowing, or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 33_% 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,
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to the extent permitted under the 1940 Act, are not considered senior securities
for purposes of this investment restriction.
The following investment restriction numbered 6 is a fundamental policy
which applies only to the Treasury Reserve Money Market Fund. The Treasury
Reserve Money Market Fund may not:
6. Invest in securities other than those issued or guaranteed by the U.S.
Government or its agencies or instrumentalities or repurchase agreements related
thereto.
The following investment restriction numbered 7 is a fundamental policy
which applies to each of the Tennessee Tax-Exempt and Tennessee Limited Term
Tax-Exempt Funds. Neither of these Funds may:
7. Purchase any securities which would cause 25% or more of the Fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
The following investment restriction numbered 8 is fundamental for the
Treasury Reserve Money Market, International Equity Fund, Mid Cap Fund, Capital
Growth, Large Cap Equity Fund, Limited Term U.S. Government Fund, Aggressive
Growth Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth
and Income Portfolio, and Current Income Portfolio. None of these Funds may:
8. Purchase any securities which would cause more than 25% of the value of
such Fund's total assets at the time of purchase to be invested in securities of
one or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the U.S.
government or its agencies or instrumentalities; (b) for the Aggressive Growth
Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth and
Income Portfolio, and Current Income Portfolio, there is no limitation with
respect to registered investment companies; (c) wholly-owned finance companies
will be considered to be in the industries of their parents if their activities
are primarily related to financing the activities of their parents; and (d)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
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The following investment restriction numbered 9 is fundamental for the Mid
Cap Fund, Large Cap Equity Fund, Limited Term U.S. Government Fund, Treasury
Reserve Money Market Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth
and Income Portfolio, Moderate Growth and Income Portfolio, and Current Income
Portfolio. No such fund may:
9. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities or securities of other investment
companies.
* * *
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, 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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Portfolio Turnover
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose maturities at the time of acquisition were one year or
less. Portfolio turnover with respect to each of the Money Market Funds and the
Institutional Money Market Fund is expected to be zero percent for regulatory
purposes.
For the fiscal years ended July 31, 1999 and July 31, 1998, the portfolio
turnover rate for the Balanced Fund was 13.51% and 17.15%, respectively, for the
common stock portion of its portfolio and 23.01% and 11.99%, respectively, for
the other portion of its portfolio.
For the other AmSouth Funds, each Fund's portfolio turnover rate for the
fiscal year ended July 31, 1999 and July 31, 1998 (December 31, 1999 and
December 31, 1998 in the case of Funds participating in the ISG/AmSouth
combination) were as follows:
<TABLE>
<CAPTION>
Fund 1999 1998
- ---- ---- ----
<S> <C> <C>
Balanced Fund 23.24% 25.40%
Growth Fund 79.30% 77.26%
Enhanced Market Fund 36.03% --
Value Fund 17.65% 16.95%
Equity Income Fund 133.74% 83.26%
Select Equity Fund 9.72% --
Small Cap Fund 208.13% 70.64%
Bond Fund 18.26% 40.41%
Government Income Fund 26.85% 34.89%
Limited Term Bond Fund 39.15% 39.31%
Florida Tax-Exempt Fund 34.33% 29.55%
Municipal Bond Fund 20.74% 28.75%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
<S> <C> <C>
International Equity Fund 39.97% 62.47%
Mid Cap Fund 19.71% N/A
Capital Growth Fund 178.49% 152.00%
Large Cap Fund 14.92% 2.79%
Limited Term U.S. Government Fund 16.91% 86.00%
Tennessee Tax-Exempt Fund 63.97% 154.86%
Limited Term Tennessee Tax-Exempt Fund 52.09% 167.48%
Treasury Reserve Money Market Fund N/A N/A
Aggressive Growth Portfolio 94.78% N/A
Growth Portfolio 82.83% N/A
Growth and Income Portfolio 61.90% N/A
Moderate Growth and Income Portfolio 133.91% N/A
Current Income Portfolio 103.66% N/A
</TABLE>
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The portfolio turnover rate may vary greatly from year to year as well as
within a particular year, and may also be affected by cash requirements for
redemptions of Shares and, in the case of the Tax-Exempt Fund, the Tax-Free
Funds, and the former ISG Tax-Free Funds, by requirements which enable these
Funds to receive certain favorable tax treatments. A higher portfolio turnover
rate may lead to increased taxes and transaction costs. Portfolio turnover will
not be a limiting factor in making investment decisions.
The Tax-Free Funds and the former ISG Tax-Free Funds will not purchase
securities solely for the purpose of short-term trading. The turnover rates for
the Funds will not be a factor preventing either the sale or the purchase of
securities when the Adviser believes investment considerations warrant such sale
or purchase. However, the portfolio turnover rate for each of the Tax-Free Funds
and the former ISG Tax-Free Funds may vary greatly from year to year as well as
within a particular year. High turnover rates will generally result in higher
transaction costs to the Funds and may result in higher levels of taxable
realized gains to the Funds' Shareholders. To the extent portfolio turnover
results in the realization of short-term capital gains, such gains will
generally be taxed to shareholders at ordinary income tax rates.
VALUATION
As indicated in the Prospectuses, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of 4:00 p.m., Eastern time
(and also as of 1:00 p.m., Eastern time for the Treasury Reserve Fund and as of
2:00 p.m., Eastern time for the Institutional Prime Obligations Fund) (the
"Valuation Time") on each Business Day of the Fund. As used herein a "Business
Day" constitutes any day on which the New York Stock Exchange (the "NYSE") is
open for trading and the Federal Reserve Bank of Atlanta is open, except days on
which there are not sufficient changes in the value of the Fund's portfolio
securities that the Fund's net asset value might be materially affected, or days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received. Currently, either the NYSE or the Federal Reserve Bank of
Atlanta is closed on the customary national business holidays of New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and
Christmas Day.
Valuation of the Money Market Funds and the Institutional Money Market Fund
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These Funds have elected to use the amortized cost method of valuation
pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an instrument at
its cost initially and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. This method may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument. The value of securities
in these Funds can be expected to vary inversely with changes in prevailing
interest rates.
Pursuant to Rule 2a-7, these Funds will maintain a dollar-weighted average
portfolio maturity appropriate to its objective of maintaining a stable net
asset value per Share, provided that no Fund will purchase any security with a
remaining maturity of more than thirteen months (securities subject to
repurchase agreements may bear longer maturities) nor maintain a dollar-weighted
average portfolio maturity which exceeds 90 days. The Trust's Board of Trustees
has also undertaken to establish procedures reasonably designed, taking into
account current market conditions and the Fund's investment objective, to
stabilize the net asset value per Share of the Funds for purposes of sales and
redemptions at $1.00. These procedures include review by the Trustees, at such
intervals as they deem appropriate, to determine the extent, if any, to which
the net asset value per Share of each Fund calculated by using available market
quotations deviates from $1.00 per Share. In the event such deviation exceeds
one-half of one percent, Rule 2a-7 requires that the Board of Trustees promptly
consider what action, if any, should be initiated. If the Trustees believe that
the extent of any deviation from a Fund's $1.00 amortized cost price per Share
may result in material dilution or other unfair results to new or existing
investors, they will take such steps as they consider appropriate to eliminate
or reduce to the extent reasonably practicable any such dilution or unfair
results. These steps may include selling portfolio instruments prior to
maturity, shortening the dollar-weighted average portfolio maturity, withholding
or reducing dividends, reducing the number of a Fund's outstanding Shares
without monetary consideration, or utilizing a net asset value per Share
determined by using available market quotations.
Valuation of the Capital Appreciation Funds and the Income Funds
The value of the portfolio securities held by each of the Capital
Appreciation Funds and the Income Funds for purposes of determining such Fund's
net asset value per Share will be established on the basis of current valuations
provided by Muller Data Corporation or Kenny S&P Evaluation Services, whose
procedures shall be monitored by the Administrator, and which valuations shall
be the fair market value of such securities.
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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each Fund are sold on a continuous basis by BISYS Fund Services
Limited Partnership ("BISYS"), and BISYS has agreed to use appropriate efforts
to solicit all purchase orders. In addition to purchasing Shares directly from
BISYS, Shares may be purchased through procedures established by BISYS in
connection with the requirements of accounts at AmSouth or financial
institutions that provide certain support services for their customers or
account holders ("Financial Institutions"). Customers purchasing Shares may
include officers, directors, or employees of AmSouth or AmSouth's correspondent
banks.
Purchase of Shares
As stated in the relevant Prospectuses, the public offering price of Class
A Shares of the Capital Appreciation Funds, the Strategic Portfolios, and the
Income Funds is their net asset value computed after the sale plus a sales
charge which varies based upon the quantity purchased. The public offering price
of Class B and Trust Shares is their net asset value computed after the sale.
The public offering price of such Shares is calculated by dividing net asset
value by the difference (expressed as a decimal) between 100% and the sales
charge percentage of the offering price applicable to the purchase (see
"Shareholder Information - Pricing of Fund Shares" in the relevant
Prospectuses). The public offering price of the Class I, Class II, and Class III
Shares is their net asset value per Share, as next computed after an order is
received.
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,
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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 Class A and Class B Shares Prospectus, the Class B Shares are subject to a
Contingent Deferred Sales Charge if they are redeemed prior to the sixth
anniversary of purchase. Class B Shares of the Prime Money Market Fund only are
available to Shareholders of Class B Shares of another Fund who wish to exchange
their Class B Shares of such other Fund for Class B Shares of the Prime Money
Market Fund.
Certain sales of Class A Shares are made without a sales charge, as
described in the relevant Prospectuses under the caption "Sales Charge Waivers",
to promote goodwill with employees and others with whom BISYS, AmSouth and/or
the Trust have business relationships, and because the sales effort, if any,
involved in making such sales is negligible.
ADDITIONAL INFORMATION REGARDING BROKER COMPENSATION. As the Trust's
principal underwriter, BISYS acts as principal in selling Class A Shares and
Class B Shares of the Trust to dealers. BISYS re-allows a portion of the sales
charge as dealer discounts and brokerage commissions. Dealer allowances
expressed as a percentage of the offering price for all offering prices are set
forth in the relevant Class A Shares and Class B Shares Prospectuses (see
"Shareholder Information - Pricing of Fund Shares"). From time to time, BISYS
may make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
In some instances, promotional incentives to dealers may be offered only to
certain dealers who have sold or may sell significant amounts of Group shares.
Neither BISYS nor dealers are permitted to delay the placement of orders to
benefit themselves by a price change.
From time to time dealers who receive dealer discounts and broker
commissions from the Distributor may reallow all or a portion of such dealer
discounts and broker commissions to other dealers or brokers.
The Distributor, at its expense, will also provide additional compensation
to dealers in connection with sales of Class A Shares and Class B Shares of any
of the Funds. Such compensation will include financial assistance to dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding one or more Funds of
the Trust, and/or other dealer-sponsored special events. In some instances, this
compensation will be made available only to certain dealers whose
representatives have sold a significant amount of such Shares. Compensation will
include payment for travel expenses,
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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 or the Institutional Money Market Fund. These
procedures may also include transactions whereby AmSouth as agent purchases
Shares of the Funds in amounts that correspond to the market value of securities
sold to the Funds by AmSouth as agent.
Shares of the Trust sold to Financial Institutions acting in a fiduciary,
advisory, custodial, agency, or other similar capacity on behalf of Customers
will normally be held of record by the Financial Institutions. With respect to
Shares so sold, it is the responsibility of the particular Financial Institution
to transmit purchase or redemption orders to the Distributor and to deliver
federal funds for purchase on a timely basis. Beneficial ownership of the Shares
will be recorded by the Financial Institutions and reflected in the account
statements provided by the Financial Institutions to Customers.
Depending upon the terms of a particular Customer account, the Financial
Institutions may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in the
Capital Appreciation Funds. Information concerning these services and any
charges can be obtained from the Financial Institutions.
There is no sales charge imposed by the Trust in connection with the
purchase of Shares of the Institutional Money Market Fund.
Shares of the Institutional Money Market Fund are purchased at the
appropriate net asset value per Share next determined after receipt by the
Distributor of an order in good form to purchase Shares. An order to purchase
Shares will be deemed to have been received by the Distributor only when federal
funds with respect thereto are available to the Trust's custodian for
investment. Federal funds are monies credited to a bank's account within a
Federal Reserve Bank. Payment for an order to purchase Shares which is
transmitted by federal funds wire will be available the same day for investment
by the Trust's custodian, if
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received prior to the last Valuation Time. Payments transmitted by other means
(such as by check drawn on a member of the Federal Reserve System) will normally
be converted into federal funds within two banking days after receipt. The Trust
strongly recommends that investors use federal funds to purchase Shares.
Every Shareholder will receive a confirmation of each new transaction in
his or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. In the case of Shares held of record
by Financial Institutions but beneficially owned by a Customer, confirmations of
purchases, exchanges, and redemptions of Shares by a Financial Institution will
be sent to the Customer by the Financial Institution. Shareholders may rely on
these statements in lieu of certificates. Certificates representing Shares will
not be issued.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Class A Shares and Class B Shares
either by telephone or by wiring funds to the Trust's custodian. Telephone
orders may be placed by calling the Trust at (800) 451-8382. Payment for Shares
ordered by telephone may be made by check and must be received by the Trust's
custodian within three days of the telephone order. If payment is not received
within three days or a check timely received does not clear, the purchase will
be canceled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Shares effected by wiring funds to the Trust's
custodian, investors must call the Trust at (800) 451-8382 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Automatic Investment Plan
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
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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 and the Institutional Money Market
Fund" above.
The Trust reserves the right to convert, at net asset value, Class I
Shares of any Shareholder to Trust Shares if, because of redemptions of Shares
by or on behalf of the Shareholder, the account of such Shareholder in Class I
Shares of the Institutional Money Market Fund has a value of less than $3
million. Accordingly, an investor purchasing Class I Shares of the Institutional
Money Market Fund in only the minimum investment amount may be subject to such
involuntary conversion to Trust Shares of a Money Market Fund if he or she
thereafter redeems some of his or her Shares. Before the Trust exercises its
right to convert Class I Shares to Trust Shares, the Shareholder will be given
notice that the value of the Class I Shares in his or her account is less than
the minimum amount and the Shareholder will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $3 million.
Taxes
THE MONEY MARKET FUNDS AND THE INSTITUTIONAL MONEY MARKET FUND
The net income of each Money Market Fund is declared daily as a dividend
to Shareholders of record at the close of business on the day of declaration.
Dividends will generally be paid monthly. Distributable net capital gains (if
any) will be distributed at least annually. A Shareholder will automatically
receive all income dividends and capital gains distributions in additional full
and fractional Shares of the same class at net asset value as of the date of
payment unless the Shareholder elects to receive such dividends or distributions
in cash. Reinvested dividends receive the same tax treatment as dividends paid
in cash. Such election, or any revocation thereof, must be made in writing to
the Transfer Agent at P.O. Box 182733, Columbus, Ohio 43218-2733, and will
become effective with respect to dividends and distributions having record dates
after its receipt by the Transfer Agent. For each Fund, dividends are paid in
cash not later than seven Business Days after a Shareholder's complete
redemption of his or her Shares. Dividends are generally taxable when received.
However, dividends declared in October, November, or December to Shareholders of
record during those months and paid during the following January are treated for
tax purposes as if they were received by each Shareholder on December 31 of the
prior year.
INFORMATION SPECIFIC TO THE PRIME MONEY MARKET FUND, THE INSTITUTIONAL
PRIME OBLIGATIONS FUND, THE TREASURY RESERVE FUND, AND THE U.S. TREASURY FUND.
Dividends will generally be taxable to a Shareholder as ordinary income to the
extent of the Shareholder's ratable share of each Fund's earnings and profits as
determined for tax purposes. Because all of the net
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investment income of each Fund is expected to be interest income, it is
anticipated that no distributions will qualify for the dividends-received
deduction for corporate shareholders. These Funds do not expect to realize any
long-term capital gains and, therefore, do not foresee paying any "capital gains
dividends" as described in the Code. Dividends received by a Shareholder that
are derived from the U.S. Treasury Fund's, the Treasury Reserve Fund's, and the
Institutional Prime Obligations Fund's investments in U.S. government
obligations may not be eligible for exemption from state and local taxes even
though the income on such investments would have been exempt from state and
local taxes if the Shareholder directly held such investments. In addition, the
state and local tax exemption for interest earned on U.S. government obligations
may not extend to income earned on U.S. government obligations that are subject
to a repurchase agreement. Shareholders are advised to consult their own tax
Advisers concerning their own tax situation and the application of state and
local taxes.
THE INCOME FUNDS AND THE FORMER ISG INCOME FUNDS
A dividend for each Income Fund will be declared monthly at the close of
business on the day of declaration consisting of an amount of accumulated
undistributed net income of the Fund as determined to be necessary or
appropriate by the appropriate officers of the Trust. Dividends will generally
be paid monthly. Distributable net realized capital gains are distributed
annually to Shareholders of record. A Shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional Shares unless the Shareholder elects to receive such dividends or
distributions in cash. Dividends and distributions are reinvested without a
sales charge as of the ex-dividend date using the net asset value determined on
that date and are credited to a Shareholder's account on the payment date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash. Dividends are generally taxable when
received. However, dividends declared in October, November, or December to
Shareholders of record during those months and paid during the following January
are treated for tax purposes as if they were received by each Shareholder on
December 31 of the prior year. Elections to receive dividends or distributions
in cash, or any revocation thereof, must be made in writing to the Transfer
Agent at P.O. Box 182733, Columbus, Ohio 43218-2733, and will become effective
with respect to dividends and distributions having record dates after its
receipt by the Transfer Agent.
INFORMATION SPECIFIC TO THE BOND FUND, THE LIMITED TERM BOND FUND AND THE
GOVERNMENT INCOME FUND. Distributions by the Bond Fund, the Limited Term Bond
Fund and the Government Income Fund of ordinary income and/or an excess of net
short-term capital gain over net long-term loss are taxable to shareholders as
ordinary income. It is not expected that the dividends-received deduction for
corporations will apply to these distributions.
Distributions designated by the Bond Fund, the Limited Term Bond Fund and
the Government Income Fund as derived from net gains on securities held for more
than one year are taxable to Shareholders as such regardless of how long the
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Shareholder has held Shares in such Fund. Such distributions are not eligible
for the dividends-received deduction.
Prior to purchasing Shares of the Bond Fund, the Limited Term Bond Fund or
the Government Income Fund, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Dividends or capital gains distributions
paid after a purchase of Shares are subject to federal income taxes, although in
some circumstances the dividends or distributions may be, as an economic matter,
a return of capital. A Shareholder should consult his or her own Adviser for any
special advice.
Dividends received by a Shareholder that are derived from the Bond Fund's,
the Limited Term Bond Fund's or the Government Income Fund's investments in U.S.
government obligations may not be entitled to the exemptions from state and
local income taxes that would be available if the Shareholder had purchased U.S.
government obligations directly.
A Shareholder will generally recognize long-term capital gain or loss on
the sale or exchange of shares in an Income Fund held by the Shareholder for
more than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Term Bond Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
The holder of a security issued with "original issue discount" (including
a zero-coupon U.S. Treasury security) is required to accrue as income each year
a portion of the discount at which the security was purchased, even though the
holder does not currently receive the interest payment in cash. A security has
original issue discount if its redemption price exceeds its issue price by more
than a de minimis amount. Accordingly, the Bond Fund, the Limited Term Bond Fund
and the Government Income Fund may be required to distribute each year an amount
which is greater than the total amount of cash interest the Fund actually
received. Such distributions may be made from the cash assets of the Fund or by
liquidation of its portfolio securities, if necessary. The Fund may realize
gains or losses from such liquidations. In the event the Fund realizes net
capital gains from such transactions, its shareholders may receive a larger
capital gain distribution than they would have in the absence of such
transactions.
INFORMATION SPECIFIC TO THE TAX-EXEMPT FUND, THE FLORIDA FUND, THE
MUNICIPAL BOND FUND, THE TENNESSEE TAX-EXEMPT FUND, AND THE LIMITED TERM
TENNESSEE TAX-EXEMPT FUND. Shareholders of these 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
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<PAGE> 300
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 these Funds attributable to exempt-interest dividends may
cause the social security and railroad retirement benefits of individual
Shareholders to become taxable, or increase the amount that is taxable. Interest
on indebtedness incurred by a Shareholder to purchase or carry Shares is not
deductible for federal income tax purposes to the extent the Funds distribute
exempt-interest dividends during the Shareholder's taxable year. The amount of
the disallowed interest deduction is the total amount of interest paid or
accrued on the indebtedness multiplied by a fraction, the numerator of which is
the amount of exempt-interest dividends received by the Shareholder and the
denominator of which is the sum of the exempt-interest dividends and taxable
dividends received by the Shareholder (excluding capital gain dividends received
by the Shareholder and capital gains required to be included in the
Shareholder's computation of long-term capital gains under Section 852(b)(3)(D)
of the Code). It is anticipated that distributions from these Funds will not be
eligible for the dividends-received deduction for corporate shareholders.
Gains on the sale of Shares in the 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 Funds may at times purchase Municipal Securities at a discount from
the price at which they were originally issued. For federal income tax purposes,
some or all of this market discount will be included in a Fund's ordinary income
and will be taxable to Shareholders as such when it is distributed to them.
To the extent dividends paid to Shareholders are derived from taxable
income (for example, from interest on certificates of deposit, market discount
or repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax Adviser for any
special advice.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in the alternative minimum taxable
income of individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate Shareholders.
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<PAGE> 301
Additional Tax Information
It is the policy of each Fund to qualify for the favorable tax treatment
accorded regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By following such policy, the
Trust's Funds expect to eliminate or reduce to a nominal amount the federal
income taxes to which such Fund may be subject.
In order to qualify for the special tax treatment accorded regulated
investment companies and their Shareholders, a Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, securities, and foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; (b) each year distribute at least 90% of the sum of its taxable net
investment company income, its net tax-exempt income, and the excess, if any, of
its net short-term capital gains over its net long-term capital losses; and (c)
diversify its holdings so that, at the end of each fiscal quarter (i) at least
50% of the market value of its total assets is represented by cash, cash items
(including receivables), U.S. Government securities, securities of other
regulated investment companies, and other securities, limited in respect of any
one issuer to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities
(other than those of the U.S. government or other regulated investment
companies) of any one issuer or of two or more issuers which the Fund controls
and which are engaged in the same, similar, or related trades or businesses.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they have a non-calendar taxable year) an amount at least equal to the sum of
98% of their "ordinary income" (as defined) for the calendar year, 98% of their
capital gain net income for the 1-year period ending on October 31 of such
calendar year, and any undistributed amounts from the previous year. For the
foregoing purposes, a Fund is treated as having distributed the sum of (i) the
deduction for dividends paid (defined in Section 561 of the Code) during such
calendar year, and (ii) any amount on which it is subject to income tax for any
taxable year ending in such calendar year. If distributions during a calendar
year by a Fund did not meet the excise tax threshold, the Fund would be subject
to the 4% excise tax on the undistributed
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amounts. Each Fund intends generally to make distributions sufficient to avoid
imposition of this 4% excise tax.
Each Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends and other distributions paid to
any Shareholder who has provided either an incorrect taxpayer identification
number or no number at all, who is subject to withholding by the Internal
Revenue Service for failure properly to report payments of interest or
dividends, or who fails to provide a certified statement that he or she is not
subject to "backup withholding."
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 2000. In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign investors
in order to qualify for exemption from the 31% back-up withholding tax and for
reduced withholding tax rates under income tax treaties. Foreign investors in a
Fund should consult their tax advisers with respect to the potential application
of these new regulations.
A Fund's transactions in options, foreign-currency-denominated securities,
and certain other investment and hedging activities of the Fund, will be subject
to special tax rules (including "mark-to-market," "straddle," "wash sale,"
"constructive sale" and "short sale" rules), the effect of which may be to
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's assets, convert short-term capital losses into
long-term capital losses, convert long-term capital gains into short-term
capital gains, and otherwise affect the character of the Fund's income. These
rules could therefore affect the amount, timing, and character of distributions
to Shareholders. Income earned as a result of these transactions would, in
general, not be eligible for the dividends-received deduction or for treatment
as exempt-interest dividends when distributed to Shareholders. The Funds will
endeavor to make any available elections pertaining to these transactions in a
manner believed to be in the best interest of the Funds.
The Funds each expect to qualify to be taxed as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes.
Depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or independent contractors
are located, or in which they are otherwise deemed to be conducting business,
the Funds may be subject to the tax laws of such states or localities.
However, if for any taxable year the Funds do not qualify for the special
federal tax treatment afforded regulated investment companies, all of their
taxable income will be subject to federal income tax at regular corporate rates
at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders may be taxed as
ordinary income even if the
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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.
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.
Additional Tax Information Concerning the Tax-Exempt Fund, the Tax-Free Funds,
the Tennessee Tax-Exempt Fund, and the Limited Term Tennessee Tax-Exempt
Fund
As indicated in the Prospectuses of the Tax-Exempt Fund and the Tax-Free
Funds, these Funds are designed to provide Shareholders with current tax-exempt
interest income. The Funds are not intended to constitute a balanced investment
program and are not designed for investors seeking capital appreciation or
maximum tax-exempt income irrespective of fluctuations in principal. Shares of
the Tax-Exempt Fund and the Tax-Free Funds would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section
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<PAGE> 304
401 of the Code, so-called Keogh or H.R. 10 plans, and individual retirement
accounts. Such plans and accounts are generally tax-exempt and, therefore, would
not gain any additional benefit from the dividends of the Tax-Exempt Fund and
the Tax-Free Funds, being tax-exempt, and such dividends would be ultimately
taxable to the beneficiaries when distributed to them.
In addition, the Tax-Exempt Fund and the Tax-Free Funds may not be
appropriate investments for Shareholders that may be "substantial users" of
facilities financed by private activity bonds or "related persons" thereof.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business, and whose gross revenues derived with respect to the facilities
financed by the issuance of bonds represent more than 5% of the total revenues
derived by all users of such facilities, or who occupies more than 5% of the
usable area of such facilities, or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related person"
includes certain related natural persons, affiliated corporations, a partnership
and its partners and an S Corporation and its shareholders. Each Shareholder
that may be considered a "substantial user" should consult a tax adviser with
respect to whether exempt-interest dividends would retain the exclusion under
Section 103 of the Code if the Shareholder were treated as a "substantial user"
or a "related person."
The Code permits a regulated investment company which invests at least 50%
of its assets in tax-free Municipal Securities to pass through to its investors,
tax-free, net Municipal Securities interest income. The policy of the Tax-Exempt
Fund and the Tax-Free Funds is to pay each year as dividends substantially all
such Fund's Municipal Securities interest income net of certain deductions. An
exempt-interest dividend is any dividend or part thereof (other than a capital
gain dividend) paid by the Tax-Exempt Fund and the Tax-Free Funds and designated
as an exempt-interest dividend in a written notice mailed to Shareholders after
the close of such Fund's taxable year, but not to exceed in the aggregate the
net Municipal Securities interest received by the Fund during the taxable year.
The percentage of the total dividends paid for any taxable year which qualifies
as federal exempt-interest dividends will be the same for all Shareholders
receiving dividends from the Tax-Exempt Fund and the Tax-Free Funds during such
year, regardless of the period for which the Shares were held.
While the Tax-Exempt Fund and the Tax-Free Funds do not expect to realize
any significant amount of long-term capital gains, any net realized long-term
capital gains will be distributed annually. The Tax-Exempt Fund and the Tax-Free
Funds will have no tax liability with respect to such gains and the
distributions will be taxable to Shareholders as net gains on securities held
for more than one year, regardless of how long a Shareholder has held the Shares
of the Funds. Such distributions will be designated as a capital gains dividend
in a written notice mailed by the Tax-Exempt Fund and the Tax-Free Funds to
Shareholders after the close of the Fund's taxable year.
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While the Tax-Exempt Fund and the Tax-Free Funds do not expect to earn any
significant amount of investment company taxable income, taxable income earned
by the Funds will be distributed to Shareholders. In general, the investment
company taxable income will be the taxable income of the Fund (including, the
excess of short-term capital gains for such year over net long-term capital
losses for such year) subject to certain adjustments and excluding the excess,
if any, of any net long-term capital gains for the taxable year over any net
short-term capital loss for such year. Any such income will be taxable to
Shareholders as ordinary income (whether paid in cash or additional Shares).
As indicated in the Prospectuses of the Tax-Exempt Fund and the Tax-Free
Funds, the Funds may acquire puts with respect to Municipal Securities (and in
the case of the Florida Fund, Florida Municipal Securities) held in their
portfolios. See "INVESTMENT OBJECTIVES AND POLICIES - Additional Information on
Portfolio Instruments - Puts" in this Statement of Additional Information. The
policy of the Tax-Exempt Fund and the Tax-Free Funds is to limit their
acquisition of puts to those under which the Fund will be treated for federal
income tax purposes as the owner of the Municipal Securities acquired subject to
the put and the interest on the Municipal Securities will be tax-exempt to such
Fund. Although the Internal Revenue Service has issued a published ruling that
provides some guidance regarding the tax consequences of the purchase of puts,
there is currently no guidance available from the Internal Revenue Service that
definitively establishes the tax consequences of many of the types of puts that
the Tax-Exempt Fund and the Tax-Free Funds could acquire under the 1940 Act.
Therefore, although the Tax-Exempt Fund and the Tax-Free Funds will only acquire
a put after concluding that it will have the tax consequences described above,
the Internal Revenue Service could reach a different conclusion from that of the
Funds. If the Tax-Exempt Fund and the Tax-Free Funds were not treated as the
owner of the Municipal Securities, income from such securities would probably
not be tax-exempt.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of Shares of the Tax-Exempt Fund
and the Tax-Free Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Tax-Exempt Fund and the
Tax-Free Funds or their Shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential purchasers of Shares
of the Tax-Exempt Fund and the Tax-Free Funds are urged to consult their tax
advisers with specific reference to their own tax situation. In addition, the
foregoing discussion is based on tax laws and regulations which are in effect on
the date of this Statement of Additional Information; such laws and regulations
may be changed by legislative or administrative action.
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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<PAGE> 306
Alabama Taxes
Section 40-18-14(3)f of the Alabama Code specifies that interest on
obligations of the State of Alabama and any county, municipality or other
political subdivision thereof is exempt from personal income tax. Section
40-18-14(3)d provides similar tax-exempt treatment for interest on obligations
of the United States or its Possessions (including Puerto Rico, Guam and the
Virgin Islands). Regulation Section 810-3-14-.02(4)(a) extends the exclusion to
agencies of the United States or corporations owned by the United States and
lists as examples of exempt obligations, U.S. savings bonds, U.S. Treasury notes
or bills, obligations of the Bank for Cooperation, Federal Land Bank, Federal
Intermediate Credit Bank, Federal Home Loan Bank, Production Credit
Associations, Federal Financing Bank, and the Tennessee Valley Authority. In
addition, Regulation Section 810-3-14-.02(4)(b)2 and an Administrative ruling of
the Alabama Department of Revenue dated March 1, 1990 extend these exemptions
for interest to distributions from a regulated investment company to the extent
that they are paid out of interest earned on such exempt obligations. Tax-exempt
treatment is not available on distributions from income earned on securities
that are merely guaranteed by the federal government (GNMAs, FNMAs, etc.), for
repurchase agreements collateralized by U.S. government obligations or for
obligations of other states to the extent such investments are made by the Fund
for temporary or defensive purposes. Such interest will be taxable on a pro rata
basis.
Any distributions of net short-term and net long-term capital gain earned
by the Fund are fully includable in each Shareholder's Alabama taxable income as
dividend income and long-term capital gain, respectively. Both types of income
are currently taxed at ordinary rates.
The foregoing discussion is based on tax laws and regulations which are in
effect as of the date of this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative actions. The
foregoing is also intended only as a brief summary of some of the important
Alabama tax considerations generally affecting the Municipal Fund and its
Shareholders. Potential investors are urged to consult their tax Advisers
concerning their own tax situation and concerning the application of state and
local (as well as federal) taxes.
Florida Taxes
The State of Florida does not impose an income tax on individuals.
Therefore, distributions of the Florida Fund to individuals will not be subject
to personal income taxation in Florida. Corporations and other entities subject
to the Florida income tax will be subject to tax on distributions of investment
income and capital gains by the Fund. Distributions attributable to interest on
obligations of any state (including Florida), the District of Columbia, U.S.
possessions, or any political subdivision thereof, will be taxable to
corporations and other entities for Florida income tax purposes even though such
interest income is exempt from federal income tax. Similarly, distributions
attributable to interest on obligations
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of the United States and its territories will be taxable to corporations and
other entities under the Florida income tax. For individuals and other entities
subject to taxation in states and localities other than Florida, distributions
of the Fund will be subject to applicable taxes imposed by such other states and
localities.
In the opinion of special Florida tax counsel to the Fund, shareholders of
the Florida Fund who are subject to the Florida Intangible Personal Property Tax
(the "Intangible Tax") will not be subject to the Intangible Tax on shares of
the Florida Fund if, on the first day of the applicable calendar year, the
assets of the Florida Fund consist solely of obligations of Florida or its
political subdivisions; obligations of the United States, Puerto Rico, the
Virgin Islands or Guam; or bank deposits, cash or other assets which would be
exempt from the Intangible Tax if directly held by the shareholder. A Technical
Assistance Advisement confirming this tax treatment has been obtained from the
Florida Department of Revenue. As described above, it is the Florida Fund's
policy to invest at least 80% of its net assets in Florida Municipal Securities
exempt from the Intangible Tax under normal market conditions. The Florida Fund
intends to insure that, absent abnormal market conditions, all of its assets
held on January 1 of each year are exempt from the Intangible Tax. Accordingly,
the value of the Florida Fund shares held by a shareholder should ordinarily be
exempt from the Intangible Tax. However, if on any January 1 the Florida Fund
holds investments that are not exempt from the Intangible Tax, the Florida
Fund's shares could be wholly or partially subject to the Intangible Tax for
that year.
The foregoing discussion is intended only as a brief summary of the
Florida tax laws currently in effect which would generally affect the Florida
Fund and its shareholders. Potential investors are urged to consult with their
Florida tax counsel concerning their own tax situation.
Tennessee Taxes
This Statement of Additional Information does not discuss Tennessee tax laws
currently in effect which would generally or specifically affect the former ISG
Tax-Free Funds and their shareholders. Potential investors are urged to consult
with their Tennessee tax counsel concerning such laws.
MANAGEMENT OF THE TRUST
Trustees
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust, who are elected by the Shareholders of the Trust.
There are currently five Trustees, one of whom is an "interested person" of the
Trust within the meaning of that term under the Investment Company Act of 1940.
The Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
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<PAGE> 308
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During the Past 5 Years
- ---------------- --- ---------------- -----------------------
<S> <C> <C> <C>
J. David Huber* 53 Chairman From June 1987 to present, employee of
3435 Stelzer Road BISYS Fund Services Limited Partnership
Columbus, Ohio 43219
Dick D. Briggs, Jr., M.D. 65 Trustee From September 1989 to present, Emeritus
459 DER Building Professor and Eminent Scholar Chair,
1808 7th Avenue South Univ. of Alabama at Birmingham; from
UAB Medical Center October 1979 to present, Physician,
Birmingham, Alabama 35294 University of Alabama Health Services
Foundation; from 1981 to 1995, Professor
and Vice Chairman, Dept. of Medicine,
Univ. of Alabama at Birmingham School of
Medicine; from 1988 to 1992, President,
CEO and Medical Director, Univ. of
Alabama Health Services Foundation
Wendell D. Cleaver 64 Trustee From September 3, 1993 to present,
209 Lakewood Drive, West retired; from December 1988 to August,
Mobile, Alabama 36608 1993, Executive Vice President, Chief
Operating Officer and Director, Mobile
Gas Service Corporation
Homer H. Turner, Jr. 71 Trustee From June 1991 to present, retired; until
751 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830-2505 Division, Alabama Power Company
James H. Woodward, Jr. 59 Trustee From 1996 to present, Trustee, The
The University of North Sessions Group; from July 1989 to
Carolina at Charlotte present, Chancellor, The University of
Charlotte, North Carolina 28223 North Carolina at Charlotte; from April
1997 to present, Trustee, BISYS Variable
Insurance Funds; from August 1984 to July
1989, Senior Vice President, University
College, University of Alabama at
Birmingham
</TABLE>
- --------------------------
* 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.
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<PAGE> 309
Officers
The officers of each Fund, their current addresses, their age, and
principal occupation during the past five years are as follows (if no address is
listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With the Trust During Past 5 Years
---------------- --- ---------------- --------------------
<S> <C> <C> <C>
John F. Calvano 39 President From September 1999 to present, Senior Vice President,
AmSouth Bank; from October 1994 to September 1999, employee
of BISYS Fund Services Limited Partnership; from July 1992
to August 1994, investment representative, BA Investment
Services; and from October 1986 to July 1994, Marketing
Manager, Great Western Investment Management.
Walter B. Grimm 53 Vice President From June 1992 to present, employee of BISYS Fund Services
Limited Partnership; from 1990 to 1992, President and CEO,
Security Bancshares; from July 1981 to 1990, President of
Leigh Investments Consulting (investments firm).
Charles L. Booth 39 Treasurer From 1988 to present, employee of BISYS Fund Services
Limited Partnership.
Rodney L. Ruehle 31 Secretary From August 1990 to August 1995, Treasurer of the Cardinal
Assistant Group of Funds; August 1995 to present, Director
from Services, BISYS Fund Services, Inc.
Administration
Jeffrey C. Cusick 38 Assistant Secretary An employee of BISYS Fund Services, Inc. since July 1995,
Vice President and an officer of other investment companies administered by
the Administrator or its affiliates. From September 1993 to
July 1995, he was Assistant Vice President of Federated
Administrative Services.
Alaina V. Metz 32 Assistant Secretary From June 1995 to present, Chief Administrator,
Administrative and Regulatory Services, BISYS Fund Services
Limited Partnership; from May 1989 to June 1995, Supervisor,
Mutual Fund Legal Department, Alliance Capital Management.
</TABLE>
The officers of the Trust receive no compensation directly from the Trust
for performing the duties of their offices. BISYS receives fees from the Trust
for acting as Administrator and BISYS Fund Services, Inc. receives fees from the
Trust for acting as Transfer Agent for and for providing fund accounting
services to the Trust. Messrs. Cusick, Grimm, Ruehle, and Booth and Ms. Metz are
employees of BISYS Fund Services Limited Partnership.
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<PAGE> 310
COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Annual from AmSouth
Name of from AmSouth Accrued Benefits Upon Mutual Funds
Position Fund Expenses As Part of Retirement Paid to Trustee
Fund Expenses
<S> <C> <C> <C> <C>
J. David Huber None None None None
James H. Woodward, Jr. $14,000 None None $14,000
Homer H. Turner $14,000 None None $14,000
Wendell D. Cleaver $14,000 None None $14,000
Dick D. Briggs, Jr., M.D. $14,000 None None $14,000
</TABLE>
(1) Figures are for the Trust's fiscal year ended July 31, 1999.
Code of Ethics
Each Fund, AmSouth Bank, and BISYS Fund Services have adopted codes of
ethics ("Codes") under Rule 17j-1 of the Investment Company Act, and these Codes
permit personnel subject to the Codes to invest in securities, including
securities that may be purchased or held by each Fund.
Investment Adviser
Investment advisory and management services are provided to each Fund
(except the Limited Term Bond Fund) by the Adviser pursuant to the Investment
Advisory Agreement dated as of August 1, 1988, as amended (the "First Investment
Advisory Agreement"). Investment advisory and management services are provided
to the Limited Term Bond Fund by the Adviser pursuant to the Investment Advisory
Agreement dated as of January 20, 1989, as amended (the "Second Investment
Advisory Agreement"). The First Investment Advisory Agreement and the Second
Investment Advisory Agreement are collectively referred to as the "Advisory
Agreements."
In selecting investments for the Value Fund and the Balanced Fund, the
Adviser employs the "value investing" method. A primary theory of value
investing is that many investors tend to exaggerate both prosperity and problems
in market valuations. This method, which may conflict with the prevailing mood
of the market, involves the use of independent judgment backed by careful
analysis of market data. The Adviser's approach when selecting investments for
each of these Funds is to attempt to buy and sell securities that are
temporarily mispriced relative to long-term value.
B-65
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In selecting investments for each of the Income Funds and the Balanced
Fund, the Adviser attempts to anticipate interest rates, thereby capitalizing on
cyclical movements in the bond markets. The Adviser seeks to achieve this goal
through active management of the buying and selling of fixed-income securities
in anticipation of changes in yields.
Under the Advisory Agreements, the fee payable to the Adviser by the Funds
for investment advisory services is the lesser of (a) such fee as may from time
to time be agreed upon in writing by the Trust and the Adviser or (b) a fee
computed daily and paid monthly based on the average daily net assets of each
Fund as follows: the Prime Money Market Fund - forty one-hundredths of one
percent (0.40%) annually; the U.S. Treasury Fund - forty one-hundredths of one
percent (0.40%) annually; the Institutional Prime Obligations Fund - twenty
one-hundredths of one percent (0.20%); the Institutional U.S. Treasury Fund -
twenty one-hundredths of one percent (0.20%); the Value Fund - eighty
one-hundredths of one percent (0.80%) annually; the Tax-Exempt Fund - forty
one-hundredths of one percent (0.40%) annually; the Bond Fund - sixty-five
one-hundredths of one percent (0.65%) annually; the Limited Term Bond Fund -
sixty-five one-hundredths of one percent (0.65%) annually; the Balanced Fund -
eighty one-hundredths of one percent (0.80%) annually; the Government Income
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Florida
Fund - sixty-five one-hundredths of one percent (0.65%) annually; the Municipal
Bond Fund - sixty-five one-hundredths of one percent (0.65%) annually; the
Equity Income Fund - eighty one-hundredths of one percent (0.80%) annually; the
Growth Fund eighty one-hundredths of one percent (0.80%) annually; the Small Cap
Fund - one hundred twenty one-hundredths of one percent (1.20%) annually; the
Select Equity Fund - eighty one hundredths of one percent (.80%) annually; the
Enhanced Market Fund - forty-five hundredths of one percent (0.45%) annually;
the International Equity Fund - one hundred twenty five one-hundredths of one
percent (1.25%) annually; the Mid Cap Fund - one hundred one-hundredths of one
percent (1.00%) annually; the Capital Growth Fund - eighty one-hundredths of one
percent (0.80%) annually; the Large Cap Fund - eighty one-hundredths of one
percent (0.80%) annually; the Limited Term U.S. Government Fund - sixty-five
one-hundredths of one percent (0.65%) annually; Tennessee Tax-Exempt Fund -
sixty-five one-hundredths of one percent (0.65%) annually; Limited Term
Tennessee Tax-Exempt Fund - sixty-five one-hundredths of one percent (0.65%)
annually; Treasury Reserve Fund - forty one-hundredths of one percent (0.40%)
annually; Aggressive Growth Portfolio - twenty one-hundredths of one percent
(0.20%) annually; Growth Portfolio - twenty one-hundredths of one percent
(0.20%) annually; Growth and Income Portfolio - twenty one-hundredths of one
percent (0.20%) annually; Moderate Growth and Income Portfolio - twenty
one-hundredths of one percent (0.20%) annually; Current Income Portfolio -
twenty one-hundredths of one percent (0.20%) annually. A fee agreed to in
writing from time to time by the Trust and the Adviser may be significantly
lower than the fee calculated at the annual rate and the effect of such lower
fee would be to lower a Fund's expenses and increase the net income of such Fund
during the period when such lower fee is in effect.
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For the fiscal years ended July 31, 1999, July 31, 1998, and July 31,
1997, the Adviser received the following investment advisory fees(1):
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------------------ -------------------------- --------------------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $3,046,371 -- $3,005,940 -- $2,855,190 --
Growth Fund 207,326 -- 70,873 -- -- --
Enhanced Market Fund 78,331 -- -- -- -- --
Value Fund 8,292,490 -- 7,981,703 -- 3,733,019 --
Equity Income Fund 324,890 -- 267,522 -- 36,130 --
Select Equity Fund 129,762 -- -- -- -- --
Small Cap Fund 127,255 -- 33,202 -- -- --
Bond Fund 2,319,255 $535,215 2,056,000 475,000 969,000 $224,000
Government Income Fund 61,967 33,367 69,000 37,000 90,000 48,000
Limited Term Bond Fund 734,542 169,510 774,000 179,000 322,000 74,000
Florida Tax-Exempt Fund 460,845 248,147 369,000 199,000 340,000 183,000
Municipal Bond Fund 2,120,841 815,707 2,170,000 835,000 181,117 70,000
Prime Money Market Fund 2,765,375 -- 2,515,690 -- 2,366,707 --
U.S. Treasury Fund 1,261,718 -- 1,256,351 -- 1,325,127 --
Tax-Exempt Fund 383,340 191,672 354,000 176,963 321,570 160,785
Institutional Prime
Obligations Fund 198,365 128,935 -- -- -- --
International Equity Fund(1a) 236,272 91,551 239,978 77,837 95,011 47,505
Mid Cap Fund 102,860 745 N/A N/A N/A N/A
Capital Growth Fund 1,501,646 25,355 105,152 10,125 783,646 141,465
Large Cap Fund 6,578,349 809,287 4,767,781 0 4,445,559 0
Limited Term 161,658 76,077 108,1951(1b) 35,572 81,110 41,559
U.S. Government Fund
Tennessee Tax-Exempt Fund 453,208 7,254 497,352 5,617 502,268 423,799
Limited Term Tennessee 79,230 22,677 112,873 25,811 93,669(1b) 59,000
Tax-Exempt Fund
Treasury Reserve Fund 1,426,081 215,483 N/A N/A N/A N/A
Aggressive Growth Portfolio 111,136 111,136 N/A N/A N/A N/A
Growth Portfolio 111,326 111,326 N/A N/A N/A N/A
Growth and Income Portfolio 102,659 102,659 N/A N/A N/A N/A
Moderate Growth and 109,442 212,101 N/A N/A N/A N/A
Income Portfolio
Current Income Portfolio 116,123 116,123 N/A N/A N/A N/A
</TABLE>
- -----------------------------------
(1) With respect to Funds participating in the ISG/AmSouth combination,
the figures reflect the investment advisory fee paid to the former Adviser for
the fiscal years ended December 31, 1999, December 31, 1998, and December 31,
1997.
(1a) The International Equity fund commenced operations 12/14/98.
(1b) For the period February 28, 1997 (commencement of operations) through
December 31, 1997.
Each of the Advisory Agreements provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of such Advisory Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Adviser in the performance of its
duties, or from reckless disregard by the Adviser of its duties and obligations
thereunder.
B-67
<PAGE> 313
Unless sooner terminated, the First Investment Advisory Agreement will
continue in effect until January 31, 2000 as to each of the Money Market Funds,
the Capital Appreciation Funds, the Tax-Free Funds, the Bond Fund and the
Government Income Fund and for successive one-year periods if such continuance
is approved at least annually by the Trust's Board of Trustees or by vote of the
holders of a majority of the outstanding voting Shares of that Fund, and a
majority of the Trustees who are not parties to the First Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
First Investment Advisory Agreement by votes cast in person at a meeting called
for such purpose.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Term Bond Fund until January 31, 2000 and
for successive one-year periods thereafter if such continuance is approved at
least annually by the Trust's Board of Trustees or by vote of the holders of a
majority of the outstanding voting Shares of the Limited Term Bond Fund, and a
majority of the Trustees who are not parties to the Second Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Second Investment Advisory Agreement by votes cast in person at a meeting called
for such purpose. The Advisory Agreements are terminable as to a particular Fund
at any time on 60 days' written notice without penalty by the Trustees, by vote
of the holders of a majority of the outstanding voting Shares of that Fund, or
by the Adviser. The Advisory Agreements also terminate automatically in the
event of any assignment, as defined in the 1940 Act.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective shareholders of the Funds may
include descriptions of the investment adviser including, but not limited to,
(i) descriptions of the adviser's operations; and (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings related to the
adviser's operations.
AmSouth also serves as Sub-Administrator for the Trust. See
"Sub-Administrator" below.
Investment Sub-Advisers
Investment sub-advisory services are provided to the Equity Income Fund by
Rockhaven Asset Management, LLC ("Rockhaven" or "Sub-Adviser") pursuant to a
Sub-Advisory Agreement dated as of March 12, 1997 between the Adviser and
Rockhaven ("Sub-Advisory Agreement"). Investment sub-advisory services are
provided to the Growth Fund by Peachtree Asset Management ("Peachtree" or
"Sub-Adviser") pursuant to a Sub-Advisory Agreement dated July 31, 1997 between
the Adviser and Peachtree. Investment sub-advisory services are provided to the
Small Cap Fund by Sawgrass Asset Management, LLC ("Sawgrass" or "Sub-Adviser")
pursuant to a Sub-Advisory Agreement dated as of March 2, 1998 between the
Adviser and Sub-Adviser (a "Sub-Advisory Agreement"). Investment sub-advisory
services are provided to the Select Equity Fund and the Enhanced Market Fund
B-68
<PAGE> 314
pursuant to a Sub-Advisory Agreement dated as of September 1, 1998 between the
Adviser and OakBrook Investments, LLC ("OakBrook" or "Sub-Adviser").
The Sub-Advisers shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Adviser, the Trust or the Fund in
connection with the matters to which Agreement relates, except that a
Sub-Adviser shall be liable to the Adviser for a loss resulting from a breach of
fiduciary duty by the Sub-Adviser under the 1940 Act with respect to the receipt
of compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations or duties
thereunder.
Unless sooner terminated, the Sub-Advisory Agreement shall continue
with respect to the Equity Income Fund until January 31, 2000, with respect to
the Growth Fund until July 31, 2000, with respect to the Small Cap Fund until
January 31, 2000, and with respect to the Select Equity Fund and Enhanced Market
Fund until January 31, 2000, and each Sub-Advisory Agreement shall continue in
effect for successive one-year periods if such continuance is approved at least
annually by the Board of Trustees or by vote of the holders of a majority of the
outstanding voting Shares of the respective Fund and a majority of the Trustees
who are not parties to the Sub-Advisory Agreement or interested persons (as
defined in the 1940 Act) of any party to the Sub-Advisory Agreement by vote cast
in person at a meeting called for such purpose. Each Sub-Advisory Agreement may
be terminated with respect to a Fund by the Trust at any time without the
payment of any penalty by the Board of Trustees, by vote of the holders of a
majority of the outstanding voting securities of the Fund, or by the Adviser or
Sub-Adviser on 60 days written notice. Each Sub-Advisory Agreement will also
immediately terminate in the event of its assignment.
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 as of March 13, 2000. 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
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.
B-69
<PAGE> 315
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 as
of March 13, 2000. 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>
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective Shareholders of the Trust may
include descriptions of a Sub-Adviser including, but not limited to, (i)
descriptions of the Sub-Adviser's operations; (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings relating to the
Sub-Adviser's operations.
Portfolio Transactions
B-70
<PAGE> 316
Pursuant to the Advisory Agreements, the Adviser or Sub-Adviser
determines, subject to the general supervision of the Board of Trustees and in
accordance with each Fund's investment objective, policies and restrictions,
which securities are to be purchased and sold by a Fund, and which brokers are
to be eligible to execute such Fund's portfolio transactions. Purchases and
sales of portfolio securities with respect to the Money Market Funds, the Income
Funds, the former ISG Income Funds, and the Balanced Fund (with respect to its
debt securities) usually are principal transactions in which portfolio
securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter and purchases from dealers serving as market makers may include
the spread between the bid and asked price. Transactions on stock exchanges
involve the payment of negotiated brokerage commissions. Transactions in
over-the-counter market are generally principal transactions with dealers. With
respect to over-the-counter market, the Trust, where possible, will deal
directly with dealers who make a market in the securities involved except in
those circumstances where better price and execution are available elsewhere.
While the Adviser and Sub-Adviser generally seek competitive spreads or
commissions, the Trust may not necessarily pay the lowest spread or commission
available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser and the Sub-Adviser in their best judgment
and in a manner deemed fair and reasonable to Shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, dealers who provide supplemental
investment research to the Adviser or Sub-Adviser may receive orders for
transactions on behalf of the Trust. Information so received is in addition to
and not in lieu of services required to be performed by the Adviser or
Sub-Adviser and does not reduce the advisory fees payable to the Adviser or the
Sub-Adviser. Such information may be useful to the Adviser or Sub-Adviser in
serving both the Trust and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser or Sub-Adviser in carrying out their obligations to the Trust.
To the extent permitted by applicable rules and regulations, either
AmSouth or the Sub-Advisers may execute portfolio transactions on behalf of the
Funds through an affiliate of AmSouth. As required by Rule 17e-1 under the 1940
Act, the Funds have adopted procedures which provide that commissions paid to
such affiliate must be fair and reasonable compared to the commission, fees or
other remuneration paid to other brokers in connection with comparable
transactions. The procedures also provide that the Board will review reports of
such affiliated brokerage transactions in connection with the foregoing
standard.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by the
Adviser or Sub-Adviser. Any such other investment company or account may also
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<PAGE> 317
invest in the same securities as the Trust. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Fund and another
Fund, investment company or account, the transaction will be averaged as to
price and available investments will be allocated as to amount in a manner which
the Adviser or Sub-Adviser believe to be equitable to the Fund(s) and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained by a Fund. To the extent permitted by law, the Adviser or
Sub-Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for the other Funds or for other investment
companies or accounts in order to obtain best execution. As provided by each of
the Advisory Agreements and the Sub-Advisory Agreement, in making investment
recommendations for the Trust, the Adviser or Sub-Adviser will not inquire or
take into consideration whether an issuer of securities proposed for purchase or
sale by the Trust is a customer of the Adviser or Sub-Adviser, its parent or its
subsidiaries or affiliates and, in dealing with its customers, the Adviser or
Sub-Adviser, its parent, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Trust.
During the following fiscal years, the Funds listed below paid the
following aggregate brokerage commissions:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Balanced Fund $132,669 $365,522 $145,513
Growth Fund 34,442 -- --
Enhanced Market Fund 20,125** -- --
Value Fund 534,115 592,269 397,221
Equity Income Fund 119,234 615,317 28,462*
Select Equity Fund 13,150** -- --
Small Cap Fund 108,710 -- --
</TABLE>
*For the period March 30, 1997 to July 31, 1997.
** For the period September 1, 1998 to July 31, 1999.
<TABLE>
<CAPTION>
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1997
------------ ------------- -------------
<S> <C> <C> <C>
International Equity Fund $52,129 $68.007 $67,394
Mid Cap Fund 16,260 N/A N/A
Capital Growth Fund 656,419 494,130 360,208
Large Cap Fund 312,254 76,036 74,672
Limited Term U.S. Government Fund 0 0 0
Tennessee Tax-Exempt Fund 0 0 0
Limited Term Tennessee Tax-Exempt Fund 0 0 0
Treasury Reserve Fund 0 0 0
Aggressive Growth Portfolio N/A N/A N/A
Growth Portfolio N/A N/A N/A
Growth and Income Portfolio N/A N/A N/A
Moderate Growth and Income Portfolio N/A N/A N/A
Current Income Portfolio N/A N/A N/A
</TABLE>
During the period from September 1, 1998 to July 31, 1999, the Select
Equity Fund paid aggregate brokerage commissions of $30 to AmSouth Brokerage
Services, an affiliate of AmSouth. The aggregate brokerage commission paid to
AmSouth Brokerage Services was less than 1% of the aggregate commissions paid to
brokers
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<PAGE> 318
by the Fund for the period ended July 31, 1999. Additionally, the aggregate
dollar amount of transactions involving the payment of commissions effected
through AmSouth Brokerage Services was less than 1% of the aggregate dollar
amount of such transactions for the Fund for the period ended July 31, 1999.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
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,
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<PAGE> 319
however, that any change in the Trust's method of operations would affect its
net asset value per Share or result in financial losses to any customer.
Administrator
ASO Services Company ("ASO") serves as administrator (the
"Administrator") to each Fund of the Trust pursuant to the Management and
Administration Agreement dated as of April 1, 1996 (the "Administration
Agreement"). ASO is a wholly-owned subsidiary of BISYS which is a wholly-owned
subsidiary of BISYS Group, Inc., a publicly held company which is a provider of
information processing, loan servicing and 401(k) administration and
record-keeping services to and through banking and other financial
organizations. The Administrator assists in supervising all operations of each
Fund (other than those performed by the Adviser under the Advisory Agreements,
the Sub-Advisers under the Sub-Advisory Agreements, those performed by AmSouth
under its custodial services agreement with the Trust and those performed by
BISYS Fund Services, Inc. under its transfer agency and fund accounting
agreements with the Trust).
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value per Share of the Money Market Funds, to maintain
office facilities for the Trust, to maintain the Trust's financial accounts and
records, and to furnish the Trust statistical and research data and certain
bookkeeping services, and certain other services required by the Trust. The
Administrator prepares annual and semi-annual reports to the Securities and
Exchange Commission, prepares federal and state tax returns, prepares filings
with state securities commissions, and generally assists in supervising all
aspects of the Trust's operations (other than those performed by the Adviser
under the Advisory Agreements, the Sub-Advisers under the Sub-Advisory
Agreements, those by AmSouth under its custodial services agreement with the
Trust and those performed by BISYS Fund Services, Inc. under its fund accounting
agreement and BISYS Fund Services Ohio, Inc. under its transfer agency agreement
with the Trust). Under the Administration Agreement, the Administrator may
delegate all or any part of its responsibilities thereunder.
Under the Administration Agreement for expenses assumed and services
provided as manager and administrator, the Administrator receives a fee from
each Fund (except the Institutional Money Market 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. Under
the Administration Agreement for expenses assumed and services provided as
manager and administrator, the Administrator receives a fee from the
Institutional Money Market Fund equal to the lesser of (a) a fee computed at the
annual rate of (0.10%) of the Institutional Money Market Fund's average daily
net assets; or (b) such fee as may from time to time be agreed upon in writing
by the Trust and the Administrator. A fee agreed to from time to time by the
Trust and the Administrator may be significantly lower than the fee calculated
at the annual rate and the effect of such lower fee would be to lower a Fund's
expenses and increase
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<PAGE> 320
the net income of such Fund during the period when such lower fee is in effect.
Each Fund also bears expenses incurred in pricing securities owned by the Fund.
For its services as administrator and expenses assumed pursuant to the
Administration Agreement, the Administrator received the following fees:
<TABLE>
<CAPTION>
Fiscal Year or Period Ended
July 31, 1999(2) July 31, 1998(2) July 31, 1997(2)
---------------------------- ---------------------------- --------------------------
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $761,600 -- $751,492 -- $714,000 $165,000
Growth Fund 51,832 $51,832 18,000 $16,000 -- --
Enhanced Market Fund 35,097 35,097 -- -- -- --
Value Fund 2,073,141 -- 1,995,442 -- 934,000 188,000
Equity Income Fund 81,223 -- 66,881 -- 9,033 --
Select Equity Fund 32,564 32,564 -- -- -- --
Small Cap Fund 21,209 21,209 6,000 6,000 -- --
Bond Fund 713,624 285,450 633,000 475,000 298,000 119,000
Government Income Fund 19,067 9,450 21,000 10,000 28,000 14,000
Limited Term Bond Fund 226,015 90,406 238,000 95,000 99,000 40,000
Florida Tax-Exempt Fund 141,800 70,899 114,000 57,000 104,000 53,000
Municipal Bond Fund 652,573 261,029 668,000 267,000 55,000 22,000
Prime Money Market Fund 1,382,700 -- 1,257,853 -- 1,183,357 --
U.S. Treasury Fund 630,865 -- 628,179 -- 662,565 --
Tax-Exempt Fund 191,672 -- 176,963 -- 160,785 --
Institutional Prime
Obligations Fund 99,181 69,427 -- -- -- --
International Equity Fund 49,045 0 68863 0 -- --
Mid Cap Fund 15,317 0 -- -- -- --
Capital Growth Fund 340,631 0 231,959 0 180,842 0
Large Cap Fund 1,153,818 0 630,646 0 -- --
Limited Term 71,320 1,485 32,459 23,803 24,333 17,844
U.S. Government Fund
Tennessee Tax-Exempt Fund 133,786 0 149,206 0 150,681
Limited Term Tennessee 30,297 22,218 33,862 24,832 28,101 20,607
Tax-Exempt Fund
Treasury Reserve Fund 484,234 0 192,322 0 189,650 0
Aggressive Growth Portfolio 9,656 0 -- -- -- --
Growth Portfolio 5,547 0 -- -- -- --
Growth and Income Portfolio 37,323 0 -- -- -- --
Moderate Growth and 9,525 0 -- -- -- --
Income Portfolio
Current Income Portfolio 622 0 -- -- -- --
</TABLE>
- ------------------------------------
(2) For former ISG Funds, the figures reflect fees received by the former
Administrator for the fiscal year ended December 31, 1999, December 31, 1998,
and December 31, 1997.
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.
B-75
<PAGE> 321
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
Expenses
Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Trustees of the
Trust, Securities and Exchange Commission fees, state securities qualification
fees, costs of preparing and printing Prospectuses for regulatory purposes and
for distribution to current Shareholders, outside auditing and legal expenses,
advisory and administration fees, fees and out-of-pocket expenses of the
custodian and the transfer agent, dividend disbursing agents fees, fees and
out-of-pocket expenses for fund accounting services, expenses incurred for
pricing securities owned by it, certain insurance premiums, costs of maintenance
of its existence, costs of Shareholders' and Trustees' reports and meetings, and
any extraordinary expenses incurred in its operation.
AmSouth and the Administrator each bear all expenses in connection with
the performance of their services as Adviser and Administrator, respectively,
other than the cost of securities (including brokerage commissions, if any)
purchased for a Fund. No Fund will bear, directly or indirectly, the cost of any
activity primarily intended to result in the distribution of Shares of such
Fund; such costs will be borne by the Distributor.
As a general matter, expenses are allocated to the Trust, Class A,
Class B, Class I, Class II and Class III Shares of a Fund on the basis of the
relative net asset value of each class. At present, the only expenses that will
be borne solely by Class A, Class B Shares, Class II and Class III, other than
in accordance with the relative net asset value of the class, are expenses under
the Servicing Plan which relates only to the Class A Shares and the Distribution
Plan which relates only to the Class B Shares.
Sub-Administrators
AmSouth is retained by BISYS as the Sub-Administrator to the Trust
pursuant to an agreement between the Administrator and AmSouth. On April 1,
1996, AmSouth entered into an Agreement with ASO as the Sub-Administrator of the
Trust. Pursuant to this agreement, AmSouth has assumed certain of the
Administrator's duties, for which AmSouth receives a fee, paid by the
Administrator, calculated at an annual rate of up to (0.10%) ten one-hundredths
of one percent of each Fund's average net assets. For the fiscal years ended
July 31, 1999 and July 31, 1998, AmSouth received $2,184,291 and $1,924,684,
respectively, with respect to the Trust.
B-76
<PAGE> 322
BISYS is retained by the Administrator as a Sub-Administrator to the
Trust. Pursuant to its agreement with the Administrator, BISYS Fund Services is
entitled to compensation as mutually agreed upon from time to time by it and the
Administrator.
Distributor
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of July 16, 1997 (the "Distribution Agreement").
The Distribution Agreement provides that, unless sooner terminated it will
continue in effect until January 31, 2000, and from year to year thereafter if
such continuance is approved at least annually (i) by the Trust's Board of
Trustees or by the vote of a majority of the outstanding Shares of the Funds or
Fund subject to such Distribution Agreement, and (ii) by the vote of a majority
of the Trustees of the Trust who are not parties to such Distribution Agreement
or interested persons (as defined in the 1940 Act) of any party to such
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
Class A Shares of the Trust are subject to a Shareholder Servicing Plan
(the "Servicing Plan") permitting payment of compensation to financial
institutions that agree to provide certain administrative support services for
their customers or account holders. Each Fund has entered into a specific
arrangement with BISYS for the provision of such services by BISYS, and
reimburses BISYS for its cost of providing these services, subject to a maximum
annual rate of twenty-five one-hundredths of one percent (0.25%) of the average
daily net assets of the Class A Shares of each Fund.
The Servicing Plan was initially approved on December 6, 1995 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Servicing Plan (the "Independent
Trustees"). The Servicing Plan reflects the creation of the Class A Shares, and
provides for fees only upon that Class.
The Servicing Plan may be terminated with respect to any Fund by a vote
of a majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class A Shares of that Fund. The Servicing Plan may be amended by
vote of the Trust's Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for such purpose, except that any
change in the Servicing Plan that would materially increase the shareholder
servicing fee with respect to a Fund requires the approval of the holders of
that Fund's Class A Class. The Trust's Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the Servicing Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Servicing Plan) indicating the purposes for which such expenditures
were made.
B-77
<PAGE> 323
Under the Trust's Distribution and Shareholder Services Plan (the
"Distribution Plan"), all Class B Shares pay a shareholder servicing fee of
0.25% of average daily net assets. Regarding all Funds that participated in the
ISG/AmSouth combination, this fee is in the form of a separate non-Rule 12b-1
fee. With respect to all other AmSouth Funds, the fee is a component of a 1.00%
Rule 12b-1 fee. Funds that participated in the ISG/AmSouth combination bear a
Rule 12b-1 fee of 0.75%. Despite the above-described differences in the legal
character of shareholder servicing fees, all B Shares are subject to the same
1.00% aggregate fees for distribution and shareholder services; Class II Shares
of a Fund will pay a monthly distribution fee to the Distributor as compensation
for its services in connection with the Distribution Plan at an annual rate
equal to twenty-five one-hundredths of one percent (0.25%) of the average daily
net assets of Class II Shares of each Fund; Class III Shares of a Fund will pay
a monthly distribution fee to the Distributor as compensation for its services
in connection with the Distribution Plan at an annual rate equal to fifty
one-hundredths of one percent (0.50%) of the average daily net assets of the
Class III Shares of each Fund. The Distributor may periodically waive all or a
portion of the fee with respect to a Fund in order to increase the net
investment income of the Fund available for distribution as dividends. The
Distributor may apply the Class B, Class II or Class III Share Fee toward the
following: (i) compensation for its services or expenses in connection with
distribution assistance with respect to such Fund's Class B, Class II or Class
III Shares; (ii) payments to financial institutions and intermediaries (such as
banks, savings and loan associations, insurance companies, and investment
counselors) as brokerage commissions in connection with the sale of such Fund's
Class B, Class II or Class III Shares; and (iii) payments to financial
institutions and intermediaries (such as banks, savings and loan associations,
insurance companies, and investment counselors), broker-dealers, and the
Distributor's affiliates and subsidiaries as compensation for services and/or
reimbursement of expenses incurred in connection with distribution or
shareholder services with respect to such Fund's Class B, Class II or Class III
Shares.
The Distribution Plan was initially approved on March 12, 1997 by the
Trust's Board of Trustees, including a majority of the trustees who are not
interested persons of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees").
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to the Class B, Class II or Class III Shares of
any Fund by a vote of a majority of the Independent Trustees, or by a vote of a
majority of the outstanding Class B, Class II or Class III Shares of that Fund.
The Distribution Plan may be amended by vote of the Fund's Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for such purpose, except that any change in the Distribution Plan that
would materially increase the distribution fee with respect to the Class B,
Class II or Class III Shares of a Fund requires the approval of the holders of
that Fund's Class B, Class II or Class III Shares. The Trust's Board of Trustees
will review on a quarterly and annual basis written reports of the amounts
received and expended under the Distribution Plan
B-78
<PAGE> 324
(including amounts expended by the Distributor to Participating Organizations
pursuant to the Servicing Agreements entered into under the Distribution Plan)
indicating the purposes for which such expenditures were made.
For the fiscal year ended July 31, 1999, July 31, 1998 and July 31,
1997 the Distributor received the following servicing fees with respect to the
Class A Shares and the following distribution fees with respect to the Class B,
Class II and Class III Shares from the following Funds:
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999(3) July 31, 1998(3) July 31, 1997(3)
--------------------------- ------------------------ ---------------------
Class A Shares Class A Shares Class A Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $113,423 -- $113,853 $341 -- --
Growth Fund 28,262 -- 12,190 37 -- --
Enhanced Market Fund 27,092 $9,055 -- -- -- --
Value Fund 178,812 -- 145,774 437 -- --
Equity Income Fund 58,845 -- 55,674 167 -- --
Select Equity Fund 28,366 10,391 -- -- --
Small Cap Fund 3,080 -- 1,091 7 -- --
Bond Fund 7,330 -- 15,851 9,530 -- --
Government Income Fund 6,909 -- 21,290 12,799 -- --
Limited Term Bond Fund 7,521 4,513 8,171 4,912 -- --
Florida Tax-Exempt Fund 9,991 -- 13,848 8,325 -- --
Municipal Bond Fund 5,843 -- 4,831 2,904 -- --
Prime Money Market Fund 336,424 201,863 305,250 183,129 $305,882 $182,913
U.S. Treasury Fund 16,054 9,633 19,155 11,498 27,598 16,307
Tax-Exempt Fund 62,542 37,562 58,152 34,888 50,267 31,033
International Equity Fund 1,031 1,031 0 0 -- --
Mid Cap Fund 1,503 0 -- -- -- --
Capital Growth Fund 18,891 0 6,073 0 214,963 214,887
Large Cap Fund 172,705 172,705 0 0 -- --
Limited Term U.S. 7,305 7,305 48,533 48,533 40,554 40,554
Government Fund
Tennessee Tax-Exempt 7,736 0 6,387 0 189,842 189,623
Fund
Limited Term Tennessee 48,523 48,523 55,168 55,168 46,847 46,847
Tax-Exempt Fund
Treasury Reserve Fund 0 0 -- -- -- --
Aggressive Growth 524 0 -- -- -- --
Portfolio
Growth Portfolio 266 0 -- -- -- --
Growth and Income 755 0 -- -- -- --
Portfolio
Moderate Growth and 291 0 -- -- -- --
Income Portfolio
Current Income Portfolio 5 0 -- -- -- --
</TABLE>
- ------------------------
(3) For participating in the ISG/AmSouth combination, the figures reflect
fees received by the former Distributor for the fiscal year ended December 31,
1999, December 31, 1998, and December 31, 1997.
B-79
<PAGE> 325
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999(3) July 31, 1998(3) July 31, 1997(3)
------------------------- ------------------------- -------------------------
Class B Shares Class B Shares Class B Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $78,669 -- $21,204 -- -- --
Growth Fund 51,893 -- 15,982 -- -- --
Enhanced Market Fund 20,045 -- -- -- -- --
Value Fund 102,305 -- 33,233 -- -- --
Equity Income Fund 77,644 -- 35,433 -- -- --
Select Equity Fund 8,018 -- -- -- -- --
Small Cap Fund 8,620 -- 2,093 -- -- --
Bond Fund 16,859 -- 1,542 -- -- --
Government Income Fund -- -- -- -- -- --
Limited Term Bond Fund 4,053 -- -- -- -- --
Florida Tax-Exempt Fund 1,086 -- -- -- -- --
Municipal Bond Fund -- -- -- -- -- --
Prime Money Market Fund 1,468 -- -- -- -- --
U.S. Treasury Fund -- -- -- -- -- --
Tax-Exempt Fund -- -- -- -- -- --
International Equity Fund 416 0 0 0 -- --
Mid Cap Fund 2,945 0 -- -- -- --
Capital Growth Fund 40,157 0 8,089 0 -- --
Large Cap Fund 74,774 0 23 23 -- --
Limited Term U.S. 3,735 0 1,398 0 -- --
Government Fund
Tennessee Tax-Exempt 10,630 0 5,131 0 -- --
Fund
Limited Term Tennessee 5,915 0 3,332 0 -- --
Tax-Exempt Fund
Treasury Reserve Fund 0 0 -- -- -- --
Aggressive Growth 2,179 0 -- -- -- --
Portfolio
Growth Portfolio 3,954 0 -- -- -- --
Growth and Income 8,688 0 -- -- -- --
Portfolio
Moderate Growth and 4,809 0 -- -- -- --
Income Portfolio
Current Income Portfolio 167 0 -- -- -- --
</TABLE>
- --------------------------------
(3) For participating in the ISG/AmSouth combination, the figures reflect
fees received by the former Distributor for the fiscal year ended December 31,
1999, December 31, 1998, and December 31, 1997.
B-80
<PAGE> 326
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------------ ---------------------- ----------------------
Class II Shares Class II Shares Class II Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $17,200 -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
July 31, 1999 July 31, 1998 July 31, 1997
------------------------ ---------------------- ----------------------
Class III Shares Class III Shares Class III Shares
Amount Amount Amount
Earned Waived Earned Waived Earned Waived
<S> <C> <C> <C> <C> <C> <C>
Institutional Prime
Obligations Fund $15,473 -- -- -- -- --
</TABLE>
B-81
<PAGE> 327
All payments by the Distributor for distribution assistance or
shareholder services under the Distribution Plan will be made pursuant to an
agreement (a "Servicing Agreement") between the Distributor and such bank, other
financial institution or intermediary, broker-dealer, or affiliate or subsidiary
of the Distributor (hereinafter referred to individually as "Participating
Organizations"). A Servicing Agreement will relate to the provision of
distribution assistance in connection with the distribution of a Fund's Class B
Shares, Class II Shares or Class III Shares to the Participating Organization's
customers on whose behalf the investment in such Shares is made and/or to the
provision of shareholder services to the Participating Organization's customers
owning a Fund's Class B Shares, Class II Shares or Class III Shares. Under the
Distribution Plan, a Participating Organization may include AmSouth or a
subsidiary bank or nonbank affiliates, or the subsidiaries or affiliates of
those banks. A Servicing Agreement entered into with a bank (or any of its
subsidiaries or affiliates) will contain a representation that the bank (or
subsidiary or affiliate) believes that it possesses the legal authority to
perform the services contemplated by the Servicing Agreement without violation
of applicable banking laws (including the Glass-Steagall Act) and regulations.
The distribution fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular year by the Distributor in connection with distribution assistance or
shareholder services rendered by the Distributor itself or incurred by the
Distributor pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Glass-Steagall Act and other applicable laws prohibit banks
generally from engaging in the business of underwriting securities, but in
general do not prohibit banks from purchasing 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.
B-82
<PAGE> 328
Custodian
AmSouth serves as custodian of the Trust pursuant to a Custodial
Services Agreement with the Trust (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments.
Transfer Agent and Fund Accounting Services.
BISYS Fund Services Ohio, Inc. ("Transfer Agent") serves as transfer
agent to each Fund of the Trust pursuant to a Transfer Agency and Shareholder
Service Agreement with the Trust. The Transfer Agent is a wholly-owned
subsidiary of The BISYS Group, Inc.
BISYS Fund Services, Inc. ("Fund Accountant") provides fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement with the
Trust. Under the Fund Accounting Agreement, the Fund Accountant receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, plus out-of-pocket expenses, subject to a minimum annual fee of $40,000
for each tax-exempt Fund and $30,000 for each taxable Fund and the Money Market
Funds may be subject to an additional fee of $10,000 for each Class.
Independent Accountants
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
incorporated by reference into this Statement of Additional Information which
have been audited by PricewaterhouseCoopers LLP, former independent accountants
for the Trust, as set forth in their report incorporated by reference herein,
and are included in reliance upon such report and on the authority of such firm
as experts in auditing and accounting. For the fiscal year ending July 31, 2000,
Ernst & Young has been selected as the independent accountants for the Trust.
Ernst & Young's address is 10 West Broad Street, Columbus, OH 43215. With
respect to Funds participating in the ISG/AmSouth combination where a former ISG
Fund is the accounting survivor, the financial information appearing in the
Prospectuses under "FINANCIAL HIGHLIGHTS" has been derived from financial
statements of the ISG Funds incorporated by reference into this Statement of
Additional Information which have been audited by KPMG LLP, independent
accountants for the ISG Funds, 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.
Legal Counsel
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333, are counsel to the Trust.
B-83
<PAGE> 329
PERFORMANCE INFORMATION
General
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry indices or other
appropriate benchmarks; and (8) discussions of fund rankings or ratings by
recognized rating organizations.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. and Donoghue's Money
Fund Report. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, Ibbotson
Associates, Inc., Morning Star, Inc., CDA/Wiesenberger, Pensions and
Investments, U.S.A. Today, and local newspapers and periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and in reports to Shareholders. Additional performance
information is contained in the Trust's Annual Report, which is available free
of charge by calling the number on the front page of the Prospectus.
Information about the performance of a Fund is based on the Fund's
record up to a certain date and is not intended to indicate future performance.
Yield and total return are functions of the type and quality of instruments held
in a Fund, operating expenses, and marketing conditions. Any fees charged by a
Financial Institution with respect to customer accounts investing in Shares of a
Fund will not be included in performance calculations.
Yields of the Money Market Funds
The "yield" of each Money Market Fund 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
B-84
<PAGE> 330
account will include the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares, but will not include realized gains or losses or
unrealized appreciation or depreciation on portfolio investments. Yield may also
be calculated on a compound basis (the "effective yield") which assumes that net
income is reinvested in Fund shares at the same rate as net income is earned for
the base period.
The Tax-Exempt Fund may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of the Tax-Exempt Fund's yield which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent effective yield for the Tax-Exempt Fund is computed by dividing that
portion of the effective yield of the Tax-Exempt Fund which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax-Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1999, the yield, effective
yield, the tax equivalent yield and the tax equivalent effective yield of the
Trust Shares and Class A Shares of each Money Market Fund, calculated as
described, above was as follows:
<TABLE>
<CAPTION>
Effective Tax Equivalent Tax Equivalent
Fund Class Yield Yield Yield Effective Yield
<S> <C> <C> <C> <C> <C>
Prime
Money Market Fund Trust 4.39% 4.48% -- --
U.S. Treasury Fund Trust 4.05% 4.13% -- --
Tax-Exempt Fund Trust 2.57% 2.60% 4.25% 4.30%
Treasury Reserve Fund Trust 4.23% 4.42% -- --
Prime
Money Market Fund Class A 4.29% 4.37% -- --
U.S. Treasury Fund Class A 3.96% 4.02% -- --
Tax-Exempt Fund Class A 2.47% 2.50% 4.09% 4.14%
Treasury Reserve Fund Class A 4.32% 4.42% -- --
Institutional
</TABLE>
B-85
<PAGE> 331
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Class I 4.83% 4.94% -- --
Institutional
Prime Obligations Fund Class II 4.58% 4.68% -- --
Institutional
Prime Obligations Fund Class III 4.33% 4.42% -- --
</TABLE>
Yield of the Capital Appreciation Funds, the Income Funds and the Tax-Free Funds
The yield of each of the Capital Appreciation Funds, the Income Funds
and the Tax-Free Funds will be computed by annualizing net investment income per
share for a recent 30-day period and dividing that amount by the maximum
offering price per share (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed-income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The yield of each of the
Capital Appreciation Funds and the Income Funds will vary from time to time
depending upon market conditions, the composition of the Fund's portfolios and
operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of the
Capital Appreciation Funds and the Income Funds.
The Tax-Free Funds may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of each Fund's yield which is tax-exempt by the difference
between one and a stated income tax rate and adding the product to that portion,
if any, of the yield of the Fund that is not tax-exempt. The tax equivalent
effective yield for the Tax-Free Funds is computed by dividing that portion of
the effective yield of the Fund which is tax-exempt by the difference between
one and a stated income tax rate and adding the product to that portion, if any,
of the effective yield of the Fund that is not tax-exempt.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.
Investors in the Capital Appreciation Funds and the Income Funds are
specifically advised that share prices, expressed as the net asset values per
share, will vary just as yields will vary.
B-86
<PAGE> 332
For the 30-day period ending July 31, 1999, the yield and the tax
equivalent yield of the Income Funds was:
<TABLE>
<CAPTION>
Tax Equivalent
Fund Class Yield Yield
<S> <C> <C> <C>
Florida Tax-Exempt Fund Class A 3.88% 6.42%
Trust 3.96% 6.56%
Municipal Bond Fund Class A 4.01% 6.64%
Trust 4.10% 6.79%
Bond Fund Class A 5.43% --
Trust 5.53% --
Class B 4.60% --
Government Income Fund Class A 6.11% --
Trust 6.22% --
Limited Term Bond Fund Class A 5.29% --
Trust 5.38% --
Limited Term U.S. Class A 4.70% N/A
Government Fund Trust 4.85% N/A
Tennessee Tax-Exempt Class A 3.39% 5.61%
Fund Trust 3.74% 6.19%
Limited Term Tennessee Class A 3.25% 5.38%
Tax-Exempt Fund Trust N/A N/A
</TABLE>
For the 30-day period ending July 31, 1999, the yield of the Capital
Appreciation Funds was:
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<PAGE> 333
<TABLE>
<CAPTION>
Fund Class Yield
---- ----- -----
<S> <C> <C>
Value Fund Trust 0.63%
Balanced Fund Trust 2.84%
Equity Income Fund Trust 0.79%
Growth Fund Trust -0.38%
Small Cap Fund Trust -0.99%
Enhanced Market Fund Trust 0.31%
Select Equity Fund Trust -0.84%
International Equity Fund Trust N/A
Mid Cap Fund Trust 0
Capital Growth Fund Trust 0
Large Cap Fund Trust 0.08%
Value Fund Class A 0.38%
Balanced Fund Class A 2.59%
Equity Income Fund Class A 0.54%
Growth Fund Class A -0.63%
Small Cap Fund Class A -1.24%
Enhanced Market Fund Class A 0.56%
Select Equity Fund Class A -1.10%
International Equity Fund Class A 0
Mid Cap Fund Class A 0
Capital Growth Fund Class A 0
Large Cap Fund Class A 0.08%
Value Fund Class B -0.36%
Balanced Fund Class B 1.84%
Equity Income Fund Class B -0.21%
Growth Fund Class B -1.39%
Small Cap Fund Class B -1.99%
Enhanced Market Fund Class B -0.44%
Select Equity Fund Class B -1.85%
International Equity Fund Class B 0
Mid Cap Fund Class B 0
Capital Growth Fund Class B 0
Large Cap Fund Class B 0
</TABLE>
Calculation of Total Return
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
B-88
<PAGE> 334
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
<S> <C> <C> <C>
Prime Money Market Fund Trust 4.59% 4.99%
U.S. Treasury Fund Trust 4.16% 4.70%
Tax-Exempt Fund Trust 2.76% 3.08%
Prime Money Market Fund Class A 4.48% 4.92%
U.S. Treasury Fund Class A 4.06% 4.63%
Tax-Exempt Fund Class A 2.66% 3.01%
Florida Tax-Exempt Fund Class A 2.06% --
Bond Fund Class A 2.58% 6.00%
Limited Term Bond Fund Class A 4.01% 5.03%
Government Income Fund Class A 2.62% 5.86%
Municipal Bond Class A 2.31% 3.71%
Institutional
Prime Obligations Fund Class I -- --
Institutional
Prime Obligations Fund Class II -- --
Institutional
Prime Obligations Fund Class III -- --
</TABLE>
B-89
<PAGE> 335
<TABLE>
Fund Class One-Year(4) Five-Year(4)
<S> <C> <C> <C>
AmSouth Limited Term Class A N/A N/A
U.S. Government Fund
AmSouth Tennessee Tax- Class A (3.07%) 4.47%
Exempt Fund
AmSouth Limited Term Class A 0.95% 5.83%
Tennessee Tax-Exempt
Fund
AmSouth Treasury Reserve Class A 4.38% 4.80%
Money Market Fund
AmSouth Limited Term Class B N/A N/A
U.S. Government Fund
AmSouth Tennessee Tax- Class B (3.65%) 4.28%
Exempt Fund
AmSouth Limited Term Class B (1.84%) 3.32%
Tennessee Tax-Exempt
Fund
AmSouth Limited Term Trust N/A N/A
U.S. Government Fund
AmSouth Tennessee Tax- Trust (2.83%) 4.58%
Exempt Fund
AmSouth Limited Term Trust 1.08% 5.44%
Tennessee Tax-Exempt
Fund
AmSouth Treasury Reserve Trust 4.39% 4.94%
Money Market Fund
</TABLE>
- ------------------------------
(4) For participating in the ISG/AmSouth combination, the figures
reflect fees received by the former Distributor for the fiscal year ended
December 31, 1999, December 31, 1998, and December 31, 1997.
B-90
<PAGE> 336
For the one-year and five-year periods ended July 31, 1999, average
annual total return was as follows:
<TABLE>
<CAPTION>
Fund Class One-Year Five-Year
---- ----- -------- ---------
<S> <C> <C> <C>
Value Fund Trust 15.43% 19.61%
Balanced Fund Trust 9.74% 13.71%
Growth Fund Trust 22.05% --
Equity Income Fund Trust 14.43% --
Small Cap Fund Trust
Value Fund Class A 14.92% 18.38%
Balanced Fund Class A 9.40% 12.55%
Growth Fund Class A 21.76% --
Equity Income Fund Class A 9.03% --
Small Cap Fund Class A -8.10% --
Value Fund Class B 14.03% 18.95%
Balanced Fund Class B 9.74% 13.04%
Growth Fund Class B 20.96% --
Equity Income Fund Class B 13.34% --
Small Cap Fund Class B -8.78% --
</TABLE>
B-91
<PAGE> 337
<TABLE>
<CAPTION>
Fund Class One-Year(5) Five-Year(5)
---- ----- ----------- -------------
<S> <C> <C> <C>
AmSouth Capital Growth Class A 21.85% 27.39%
Fund
AmSouth Large Cap Fund Class A 18.85% 28.74%
AmSouth Mid Cap Fund Class A N/A N/A
AmSouth International Class A 26.77% N/A
Equity Fund
AmSouth Aggressive Class A N/A N/A
Growth Portfolio
AmSouth Growth Portfolio Class A N/A N/A
AmSouth Growth and Class A N/A N/A
Income Portfolio
AmSouth Moderate Growth Class A N/A N/A
Income Portfolio
AmSouth Current Income Class A N/A N/A
Portfolio
AmSouth Capital Growth Class B 21.11% 26.81%
Fund
AmSouth Large Cap Fund Class B 17.78% 28.50%
AmSouth Mid Cap Fund Class B N/A N/A
AmSouth International Class B 25.98% N/A
Equity Fund
AmSouth Aggressive Class B N/A N/A
Growth Portfolio
AmSouth Growth Portfolio Class B N/A N/A
AmSouth Growth and Class B N/A N/A
Income Portfolio
AmSouth Moderate Growth Class B N/A N/A
Income Portfolio
AmSouth Current Income Class B N/A N/A
Portfolio
AmSouth Capital Growth Trust 22.09% 27.29%
Fund
AmSouth Large Cap Fund Trust 18.85% 28.74%
AmSouth Mid Cap Fund Trust N/A N/A
AmSouth International Trust 26.72% N/A
Equity Fund
AmSouth Aggressive Trust N/A N/A
Growth Portfolio
AmSouth Growth Portfolio Trust N/A N/A
AmSouth Growth and Trust N/A N/A
Income Portfolio
AmSouth Moderate Growth Trust N/A N/A
Income Portfolio
AmSouth Current Income Trust N/A N/A
Portfolio
</TABLE>
(5) For participating in the ISG/AmSouth combination, the figures
reflect fees received by the former Distributor for the fiscal year ended
December 31, 1999, December 31, 1998, and December 31, 1997.
B-92
<PAGE> 338
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1999 of Operations Date
---- ----- ---------------------- ------------------
<S> <C> <C> <C>
Prime Money Market Fund Trust 5.33% August 8, 1988
U.S. Treasury Fund Trust 5.08% September 8, 1988
Tax-Exempt Fund Trust 3.06% June 27, 1988
Florida Tax-Exempt Fund Trust 5.05% September 2, 1997
Municipal Bond Fund Trust 5.90% September 2, 1997
Bond Fund Trust 7.94% September 2, 1997
Limited Term Bond Fund Trust 6.78% September 2, 1997
Government Income Fund Trust 5.69% September 2, 1997
Prime Money Market Fund Class A 5.30% April 1, 1996
U.S. Treasury Fund Class A 5.05% April 1, 1996
Tax-Exempt Fund Class A 3.03% April 1, 1996
Florida Fund Class A 4.10% September 30, 1994
Municipal Bond Fund Class A 5.72% July 1, 1997
Bond Fund Class A 7.51% December 1, 1988
Limited Term Bond Fund Class A 6.34% February 1, 1988
Government Income Fund Class A 4.94% October 1, 1993
Bond Fund Class B 7.75% September 2, 1997
Prime Money Market Fund Class B 3.62% June 15, 1998
Institutional
Prime Obligations Fund Class I 4.31% September 15, 1998
Institutional
Prime Obligations Fund Class II 1.96% February 19, 1999
Institutional
Prime Obligations Fund Class III 1.84% February 22, 1999
</TABLE>
B-93
<PAGE> 339
<TABLE>
<CAPTION>
Fund Class Since Inception(6)
---- ----- ----------------
<S> <C> <C>
AmSouth Limited Term Class A 5.99%
U.S. Government Fund
AmSouth Tennessee Tax- Class A 6.25%
Exempt Fund
AmSouth Limited Term Class A 7.48%
Tennessee Tax-Exempt
Fund
AmSouth Treasury Reserve Class A 4.30%
Money Market Fund
AmSouth Limited Term Class B 5.87%
U.S. Government Fund
AmSouth Tennessee Tax- Class B 6.20%
Exempt Fund
AmSouth Limited Term Class B 3.98%
Tennessee Tax-Exempt
Fund
AmSouth Limited Term Trust 5.99%
U.S. Government Fund
AmSouth Tennessee Tax- Trust 6.28%
Exempt Fund
AmSouth Limited Term Trust N/A
Tennessee Tax-Exempt
Fund
AmSouth Treasury Reserve Trust 4.39%
Money Market Fund
</TABLE>
- ------------------------------
(6) For participating in the ISG/AmSouth combination, the figures reflect
fees received by the former Distributor for the fiscal year ended December 31,
1999, December 31, 1998, and December 31, 1997.
B-94
<PAGE> 340
For the period from commencement of operations through July 31, 1999,
the average annual total return was as follows:
<TABLE>
<CAPTION>
Commencement of Operations Commencement
Fund Class through July 31, 1999 of Operations Date
---- ----- --------------------- ------------------
<S> <C> <C> <C>
Value Fund Trust 15.49% December 1, 1988
Balanced Fund Trust 12.97% December 19, 1991
Equity Income Fund Trust 17.01% March 20, 1997
Growth Fund Trust 19.36% July 31, 1997
Small Cap Fund Trust -11.30% March 2, 1998
Enhanced Market Fund Trust 40.10% September 1, 1998
Select Equity Fund Trust 19.62% September 1, 1998
Value Fund Class B 15.28% December 1, 1988
Balanced Fund Class B 12.70% December 19, 1991
Equity Income Fund Class B 15.00% March 20, 1997
Growth Fund Class B 16.54% August 3, 1997
Small Cap Fund Class B -14.77% March 2, 1998
Enhanced Market Fund Class B 33.90% September 1, 1998
Select Equity Fund Class B 13.59% September 1, 1998
Value Fund Class A 14.93% December 1, 1988
Balanced Fund Class A 12.22% December 19, 1991
Equity Income Fund Class A 14.54% March 20, 1997
Growth Fund Class A 16.34% August 3, 1997
Small Cap Fund Class A -14.27% March 2, 1998
Enhanced Market Fund Class A 33.65% September 1, 1998
Select Equity Fund Class A 14.08% September 1, 1998
</TABLE>
B-95
<PAGE> 341
<TABLE>
<CAPTION>
Fund Class Since Inception(7)
---- ----- ----------------
<S> <C> <C>
AmSouth Capital Growth Class A 13.75%
Fund
AmSouth Large Cap Fund Class A 20.61%
AmSouth Mid Cap Fund Class A 73.30%
AmSouth International Class A 13.37%
Equity Fund
AmSouth Aggressive Class A 16.92%
Growth Portfolio
AmSouth Growth Portfolio Class A 8.85%
AmSouth Growth and Class A 5.21%
Income Portfolio
AmSouth Moderate Growth Class A 3.37%
Income Portfolio
AmSouth Current Income Class A (1.63%)
Portfolio
AmSouth Capital Growth Class B 13.61%
Fund
AmSouth Large Cap Fund Class B 20.46%
AmSouth Mid Cap Fund Class B 72.80%
AmSouth International Class B 13.07%
Equity Fund
AmSouth Aggressive Class B 15.70%
Growth Portfolio
AmSouth Growth Portfolio Class B 9.48%
AmSouth Growth and Class B 6.10%
Income Portfolio
AmSouth Moderate Growth Class B 1.50%
Income Portfolio
AmSouth Current Income Class B (1.66%)
Portfolio
AmSouth Capital Growth Trust 13.73%
Fund
AmSouth Large Cap Fund Trust 20.60%
AmSouth Mid Cap Fund Trust 78.70%
AmSouth International Trust 13.35%
Equity Fund
AmSouth Aggressive Trust 16.31%
Growth Portfolio
AmSouth Growth Portfolio Trust 8.59%
AmSouth Growth and Trust 8.40%
Income Portfolio
AmSouth Moderate Growth Trust 3.64%
Income Portfolio
AmSouth Current Income Trust (1.41%)
Portfolio
</TABLE>
- -------------------------------
(7) For participating in the ISG/AmSouth combination, the figures reflect
fees received by the former Distributor for the fiscal year ended December 31,
1999, December 31, 1998, and December 31, 1997.
B-96
<PAGE> 342
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.
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
B-97
<PAGE> 343
expenses allocated to the Fund. Fees imposed upon customer accounts by Financial
Institutions for cash management services will reduce a Fund's effective yield
to Customers.
ADDITIONAL INFORMATION
Organization and Description of Shares
The Trust was organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988, to "AmSouth Mutual Funds" as of August 19, 1993 and to
"AmSouth Funds" as of November 30, 1999 by amendments to the Agreement and
Declaration of Trust. A copy of the Trust's Agreement and Declaration of Trust,
as amended (the "Declaration of Trust") is on file with the Secretary of State
of The Commonwealth of Massachusetts. The Declaration of Trust authorizes the
Board of Trustees to issue an unlimited number of Shares, which are units of
beneficial interest. The Trust presently has twenty-nine series of Shares which
represent interests in the Value Fund, the Growth Fund, the Capital Growth Fund,
the Large Cap Fund, the Mid Cap Fund, the Small Cap Fund, the Equity Income
Fund, the Balanced Fund, the Select Equity Fund, the Enhanced Market Fund, the
International Equity Fund, the Strategic Portfolios: Aggressive Growth
Portfolio, the Strategic Portfolios: Growth Portfolio, the Strategic Portfolios:
Growth and Income Portfolio, the Strategic Portfolios: Moderate Growth and
Income Portfolio, the Strategic Portfolios: Current Income Portfolio, the Bond
Fund, the Limited Term Bond Fund, the Government Income Fund, the Limited Term
U.S. Government Fund, the Municipal Bond Fund, the Florida Tax-Exempt Fund, the
Tennessee Tax-Exempt Fund, the Limited Term Tennessee Tax-Exempt Fund, the Prime
Money Market Fund, the U.S. Treasury Money Market Fund, the Treasury Reserve
Money Market Fund, the Tax-Exempt Money Market Fund, and the Prime Obligations
Money Market Fund. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide or redivide any unissued Shares of the Trust into one or more
additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
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)
B-98
<PAGE> 344
when the Trustees have determined that the matter affects only the interests of
one or more series or class, then only Shareholders of such series or class
shall be entitled to vote thereon, (iii) when pertaining to the Shareholder
Servicing Plan, and (iv) when pertaining to the Distribution Plan. There will
normally be no meetings of Shareholders for the purposes of electing Trustees
unless and until such time as less than a majority of the Trustees have been
elected by the Shareholders, at which time the Trustees then in office will call
a Shareholders' meeting for the election of Trustees. In addition, Trustees may
be removed from office by a written consent signed by the holders of two-thirds
of the outstanding voting Shares of the Trust and filed with the Trust's
custodian or by vote of the holders of two-thirds of the outstanding voting
Shares of the Trust at a meeting duly called for the purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding voting Shares of any Fund. Except as set forth above, the
Trustees shall continue to hold office and may appoint their successors.
Shareholder Liability
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in every agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any Shareholder of such
Fund held liable on account of being or having been a Shareholder. Thus, the
risk of a Shareholder incurring financial loss on account of Shareholder
liability is limited to circumstances in which a Fund would be unable to meet
its obligations.
Miscellaneous
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Trust.
As used in this Statement of Additional Information, "assets belonging
to a Fund" means the consideration received by the Fund upon the issuance or
sale of Shares in that Group, 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
B-99
<PAGE> 345
liabilities and expenses of the Trust not readily identified as belonging to a
particular Fund that are allocated to that Fund in proportion to the relative
net assets of the respective Funds at the time of allocation. The timing of
allocations of general assets and general liabilities and expenses of the Trust
to particular Funds will be determined by the Board of Trustees of the Trust and
will be in accordance with generally accepted accounting principles.
Determinations by the Board of Trustees of the Trust as to the timing of the
allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to a particular Fund are
conclusive.
As used in this Statement of Additional Information, a "vote of a
majority of the outstanding Shares" of the Trust or a particular Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Trust or such Fund present at
such meeting at which the holders of more than 50% of the votes attributable to
the Shareholders of record of the Trust or such Fund are represented in person
or by proxy, or (b) the holders of more than 50% of the outstanding votes of
Shareholders of the Trust or such Fund.
[REVISE AS OF WHAT DATE?]As of August 10, 1999, the trustees and
officers of the Trust, as a group, owned less than 1% of the Trust Shares, of
the Class A Shares and of the Class B Shares of any of the AmSouth Funds.
As of August 10, 1999, AmSouth, 1901 Sixth Avenue-North, Birmingham,
Alabama 35203 was the Shareholder of record of the outstanding voting shares of
the Trust Shares of the Funds as follows: 92.68% of the Prime Money Market Fund,
46.91% of the U.S. Treasury Fund, 99.99% of the Tax-Exempt Fund, 97.49% of the
Value Fund, 98.90% of the Regional Equity Fund, 98.19% of the Bond Fund, 99.09%
of the Limited Term Bond Fund, 96.80% of the Balanced Fund, 98.67% of the
Florida Fund, 100% of the Government Income Fund, 98.49% of the Municipal Bond
Fund, 100% of the Equity Income Fund, 96.76% of the Growth Fund, 100% of the
Small Cap Fund, 99.95% of the Enhanced Market Fund, and 100% of the Select
Equity Fund. AmSouth was the Shareholder of record of 6.64% of the Class A
Shares of the Select Equity Fund and 100% of the Class I, Class II and Class III
Shares of the Institutional Prime Obligations Fund. Under the 1940 Act, AmSouth
may be deemed to be a controlling person of the Trust Class of each of the
above-mentioned Funds. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of August 10, 1999, National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of the outstanding voting Shares of the Class A Shares of
the Funds as follows: 99.54% of the Prime Money Market Fund, 97.86% of the
Treasury Fund, 95.84% of the Tax-Exempt Fund, 7.44% of the Government Income
Fund, 20.45% of the Bond Fund, 5.30% of the Limited Term Bond Fund, 36.55% of
the Municipal Bond Fund, 68.22% of the Florida Fund, 13.75% of the Growth Fund,
54.19% of the Small Cap Fund, 5.57% of the Select Equity Fund, 5.23% of the
Regional Equity Fund, and 12.41% of the Enhanced Market Fund. As of August 10,
1999 National Financial Services Corporation, One World Financial Center, 200
B-100
<PAGE> 346
Liberty Street, New York, New York 10281, was the Shareholder of record of the
outstanding voting Shares of the Class B Shares of the Funds as follows: 82.16%
of the Prime Money Market Fund, 7.56% of the Bond Fund, 7.98% of the Regional
Equity Fund, 5.62% of the Small Cap Fund, 24.71% of the Limited Term Bond Fund,
99.38% of the Municipal Bond Fund, and 92.10% of the Florida Fund. National
Financial Services Corporation under the 1940 Act may be deemed to be a
controlling person of the Class A Shares of the Prime Money Market Fund,
Treasury Fund, Tax-Exempt Fund, Municipal Bond Fund, Florida Fund and Small Cap
Fund and the Class B Shares of the Prime Money Market Fund, Select Equity Fund,
Municipal Bond Fund and Florida Fund.
The following table indicates each additional person known by the group
to own beneficially 5% or more of the Shares of a Fund of the Trust as of August
10, 1999:
<TABLE>
<CAPTION>
U.S. Treasury Fund -- Trust Shares
Number of
Name and Address Shares Percentage
<S> <C> <C>
Hare & Co. 160,484,114 51.83%
One Wall Street
New York, NY 10286
</TABLE>
<TABLE>
<CAPTION>
Limited Term Bond Fund -- Class A Shares
Number of
Name and Address Shares Percentage
<S> <C> <C>
Morgan Keegan, Inc. 14,229 5.32%
Robert P. Hall, IRA
19493 Scenic Hwy. 98
Fairhope, AL 36532
</TABLE>
<TABLE>
<CAPTION>
Municipal Bond Fund -- Class A Shares
Number of
Name and Address Shares Percentage
<S> <C> <C>
Sterne Agee Leach Inc. 60,586 21.09%
Plaza Suite 100B
813 Shades Creek Parkway
Birmingham, AL 35209
</TABLE>
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such
B-101
<PAGE> 347
offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses of the Funds and this Statement of Additional
Information.
B-102
<PAGE> 348
FINANCIAL STATEMENTS
The financial statements of the AmSouth Funds are incorporated by
reference into this Statement of Additional Information. The financial
statements for the fiscal year ended July 31, 1999 have been audited by
PricewaterhouseCoopers LLP, the former independent public accountants to the
AmSouth Funds, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. The financial
statements for the former ISG Funds for the fiscal year ended December 31, 1999
have been audited by KPMG LLP, the former independent public accountants to the
ISG Funds, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. A copy of each such
reports may be obtained without charge by contacting the Distributor, BISYS Fund
Services at 3435 Stelzer Road, Columbus, Ohio 43219 or by telephone toll-free at
800-451-8382.
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
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and market composition may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protection measurements
and may require relatively high financial leverage. Adequate alternate liquidity
is maintained. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
Short-term credit rated F-1 by Fitch IBCA is regarded as having the
strongest capacity for timely payments. Short-term credit rated F-2 by Fitch
IBCA is regarded as having a satisfactory capacity for timely payment, but that
margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
Short-term credit rated F-3 has an adequate capacity for timely payment but
near-term adverse changes could cause these securities to be rated below
investment grade. Issues rated B have characteristics suggesting a minimal
capacity for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions. Issues related C have characteristics
suggesting default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment. Issues rated D denotes actual or imminent payment default. The plus
(+) sign is used after a rating symbol to designate the relative status of an
issuer within the rating category.
Corporate Debt and State and Municipal Bond Ratings.
Standard & Poor's Corporation. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
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
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adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal.
CC -- The rating "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
Moody's Investor Services. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium-grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
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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.
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.
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"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.
"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
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quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
"CC" The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
"C" A preferred stock rated "C" is a nonpaying issue.
"D" A preferred stock rated "D" is a nonpaying issue with the issuer in
default on debt instruments.
"N.R." This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
"Plus (+) or minus (-)" To provide more detailed indications of
preferred stock quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
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PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Amended Declaration of Trust, dated as of June 25, 1993
and filed on August 19, 1993 -- incorporated by reference
to Post-Effective Amendment No. 11 to the Registrant's
Registration Statement on Form N-1A (File No. 33-21660).
(b) (1) By-laws -- incorporated by reference to the Registrant's
initial Registration Statement on Form N-1A (File No.
33-21660).
(2) Amendment No. 1 to By-laws -- incorporated by reference to
Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A (File No. 33-21660).
(c) Rights of Shareholders
The following portions of Registrant's Declaration of Trust
incorporated as Exhibit (a) hereto, define the rights of
shareholders:
ARTICLE III
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by
the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every Shareholder by
virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same
nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but only to the rights of said decedent
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
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Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. There shall initially be one Trustee who shall be
Stephen G. Mintos. The number of Trustees shall be as provided in
the Bylaws or as fixed from to time by the Trustees. The
shareholders may elect Trustees at any meeting of Shareholders
called by the Trustees for that purpose. Each Trustee shall serve
during the continued lifetime of the Trust until he dies, resigns
or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and the
election and qualification of his successor. Any Trustee may resign
at any time by written instrument signed by him and delivered to
any officer of the Trust, to each other Trustee or to a meeting of
the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust, no
Trustee resigning and no Trustee removed shall have any right to
any compensation for any period following his resignation or
removal, or any right to damages on account of such removal.
Advisory, Management and Distribution
Section 6. The Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or: management
services with any corporation, trust, association or other
organization (the "Manager"), every such contract to comply with
such requirements and restrictions as may be set forth in the
Bylaws; and any such contract may provide for one or more Sub-
advisers who shall perform all or part of the obligations of the
Manager under such Contract and may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, 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.
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The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of
or for any corporation, trust, association, or other organization,
or of or for any parent or affiliate of any organization, with
which an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, shareholder
servicing or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's
or distributor's contract, or transfer, shareholder servicing or
other agency contract may have been or may hereafter be made also
has an advisory or management contract, or principal underwriter's
or distributor's contract, or transfer, Shareholder servicing or
other agency contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Shareholders shall have such power to vote as is provided for in,
and may hold meetings and take actions pursuant to the provisions
of the Bylaws.
ARTICLE VIII
Indemnification
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his or her being
or having been a Shareholder and not because of his or her acts or
omissions or for some other 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.
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ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares for payment under such credit, contract
or claim; and neither the Shareholders nor the Trustees, nor any of
the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall
give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite
that the same was executed or made by or on behalf of the Trust or
by them as Trustee or Trustees or as officers or officer and not
individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are
binding only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to bind any
Trustee or Trustees or officer or officers or Shareholder or
Shareholders individually.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at
any time by the vote of Shareholders holding at least a majority of
the Shares of each series entitled to vote or by the Trustees by
written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding at least a
majority of the Shares of such series entitled to vote or by the
Trustees by written notice to the Shareholders of such series.
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
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thereof, and distribute the proceeds to the Shareholders of the
series involved, ratably according to the number of Shares of such
series held by the several Shareholders of such series on the date
of termination.
Amendments
Section 7. This Declaration of Trust may be amended at any time by
an instrument in writing signed by a majority of the then Trustees
when authorized to do so by vote of Shareholders holding a majority
of the Shares of each series entitled to vote, except that an
amendment which shall affect the holders of one or more series of
Shares but not the holders of all outstanding series shall be
authorized by vote of the Shareholders holding a majority of the
Shares entitled to vote of each series affected and no vote of
Shareholders of a series not affected shall be required. Amendments
having the purpose of changing the name of the Trust, of
establishing, changing, or eliminating the par value of the shares
or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision
contained herein shall not require authorization by Shareholder
vote.
The following portions of Registrant's Bylaws incorporated as
Exhibit (b) hereto, define the rights of Shareholders:
ARTICLE 11
Shareholders' Voting Powers and Meetings
11.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV,
Section 1 of the Declaration of Trust, provided, however, that no
meeting of Shareholders is required to be called for the purpose of
electing Trustees unless and until such time as less than a
majority of the Trustees have been elected by the Shareholders,
(ii) with respect to any Manager or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the extent
required by the 1940 Act, (iii) with respect to any termination of
this Trust to the extent and as provided in Article IX, Section 4
of the Declaration of Trust, (iv) with respect to any amendment of
the Declaration of Trust to the extent and as provided in Article
IX, Section 7 of the Declaration of Trust, (v) to the same extent
as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should
not be brought or 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
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vote and each fractional Share shall be entitled to a proportionate
fractional vote. The Shareholders of any particular series shall
not be entitled to vote on any matters as to which such series is
not affected. Except with respect to matters as to which the
Trustees have determined that only the interests of one or more
particular series are affected or as required by law, all of the
Shares of each series shall, on matters as to which it is entitled
to vote, vote with other series so entitled as a single class.
Notwithstanding the foregoing, with respect to matters which would
otherwise be voted on by two or more series as a single class, the
Trustees may, in their sole discretion, submit such matters to the
Shareholders of any or all such series, separately. There shall be
no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. A proxy with respect to Shares held in
the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, the
Declaration of Trust or these Bylaws to be taken by shareholders.
11.2 Voting and Meetings. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as
provided in Article IV, Section 1 of the Declaration of Trust and
for such other purposes as may be prescribed by law, by the
Declaration of Trust or by these Bylaws. Meetings of the
Shareholders may also be called by the Trustees from time to time
for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of
Shareholders may be held at any place designated by the Trustees.
Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least
seven days before such meeting, postage prepaid, stating the time
and place of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. Whenever notice
of a meeting is required to be given to a Shareholder under the
Declaration of Trust or these Bylaws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the
meeting, shall be deemed equivalent to such notice.
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
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series. Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time
after the date set for the original meeting, without the necessity
of further notice. Except when a larger vote is required by any
provision of law or the Declaration of Trust or these Bylaws, a
majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision
of law or of the Declaration of Trust or these Bylaws permits or
requires that the holders of any series shall vote as a series,
then a majority of the Shares of that series voted on the matter
(or a plurality with respect to the election of a Trustee) shall
decide that matter insofar as that series is concerned.
11.4 Action by Written Consent. Any action taken by Shareholders
may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof
as shall be required by any express provision of law or the
Declaration of Trust or these Bylaws) consent to the action in
writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
11.5 Record Dates. For the purposes of determining the shareholders
who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend or
of any other distribution, the Trustees may from time to time fix a
time, which shall be not more than 90 days before the date of any
meeting of shareholders or the date for the payment of any dividend
or of any other distributions, as the record date for determining
the shareholders having the right to notice of and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right notwithstanding
any transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
of such purposes close the register or transfer books for all of
any part of such period.
(d) (1) Investment Advisory Agreement dated as of August 1, 1988
between the Registrant and AmSouth Bank N.A. --
incorporated by reference to Post-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(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
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to the Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(3) Form of Amended Schedule A dated March 13, 2000 to the
Investment Advisory Agreement dated as of August 1,
1988 between the Registrant and AmSouth Bank, N.A. is
filed herewith.
(4) Investment Advisory Agreement between the Group and
AmSouth Bank N.A. dated as of January 20, 1989 with
respect to The ASO Outlook Group Limited Maturity Fund
-- incorporated by reference to Post-Effective Amendment
No. 2 to the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(5) Amendment No. 1 dated as of December 5, 1989 to the
Investment Advisory Agreement dated as of January 20,
1989 between the Registrant and AmSouth Bank, N.A. --
incorporated by reference to Post-Effective Amendment
No. 4 to the Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(6) Investment Sub-Advisory Agreement dated as of March 12,
1997 between AmSouth Bank and Rockhaven Asset Management
-- incorporated by reference to Exhibit 5(f) to
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement filed on July 3, 1997 on Form
N-1A (File No. 33-21660).
(7) Investment Sub-Advisory Agreement dated July 31, 1997
between AmSouth Bank and Peachtree Asset Management --
incorporated by reference to Exhibit 5(g) to
Post-Effective Amendment No. 25 to the Registrant's
Registration Statement filed on November 26, 1997 on
Form N-1A (File No. 33-21660).
(8) Investment Sub-Advisory Agreement dated as of
March 2, 1998 between AmSouth Bank and Sawgrass Asset
Management, LLC -- incorporated by reference to Exhibit
5(h) to Post-Effective Amendment No. 26 to the
Registrant's Registration Statement filed on May 22,
1998 on Form N-1A (File No. 33-21660).
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<PAGE> 362
(9) Investment Sub-Advisory Agreement dated September 1,
1998 between AmSouth Bank and OakBrook Investments, LLC
is incorporated by reference to Exhibit 5(i) of
Post-Effective Amendment No. 28 to the Registrant's
Registration Statement filed on September 24, 1998 on
Form N-1A (File No. 33- 21660).
(10) Form of the Investment Sub-Advisory Agreement dated
March 13, 2000 between AmSouth Bank and Lazard Asset
Management is filed herewith.
(11) Form of the Investment Sub-Advisory Agreement dated
March 13, 2000 between AmSouth Bank and Bennett Lawrence
Management, LLC 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 November
23, 1999 to the Distribution Agreement between the
Registrant and BISYS Fund Services Limited Partnership
are filed herewith.
(3) Dealer Agreement between The Winsbury Company and
AmSouth Investment Services, Inc. -- incorporated by
reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-21660).
(4) Dealer Agreement between The Winsbury Company and
National Financial Services Corporation -- incorporated
by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-21660).
(5) Dealer Agreement between The Winsbury Company and
AmSouth Bank N.A. -- incorporated by reference to Post-
Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A (File No. 33-21660).
(f) None.
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(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 March 13, 2000 to the
Custodian Agreement between the Registrant and AmSouth
Bank is filed herewith.
(h) (1) Management and Administration Agreement dated as of
November 23, 1999 between the Registrant and ASO
Services Company is filed herewith.
(2) Sub-Administration Agreement dated as of November 23,
1999 between ASO Services Company and AmSouth Bank is
filed herewith.
(3) Sub-Administration Agreement dated as of November 23,
1999 between ASO Services Company and BISYS Fund
Services, Inc. is filed herewith.
(4) Transfer Agency and Shareholder Service Agreement dated
as of November 23, 1999 between the Registrant and BISYS
Fund Services, Inc. is filed herewith.
(5) Fund Accounting Agreement dated as of November 23, 1999
between the Registrant and ASO Services Company, Inc. is
filed herewith.
(6) 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).
(7) Form of Amended Schedule I dated March 13, 2000 to the
Shareholder Servicing Plan is filed herewith.
(8) 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).
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<PAGE> 364
(i) Opinion of Ropes & Gray is filed herewith.
(j) (1) Consent of Ropes & Gray is filed herewith.
(2) Consent of PricewaterhouseCoopers LLP is filed
herewith.
(3) Consent of KPMG LLP is filed herewith.
(k) None.
(l) (1) Purchase Agreement between the Registrant and
Winsbury Associates incorporated by reference to
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(2) Purchase Agreement between the Registrant and
Winsbury Associates dated October 31, 1991
incorporated by reference to Post-Effective
Amendment No. 7 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(3) Purchase Agreement between the Registrant and
Winsbury Associates relating to the Alabama
Tax-Free Fund and the Government Income Fund is
incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(4) Purchase Agreement between the Registrant and
Winsbury Service Corporation relating to the
Florida Tax-Free Fund is incorporated by reference
to Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(m) Form of Distribution and Shareholder Services Plan
between the Registrant and BISYS Fund Services, Inc.,
dated as of March 13, 2000 is filed herewith.
(n) Multiple Class Plan for AmSouth Funds adopted by the
Board of Trustees on December 6, 1995, as amended and
restated as of November 23, 1999 is filed herewith.
(p) (1) Form of AmSouth Funds Code of Ethics is filed
herewith.
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(p) (2) Form of AmSouth Bank Code of Ethics is filed
herewith.
(p) (3) Form of BISYS Fund Services Code of Ethics 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 and Small Cap Fund.
Item 25. Indemnification
Article VIII, Sections 1 and 2 of the Registrant's Declaration
of Trust provides as follows:
"Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect
to any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other
proceeding to be liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
such Covered Person's office. Expenses, including counsel fees
so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the
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<PAGE> 366
Trust in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on
behalf of such Covered Person to repay amounts so paid to the
Trust if it is ultimately determined that indemnification of
such expenses is not authorized under this Article, provided,
however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any such
advance payments or (c) either a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body
before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable
belief that his action was in the best interests of the Trust
or (b) is liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, indemnification shall be provided if (a) approved as
in the best 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
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<PAGE> 367
jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or
its Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Indemnification for the Group's principal underwriter is
provided for in the Distribution Agreement incorporated herein
by reference as Exhibits 6(a).
In addition, the Trust maintains a directors and officer
liability insurance policy with a maximum coverage of
$3,000,000.
Item 26. Business and Other Connections of Investment Advisor and
Investment Sub-Advisors.
AmSouth Bank
AmSouth Bank ("AmSouth") is the investment advisor of each
Fund of the Trust. AmSouth is the bank affiliate of AmSouth
Bancorporation, one of the largest banking institutions
headquartered in the mid-south region. AmSouth Bancorporation
reported assets as of June 30, 1999 of $20 billion and
operated 276 banking offices and over 600 ATM locations in
Alabama, Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment
Department since 1915. As of March 31, 1999, AmSouth and its
affiliates had over $8 billion in assets under discretionary
management and provided custody services for an additional $21
billion in securities. AmSouth is the largest provider of
trust services in Alabama, and its Trust Natural Resources and
Real Estate
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<PAGE> 368
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.
<TABLE>
<CAPTION>
Name and Position with Other business, profession,
AmSouth Bank AmSouth Bank vocation, or employment
- ------------ ------------------------------------
<S> <C>
J. Harold Chandler Chairman, President & CEO
Director Provident Companies, Inc.
One Fountain Square
Chattanooga, Tennessee 37402
James E. Dalton, Jr. President and CEO
Director Quorum Health Group, Inc.
103 Continental Place
Brentwood, Tennessee 37027
Rodney C. Gilbert Chairman of the Board & CEO
Director Enfinity Corporation
3700 Old Leeds Road
Birmingham, Alabama 35213
Elmer B. Harris President and CEO
Director Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Victoria Jackson Gregorious President and CEO
Director DSS/ProDiesel, Inc.
922 Main Street
Nashville, Tennessee 37206
Ronald L. Kuehn, Jr. Chairman of the Board, President and CEO
Director Sonat Inc.
1900 Fifth Avenue North
Birmingham, Alabama 35203
</TABLE>
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<PAGE> 369
<TABLE>
<CAPTION>
<S> <C>
James R. Malone Chairman and CEO
Director HMI Industries, Inc./Intok Capital, Inc.
8889 Pelican Bay Boulevard
Naples, Florida 34108
Claude B. Nielson President and CEO
Director Coca-Cola Bottling Company United, Inc.
4600 East Lake Boulevard
Birmingham, Alabama 35217
Dr. Benjamin F. Payton President
Director Tuskegee University
399 Montgomery Road
Tuskegee, Alabama 36083
C. Dowd Ritter AmSouth Bancorporation
Chairman, President and CEO AmSouth Bank
AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
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
</TABLE>
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<PAGE> 370
<TABLE>
<CAPTION>
<S> <C>
Candice W. Rogers None
Senior Executive Vice President
E.W. Stephenson, Jr. None
Senior Executive Vice President
Alfred W. Swan, Jr. None
Senior Executive Vice President
Stephen A. Yoder None
Executive Vice President
and General Counsel
</TABLE>
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 predominant
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
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<PAGE> 371
subsidiary of Travelers Group Inc. Peachtree has performed advisory services
since 1994 for institutional clients, and has its principal offices at 303
Peachtree Street, N.E., Atlanta, GA 30308. SSBCFM and its predecessors have been
providing investment advisory services to mutual funds since 1968. As of
February 28, 1999, SSBCFM had aggregate assets under management of approximately
$___ BILLION.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation) in which each director or senior officer
of the Registrant's sub-advisor is, or at any time during the past two fiscal
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Position with Other business, profession,
Peachtree Asset Management vocation, or employment
- -------------------------- -----------------------
Lamond Godwin N/A
Chairman & CEO
Dennis A. Johnson N/A
President & Chief Investment Officer
Sawgrass
Sawgrass Asset Management, LLC ("Sawgrass") serves as the investment
sub-advisor to the AmSouth Small Cap Fund. Sawgrass is 50% owned by AmSouth and
50% owned by Sawgrass Asset Management, Inc. Sawgrass Asset Management, Inc. is
controlled by Mr. Dean McQuiddy, Mr. Brian Monroe and Mr. Andrew Cantor.
Sawgrass was organized in January, 1998 to perform advisory services for
investment companies and other institutional clients and has its principal
offices at 4337 Pablo Oaks Court, Jacksonville, FL 32224.
Set forth below is information as to any other business, vocation or
employment of a substantial nature (other than service in wholly-owned
subsidiaries or the parent corporation of AmSouth Bank) in which each director
or senior officer of the Registrant's sub-advisor is, or at any time during the
past two fiscal years has been, engaged for his own account or in the capacity
of director, officer, employee, partner or trustee.
<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
</TABLE>
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<PAGE> 372
<TABLE>
<CAPTION>
<S> <C>
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 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 directors of Lazard Asset Management, the investment adviser
of the Registrant's
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<PAGE> 373
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).
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.
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<PAGE> 374
(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
WC Subsidiary Sole Limited None
Corporation Partner
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
Item 28. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and
other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated
thereunder are as follows:
(1) AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Attention: Secretary
(Registrant)
(2) AmSouth Bank
1901 Sixth Avenue - North
Birmingham, Alabama 35203
Attention: Trust Investments
(Investment Advisor and Custodian)
(3) BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
(Distributor)
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<PAGE> 375
(4) ASO Services Company
3435 Stelzer Road
Columbus, Ohio 43219
(Administrator)
(5) Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, Pennsylvania 15222
(Sub-Advisor to the Equity Income Fund)
(6) BISYS Fund Services, Inc.
3435 Stelzer Road
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
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<PAGE> 376
None.
Item 30. Undertakings
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of
removal of one or more trustees when requested to do so by
the holders of at least 10% of the outstanding voting shares
of any series of the Trust and will assist in shareholder
communication in connection with calling a meeting for the
purpose of removing one or more trustees.
The Registrant undertakes to furnish to each person to whom
a prospectus is delivered a copy of the Registrant's latest
annual report to shareholders upon request and without
charge.
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<PAGE> 377
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 32 to
the Registrant's Registration Statement on Form N-1A pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Washington, District of Columbia on the 13th day
of March, 2000
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.
32 to the Registration Statement of AmSouth Funds has been signed below by the
following persons in the capacities indicated on the 13th day of March, 2000.
Signature Title Date
- --------- ----- ----
* /s/ J. David Huber Chairman March 13, 2000
--------------------------------
J. David Huber
* /s/ Charles L. Booth Treasurer March 13, 2000
--------------------------------
Charles L. Booth
* /s/ James H. Woodward, Jr. Trustee March 13, 2000
---------------------------
James H. Woodward, Jr.
* /s/ Homer H. Turner, Jr. Trustee March 13, 2000
-----------------------------
Homer H. Turner, Jr.
* /s/ Wendell D. Cleaver Trustee March 13, 2000
------------------------------
Wendell D. Cleaver
* /s/ Dick D. Briggs, Jr. Trustee March 13, 2000
-------------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest March 13, 2000
----------------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
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<PAGE> 378
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.
-25-
<PAGE> 379
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
-26-
<PAGE> 380
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
-27-
<PAGE> 381
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.
-28-
<PAGE> 382
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.
-29-
<PAGE> 383
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
-30-
<PAGE> 384
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(d)(3) Form of Amended Schedule A dated March 13, 2000 to the
Investment Advisory Agreement dated as of August 1, 1988
between the Registrant and AmSouth Bank, N.A.
(d)(10) Form of the Investment Sub-Advisory Agreement dated March 13,
2000 between AmSouth Bank and Lazard Asset Management
(d)(11) Form of the Investment Sub-Advisory Agreement dated March 13,
2000 between AmSouth Bank and Bennett Lawrence Management,
LLC
(e)(2) Form of Amended Schedules A, B, C and D dated November 23,
1999 to the Distribution Agreement between the Registrant
and BISYS Fund Services Limited Partnership
(g)(2) Form of Amended Schedule A dated March 13, 2000 to the
Custodian Agreement between the Registrant and AmSouth Bank
(h)(1) Management and Administration Agreement dated as of
November 23, 1999 between the Registrant and ASO Services
Company
(h)(2) Sub-Administration Agreement dated as of November 23, 1999
between ASO Services Company and AmSouth Bank is filed
herewith.
(h)(3) Sub-Administration Agreement dated as of November 23, 1999
between ASO Services Company and BISYS Fund Services, Inc.
is filed herewith
(h)(4) Transfer Agency and Shareholder Service Agreement dated as
of November 23, 1999, between the Registrant and BISYS
Fund Services, Inc.
(h)(5) Fund Accounting Agreement dated as of November 23, 1999
between the Registrant and ASO Services Company, Inc.
(h)(7) Form of Amended Schedule I dated March 13, 2000 to the
Shareholder Servicing Plan
</TABLE>
<PAGE> 385
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(i) Opinion of Ropes & Gray
(j)(1) Consent of Ropes & Gray
(j)(2) Consent of PricewaterhouseCoopers LLP
(j)(3) Consent of KPMG LLP
(m) Form of Distribution and Shareholder Services Plan between
the Registrant and BISYS Fund Services, Inc., dated as of
March 13, 2000
(n) Multiple Class Plan for AmSouth Funds adopted by the Board
of Trustees on December 6, 1995, as amended and restated
as of November 23, 1999
(p)(1) Form of AmSouth Funds Code of Ethics
(p)(2) Form of AmSouth Bank Code of Ethics
(p)(3) Form of BISYS Fund Services Code of Ethics
</TABLE>
<PAGE> 1
EXHIBIT (d)(3)
FORM OF AMENDED SCHEDULE A DATED MARCH 13, 2000 TO THE INVESTMENT
ADVISORY AGREEMENT DATED AS OF AUGUST 1, 1988 BETWEEN THE REGISTRANT AND
AMSOUTH BANK, N.A.
<PAGE> 2
DATED: MARCH 13, 2000
FORM OF AMENDED SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
DATED AS OF AUGUST 1, 1988 BETWEEN
AMSOUTH FUNDS (FORMERLY THE ASO OUTLOOK GROUP)
AND
AMSOUTH BANK (FORMERLY AMSOUTH BANK, N.A.)
<TABLE>
<S> <C>
NAME OF FUND
- ------------
AmSouth Funds Annual Rate of Forty One-hundredths of One Percent (.40%) of Amsouth Funds
Prime Money Market Fund Prime Money Market Fund's Average Daily Net Assets.
AmSouth Funds Annual rate of eighty one-hundredths of one percent (.80%) of
Value Fund AmSouth Funds Value Fund's average daily net assets.
AmSouth Funds Annual rate of forty one-hundredths of one percent (.40%) of
U.S. Treasury Money Market Fund AmSouth Funds U.S. Treasury Fund's average daily net assets.
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of
Tax-Exempt Money Market Fund AmSouth Funds Tax-Exempt Money Market Fund's average daily net
assets.
AmSouth Funds Annual rate of fifty one-hundredths of one percent (.50%) of
Bond Fund AmSouth Funds Bond Fund's average daily net assets.
AmSouth Funds Annual rate of eighty one-hundredths of one percent (.80%) of
Balanced Fund AmSouth Funds Balanced Fund's average daily net assets.
AmSouth Funds Annual rate of forty one-hundredths of one percent (.40%) of
Municipal Bond Fund AmSouth Funds Municipal Bond Fund's average daily net assets.
AmSouth Funds Annual rate of thirty one-hundredths of one percent (.30%) of
Government Income Fund AmSouth Funds Government Income Fund's average daily net assets.
AmSouth Funds Annual rate of thirty one-hundredths of one percent (.30%) of
Florida Tax-Exempt Fund AmSouth Funds Florida Tax-Exempt Fund's average daily net assets.
AmSouth Funds Annual basic rate of eighty one-hundredths of one percent (.80%)
Growth Fund of AmSouth Funds Growth Fund's average daily net assets.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
AmSouth Funds Annual basic rate of one hundred twenty one-hundredths of one
Small Cap Fund percent (1.20%) of AmSouth Funds Small Cap Fund's average daily net
assets.
AmSouth Funds Annual rate of eighty one-hundredths of one percent (.80%) of
Equity Income Fund AmSouth Funds Equity Income Fund's average daily net assets.
AmSouth Funds Institutional Annual rate of twenty one-hundredths of one percent (.20%) of the
Prime Obligations Fund AmSouth Funds Institutional Prime Obligations Fund
AmSouth Funds Institutional Annual rate of twenty one-hundredths of one percent (.20%) of
U.S. Treasury Money Market Fund the AmSouth Funds Institutional U.S. Treasury Money Market Fund
AmSouth Funds Annual rate of forty-five one-hundredths of one percent (.45%)
Enhanced Market Fund of AmSouth Funds Enhanced Market Fund's average daily net assets.
AmSouth Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth Funds
Select Equity Fund Select Equity Fund's average daily net assets.
AmSouth Funds Annual rate of one hundred twenty-five one-hundredths of one percent (1.25%) of
International Equity Fund AmSouth Funds International Equity Fund's average daily net assets.
AmSouth Funds Annual rate of one hundred one-hundredths of one percent (1.00%) of AmSouth
Mid Cap Fund Funds Mid-Cap Equity Fund's average daily net assets.
AmSouth Funds Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth Funds
Capital Growth Fund Capital Growth Fund's average daily net assets.
AmSouth Funds
Large Cap Annual rate of eighty one-hundredths of one percent (.80%) of AmSouth Funds
Large Cap Fund's average daily net assets.
AmSouth Funds
Limited Term Annual rate of sixty-five one-hundredths of one percent (.65%) of AmSouth Funds
U.S. Government Fund Limited Term U.S. Government Fund's average daily net assets.
AmSouth Funds
Tennessee Tax-Exempt Fund Annual rate of sixty-five one-hundredths of one percent (.65%) of AmSouth Funds
Tennessee Tax-Exempt Fund's average daily net assets.
AmSouth Funds
Limited Term Annual rate of sixty-five one-hundredths of one percent (.65%) of AmSouth Funds
Tennessee Tax-Exempt Fund Limited Term Tennessee Tax-Exempt Fund's average daily net assets.
AmSouth Funds Annual rate of forty one-hundredths of one percent (.40%) of AmSouth Funds.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Treasury Reserve Money U.S. Treasury Money Market Fund's average daily net assets.
Market Fund
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth Funds
Strategic Portfolios: Aggressive Strategic Portfolios: Aggressive Growth Portfolio's average daily net assets.
Growth Portfolio
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth Funds
Strategic Portfolios: Growth Portfolio Strategic Portfolios: Growth Portfolio's average daily net assets.
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth Funds
Strategic Portfolios: Growth and Strategic Portfolios: Growth & Income Portfolio's average daily net assets.
Income Portfolio
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth Funds
Strategic Portfolios: Moderate Growth Strategic Portfolios: Moderate Growth & Income Portfolio's average daily net
and Income Portfolio assets.
AmSouth Funds Annual rate of twenty one-hundredths of one percent (.20%) of AmSouth Funds
Strategic Portfolios: Current Strategic Portfolios: Current Income Portfolio's average daily net assets.
Income Portfolio
</TABLE>
AMSOUTH BANK AMSOUTH MUTUAL FUNDS
By:____________________________ By:____________________________
Name:__________________________ Name:_________________________
Title:___________________________ Name:_________________________
<PAGE> 1
EXHIBIT (d)(10)
FORM OF THE INVESTMENT SUB-ADVISORY AGREEMENT DATED MARCH 13, 2000
BETWEEN AMSOUTH BANK AND LAZARD ASSET MANAGEMENT
<PAGE> 2
FORM OF
SUB-INVESTMENT ADVISORY AGREEMENT
Sub-Investment Advisory Agreement made as of the 13th day of March, 2000,
between AMSOUTH BANK, a bank organized under the laws of the State of Alabama
having its principal office and place of business at 1900 Fifth Avenue North,
Birmingham, Alabama 35203 (herein called the "Adviser"), and LAZARD ASSET
MANAGEMENT, having its principal office and place of business at 30 Rockefeller
Plaza, New York, New York 10020 (herein called the "Sub-Adviser").
WHEREAS, The AmSouth Funds (herein called the "Fund") is an open-end,
management investment company, registered under the Investment Company Act of
1940, as amended (the 1940 Act"); and
WHEREAS, the Fund employs the Adviser to provide advisory services
pursuant to an investment Advisory Agreement dated August 1, 1988, as revised,
between the Fund and the Adviser (the "Investment Advisory Agreement") with
respect to the Fund's portfolio or portfolios set forth on Schedule 1 attached
hereto, as such may be revised from time to time (the "Series"; if there are
more than one Series to which this Agreement applies, the provisions herein
shall apply severally to each such Series); and
WHEREAS, the Fund intends to employ ASO Services Company(the
"Administrator") to act as the Fund's administrator; and
WHEREAS, the Adviser, in its capacity as investment adviser to the Series,
desires to retain the Sub-Adviser to provide the day-to-day management of the
Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser
to provide such services, and the Sub-Adviser is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
The Adviser hereby retains the Sub-Adviser to act as sub-investment
adviser to the Series for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
<PAGE> 3
2. Services of Sub-Adviser.
Subject to the oversight and supervision of the Adviser, the Sub-Adviser
will provide a continuous investment program for the Series, including
investment research and day-to-day management with respect to such Series'
assets. The Sub-Adviser will provide the services rendered by it under this
Agreement in accordance with the investment criteria and policies established
from time to time for the Series by the Adviser, the Series' investment
objective, policies and restrictions as stated in the Fund's Prospectus and
Statement of Additional information for the Series, as from time to time in
effect, and resolutions of the Fund's Board of Trustees. The Fund and the
Adviser wish to be informed of important developments materially affecting the
Series, portfolio and the Sub-Adviser agrees to furnish to the Fund and the
Adviser from time to time such information as may be appropriate for this
purpose.
3. Other Covenants.
The Sub-Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the
Securities and Exchange Commission in performance of its duties as
sub-investment adviser for the Series and, in addition, will conduct its
activities under this Agreement in accordance with other applicable federal and
state law;
(b) review and analyze on a periodic basis the Series' portfolio
holdings and transactions in order to determine their appropriateness in light
of such Series' shareholder base;
(c) provide, or cause to be provided, to the Board of Trustees of
the Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Sub-Adviser's services hereunder;
(d) use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has investment
responsibilities;
(e) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the best overall terms
-2-
<PAGE> 4
available, and in selecting the broker-dealer to execute a particular
transaction, the Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Series and other accounts over which the
Sub-Adviser or an affiliate of the Sub-Adviser exercises investment discretion.
The Sub-Adviser is authorized, subject to the prior approval of the Adviser and
the Fund's Board of Trustees, to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for any of the Series which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if,
but only if, the Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer as viewed in terms of that particular
transaction or in terms of the overall responsibilities of the Sub-Adviser to
the Series. In addition, the Sub-Adviser is authorized to take into account the
sale of the Fund's shares in allocating purchase and sale orders for portfolio
securities to brokers or dealers (including brokers and dealers that are
affiliated with the Adviser, Sub-Adviser or the Fund's principal underwriter),
provided that the Sub-Adviser believes that the quality of the execution and the
commission are comparable to what they would be with other qualified firms. In
no instance, however, will portfolio securities be purchased from or sold to the
Adviser, Sub-Adviser, the Fund's principal underwriter or any affiliated person
of any of the Fund, the Adviser, Sub-Adviser, or the principal underwriter,
acting as principal in the transaction, except to the extent permitted by the
Securities and Exchange Commission and other applicable federal and state laws
and regulations;
(f) maintain historical tax lots for each portfolio security held by the
Series;
(g) transmit trades to the Fund's custodian for proper settlement; and
(h) prepare a quarterly broker security transaction summary and monthly
security transaction listing for each Series.
4. Services Not Exclusive.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby. To
the extent that the purchase or sale of securities or other investments of the
same issuer may be deemed by the Sub-Adviser to be suitable for two or more
Series, investment companies or accounts managed by the Sub- Adviser, the
available securities or investments will be allocated in a manner believed by
the Sub-Adviser to be equitable to each of them. It is recognized and
acknowledged by the Adviser that in some cases this procedure may adversely
affect the price paid or received by the Series or the size of the position
obtained for or disposed of by Series.
5. Books and Records.
-3-
<PAGE> 5
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Series are
the property of the Fund and further agrees to surrender promptly to the Fund
any of such records upon the request of the Fund or the Adviser. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses.
Except as otherwise stated in this Section 6, the Sub-Adviser shall pay
all expenses incurred by it in performing its services and duties as
sub-investment adviser. The Adviser hereby agrees that all other expenses to be
incurred in the operation of the Fund shall not be borne by the Sub-Adviser. The
Adviser and the Fund have agreed that such other expenses will be borne by the
Fund, except to the extent specifically assumed by others. The expenses to be
borne by the Fund include, without limitation, the following: organizational
costs, taxes, in interest, brokerage fees and commissions, if any, fees of
Trustees who are not officers, trustees, employees or holders of 5% or more of
the outstanding voting securities of the Adviser, Sub-Adviser or the
Administrator, or any of their affiliates, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory and administration fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, auditing and legal expenses,
costs of maintaining corporate existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of calculating the net asset value of
the Series, shares, costs of shareholders, reports and corporate meetings, costs
of preparing and printing certain prospectuses and statements of additional
information, and any extraordinary expenses.
7. Compensation.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay the Sub-Adviser on the first business day of each month the fee
at the annual rate set forth opposite the Series' name on Schedule 1 attached
hereto, based on the value of such Series, average daily net assets for the
previous month. The Sub-Adviser agrees to accept such fee from the Adviser as
full compensation for the services provided and expenses assumed by it pursuant
to this Agreement, and acknowledges that it shall not be entitled to any further
compensation from any other person in respect of the same.
Net asset value shall be computed on such days and at such time or times
as described in the Fund's current Prospectus for the Series. The fee for the
period from the date of the commencement of the initial public sale of the
Series' shares to the end of the month during which such sale shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this
-4-
<PAGE> 6
Agreement before the end of any month, the fee for such part of a month shall be
pro-rated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
For the purpose of determining fees payable to the Sub-Adviser, the value
of the Series, net assets shall be computed in the manner specified in the
Fund's Charter for the computation of the value of the Series' net assets.
8. Limitation of Liability.
The Sub-Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or the Adviser in connection with
the matters to which this Agreement relates, except that the Sub-Adviser shall
be liable to the Fund for any loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of the Sub-Adviser's duties
or from its reckless disregard of its obligations and duties under this
Agreement. Any person, even though also an officer, director, partner, employee
or agent of the Sub-Adviser, who maybe or become an officer, Trustee, employee
or agent of the Fund, shall be deemed, when rendering services to the Fund or to
the Series, or acting on any business of the Fund or of the Series (other than
services or business in connection with the Sub-Adviser's duties as
sub-investment adviser hereunder) to be rendering such services to or acting
solely for the Fund or the Series and not as an officer, director, partner,
employee or agent or one under the control or direction of the Sub-Adviser even
though paid by the Sub-Adviser.
9. Term.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series, name on
Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is
specifically approved as to a Series at least annually by (a) the Fund's Board
of Trustee or (b) vote of a majority (as defined in the 1940 Act) of such
Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement may be terminated without
penalty (i) by the Fund's Board of Trustees or by vote of the holders of a
majority of such Series, shares, upon written notice to the Sub-Adviser, (ii) by
the Adviser (but only upon the approval of the Fund's Board of Trustees) upon 60
days' written notice to the Sub-Adviser (which notice may be waived in writing
by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90 days'
written notice to the Fund and the Adviser (which notice may be waived in
writing by the Fund and the Adviser). This Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in the 1940 Act). In addition,
-5-
<PAGE> 7
notwithstanding anything herein to the contrary, if the Investment Advisory
Agreement is terminated for any reason (whether by the Fund, by the Adviser or
by operation of law), this Agreement shall terminate with respect to the Series
upon the effective date of such termination of the Investment Advisory
Agreement.
10. Miscellaneous.
(a) Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party or parties against whom an enforcement of the change, waiver,
discharge or termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Section 10 hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and shall be governed by New York law; provided,
however, that nothing herein shall be construed in a manner inconsistent with
the 1940 Act or any rule or regulation of the Securities and Exchange Commission
thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective upon
actual receipt by the Fund, or on the fourth day after the postmark if such
notice or other instrument is mailed via first class postage prepaid, at its
office at 3435 Stelzer Road, Columbus, Ohio 43219-3035, Attention: Compliance
Officer, or at such other place as the Fund may from time to time designate in
writing. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Adviser or Sub-Adviser, as the case may be,
shall be effective upon actual receipt by the Adviser or Sub-Adviser, as the
case may be, or on the fourth day after the postmark if such notice or other
instrument is mailed via first class postage prepaid, at its office at the
address first above written, or at such other place as the Adviser or
Sub-Adviser, as the case may be, may from time to time designate in writing.
-6-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
AMSOUTH BANK
By:_______________________________
Attest:____________________________
LAZARD ASSET MANAGEMENT
By:________________________________
Attest:____________________________
-7-
<PAGE> 9
SCHEDULE 1
<TABLE>
<CAPTION>
Annual Fee As
a Percentage
of Average
Name of Daily Net
Series Assets Reapproval Date Reapproval Day
- ------ ------ --------------- --------------
<S> <C> <C> <C>
AmSouth .50 of 1% July 31, 2001 July 31
International
Equity Fund
</TABLE>
-8-
<PAGE> 1
EXHIBIT (d)(11)
FORM OF THE INVESTMENT SUB-ADVISORY AGREEMENT DATED MARCH 13, 2000
BETWEEN AMSOUTH BANK AND BENNETT LAWRENCE MANAGEMENT, LLC
<PAGE> 2
FORM OF
SUB-INVESTMENT ADVISORY AGREEMENT
Sub-Investment Advisory Agreement made as of the 13th day of March, 2000,
between AMSOUTH BANK, a bank organized under the laws of the State of Alabama
having its principal office and place of business at 1900 Fifth Avenue North,
Birmingham, Alabama 35203 (herein called the "Adviser"), and BENNETT LAWRENCE
MANAGEMENT, LLC, having its principal office and place of business at 757 Third
Avenue, New York, New York 10017 (herein called the "Sub-Adviser").
WHEREAS, The AmSouth Funds (herein called the "Fund") is an open-end,
management investment company, registered under the Investment Company Act of
1940, as amended (the 1940 Act"); and
WHEREAS, the Fund employs the Adviser to provide advisory services
pursuant to an Investment Advisory Agreement dated August 1, 1988, as revised,
between the Fund and the Adviser (the "Investment Advisory Agreement") with
respect to the Fund's portfolio or portfolios set forth on Schedule 1 attached
hereto, as such may be revised from time to time (the "Series"; if there are
more than one Series to which this Agreement applies, the provisions herein
shall apply severally to each such Series); and
WHEREAS, the Fund intends to employ ASO Services Company (the
"Administrator") to act as the Fund's administrator; and
WHEREAS, the Adviser, in its capacity as investment adviser to the Series,
desires to retain the Sub-Adviser to provide the day-to-day management of the
Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser
to provide such services, and the Sub-Adviser is willing to perform such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it-is agreed between the parties hereto as follows:
1. Appointment.
The Adviser hereby retains the Sub-Adviser to act as sub-investment
adviser to the Series for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Services of Sub-Adviser.
<PAGE> 3
Subject to the oversight and supervision of the Adviser, the Sub-Adviser
will provide a continuous investment program for the Series, including
investment research and day-to-day management with respect to such Series'
assets. The Sub-Adviser will provide the services rendered by it under this
Agreement in accordance with the investment criteria and policies established
from time to time for the Series by the Adviser, the Series' investment
objective, policies and restrictions as stated in the Fund's Prospectus and
Statement of Additional Information for the Series, as from time to time in
effect, and resolutions of the Fund's Board of Trustees. The Fund and the
Adviser wish to be informed of important developments materially affecting the
Series, portfolio and the Sub-Adviser agrees to furnish to the Fund and the
Adviser from time to time such information as may be appropriate for this
purpose.
3. Other Covenants.
The Sub-Adviser agrees that it will:
(a) comply with all applicable rules and regulations of the
Securities and Exchange Commission in performance of its duties as
sub-investment adviser for the Series and, in addition, will conduct its
activities under this Agreement in accordance with other applicable federal and
state law;
(b) provide, or cause to be provided, to the Board of Trustees of
the Fund such reports, statistical data and economic information as may be
reasonably requested in connection with the Sub-Adviser's services hereunder;
(c) use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has investment
responsibilities;
(d) place orders pursuant to its investment determinations for the
Series either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the Series the best
overall terms available. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the best overall terms available, and
in selecting the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Series and other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is
authorized, subject to the prior approval of the Adviser and the Fund's Board of
Trustees, to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for any of the
Series which is in excess of the amount of commission another broker or dealer
would have charged
-2-
<PAGE> 4
for effecting that transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer as viewed in
terms of that particular transaction or in terms of the overall responsibilities
of the Sub-Adviser to the Series. In addition, the Sub-Adviser is authorized to
take into account the sale of the Fund's shares in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with the Adviser, Sub-Adviser or the Fund's
principal underwriter), provided that the Sub-Adviser believes that the quality
of the execution and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will portfolio securities be
purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal
underwriter or any affiliated person of any of the Fund, the Adviser,
Sub-Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission and other applicable federal and state laws and regulations;
(e) maintain historical tax lots for each portfolio security held by
the Series;
(f) transmit trades to the Fund's custodian for proper settlement;
and
(g) prepare a quarterly broker security transaction summary and
monthly security transaction listing for each Series.
4. Services Not Exclusive.
The services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby. To
the extent that the purchase or sale of securities or other investments of the
same issuer may be deemed by the Sub-Adviser to be suitable for two or more
Series, investment companies or accounts managed by the Sub-Adviser, the
available securities or investments will be allocated in a manner believed by
the Sub-Adviser to be equitable to each of them. It is recognized and
acknowledged by the Adviser that in some cases this procedure may adversely
affect the price paid or received by the Series or the size of the position
obtained for or disposed of by series.
5. Books and Records.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Series are
the property of the Fund and further agrees to surrender promptly to the Fund
any of such records upon the request of the Fund of the Adviser. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 5
6. Expenses.
Except as otherwise stated in this Section 6, the Sub-Adviser shall pay
all expenses incurred by it in performing its services and duties as
sub-investment adviser. The Adviser hereby agrees that all other expenses to be
incurred in the operation of the Fund shall not be borne by the Sub-Adviser. The
Adviser and the Fund have agreed that such other expenses will be borne by the
Fund, except to the extent specifically assumed by others. The expenses to be
borne by the Fund include, without limitation, the following: organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees of Trustees
who are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Adviser, Sub-Adviser or the Administrator,
or any of their affiliates, Securities and Exchange commission fees, state Blue
Sky qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of the Series' shares, costs
of shareholders, reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses.
7. Compensation.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay the Sub-Adviser on the first business day of each month the fee
at the annual rate set forth opposite the Series, name on Schedule 1 attached
hereto, based on the value' of such Series, average daily net assets for the
previous month. The Sub-Adviser agrees to accept such fee from the Adviser as
full compensation for the services provided and expenses assumed by it pursuant
to this Agreement, and acknowledges that it shall not be entitled to any further
compensation from any other person in respect of the same.
Net asset value shall be computed on such days and at such time or times
as described in the Fund's current Prospectus for the Series. The fee for the
period from the date of the commencement of the initial public sale of the
Series' shares to the end of the month during which such sale shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Sub-Adviser, the value
of the Series, net assets shall be computed in the manner specified in the
Fund's Charter for the computation of the value of the Series' net assets.
-4-
<PAGE> 6
8. Limitation of Liability.
The Sub-Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or the Adviser in connection with
the matters to which this Agreement relates, except that the Sub-Adviser shall
be liable to the Fund for any loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of the Sub-Adviser's duties
or from its reckless disregard of its obligations and duties under this
Agreement. Any person, even though also an officer, director, partner, employee
or agent of the Sub-Adviser, who may be or become an officer, Trustee, employee
or agent of the Fund, shall be deemed, when rendering services to the Fund or to
the Series, or acting on any business of the Fund or of the Series (other than
services or business in connection with the Sub-Adviser's duties as
sub-investment adviser hereunder) to be rendering such services to or acting
solely for the Fund or the Series and not as an officer, director, partner,
employee or agent or one under the control or direction of the Sub-Adviser even
though paid by the Sub-Adviser.
9. Term.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 attached hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is
specifically approved as to a Series at least annually by (a) the Fund's Board
of Trustees or (b) vote of a majority (as defined in the 1940 Act) of such
Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement may be terminated without
penalty (i) by the Fund's Board of Trustees or by vote of the holders of a
majority of such Series, shares, upon written notice to the Sub-Adviser, (ii) by
the Adviser (but only upon the approval of the Fund's Board of Trustees) upon 60
days' written notice to the Sub-Adviser (which notice may be waived in writing
by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90 days,
written notice to the Fund and the Adviser (which notice may be waived in
writing by the Fund and the Adviser). This-Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in the 1940 Act). In addition, notwithstanding anything herein to the
contrary, if the Investment Advisory Agreement is terminated for any reason
(whether by the Fund, by the Adviser or by operation of law), this Agreement
shall terminate with respect to the Series upon the effective date of such
termination of the Investment Advisory Agreement.
10. Miscellaneous.
-5-
<PAGE> 7
(a) Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party or parties against whom an enforcement of the change, waiver,
discharge or termination is sought.
(b) Construction. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Section 10 hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and shall be governed by New York law; provided,
however, that nothing herein shall be construed in a manner inconsistent with
the 1940 Act or any rule or regulation of the Securities and Exchange Commission
thereunder.
(c) Notice. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be effective upon
actual receipt by the Fund, or on the fourth day after the postmark if such
notice or other instrument is mailed via first class postage prepaid, at its
office at 3435 Stelzer Road, Columbus, Ohio 43219-3035, Attention: Compliance
Officer, or at such other place as the Fund may from time to time designate in
writing. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Adviser or Sub-Adviser, as the case may be,
shall be effective upon actual receipt by the Adviser or Sub-Adviser, as the
case may be, or on the fourth day after the postmark if such notice or other
instrument is mailed via first class postage prepaid, at its office at the
address first above written, or at such other place as the Adviser or
Sub-Adviser, as the case may be, may from time to time designate in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
AMSOUTH BANK
By:______________________________________
Attest:____________________________
BENNETT LAWRENCE MANAGEMENT, LLC
By:______________________________________
Attest:____________________________
-6-
<PAGE> 8
SCHEDULE 1
<TABLE>
<CAPTION>
Annual Fee As
a Percentage
of Average
Name of Daily Net
Series Assets Reapproval Date Reapproval Day
- ------ ------ --------------- --------------
<S> <C> <C> <C>
AmSouth Mid * July 31, 2001 July 31
Cap Fund
</TABLE>
- --------------------
* .75% on the first $25 million of average aggregate daily net assets; .625%
on the next $50 million of such assets; and .50% on assets in excess of
$75 million.
-7-
<PAGE> 1
EXHIBIT (e)(2)
FORM OF AMENDED SCHEDULES A, B, C AND D DATED MARCH 13, 2000 TO THE
DISTRIBUTION AGREEMENT BETWEEN THE REGISTRANT AND BISYS FUND SERVICES
LIMITED PARTNERSHIP
<PAGE> 2
Dated: November 23, 1999
FORM OF AMENDED SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DATED JULY 16, 1997
NAME OF FUND
AmSouth Prime Money Market Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Tax-Exempt Money Market Fund
AmSouth Value Fund
AmSouth Regional Equity Fund
AmSouth Bond Fund AmSouth Limited Term Bond Fund
AmSouth Municipal Bond Fund
AmSouth Balanced Fund AmSouth Government Income Fund
AmSouth Florida Tax-Exempt Fund
AmSouth Growth Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Institutional Prime Obligations Money Market Fund
AmSouth Institutional U.S. Treasury Money Market Fund
AmSouth Enhanced Market Fund
AmSouth Select Equity Fund
AmSouth International Equity Fund
AmSouth Mid Cap Fund
AmSouth Capital Growth Fund
AmSouth Large Cap Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Tennessee Tax-Exempt Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth Treasury Reserve Money Market Fund
AmSouth Strategic Portfolios: Aggressive Growth Portfolio
AmSouth Strategic Portfolios: Growth Portfolio
AmSouth Strategic Portfolios: Growth & Income Portfolio
AmSouth Strategic Portfolios: Moderate Growth & Income Portfolio
AmSouth Strategic Portfolios: Current Income Portfolio
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: _______________________
<PAGE> 3
Dated: March 13, 2000
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 Money Market Fund
Class A Shares of the AmSouth U.S. Treasury Money Market Fund
Class A Shares of the AmSouth Tax-Exempt Money Market Fund
Class A Shares of the AmSouth Value 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 Term Bond 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-Exempt Fund
Class A Shares of the AmSouth 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 Fund
Class A Shares of the AmSouth Capital Growth Fund
Class A Shares of the AmSouth Large Cap 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 Reserve Money Market Fund
Class A Shares of the AmSouth Strategic Portfolios: Aggressive Growth Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Growth Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Growth & Income Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Moderate Growth & Income
Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Current Income Portfolio
Distribution Plan Funds
Class B Shares of the AmSouth Prime Money Market Fund
Class B Shares of the AmSouth Value 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 Term Bond 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-Exempt Fund
Class B Shares of the AmSouth 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 Money Market Fund
Class III Shares of the AmSouth Institutional Prime Obligations Money Market
Fund Class II Shares of the AmSouth Institutional U.S. Treasury Money Market
Fund Class III Shares of the AmSouth Institutional U.S. Treasury Money Market
Fund Class B Shares of the AmSouth International Equity Fund
Class B Shares of the AmSouth Mid Cap Fund
Class B Shares of the AmSouth Capital Growth Fund
Class B Shares of the AmSouth Large Cap 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 Strategic Portfolios: Aggressive Growth Portfolio
Class B Shares of the AmSouth Strategic Portfolios: Growth Portfolio
Class B Shares of the AmSouth Strategic Portfolios: Growth & Income Portfolio
Class B Shares of the AmSouth Strategic Portfolios: Moderate Growth & Income
Portfolio
Class B Shares of the AmSouth Strategic Portfolios: 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: March 13, 2000
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 Term Bond 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-Exempt Fund
Class A Shares of the AmSouth 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 Fund
Class A Shares of the AmSouth Capital Growth Fund
Class A Shares of the AmSouth Large Cap 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 Strategic Portfolios: Aggressive Growth Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Growth Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Growth & Income Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Moderate Growth & Income
Portfolio
Class A Shares of the AmSouth Strategic Portfolios: Current Income Portfolio
AMSOUTH MUTUAL FUNDS
By:___________________________
Name: ________________________
Title: _______________________
<PAGE> 6
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:___________________________
Name: ________________________
Title: ______________________
C-2
<PAGE> 7
Dated: March 13, 2000
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 Money Market Fund
Class B Shares of the AmSouth
Value 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 Term Bond 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-Exempt Fund
Class B Shares of the AmSouth
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 Money Market Fund
Class III Shares of the AmSouth
Institutional Prime Obligations Money Market Fund
Class II Shares of the AmSouth
Institutional U.S. Treasury Money Market Fund
Class III Shares of the AmSouth
Institutional U.S. Treasury Money Market Fund
Class B Shares of the AmSouth
International Equity Fund
Class B Shares of the AmSouth
Mid Cap Fund
Class B Shares of the AmSouth
Capital Growth Fund
Class B Shares of the AmSouth
Large Cap 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
Strategic Portfolios: Aggressive Growth Portfolio
Class B Shares of the AmSouth
Strategic Portfolios: Growth Portfolio
D-2
<PAGE> 9
Class B Shares of the AmSouth
Strategic Portfolios: Growth and Income Portfolio
Class B Shares of the AmSouth
Strategic Portfolios: Moderate Growth and Income Portfolio
Class B Shares of the AmSouth
Strategic Portfolios: 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)(2)
FORM OF AMENDED SCHEDULE A DATED MARCH 13, 2000 TO THE CUSTODIAN
AGREEMENT BETWEEN THE REGISTRANT AND AMSOUTH BANK
<PAGE> 2
Dated: March 13, 2000
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
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AMSOUTH MUTUAL FUNDS
By: _______________________________
Title: ___________________________
AMSOUTH BANK
By: ______________________________
Title: ___________________________
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EXHIBIT (h)(1)
MANAGEMENT AND ADMINISTRATION AGREEMENT DATED AS OF NOVEMBER 23, 1999
BETWEEN THE REGISTRANT AND ASO SERVICES COMPANY
<PAGE> 2
MANAGEMENT AND ADMINISTRATION AGREEMENT
AS OF NOVEMBER 23, 1999
ASO SERVICES COMPANY, INC.
3435 STELZER ROAD
COLUMBUS, OHIO 43219
Gentlemen:
AmSouth Mutual Funds, a Massachusetts business trust (the "Trust"),
herewith confirms its Agreement with ASO Services Company, Inc.
("Administrator") as follows:
The Trust desires to employ a portion of its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its Declaration of Trust and in the Prospectuses and
Statement of Additional Information relating to each of the investment
portfolios and any additional investment portfolios of the Trust, as each are or
will be identified on Schedule A hereto (such investment portfolios and any
additional investment portfolios together called the "Funds"), copies of which
have been or will be submitted to Administrator, and in resolutions of the
Trust's Board of Trustees. The Trust desires to engage Administrator to serve as
the manager and administrator for the Funds upon the following terms and
conditions.
1. Services as Manager and Administrator
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreements, the custodian for the Funds under its
Custodial Services Agreement, the transfer agent for the Funds under its
Transfer Agency Agreement and the fund accountant for the Funds under its Fund
Accounting Agreement.
Administrator will maintain office facilities (which may be in the office
of Administrator or an affiliate but shall be in such location as the Trust
shall reasonably determine); furnish statistical and research data, clerical and
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Securities and Exchange Commission (the "Commission") on
Form N-SAR or any replacement forms therefor; compile data for, assist the Trust
or its designee in the preparation of, and file all the Funds' federal and state
tax returns and required tax filings other than those required to be made by the
Funds' custodian and transfer agent; prepare compliance filings pursuant to
state securities laws with the advice of the Trust's counsel; respond to fund
audits from both independent accountants and regulatory agencies and coordinate
Commission inspections; provide support and review of periodic Commission and
Internal Revenue Service qualification and compliance measurement tests; assist
to the extent requested by the Trust with the Trust's preparation of its Annual
and Semi-Annual Reports to Shareholders and its Registration Statements (on Form
<PAGE> 3
N-1A or any replacement therefor); maintain fund and director insurance as
directed by the Trust; assist to the extent requested by the Trust in the
Trust's Shareholder Meeting and proxy solicitation process; compile data for,
prepare and file timely Notices to the Commission required pursuant to Rule
24f-2 under the Investment Company Act of 1940 (the "1940 Act"); keep and
maintain Fund agreements with service providers and broker-dealers; review and
file all Fund advertising and sales material; keep and maintain the financial
accounts and records of the Funds, including calculation of daily expense
accruals; in the case of money market funds, periodically review the amount of
deviation, if any, of the current net asset value per share (calculated using
available market quotations or an appropriate substitute that reflects current
market conditions) from each money market fund's amortized cost price per share;
and generally assist in all aspects of the operations of the Funds. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Administrator
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 of such
records upon the Trust's request. Administrator further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some
or all of its responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder; provided,
however, that Administrator shall not be relieved of any of its obligations
under this Agreement by the appointment of such subcontractor and provided
further, that Administrator shall be responsible, to the extent provided in
Section 4 hereof, for all acts of such subcontractor as if such acts were its
own.
2. Fees; Expenses
In consideration of the services rendered and expenses assumed by
Administrator pursuant to this Agreement and by Administrator pursuant to the
Fund Accounting Agreement, dated November 23, 1999, between Administrator and
the Trust, each of the Funds will pay Administrator on the first business day of
each month, or at such time(s) as Administrator shall request and the parties
hereto shall agree, a fee, computed daily and paid as specified below, equal to
the applicable annual rate set forth on Schedule A hereto. The fee for the
period from the day of the month this Agreement is entered into until the end of
that month shall be prorated according to the proportion which such period bears
to the full monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated according
to the proportion which such period bears to the full monthly period and shall
be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the value of
the net assets of a particular Fund shall be computed in the manner described in
the Trust's Declaration of Trust or in the Prospectus or Statement of Additional
Information respecting that Fund as from time to time is in effect for the
computation of the value of such net assets in connection with the determination
of the liquidating value of the shares of such Fund.
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Administrator will from time to time employ or associate with itself such
person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
officers or employees who are employed by both Administrator and the Trust. The
compensation of such person or persons shall be paid by Administrator and no
obligation may be incurred on behalf of the Funds in such respect. Other
expenses to be incurred in the operation of the Funds including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not partners,
officers, directors, shareholders or employees of Administrator or the
investment adviser or distributor for the Funds, commission fees and state Blue
Sky qualification and renewal fees and expenses, investment advisory fees,
custodian fees, transfer and dividend disbursing agents' fees, fund accounting
fees including pricing of portfolio securities, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of corporate
existence, typesetting and printing prospectuses for regulatory purposes and for
distribution to current Shareholders of the Funds, costs of Shareholders' and
Trustees' reports and meetings and any extraordinary expenses will be borne by
the Funds; provided, however, that the Funds will not bear, directly or
indirectly, the costs of any activity which is primarily intended to result in
the distribution of shares of the Funds.
3. Proprietary and Confidential Information
Administrator agrees on behalf of itself and its officers and employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Trust and prior, present, or potential
Shareholders, and not to 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 Administrator 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.
4. Limitation of Liability
Administrator shall not be liable for any loss suffered by the Funds in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
employee, or agent of Administrator, who may be or become an officer, Trustee,
employee, or agent of the Trust or the Funds shall be deemed, when rendering
services to the Trust or the Funds, or acting on any business of that party, to
be rendering such services to or acting solely for that party and not as a
partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
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5. Term
The term of this Agreement shall commence on the date first written above
(the "Effective Date") and shall remain in effect for a period of two (2) years
following the merger (the "Merger") of the ISG Funds (investment portfolios
within the Infinity Mutual Funds, Inc.) into the Trust (the "Initial Term");
provided, however, that, in the event that an acquisition of AmSouth Bank is
announced during the Initial Term, such Initial Term shall be automatically
extended in which case this Agreement shall remain in effect for a period of
three (3) years following the Merger. Thereafter, unless otherwise terminated as
provided herein, this Agreement shall be renewed automatically for successive
two-year periods ("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the manner set forth
below, (ii) by mutual agreement of the parties or (iii) for "cause," as defined
below, upon the provision of sixty (60) days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided at least sixty
(60) days prior to the end of the Initial Term or any Rollover Period, as the
case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involved by way of pleading, consent, or
acquiescence in, a voluntary case under Title 11 of the United States Code, as
from time to time is in effect, or any applicable law, other than said Title 11,
of any jurisdiction relating to the liquidation or reorganization of debtors or
to the modification or alteration of the rights of creditors; or (d) any
circumstance which substantially impairs the performance of the obligations and
duties of the party to be terminated, or the ability to perform those
obligations and duties, as contemplated herein.
Notwithstanding the foregoing, after such termination, for so long as
Administrator, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due Administrator and unpaid by the Trust upon
such termination shall be immediately due and payable upon and notwithstanding
such termination. Administrator shall be entitled to collect from the Trust, in
addition to the compensation described in Schedule A hereto, the amount of all
of Administrator's cash disbursements for services in connection with
Administrator's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents.
If, during the term of this Agreement, there is a change of control of
AmSouth Bank and Administrator is not retained by the Trust as administrator at
comparable fees in effect prior to the change of control, liquidated damages
shall be paid by the Trust to Administrator in an amount
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equal to the fees that are due and payable under this Agreement for the greater
of (i) the remainder of the contract term of this Agreement or (ii) a one-year
period.
6. Representations of the Trust.
The Trust certifies to Administrator that this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
7. Representations of Administrator.
Administrator represents and warrants that: (1) the various procedures and
systems which Administrator has implemented with regard to safeguarding from
loss or damage attributable to fire, theft, or any other cause of the records
and other data of the Trust and Administrator's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of it obligations hereunder, and
(2) this Agreement has been duly authorized by Administrator and, when executed
and delivered by Administrator, will constitute a legal, valid and binding
obligation of Administrator, enforceable against Administrator in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
8. Insurance.
Administrator shall notify the Trust should any of its insurance coverage
be cancelled or reduced. Such notification shall include the date of change and
the reasons therefor. Administrator shall notify the Trust of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Trust from
time to time as may be appropriate of the total outstanding claims made by
Administrator under its insurance coverage.
9. Governing Law and Matters Relating to the Trust as a Massachusetts
Business Trust
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. 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 the Declaration
of Trust dated as of October 1, 1987, as amended June 25, 1993, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of the Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of "AmSouth Mutual Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually,
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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. If the foregoing is in
accordance with your understanding, kindly so indicate by signing and returning
to us the enclosed copy hereof.
Very truly yours,
AMSOUTH MUTUAL FUNDS
By: /s/ J. David Huber
----------------------------
Title: Chairman
----------------------------
Accepted:
ASO SERVICES COMPANY, INC.
By: /s/ Walter B. Grimm
----------------------------
Title: President
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DATED: NOVEMBER 23, 1999
SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
ASO SERVICES COMPANY, INC.
COMPENSATION
1. FEES PAYABLE PRIOR TO MERGER OF ISG FUNDS INTO AMSOUTH MUTUAL FUNDS
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 Limited 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, and AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund and AmSouth Institutional U.S.
Treasury Fund
Compensation*
Annual Rate of twenty one-hundredths of one percent (0.20%) of each such Fund's
average daily net assets
Annual Rate of ten one-hundredths of one percent (0.10%) of each such Fund's
average daily net assets
In addition to the foregoing, Funds that have two (2) or more classes of
shares each having different net asset values or paying different daily
dividends shall be subject to an additional annual fee of $10,000 per additional
class.
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*All fees are computed daily and paid periodically.
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2. FEES PAYABLE FOLLOWING THE MERGER OF ISG FUNDS INTO AMSOUTH MUTUAL
FUNDS
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 Limited 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, and AmSouth Select Equity Fund
AmSouth Institutional Prime Obligations Fund and AmSouth Institutional U.S.
Treasury Fund
Compensation*
Annual Rate of twenty one- hundredths of one percent (0.20%) of each such Fund's
average daily net assets
Annual Rate of ten one-hundredths of one percent (0.10%) of each such Fund's
average daily net assets
In addition to the foregoing, for all Funds that are created following the
merger of ISG Funds into AmSouth Mutual Funds that have two (2) or more classes
of shares each having different net asset values or paying different daily
dividends, such Funds shall be subject to an additional annual fee of $10,000
per additional class.
The parties acknowledge and agree that the above-referenced fee schedule
reflects the agreed upon compensation (i) payable to Administrator for the
services to be provided under this Agreement and (ii) payable to Administrator
for the services to be provided under the Fund Accounting Agreement, dated
November 23, 1999, between Administrator and the Trust.
AMSOUTH MUTUAL FUNDS
By: /s/ J. David Huber
------------------------
Title: Chairman
------------------------
ASO SERVICES COMPANY, INC.
By: /s/ Walter B. Grimm
------------------------
Title: President
------------------------
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*All fees are computed daily and paid periodically.
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EXHIBIT (h)(2)
SUB-ADMINISTRATION AGREEMENT DATED AS OF NOVEMBER 23, 1999 BETWEEN ASO
SERVICES COMPANY AND AMSOUTH BANK
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SUB-ADMINISTRATION AGREEMENT
AGREEMENT made this 23rd day of November, 1999, between the ASO Services
Company, Inc. ("ASC"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219, and AmSouth Bank (the "Sub-Administrator"), a
state-chartered bank having its main office at 1901 Sixth Avenue, North,
Birmingham, Alabama 35203.
WHEREAS, ASC has entered into a Management and Administration Agreement,
dated as of November 23, 1999, (the "Management and Administration Agreement"),
with AmSouth Mutual Funds (the "Trust"), a Massachusetts business trust having
its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219,
concerning the provision of management and administrative services for each Fund
of the Trust, as such Funds of the Trust may exist from time to time
(individually referred to herein as the "Fund" and collectively as the "Funds");
and
WHEREAS, ASC desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the
Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Sub-Administrator. The Sub-Administrator will assist ASC in
providing mutually agreed upon administrative services with respect to each Fund
as may be reasonably requested by ASC from time to time. Such services may
include, but are in no way limited to, such clerical, recordkeeping, accounting,
stenographic, and administrative services, as will enable ASC to more
efficiently perform its obligations under the Management and Administration
Agreement. Specific assignments with which the Sub-Administrator may be asked to
assist ASC include:
(i) Compliance
a. Assist in response to examination letters received from the
Securities and Exchange Commission.
b. Assist in response to audit requests from the Trust's
independent accountants.
c. Coordinate with legal staff for the provision of compliance
consulting and advice to portfolio manager.
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(ii) Operational Matters
a. Review calendar and files of all Board and shareholder meeting
materials.
b. Review and supplement annual regulatory filing calendar.
c. Review prospectuses as prepared by counsel to the Trust.
d. Review periodic supplements to prospectuses, as prepared by
counsel to the Trust.
e. Review and supplement operating manual of the Trust.
f. Communicate all income breakdown data to Trust Department and
coordinate the printing and mailing of state income letters to
such shareholders.
g. Review all regulatory filings.
h. Coordinate distribution of proxy statements and tabulation of
proxies to Trust Department shareholders.
i. Review Form N-SARs.
j. Review 24f-2 filings.
k. Review 17f-2 audits.
l. Coordinate all Adviser NRSRO rating meetings.
m. Review authorized signors list, and Trust compliance
calendars.
n. Advise on product development issues.
(iii) Board Process and Meetings
a. Assist in preparation of Board meeting materials.
b. Review Board agendas and administrative sections of Board
materials.
c. Participate at Board meetings.
d. Review all Board minutes.
(iv) Legal Services
a. Assist in preparing for and complying with any regulatory
examinations of or involving the Trust.
b. Respond to state securities agency comment letters.
c. Respond to regulatory agency inquiries.
(iv) Blue Sky
a. Assist in determining appropriate states and amounts from
state blue-sky authorities.
b. Review and monitor the sale of shares in the Trust Department
in individual states.
c. Conduct requested blue-sky fee analyses.
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(iv) Miscellaneous
a. Assist with implementation and management of DDA Sweep.
b. Provide a designated project manager for routine ongoing
projects.
c. Assist with institutional trades.
d. Provide assistance with asset-related conversions.
e. Provide fulfillment services.
2. Compensation; Reimbursement of Expenses. ASC shall pay the
Sub-Administrator for the services to be provided by the Sub-Administrator under
this Agreement such amount, not to exceed ten one-hundredths of one percent
(.10%) of the Trust's average daily net assets, that the parties shall agree
upon from time to time. In addition, ASC agrees to reimburse the
Sub-Administrator for the Sub-Administrator's reasonable out of pocket expenses
in providing services hereunder.
3. Effective Date. This Agreement shall become effective with respect to a
Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date of the Fund's inception) (the "Effective
Date").
4. Term. This Agreement shall continue in effect with respect to a Fund,
for so long as the Management and Administration Agreement dated November 23,
1999 between ASC and the Trust remains in effect.
5. Standard of Care; Reliance on Records and Instructions;
Indemnification. The Sub-Administrator shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to ASC or the Trust for any action taken or omitted by the Sub-Administrator in
the absence of bad faith, willful misfeasance, negligence or from reckless
disregard by it of its obligations and duties. ASC agrees to indemnify and hold
harmless the Sub-Administrator, its employees, agents, directors, officers and
nominees from and against any and all claims, demands, actions and suits,
whether groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way relating to the
Sub-Administrator's actions taken or nonactions with respect to the performance
of services under this Agreement with respect to a Fund or based, if applicable,
upon reasonable reliance on information, records, instructions or requests with
respect to such Fund given or made to the Sub-Administrator by a duly authorized
representative of ASC; provided that this indemnification shall not apply to
actions or omissions of the Sub-Administrator in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, the
Sub-Administrator shall give ASC written notice of and reasonable opportunity to
defend against said claim in its own name or in the name of the
Sub-Administrator.
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The Sub-Administrator agrees to indemnify and hold harmless the
Administrator, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to the Sub-Administrator's bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, with respect to the performance of services under this
Agreement.
6. Record Retention and Confidentiality. The Sub-Administrator shall keep
and maintain on behalf of the Trust all books and records which the Trust and
the Sub-Administrator are, or may be, required to keep and maintain in
connection with the services to be provided hereunder pursuant to any applicable
statutes, rules and regulations, including without limitation Rules 31a-1 and
31a-2 under the 1940 Act. The Sub-Administrator further agrees that all such
books and records shall be the property of the Trust and to make such books and
records available for inspection by the Trust, by ASC, or by the Securities and
Exchange Commission at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
7. Uncontrollable Events. The Sub-Administrator assumes no responsibility
hereunder, and shall not be liable, for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable control.
8. Rights of Ownership. All computer programs and procedures developed to
perform the services to be provided by the Sub-Administrator under this
Agreement are the property of the Sub-Administrator. All records and other data
except such computer programs and procedures are the exclusive property of the
Trust and all such other records and data will be furnished to ASC and/or the
Trust in appropriate form as soon as practicable after termination of this
Agreement for any reason.
9. Return of Records. The Sub-Administrator may at its option at any time,
and shall promptly upon the demand of ASC and/or the Trust, turn over to ASC
and/or the Trust and cease to retain the Sub-Administrator's files, records and
documents created and maintained by the Sub-Administrator pursuant to this
Agreement which are no longer needed by the Sub-Administrator in the performance
of its services or for its legal protection. If not so turned over to ASC and/or
the Trust, such documents and records will be retained by the Sub-Administrator
for six years from the year of creation. At the end of such six-year period,
such records and documents will be turned over to ASC and/or the Trust unless
the Trust authorizes in writing the destruction of such records and documents.
10. Representations of ASC. ASC certifies to the Sub-Administrator that
this Agreement has been duly authorized by ASC and, when executed and delivered
by ASC, will constitute a legal, valid and binding obligation of ASC,
enforceable against ASC in accordance with its terms, subject
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to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
11. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems which the
Sub-Administrator has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause of the records and other
data of the Trust and the Sub-Administrator's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of it obligations hereunder, and
(2) this Agreement has been duly authorized by the Sub-Administrator and, when
executed and delivered by the Sub-Administrator, will constitute a legal, valid
and binding obligation of the Sub-Administrator, enforceable against the
Sub-Administrator in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
12. Insurance. The Sub-Administrator shall notify ASC should any of its
insurance coverage be cancelled or reduced. Such notification shall include the
date of change and the reasons therefor. The Sub-Administrator shall notify ASC
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify ASC
from time to time as may be appropriate of the total outstanding claims made by
the Sub-Administrator under its insurance coverage.
13. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to ASC at the following address: 3435
Stelzer Road, Columbus, Ohio 43219, and to the Sub-Administrator at the
following address: 1901 Sixth Avenue, North, Birmingham, Alabama 35203 or at
such other address as either party may from time to time specify in writing to
the other party pursuant to this Section.
14. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
15. Assignment. This Agreement and the rights and duties hereunder shall
not be assignable with respect to a Fund by either of the parties hereto except
by the specific written consent of the other party and with the specific written
consent of the Trust.
16. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[SEAL] ASO SERVICES COMPANY, INC.
By: /s/ J. David Huber
---------------------------------
Title: Executive Vice President
-------------------------------
AMSOUTH BANK
By: /s/ John F. Calvano
---------------------------------
Title: Senior Vice President
-------------------------------
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<PAGE> 1
EXHIBIT (h)(3)
SUB-ADMINISTRATION AGREEMENT DATED AS OF NOVEMBER 23, 1999 BETWEEN ASO
SERVICES COMPANY AND BISYS FUND SERVICES, INC.
<PAGE> 2
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made this 23rd day of November, 1999, between the ASO Services
Company, Inc. ("ASC"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS Fund Services Ohio, Inc. (the
"Sub-Administrator"), a corporation organized under the laws of the state of
Ohio having its main office at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, ASC has entered into a Management and Administration Agreement,
dated as of November 23, 1999, (the "Management and Administration Agreement"),
with AmSouth Mutual Funds (the "Trust"), a Massachusetts business trust having
its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219,
concerning the provision of management and administrative services for each Fund
of the Trust, as such Funds of the Trust may exist from time to time
(individually referred to herein as the "Fund" and collectively as the "Funds");
and
WHEREAS, ASC desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the
Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Sub-Administrator. Subject to the direction and control of
ASC, the Sub-Administrator will assist in supervising all aspects of the
operations of the Funds except those performed by the investment adviser for the
Funds under its Investment Advisory Agreements, the custodian for the Funds
under its Custodial Services Agreement, the transfer agent for the Funds under
its Transfer Agency Agreement and the fund accountant for the Funds under its
Fund Accounting Agreement.
The Sub-Administrator will maintain office facilities (which may be in the
office of the Sub-Administrator or an affiliate but shall be in such location as
the Trust shall reasonably determine); furnish statistical and research data,
clerical and certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Securities and Exchange Commission (the
"Commission") on Form N-SAR or any replacement forms therefor; compile data for,
assist the Trust or its designee in the preparation of, and file all the Funds'
federal and state tax returns and required tax filings other than those required
to be made by the Funds' custodian and transfer agent; prepare compliance
filings pursuant to state securities laws with the advice of the Trust's
counsel; respond to fund audits from both independent accountants and regulatory
agencies and coordinate Commission inspections; provide support and review of
certain periodic Commission and Internal Revenue Service qualification and
compliance measurement tests; assist to the extent requested by
<PAGE> 3
the Trust with the Trust's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statements (on Form N-1A or any replacement
therefor); maintain fund and director insurance as directed by the Trust; assist
to the extent requested by the Trust in the Trust's Shareholder Meeting and
proxy solicitation process; compile data for, prepare and file timely Notices to
the Commission required pursuant to Rule 24f-2 under the Investment Company Act
of 1940 (the "1940 Act"); keep and maintain the financial accounts and records
of the Funds, including calculation of daily expense accruals; in the case of
money market funds, periodically review the amount of deviation, if any, of the
current net asset value per share (calculated using available market quotations
or an appropriate substitute that reflects current market conditions) from each
money market fund's amortized cost price per share; and generally assist in all
aspects of the operations of the Funds. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Administrator 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 of such records upon the
Trust's request. The Sub-Administrator further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some or
all of its responsibilities under this Agreement.
2. Compensation; Reimbursement of Expenses. ASC shall pay the
Sub-Administrator for the services to be provided by the Sub-Administrator under
this Agreement such amount, not to exceed ten one-hundredths of one percent
(.10%) of the Trust's average daily net assets, that the parties shall agree
upon from time to time. In addition, ASC agrees to reimburse the
Sub-Administrator for the Sub-Administrator's reasonable out of pocket expenses
in providing services hereunder.
3. Effective Date. This Agreement shall become effective with respect to a
Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date of the Fund's inception) (the "Effective
Date").
4. Term. This Agreement shall continue in effect with respect to a Fund,
for so long as the Management and Administration Agreement dated November 23,
1999 between ASC and the Trust remains in effect.
5. Standard of Care; Reliance on Records and Instructions;
Indemnification. The Sub-Administrator shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to ASC or the Trust for any action taken or omitted by the Sub-Administrator in
the absence of bad faith, willful misfeasance, negligence or from reckless
disregard by it of its obligations and duties. ASC agrees to indemnify and hold
harmless the Sub-Administrator, its employees, agents, directors, officers and
nominees from and against any and all claims, demands, actions and suits,
whether groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way relating to the
Sub-Administrator's actions taken or nonactions with respect to the performance
of services under this Agreement with respect to a Fund or based, if applicable,
upon reasonable reliance on information, records, instructions or
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<PAGE> 4
requests with respect to such Fund given or made to the Sub-Administrator by a
duly authorized representative of ASC; provided that this indemnification shall
not apply to actions or omissions of the Sub-Administrator in cases of its own
bad faith, willful misfeasance, negligence or from reckless disregard by it of
its obligations and duties, and further provided that prior to confessing any
claim against it which may be the subject of this indemnification, the
Sub-Administrator shall give ASC written notice of and reasonable opportunity to
defend against said claim in its own name or in the name of the
Sub-Administrator.
The Sub-Administrator agrees to indemnify and hold harmless the
Administrator, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to the Sub-Administrator's bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, with respect to the performance of services under this
Agreement.
6. Record Retention and Confidentiality. The Sub-Administrator shall keep
and maintain on behalf of the Trust all books and records which the Trust and
the Sub-Administrator are, or may be, required to keep and maintain in
connection with the services to be provided hereunder pursuant to any applicable
statutes, rules and regulations, including without limitation Rules 31a-1 and
31a-2 under the 1940 Act. The Sub-Administrator further agrees that all such
books and records shall be the property of the Trust and to make such books and
records available for inspection by the Trust, by ASC, or by the Securities and
Exchange Commission at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
7. Uncontrollable Events. The Sub-Administrator assumes no responsibility
hereunder, and shall not be liable, for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable control.
8. Rights of Ownership. All computer programs and procedures developed to
perform the services to be provided by the Sub-Administrator under this
Agreement are the property of the Sub-Administrator. All records and other data
except such computer programs and procedures are the exclusive property of the
Trust and all such other records and data will be furnished to ASC and/or the
Trust in appropriate form as soon as practicable after termination of this
Agreement for any reason.
9. Return of Records. The Sub-Administrator may at its option at any time,
and shall promptly upon the demand of ASC and/or the Trust, turn over to ASC
and/or the Trust and cease to retain the Sub-Administrator's files, records and
documents created and maintained by the Sub-Administrator pursuant to this
Agreement which are no longer needed by the Sub-Administrator in the performance
of its services or for its legal protection. If not so turned over to ASC and/or
the
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<PAGE> 5
Trust, such documents and records will be retained by the Sub-Administrator for
six years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to ASC and/or the Trust unless the
Trust authorizes in writing the destruction of such records and documents.
10. Representations of ASC. ASC certifies to the Sub-Administrator that
this Agreement has been duly authorized by ASC and, when executed and delivered
by ASC, will constitute a legal, valid and binding obligation of ASC,
enforceable against ASC in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
11. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems which the
Sub-Administrator has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause of the records and other
data of the Trust and the Sub-Administrator's records, data, equipment
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of it obligations hereunder, and
(2) this Agreement has been duly authorized by the Sub-Administrator and, when
executed and delivered by the Sub-Administrator, will constitute a legal, valid
and binding obligation of the Sub-Administrator, enforceable against the
Sub-Administrator in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
12. Insurance. The Sub-Administrator shall notify ASC should any of its
insurance coverage be cancelled or reduced. Such notification shall include the
date of change and the reasons therefor. The Sub-Administrator shall notify ASC
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify ASC
from time to time as may be appropriate of the total outstanding claims made by
the Sub-Administrator under its insurance coverage.
13. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to ASC at the following address: 3435
Stelzer Road, Columbus, Ohio 43219, and to the Sub-Administrator at the
following address: 3435 Stelzer Road, Columbus, Ohio 43219 or at such other
address as either party may from time to time specify in writing to the other
party pursuant to this Section.
14. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
15. Assignment. This Agreement and the rights and duties hereunder shall
not be assignable with respect to a Fund by either of the parties hereto except
by the specific written consent of the other party and with the specific written
consent of the Trust.
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<PAGE> 6
16. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[SEAL] ASO SERVICES COMPANY, INC.
By: /s/ J. David Huber
---------------------------------
Title: Executive Vice President
------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Walter B. Grimm
---------------------------------
Title: President
------------------------------
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<PAGE> 1
EXHIBIT (h)(4)
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENT DATED AS OF NOVEMBER
23, 1999, BETWEEN THE REGISTRANT AND BISYS FUND SERVICES, INC.
<PAGE> 2
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 23rd day of November, 1999, between AMSOUTH MUTUAL
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES
OHIO, INC. ("BISYS"), an Ohio corporation having its principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
BISYS shall perform for the Trust the transfer agent services
set forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
<PAGE> 3
3. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Trust, the Trust 's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other forms of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) All systems-related expenses associated with the provision
of special reports and services pursuant to Schedule C
attached hereto; and
(f) Any expenses BISYS shall incur at the written direction of
an officer of the Trust thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
The term of this Agreement shall commence on the Effective
Date and shall remain in effect for a period of two (2) years following the
merger (the "Merger") of the ISG Funds (investment portfolios within the
Infinity Mutual Funds, Inc.) into the Trust (the "Initial Term"); provided,
however, that, in the event that an acquisition of AmSouth Bank is announced
during the Initial Term, such Initial Term shall be automatically extended in
which case this Agreement shall remain in effect for period of three (3) years
following the Merger. Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically
2
<PAGE> 4
for successive two-year periods ("Rollover Periods"). This Agreement may be
terminated without penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of sixty (60) days advance written
notice by the party alleging cause. Written notice of nonrenewal must be
provided at least sixty (60) days prior to the end of the Initial Term or any
Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involved by way of pleading, consent, or
acquiescence in, a voluntary case under Title 11 of the United States Code, as
from time to time is in effect, or any applicable law, other than said Title 11,
of any jurisdiction relating to the liquidation or reorganization of debtors or
to the modification or alteration of the rights of creditors; or (d) any
circumstance which substantially impairs the performance of the obligations and
duties of the party to be terminated, or the ability to perform those
obligations and duties, as contemplated herein.
Notwithstanding the foregoing, after such termination, for so
long as BISYS, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due BISYS and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the compensation described in this Schedule A, the amount of all of BISYS's cash
disbursements for services in connection with BISYS's activities in effecting
such termination, including without limitation, the delivery to the Trust and/or
its designees of the Trust 's property, records, instruments and documents.
If, during the term of this Agreement, there is a change of
control of AmSouth Bank and BISYS is not retained by the Trust as transfer agent
at comparable fees in effect prior to the change of control, liquidated damages
shall be paid by the Trust to BISYS in an amount equal to the fees that are due
and payable under this Agreement for the greater of (i) the remainder of the
contract term this Agreement or (ii) a one-year period.
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
3
<PAGE> 5
7. Legal Advice.
BISYS shall notify the Trust at any time BISYS believes that it
is in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Trust, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to BISYS' responsibilities
and duties hereunder and BISYS shall in no event be liable to the Trust or any
Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust 's Board of Trustees (hereafter
referred to as the "Trustees") or by the shareholder or shareholder's agent, as
the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions;
Indemnification.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or
4
<PAGE> 6
custodian thereof; provided that this indemnification shall not apply to actions
or omissions of BISYS in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties; and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, BISYS shall give the Trust written notice of
and reasonable opportunity to defend against said claim in its own name or in
the name of BISYS.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an t as to which such shareholder has either a legal or beneficial interest
or when requested by the Trust , the shareholder, or shareholder's agent, or the
dealer of record as to such account.
11. Reports.
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
C. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein.
12. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
5
<PAGE> 7
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Trust 's demand, turn over to the Trust and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for the lesser of (i) the remaining duration
of this Agreement or (ii) six years fro the year of creation. At the end of such
period, such records and documents will be turned over to the Trust unless the
Trust authorizes in writing the destruction of such records and documents.
14. Bank Accounts.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. Representations of the Trust.
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust, shares of each Fund which are redeemed by the Trust may be
sold by the Trust from its treasury, and (c) this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust , enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
6
<PAGE> 8
17. Insurance.
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of
any amendments thereto, certified by the proper official
of the state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust 's Bylaws and any amendments thereto;
2. Certified copies of resolutions of the Trustees
covering the following matters:
A. Approval of this Agreement and authorization
of a specified officer of the Trust to execute
and deliver this Agreement and authorization
for specified officers of the Trust to
instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
7
<PAGE> 9
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding,
such statement to be certified by the Treasurer of the
Trust.
19. Information Furnished by BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
20. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in; any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the
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<PAGE> 10
Trust hereby indemnifies and holds harmless BISYS from and against any and all
claims, demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character which may
result from actions or omissions on the part of BISYS in reasonable reliance
upon such amendments and/or changes. Although BISYS is authorized to rely on the
above-mentioned amendments to and changes in the documents and other items to be
provided pursuant to Sections 18 and 20 hereof, BISYS shall be under no duty to
comply with or take any action as a result of any of such amendments or changes
unless the Trust first obtains BISYS' written consent to and approval of such
amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth in Section 10 hereof, the
Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust 's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust 's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
24. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
9
<PAGE> 11
26. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
27. Limitation of Liability of the Trustees and Shareholders.
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 a Declaration of
Trust dated as of October 1, 1987, as amended June 25, 1993, to which reference
is hereby made and a copy of which is on file at the office of the Secretary of
the Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"AmSouth 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
Agreement to be duly executed all as of the day and year first above written.
AMSOUTH MUTUAL FUNDS
By: /s/ J. David Huber
----------------------------
Title: Chairman
------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Walter B. Grimm
----------------------------
Title: President
------------------------
10
<PAGE> 12
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new
shares, through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to
current shareholders.
A-1
<PAGE> 13
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and
capital gains.
c. Issue tax-withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchases in
a load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the
Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 14
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENT FEES
A. ANNUAL FEE
1. Subject to the annual minimum fee set forth in A.2.
below, BISYS shall be entitled to receive an annual
base fee equal to one and one-half one-hundredths of
one percent (.015%) of the Trust's total assets. Such
base fee shall then be allocated to each Fund/class
based on relative total asset size.
2. The base fee set forth above shall be subject to an
annual minimum fee of $10,000 per Fund/class.
B. ADDITIONAL FEES
1. Each Fund utilizing the payroll deduction feature
will pay a fee of $.50 per transaction plus a $500
set-up fee.
2. Each Fund will pay a $20.00 fee per T.I.N. per year
for each I.R.A.
3. Each Fund with asset allocation will pay the
following fees:
$3,000 annually (quarterly rebalancing)
$4,000 annually (monthly rebalancing)
$.05 per transaction fee
C. Multiple Classes of Shares
Funds that have two or more classes of shares each having different net
asset values or paying different daily dividends shall be subject to an
additional annual fee of $10,000 per additional class.
B-1
<PAGE> 15
D. OUT-OF-POCKET EXPENSES
BISYS shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the expenses set forth in
Section 3 of the Transfer Agency Agreement to which this Schedule B is attached.
B-2
<PAGE> 16
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be
filed with the Securities and Exchange Commission pursuant to Rule
17Ad-13 of the Securities Exchange Act of 1934, as amended.
8. Such special reports and additional information that the parties may
agree upon, from time to time.
C-1
<PAGE> 1
Exhibit (h)(5)
FUND ACCOUNTING AGREEMENT DATED AS OF NOVEMBER 23, 1999 BETWEEN THE
REGISTRANT AND ASO SERVICES COMPANY, INC.
<PAGE> 2
FUND ACCOUNTING AGREEMENT
AGREEMENT made this, 23rd day of November, 1999 between AMSOUTH MUTUAL
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and ASO SERVICES
COMPANY, INC. ("Fund Accountant"), a corporation organized under the laws of the
State of Delaware and having its principal place of business at 3435 Stelzer
Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record
in detail of all purchases and sales of
securities, all receipts and disbursements
of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule;
and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services daily for each Fund:
(i) Calculate the net asset value per share
utilizing prices obtained from
<PAGE> 3
the sources described in subsection
1(b)(ii) below;
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Trust's Board
of Trustees;
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Trust the daily market pricing
of securities in any money market Funds,
with the comparison to the amortized cost
basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Trust;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions and (3) income and
expense accounts;
-2-
<PAGE> 4
(xiii) Provide accounting reports in connection
with the Trust's regular annual audit and
other audits and examinations by regulatory
agencies; and
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Trust or a Fund's investment adviser, which
may result in an additional charge, the
amount of which shall be agreed upon between
the parties.
(ii) Fund Accountant may provide such other
similar services with respect to a Fund as
may be reasonably requested by the Trust,
which may result in an additional charge,
the amount of which shall be agreed upon
between the parties.
(d) Additional Accounting Services. Fund Accountant shall
also perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Trust.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax
returns and federal excise tax
returns;
(B) the Trust's semi-annual reports
with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual
and quarterly (if any) shareholder
reports;
(D) registration statements on Form
N-1A and other filings relating to
the registration of shares;
(E) the Administrator's monitoring of
the Trust's status as a
-3-
<PAGE> 5
regulated investment company under
Subchapter M of the Internal
Revenue Code, as amended;
(F) annual audit by the Trust's
auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any
entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Fund Accountant shall not be relieved of any
of its obligations under this Agreement by the appointment of such subcontractor
and provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 7 hereof, for all acts of such subcontractor as if such acts
were its own.
3. Compensation.
The Trust shall pay Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in
Section 3 hereof, the Trust agrees to reimburse Fund Accountant for its
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) All systems-related expenses associated with the provision of
special reports and services pursuant to Section 1(c) herein;
(e) The cost of microfilm or microfiche of records or other
materials;
(f) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly
authorized; and
-4-
<PAGE> 6
(g) Any additional expenses reasonably incurred by Fund Accountant
in the performance of its duties and obligations under this
Agreement.
5. Effective Date.
This Agreement shall become effective with respect to a Fund
as of the date first written above (or, if a particular Fund is not in existence
on that date, on the date such Fund commences operation) (the "Effective Date").
6. Term.
The term of this Agreement shall commence on the Effective Date
and shall remain in effect for a period of two (2) years following the merger
(the "Merger") of the ISG Funds (investment portfolios within the Infinity
Mutual Funds, Inc.) into the Trust (the "Initial Term"); provided, however,
that, in the event that an acquisition of AmSouth Bank is announced during the
Initial Term, such Initial Term shall be automatically extended in which case
this Agreement shall remain in effect for a period of three (3) years following
the Merger. Thereafter, unless otherwise terminated as provided herein, this
Agreement shall be renewed automatically for successive two-year periods
("Rollover Periods"). This Agreement may be terminated without penalty (i) by
provision of a notice of nonrenewal in the manner set forth below, (ii) by
mutual agreement of the parties or (iii) for "cause," as defined below, upon the
provision of sixty (60) days advance written notice by the party alleging cause.
Written notice of nonrenewal must be provided at least sixty (60) days prior to
the end of the Initial Term or any Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involved by way of pleading, consent, or
acquiescence in, a voluntary case under Title 11 of the United States Code, as
from time to time is in effect, or any applicable law, other than said Title 11,
of any jurisdiction relating to the liquidation or reorganization of debtors or
to the modification or alteration of the rights of creditors; or (d) any
circumstance which substantially impairs the performance of the obligations and
duties of the party to be terminated, or the ability to perform those
obligations and duties, as contemplated herein.
Notwithstanding the foregoing, after such termination, for so
long as Fund Accountant, with the written consent of the Trust, in fact
continues to perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this Agreement,
including without limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due Fund Accountant and unpaid
by the Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. Fund
-5-
<PAGE> 7
Accountant shall be entitled to collect from the Trust, in addition to the
compensation referred to in Section 3 herein, the amount of all of Fund
Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents.
If, during the term of this Agreement, there is a change of
control of AmSouth Bank and Fund Accountant is not retained by the Trust as fund
accountant at comparable fees in effect prior to the change of control,
liquidated damages shall be paid by the Trust to Fund Accountant in an amount
equal to the fees that are due and payable under this Agreement for the greater
of (i) the remainder of the contract term of this Agreement or (ii) a one-year
period.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to the Trust for any action taken or omitted by Fund Accountant in the absence
of bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties. The Trust agrees to indemnify and hold harmless
Fund Accountant, its employees, agents, directors, officers and nominees from
and against any and all claims, demands, actions and suits, whether groundless
or otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement or based, if applicable, upon reasonable reliance on information,
records, instructions or requests given or made to Fund Accountant by a duly
authorized representative of the Trust; provided that this indemnification shall
not apply to actions or omissions of Fund Accountant in cases of its own bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, Fund Accountant
shall give the Trust written notice of and reasonable opportunity to defend
against said claim in its own name or in the name of Fund Accountant.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust
all books and records which the Trust and Fund Accountant is, or may be,
required to keep and maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating to the
maintenance of books and records in connection with the services to be provided
hereunder. Fund Accountant further agrees that all such books and records shall
be the property of the Trust and to make such books and records available for
inspection by the Trust or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Trust and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
-6-
<PAGE> 8
9. Uncontrollable Events.
Fund Accountant assumes no responsibility hereunder, and shall
not be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. Reports.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein no
later than three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding upon
the Trust and any other recipient, and, except as provided in Section 7 hereof,
Fund Accountant shall have no liability for errors or discrepancies therein and
shall have no further responsibility with respect to such report except to
perform reasonable corrections of such errors and discrepancies within a
reasonable time after requested to do so by the Trust.
11. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
12. Return of Records.
Fund Accountant may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Fund Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
-7-
<PAGE> 9
13. Representations of the Trust.
The Trust certifies to Fund Accountant that: (1) as of the
close of business on the Effective Date, each Fund that is in existence as of
the Effective Date has authorized unlimited shares, and (2) this Agreement has
been duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. Insurance.
Fund Accountant shall notify the Trust should any of its
insurance coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. Fund Accountant shall notify the Trust
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and of
any amendments thereto, certified by the proper official
of the state in which such document has been filed.
-8-
<PAGE> 10
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of
Trustees covering the approval of this Agreement,
authorization of a specified officer of the Trust
to execute and deliver this Agreement and
authorization for specified officers of the Trust
to instruct Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized
to instruct Fund Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of
Additional Information for each Fund.
17. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Trust the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments
thereto.
(b) Fund Accountant shall, upon request, furnish certified
copies of corporate actions covering the following
matters:
(i) Approval of this Agreement, and authorization of a
specified officer of Fund Accountant to execute
and deliver this Agreement; and
(ii) Authorization of Fund Accountant to act as fund
accountant for the Trust and to provide accounting
services for the Trust.
18. Amendments to Documents.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 17 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
-9-
<PAGE> 11
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in
Section 8 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not
be assignable with respect to a Fund by either of the parties hereto except by
the specific written consent of the other party.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
24. Limitation of Liability of the Trustees and Shareholders.
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 a
Declaration of Trust dated as of October 1, 1987, as amended June 25, 1993, to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "AmSouth Mutual Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are
-10-
<PAGE> 12
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 Agreement to be
duly executed all as of the day and year first above written.
AMSOUTH MUTUAL FUNDS
By: /s/ J. David Huber
------------------------------
Title: Chairman
------------------------------
ASO SERVICES COMPANY, INC.
By: /s/ Walter B. Grimm
------------------------------
Title: President
------------------------------
-11-
<PAGE> 13
DATED: NOVEMBER 23, 1999
SCHEDULE A
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
ASO SERVICES COMPANY, INC.
FEES
1. FEES PAYABLE PRIOR TO MERGER OF ISG FUNDS INTO AMSOUTH MUTUAL FUNDS.
Fund Accountant shall be entitled to receive a fee from each
Fund at the annual rate of three one-hundredths of one percent (.03%) of
each Fund's average daily net assets plus Fund Accountant's reasonable
out-of-pocket expenses incurred in the performance of its services as
provided in Section 4 of this Agreement. In its sole discretion Fund
Accountant may impose a minimum fee up to $30,000 per taxable Fund and
$40,000 per tax-exempt Fund. Funds that have two or more classes of shares
each having different net asset values or paying different daily dividends
shall be subject to an additional annual fee of $10,000 per additional
class.
2. FEES PAYABLE FOLLOWING THE MERGER OF ISG FUNDS INTO AMSOUTH MUTUAL FUNDS.
Following the above-referenced merger, the amount of compensation
due and payable to Fund Accountant shall be such amount that is reflected
in the fee schedule set forth in Schedule A to the Management and
Administration Agreement, dated November 23, 1999, between Fund Accountant
and the Trust. The parties acknowledge and agree that such fee schedule
reflects the agreed upon compensation (i) payable to Fund Accountant for
the services to be provided under this Agreement and (ii) payable to Fund
Accountant for the services to be provided under the above-referenced
Management and Administration Agreement. The parties further acknowledge
and in addition to such compensation, Fund Accountant shall be entitled to
reimbursement of the reasonable out-of-pocket expenses set forth in
Section 4 of this Agreement.
AMSOUTH MUTUAL FUNDS
By: /s/ J. David Huber
----------------------------------
Title: Chairman
-------------------------------
ASO SERVICES COMPANY, INC.
By: /s/ Walter B. Grimm
----------------------------------
Title: President
------------------------------
A-1
<PAGE> 1
EXHIBIT (h)(7)
FORM OF AMENDED SCHEDULE I DATED MARCH 13, 2000 TO THE SHAREHOLDER
SERVICING PLAN
<PAGE> 2
Dated: March 13, 2000
AMSOUTH FUNDS
FORM OF AMENDED
SCHEDULE I
TO THE
SHAREHOLDER SERVICING PLAN
This Shareholder Servicing Plan shall be adopted with respect to the following
Funds (and Classes) of AmSouth Mutual Funds:
<TABLE>
<CAPTION>
Name of Fund Class
<S> <C>
AmSouth Prime Money Market Fund Class A Class, Trust Class, Class B
AmSouth U.S. Treasury Money Market Fund Class A Class, Trust Class
AmSouth Tax Exempt Money Market Fund Class A Class, Trust Class
AmSouth Bond Fund Class A Class, Trust Class, Class B
AmSouth Limited Term Bond Fund Class A Class, Trust Class, Class B
AmSouth Municipal Bond Fund Class A Class, Trust Class, Class B
AmSouth Florida Tax-Exempt Fund Class A Class, Trust Class
AmSouth Value Fund Class A Class, Trust Class
AmSouth Balanced Fund Class A Class, Trust Class
AmSouth Small Cap Fund Class A Class, Trust Class, Class B
AmSouth Equity Income Fund Class A Class, Trust Class, Class B
AmSouth Select Equity Fund Class A Class, Trust Class
AmSouth Growth Fund Class A Class, Trust Class
AmSouth Enhanced Market Fund Class A Class, Trust Class
AmSouth Government Income Fund Class A Class, Trust Class, Class B
AmSouth Strategic Portfolios: Current Income Portfolio Class A Class, Trust Class, Class B
AmSouth Treasury Reserve Money Market Fund Class A Class, Trust Class, Class B
AmSouth Strategic Portfolios: Moderate Class A Class, Trust Class, Class B
Growth and Income Portfolio Class A Class, Trust Class, Class B
AmSouth Strategic Portfolios: Growth and Class A Class, Trust Class, Class B
Income Portfolio
AmSouth Strategic Portfolios: Aggressive Class A Class, Trust Class, Class B
Growth Portfolio
AmSouth Mid Cap Fund Class A Class, Trust Class, Class B
AmSouth Large Cap Fund Class A Class, Trust Class, Class B
AmSouth Limited Term Tennessee Tax-Exempt Fund Class A Class, Trust Class, Class B
AmSouth Limited Term U.S. Government Fund Class A Class, Trust Class, Class B
AmSouth Strategic Portfolios: Growth Portfolio Class A Class, Trust Class, Class B
AmSouth International Equity Fund Class A Class, Trust Class, Class B
AmSouth Capital Growth Fund Class A Class, Trust Class, Class B
AmSouth Tennessee Tax-Exempt Fund Class A Class, Trust Class, Class B
</TABLE>
<PAGE> 1
EXHIBIT (i)
OPINION OF ROPES & GRAY
<PAGE> 2
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Suite 800 East
Washington, D.C. 20005
(202) 626-3900
Fax: (202) 626-3961
March 13, 2000
AmSouth 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
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 Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of Shares for all
loss and expenses of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
<PAGE> 3
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. 32 to the Registration Statement of AmSouth Funds
on Form N-1A under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
March 13, 2000
<PAGE> 1
Exhibit (j)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Post-Effective Amendment
No. 32 to the Registration Statement on Form N-1A (File No. 33-21660) of our
report dated September 12, 1999 relating to the financial statements and
financial highlights appearing in the July 31, 1999 Annual Report to the
Shareholders of AmSouth Equity Income Fund, AmSouth Equity Fund, AmSouth
Enhanced Market Fund, AmSouth Capital Growth Fund, AmSouth Select Equity Fund,
AmSouth Regional Equity Fund, AmSouth Small Cap Fund, AmSouth Balanced Fund,
AmSouth Limited Maturity Fund, AmSouth Government Income Fund, AmSouth Bond
Fund, AmSouth Municipal Bond Fund, AmSouth Florida Tax-Free-Fund, AmSouth U.S.
Treasury Fund, AmSouth Prime Obligations Fund, AmSouth Institutional Prime
Obligations Fund and AmSouth Tax-Exempt Fund (separate portfolios constituting
the AmSouth Funds), which are also incorporated by reference into the
Registration Statement. We also consent to the references to our Firm under the
captions "Financial Highlights" in the Prospectuses and "Financial Statements"
and "Independent Accountants" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
March 13, 2000
<PAGE> 1
Exhibit (j)(3)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees
AmSouth Funds:
We hereby consent to the use of our report dated February 22, 2000 on the
financial statements of The Infinity Mutual Funds, Inc. - ISG Funds as
incorporated by reference in Post-Effective Amendment No. 32 to the Registration
Statement on Form N-1A (File No. 33-21660) and to the reference to our firm
under the headings "Financial Highlights" in the prospectuses pertaining to the
AmSouth Funds - Class A, Class B and Trust Shares, and "Independent Accountants"
and "Financial Statements" in the statement of additional information.
/s/ KPMG LLP
KPMG LLP
Columbus, Ohio
March 13, 2000
<PAGE> 1
Exhibit (m)
Form of Distribution and Shareholder Services Plan between the Registrant and
BISYS Fund Services, LP, dated as of March 13, 2000
<PAGE> 2
FORM OF
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
March 12, 1997
As amended and restated on March 13, 2000
This Plan (the "Plan") constitutes the DISTRIBUTION AND SHAREHOLDER
SERVICES PLAN of AmSouth Funds, a Massachusetts business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to the following Classes of Shares (each, a
"Class"): Class B Shares, Class II Shares and Class III Shares of each series of
the Trust (each a"Fund") identified on Schedule A hereto, as may be amended from
time to time.
WHEREAS, it is desirable to enable the Trust to have flexibility in meeting
the investment and shareholder servicing needs of its future investors; and
WHEREAS, the Board of Trustees, mindful of the requirements imposed by Rule
12b-1 under the 1940 Act, has determined to effect the Plan for the provision of
distribution assistance with respect to the Class B Shares, Class II Shares and
Class III Shares of each Fund listed on Schedule A hereto and for the provision
of shareholder services with respect to the holders of such Shares of each Fund;
NOW, THEREFORE, the Trust and BISYS Fund Services Limited Partnership (the
"Distributor") hereby agree as follows:
Section 1.
A. Class B Shares.
Each Fund, the Class B Shares of which are listed on Schedule A hereto,
shall pay out of its assets attributable to its Class B Shares a distribution
and shareholder services fee (the "Class B Share Fee") to the Distributor equal
to the lesser of (i) the fee at the applicable annual rate set forth in Schedule
A hereto, or (ii) such fee as may be agreed upon in writing by the Trust and the
Distributor. 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 maximum amount of the Class B Share Fee that may be payable
by the Fund for the aforementioned services and expenses other than
<PAGE> 3
services and/or reimbursement of expenses incurred in connection with
shareholder services is 0.75% of the average daily net assets of such Fund's
Class B Shares. The remaining portion of the Class B Share Fee is payable by the
Fund's Class B Shares only as compensation for services and/or reimbursement of
expenses incurred in connection with shareholder services with respect to such
Fund's Class B Shares.
B. Class II Shares.
Each Fund, the Class II Shares of which are listed on Schedule A hereto,
shall pay out of its assets attributable to its Class II Shares, a distribution
and shareholder services fee (the "Class II Share Fee") to the Distributor equal
to the lesser of (i) the fee at the applicable annual rate set forth in Schedule
A hereto, or (ii) such fee as may be agreed upon in writing by the Trust and the
Distributor. The Distributor may apply the Class II Share Fee toward the
following: (i) compensation for its services or expenses in connection with
distribution assistance with respect to such Fund's Class II Shares; (ii)
payments to financial institutions and intermediaries (such as banks, savings
and loan associations, insurance companies, and investment counselors) as
brokerage commissions in connection with the sale of such Fund's Class II; and
(iii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to such Fund's
Class II Shares. The maximum amount of the Class II Share Fee that may be
payable for the aforementioned services and expenses is 0.25% of the average
daily net assets of such Fund's Class II Shares.
C. Class III Shares.
Each Fund, the Class III Shares of which are listed on Schedule A hereto,
shall pay out of its assets attributable to its Class III Shares, a distribution
and shareholder services fee (the "Class III Share Fee") to the Distributor
equal to the lesser of (i) the fee at the applicable annual rate set forth in
Schedule A hereto, or (ii) such fee as may be agreed upon in writing by the
Trust and the Distributor. The Distributor may apply the Class III Share Fee
toward the following: (i) compensation for its services or expenses in
connection with distribution assistance with respect to such Fund's Class III
Shares; (ii) payments to financial institutions and intermediaries (such as
banks, savings and loan associations, insurance companies, and investment
counselors) as brokerage commissions in connection with the sale of such Fund's
Class III Shares; and (iii) payments to financial institutions and
intermediaries (such as banks, savings and loan associations, insurance
companies, and investment counselors), broker-dealers, and the Distributor's
affiliates and subsidiaries as compensation for services and/or reimbursement of
expenses incurred in connection with distribution or shareholder services with
respect to such Fund's Class III Shares. The maximum amount of the Class III
Share Fee
-2-
<PAGE> 4
that may be payable for the aforementioned services and expenses is 0.50% of the
average daily net assets of such Fund's Class III Shares.
Section 2. The Class B Share Fee, the Class II Share Fee and the Class III
Share Fee (each a "Share Fee") shall be accrued daily and payable monthly, and
shall be paid by the respective Class of Shares of a Fund to the Distributor
irrespective of whether such fee exceeds the amounts paid (or payable) by the
Distributor pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to the one or more
Classes of Shares of a Fund until it has been approved, together with any
related agreements, by a vote of a majority (or whatever greater percentage
may, from time to time, be required by Section 12(b) of the 1940 Act or the
rules and regulations thereunder) 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 operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan or such agreement.
Section 4. The Plan shall continue in effect with respect to a Class of
Shares of a Fund for a period of more than one year after it takes effect,
provided that such continuance is specifically approved at least annually in the
manner provided for approval of the Plan in Section 3.
Section 5. Any person authorized to direct the disposition of monies paid
or payable by a Fund pursuant to the Plan or any related agreement shall provide
to the Trustees of the Trust, and the Trustees shall review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made.
Section 6. The Plan may be terminated with respect to one or more Classes
of Shares of a Fund at any time by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding Shares of such Class or
Classes of that Fund.
Section 7. All agreements with any person relating to the implementation of
the Plan shall be in writing and any agreement related to the Plan shall
provide:
i. That such agreement, may be terminated with respect to one or more
Classes of Shares of a Fund at any time, without payment of any
penalty, by vote of a majority of the Independent Trustees, or by vote
of a majority of the outstanding Shares of such Class or Classes of
that Fund, on not more than 60 days' written notice; and
ii. That such agreement shall terminate automatically in the event of its
assignment.
<PAGE> 5
Section 8. The Plan may not be amended to increase materially the amount of
the Share Fee with respect to one or more Classes of Shares of a Fund without
approval by at least (i) a majority of the outstanding voting securities of such
Class or Classes of that Fund and (ii) the Trustees in the manner provided in
Section 3 hereof, and all material amendments to the Plan with respect to a Fund
shall be approved by the Trustees in the manner provided for approval of the
Plan in Section 3.
Section 9. As used herein, the terms "assignment," "interested person," and
"majority of the outstanding voting securities" shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
Section 10. The names "AmSouth Funds" and "Trustees of AmSouth 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
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
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 and/or Class of Shares of the Trust must look solely to the
assets of the Trust belonging to such series and/or Class for the enforcement of
any claims against the Trust.
[SEAL] AMSOUTH FUNDS
By:
---------------------------------------
Name:
-------------------------------------
Title:
-----------------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
-----------------------------------
<PAGE> 6
Dated: March 13, 2000
SCHEDULE A TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
DATED MARCH 12, 1997
As amended and restated March 13, 2000
<TABLE>
<CAPTION>
NAME OF FUNDS COMPENSATION*
- ------------- -------------
<S> <C>
AmSouth Prime Money Market Fund -- Annual rate of seventy-five
Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Prime Money
Market Fund
AmSouth Limited Term Bond Fund -- Annual rate of seventy-five
Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Limited Term
Bond Fund.
AmSouth Bond Fund -- Class B Shares Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Bond Fund.
AmSouth Government Income Fund -- Annual rate of seventy-five
Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Government
Income Fund.
AmSouth Florida Tax-Exempt Fund -- Annual rate of one percent (1.00%)
Class B Shares of the average daily net assets of
the AmSouth Florida Tax-Exempt
Fund.
AmSouth Municipal Bond Fund -- Class B Annual rate of seventy-five
Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Municipal
Bond Fund.
AmSouth Value Fund -- Class B Shares Annual rate of one percent (1.00%)
of the average daily net assets of
the AmSouth Value Fund.
A-1
</TABLE>
<PAGE> 7
AmSouth Balanced Fund -- Class B Shares AmSouth Balanced Fund
Annual rate of one percent (1.00%)
of the average daily net assets of
the AmSouth Growth Fund.
AmSouth Growth Fund -- Class B Shares
AmSouth Small Cap Fund -- Class B Annual rate of seventy-five
Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Small Cap
Fund.
AmSouth Equity Income Fund -- Class B Annual rate of seventy-five
Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Equity
Income Fund.
AmSouth Select Equity Fund -- Class B Annual rate of one percent (1.00%)
Shares of the average daily net assets of
the AmSouth Select Equity Fund.
AmSouth Enhanced Market Fund -- Class Annual rate of one percent (1.00%)
B Shares of the average daily net assets of
the AmSouth Enhanced Market Fund.
AmSouth Institutional Prime Obligations Annual rate of twenty-five
Money Market Fund -- Class II Shares one-hundredths of one percent
(0.25%) of the average daily net
assets of the AmSouth Institutional
Prime Obligations Money Market
Fund.
AmSouth Institutional Prime Obligations Annual rate of fifty one-hundredths
Money Market Fund -- Class III Shares of one percent (0.50%) of the
average daily net assets of the
AmSouth Institutional Prime
Obligations Money Market Fund.
AmSouth Institutional U.S. Treasury Annual rate of twenty-five
Money Market Fund -- Class II Shares one-hundredths of one percent
(0.25%) of the average daily net
assets of the AmSouth Institutional
U.S. Treasury Money Market Fund.
AmSouth Institutional U.S. Treasury Annual rate of fifty one-hundredths
Money Market Fund -- Class III Shares of one percent (0.50%) of the
average daily net assets of the
AmSouth Institutional U.S. Treasury
Money Market Fund.
A-2
<PAGE> 8
AmSouth International Equity Fund -- Annual rate of seventy-five
Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth International
Equity Fund.
AmSouth Mid Cap Fund -- Class B Shares Annual rate of seventy-five
one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Mid Cap Fund.
AmSouth Capital Growth Fund -- Class B Annual rate of seventy-five
Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Capital
Growth Fund.
AmSouth Large Cap Fund -- Class B Annual rate of seventy-five
Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Large Cap
Fund.
AmSouth Limited Term U.S. Government Annual rate of seventy-five
Fund -- Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Limited Term
U.S. Government Fund.
AmSouth Tennessee Tax-Exempt Fund -- Annual rate of seventy-five
Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Tennessee
Tax-Exempt Fund.
AmSouth Limited Term Tennessee Tax- Annual rate of seventy-five
Exempt Fund -- Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Limited Term
Tennessee Tax-Exempt Fund.
AmSouth Treasury Reserve Money Annual rate of seventy-five
Market Fund -- Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth U.S. Treasury
Reserve Money Market Fund.
AmSouth Strategic Portfolios: Aggressive Annual rate of seventy-five
Growth Portfolio -- Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Strategic
Portfolios: Aggressive Growth
Portfolio.
A-3
<PAGE> 9
AmSouth Strategic Portfolios: Growth Annual rate of seventy-five one-
Portfolio -- Class B Shares hundredths of one percent (0.75%)
of the average daily net assets of
the AmSouth Strategic Portfolios:
Growth Portfolio.
AmSouth Strategic Portfolios: Growth and Annual rate of seventy-five one-
Income Portfolio -- Class B Shares hundredths of one percent (0.75%)
of the average daily net assets of
the AmSouth Strategic Portfolios:
Growth and Income Portfolio.
AmSouth Strategic Portfolios: Moderate Annual rate of seventy-five one-
Growth Portfolio -- Class B Shares hundredths of one percent (0.75%)
of the average daily net assets of
the AmSouth Strategic Portfolios:
Moderate Growth Portfolio.
AmSouth Strategic Portfolios: Current Annual rate of seventy-five
Income Portfolio -- Class B Shares one-hundredths of one percent
(0.75%) of the average daily net
assets of the AmSouth Strategic
Portfolios:
Current Income Portfolio.
[SEAL] AMSOUTH 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.
A-4
<PAGE> 1
EXHIBIT (n)
MULTIPLE CLASS PLAN FOR AMSOUTH FUNDS ADOPTED BY THE BOARD OF
TRUSTEES ON DECEMBER 6, 1995, AS AMENDED AND RESTATED AS OF NOVEMBER 23,
1999
<PAGE> 2
MULTIPLE CLASS PLAN
FOR AMSOUTH FUNDS
This constitutes a MULTIPLE CLASS PLAN (the "Plan") of AmSouth Funds, a
Massachusetts business trust (the "Trust"), adopted pursuant to Rule 18f-3(d)
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Plan
is applicable to each series of the Trust's units of beneficial interest (each a
"Fund" and collectively the "Funds") set forth in Schedule I, defined as the
Retail Funds and the Institutional Funds, as amended from time to time.
WHEREAS, it is desirable to enable the Trust to have flexibility in
meeting the investment and shareholder servicing needs of its current and future
investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the Trustees who are not "interested persons" of the
Trust, as such term is defined by the 1940 Act, mindful of the requirements
imposed by Rule 18f-3(d) under the 1940 Act, has determined to adopt this Plan
to enable the Funds to provide appropriate services to certain designated
classes of shareholders of the Funds;
NOW, THEREFORE, the Trust designates the Plan as follows:
1. Designation of Classes.
A. RETAIL FUNDS. Each Retail Fund shall offer its units of beneficial
interest ("Shares") in three classes: Trust Class Shares, Class A Shares
and Class B Shares, except for the AmSouth U.S. Treasury Money Market Fund
and the AmSouth Tax-Exempt Money Market Fund which offer only two classes:
Trust Class Shares and Class A Shares.
B. INSTITUTIONAL FUNDS. Each Institutional Fund shall offer Shares in
three classes: Class I Shares, Class II Shares and Class III Shares.
2. Redesignation of Existing Shares. The Shares of the AmSouth Prime Money
Market Fund, the AmSouth U.S. Treasury Money Market Fund and the AmSouth
Tax-Exempt Money Market Fund of the Trust outstanding as of April 1, 1996, were
redesignated as of that date as Trust Class Shares. The Shares of the remaining
series of the Trust existing as of March 12, 1997, were redesignated as Class A
Shares effective as of September 1, 1997.
3. Purchases.
A. RETAIL FUNDS. Class A Shares and Class B Shares are distributed to the
general public pursuant to procedures outlined in the Trust's Registration
Statement. Trust
<PAGE> 3
Class Shares may be purchased through procedures established by the
distributor in connection with the requirements of fiduciary, advisory,
agency, custodial and other similar accounts maintained by or on behalf of
Customers of AmSouth Bank, as outlined in the Trust's Registration
Statement. Class A Shares and Class B Shares are subject to a minimum
initial purchase amount. A minimum initial purchase amount does not apply
to purchases of Trust Class Shares.
B. INSTITUTIONAL FUNDS.
i. Class I Shares
Class I Shares may be purchased pursuant to procedures established
in connection with the requirements of fiduciary, advisory, agency,
custodial and other similar accounts maintained by or on behalf of
Customers of AmSouth Bank and by other financial institutions approved by
the Distributor, as outlined in the Trust's Registration Statement.
ii. Class II Shares and Class III Shares
Class II and Class III Shares may be purchased by institutional or
corporate customers of AmSouth Bank and of other financial services
providers approved by the distributor pursuant to procedures outlined in
the Trust's Registration Statement. Where both Class II and Class III
Shares are sold through the same service provider, the distributor shall
require the financial institution to establish and maintain different
arrangements for shareholders of each Class with respect to services or
the distribution of shares.
4. Shareholder Services.
A. RETAIL FUNDS. Shareholders of Class A Shares and Class B Shares may
make automatic investments in a Fund from their bank accounts.
Shareholders of Class A Shares and Class B Shares may also make regular
exchanges and redemptions of Class A Shares or Class B Shares. These
services are not offered to shareholders of Trust Class Shares.
B. INSTITUTIONAL FUNDS. Class II Shares and Class III Shares of the
Institutional Funds are provided sub-transfer agency services.
2
<PAGE> 4
5. Sales Charges.
A. RETAIL FUNDS.
i. Trust Class Shares
Trust Class Shares are not subject to a sales charge at the time of
purchase or upon redemption.
ii. Class A Shares
Class A Shares, except Class A Shares of any money market funds, are
subject to a sales charge at the time of purchase. The sales charge is
based on a percentage of the offering price and may vary based on the
amount of purchase. Sales charges may be waived for certain purchasers or
inapplicable to purchases over a designated level in accordance with the
current Registration Statement. A contingent deferred sales charge may be
assessed on redemptions within twelve months of purchase of Class A Shares
sold without a sales charge in accordance with the current Registration
Statement. The charge will be assessed on an amount equal to the lesser of
the then current market value or the cost of the Shares being redeemed.
Accordingly, no contingent deferred sales charge is imposed on increases
in net asset value above the initial purchase price. In addition, no
charge is assessed on Shares derived from the reinvestment of dividends or
capital gain distributions.
iii. Class B Shares
If a shareholder redeems Class B Shares prior to the sixth
anniversary of purchase, the shareholder will pay a contingent deferred
sales charge assessed on an amount equal to the lesser of the then current
market value or the cost of the Shares being redeemed. Accordingly, no
contingent deferred sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no charge is assessed
on Shares derived from the reinvestment of dividends or capital gain
distributions. The amount of the contingent deferred sales charge, if any,
varies depending on the number of years from the time of payment for the
purchase of Class B Shares until the time of redemption of such Shares.
The schedule of contingent deferred sales charges shall be disclosed in
the Trust's Registration Statement and may be waived in accordance with
the procedures outlined in the Trust's Registration Statement.
3
<PAGE> 5
B. INSTITUTIONAL FUNDS.
Class I Shares, Class II Shares and Class III Shares are not subject to a
sales charge at the time of purchase or upon redemption.
6. Shareholder Services Fee (not subject to Rule 12b-1).
A. RETAIL FUNDS.
i. Trust Class Shares
Trust Class Shares are subject to a shareholder services fee
assessed in accordance with the Shareholder Services Plan adopted by
the Board of the Trust (respectively, the "Services Fee" and the
"Services Plan").
ii. Class A Shares
Class A Shares are subject to a shareholder services fee
assessed in accordance with the Shareholder Services Plan adopted by
the Board of the Trust (respectively, the "Services Fee" and the
"Services Plan").
iii. Class B Shares
Class B Shares are not subject to a fee under the Shareholder Services
Plan, but are subject to a fee under the Distribution and Shareholder Services
Plan (see Section 7(A)(ii) below).
B. INSTITUTIONAL FUNDS. Class I Shares, Class II Shares and Class II
Shares are not subject to a shareholder services fee.
7. Distribution and Shareholder Services Fee (subject to Rule 12b-1).
A. RETAIL FUNDS.
i. Trust Class Shares and Class A Shares
Trust Class Shares and Class A Shares are not subject to a
distribution and shareholder services fee.
ii. Class B Shares
Class B Shares of the Fund are subject to a distribution and
shareholder services fee assessed in accordance with the
Distribution and Shareholder
4
<PAGE> 6
Services Plan adopted by the Trust (the "Distribution Plan") (the "B Share
Fee"). the Services Fee is lower than the B Share Fee.
B. INSTITUTIONAL FUNDS.
i. Class I Shares
Class I Shares are not subject to a distribution and
shareholder services fee.
ii. Class II Shares and Class III Shares
Class II Shares and Class III Shares are subject to a distribution
and shareholder services fee assessed in accordance with the Distribution
and Shareholder Services Plan adopted by the Trust (the "Distribution
Plan") (the "Distribution Fee"). The fee assessed the Class II Shares is
lower than the fee assessed the Class III Shares.
8. Exchanges.
A. RETAIL FUNDS
i. Trust Class Shares
Trust Class Shares of a Fund may be exchanged for Trust Class
Shares of another Fund. Trust Class Shares may also be exchanged for
Class A Shares, if the shareholder ceases to be eligible to purchase
Trust Class Shares.
ii. Class A Shares
Class A Shares may be exchanged for Class A Shares of another
Fund. Class A Shares may be exchanged for Trust Class Shares only if
the shareholder becomes eligible to purchase Trust Class Shares.
iii. Class B Shares
Class B Shares of a Fund may be exchanged for Class B Shares
of another Fund. Class B Shares may not be exchanged for Class A
Shares and may be exchanged for Trust Class Shares only if the
shareholder becomes eligible to purchase Trust Class Shares.
5
<PAGE> 7
B. INSTITUTIONAL FUNDS.
i. Class I Shares
Class I Shares of an Institutional Fund may be exchanged for
Class I Shares of another Institutional Fund.
ii. Class II Shares
Class II Shares of an Institutional Fund may be exchanged for
Class II Shares of another Institutional Fund.
iii. Class III Shares
Class III Shares of an Institutional Fund may be exchanged for
Class III Shares of another Institutional Fund.
9. Redemptions.
A. RETAIL FUNDS. Trust Class Shares and Class A Shares may be redeemed
without charge. Class B Shares may be subject to a Contingent Deferred Sales
Charge as outlined in Section 5.
B. INSTITUTIONAL FUNDS. Class I Shares, Class II Shares and Class III
Shares of a Fund may be redeemed without charge.
10. Voting Rights. Each Share held entitles the shareholder of record to one
vote. Each Fund will vote separately on matters relating solely to that Fund.
Each class of a Fund shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to that class, and shall have separate
voting rights on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. However, all Fund
shareholders will have equal voting rights on matters that affect all Fund
shareholders equally.
11. Expense Allocation.
A. RETAIL FUNDS. Class A Shares and Trust Class Shares shall pay the
expenses associated with the Services Plan and Class B Shares shall pay
the expenses associated with the Distribution Plan. Each class may, at the
Board's discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if these expenses are actually incurred
in a different amount by that class, or if the class receives services of
a different kind or to a different degree than
6
<PAGE> 8
other classes. All other expenses will be allocated to each class on the
basis of the relative net asset value of that class in relation to the net
asset value of the Fund.
B. INSTITUTIONAL FUNDS. Class II Shares and Class III Shares shall pay the
expenses associated with the Distribution Plan. Each class may, at the
Board's discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if these expenses are actually incurred
in a different amount by that class, or if the class receives services of
a different kind or to a different degree than other classes. All other
expenses will be allocated to each class on the basis of the relative net
asset value of that class in relation to the net asset value of the Fund.
12. Dividends.
A. RETAIL FUNDS. The amount of dividends payable on Trust Class and Class
A Shares may be more than the dividends payable on Class B Shares because
of the respective fees charged as outlined in Sections 6.
B. INSTITUTIONAL FUNDS. The amount of dividends payable on Class I Shares
may be more than the dividends payable on Class II Shares and the amount
of dividends payable on Class II Shares may be more than the dividends
payable on Class III Shares because of the Distribution Fee charged as
outlined in Section 7.
13. Termination and Amendment. This Plan may be terminated or amended pursuant
to the requirement of Rule 18f-3(d) under the 1940 Act.
14. The names "AmSouth Funds" and "Trustees of AmSouth Funds" refer respectively
to the Trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under an Agreement and Declaration of Trust
dated 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 Funds entered
into in the name or on behalf thereof by any of the Trust, 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 and/or class of Shares of the Trust must look solely to the assets of
the Trust belonging to such series and/or class for the enforcement of any
claims against the Trust.
7
<PAGE> 9
Adopted by the Board of Trustees on December 6, 1995, as amended and
restated July 16, 1997, March 17, 1998, and November 23, 1999.
8
<PAGE> 10
Dated: November 23, 1999
SCHEDULE I
MULTIPLE CLASS PLAN
FOR AMSOUTH FUNDS
MARCH 17, 1998
Retail Funds
AmSouth Prime Money Market Fund
AmSouth U.S. Treasury Money Market Fund
AmSouth Tax Exempt Money Market Fund
AmSouth Bond Fund
AmSouth Limited Term Bond Fund
AmSouth Municipal Bond Fund
AmSouth Florida Tax-Exempt Fund
AmSouth Value Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Small Cap Fund
AmSouth Equity Income Fund
AmSouth Select Equity Fund
AmSouth Enhanced Market Fund
AmSouth Government Income Fund
AmSouth Strategic Portfolios: Current Income Portfolio
AmSouth U.S. Treasury Reserve Money Market Fund
AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio
AmSouth Strategic Portfolios: Growth and Income Portfolio
AmSouth Strategic Portfolios: Aggressive Growth Portfolio
AmSouth Mid Cap Fund
AmSouth Large Cap Fund
AmSouth Limited Term Tennessee Tax-Exempt Fund
AmSouth Limited Term U.S. Government Fund
AmSouth Strategic Portfolios: Growth Portfolio
AmSouth International Equity Fund
AmSouth Capital Growth Fund
AmSouth Tennessee Tax-Exempt Fund
Institutional Funds
AmSouth Institutional Prime Obligations Money Market Fund
AmSouth Institutional U.S. Treasury Money Market Fund
<PAGE> 1
EXHIBIT (p)(1)
FORM OF AMSOUTH FUNDS CODE OF ETHICS
<PAGE> 2
FORM OF
AMSOUTH MUTUAL FUNDS
CODE OF ETHICS
A. Legal Requirements.
Rule 17j-1(a) under the Investment Company Act of 1940 (the "Act")
makes it unlawful for any officer or trustee (as well as other persons) of the
AmSouth Mutual Funds (the "Trust"), in connection with purchase or sale by such
person of a security "held or to be acquired" by any investment portfolio of the
Trust (a "Fund"):
(1) To employ any device, scheme or artifice to defraud the Trust or
a Fund;
(2) To make to the Trust any untrue statement of a material fact or
omit to state to the Trust or a Fund a material fact necessary in order to
make the statements made, in light of the circumstances under which they
are made, not misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Trust or a Fund;
or
(4) To engage in any manipulative practice with respect to the Trust
or a Fund.
A security is "held or to be acquired" if within the most recent 15
days it (i) is or has been held by the Trust or a Fund, or (ii) is being
or has been considered by the Trust or a Fund or the investment adviser
for the Trust or a Fund for purchase by the Trust or the Fund. A purchase
or sale includes the writing of an option to purchase or sell.
B. Trust Policies.
1. It is the policy of the Trust that no "access person"* of the Trust or
of a Fund shall engage in any act,
- --------
* An "access person" is (i) each trustee or officer of the Trust, (ii)
each employee (if any) of the Trust who, in connection with his regular duties,
makes, participates in, or obtains information about the purchase or sale of a
security by and/or of the Trust or a Fund or whose functions relate to the
making of any recommendations with respect to such purchases or sales, and (iii)
any person in a control
<PAGE> 3
practice or course or conduct that would violate the provisions of Rule 17j-1(a)
set forth above.
2. In keeping with the recommendations of the Board of Governors of the
Investment Company Institute, the following general policies shall govern
personal investment activities of access persons of the Trust or of a Fund:
(a) It is the duty of all access persons of the Trust or of a Fund
to place the interest of Trust shareholders first;
(b) All access persons of the Trust or of a Fund shall conduct
personal securities transactions in a manner that is consistent with this Code
of Ethics and that avoids any actual or potential conflict of interest or any
abuse of a position of trust and responsibility; and
(c) No access person of the Trust or of a Fund shall take
inappropriate advantage of his or her position with the Trust or with a Fund.
C. Procedures.
1. In order to provide the Trust with information to enable it to
determine with reasonable assurance whether the Trust's policies are being
observed by its access persons:
(a) Each access person of the Trust or of a Fund, other than a
trustee who is not an "interested person" (as defined in the Act), shall
submit reports in the form attached hereto as Exhibit A ("Securities
Transaction Reports") to the Trust's Secretary showing all transactions in
"reportable securities" in which the person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership.** Such
- --------
relationship to the Trust or the Fund.
** "Beneficial ownership" of a security is determined in the same manner
as it would be for the purposes of Section 16 of the Securities Exchange Act of
1934, except that such determination should apply to all securities. Generally,
a person should consider himself the beneficial owner of securities held by his
spouse, his minor children, a relative who shares his home, or other persons if
by reason of any contract, understanding, relationship, agreement or other
arrangement, he obtains from such securities benefits
- 2 -
<PAGE> 4
reports shall be filed no later than 10 days after the end of each
calendar quarter, but need not show transactions over which such person
had no direct or indirect influence or control.
(b) Each trustee who is not an "interested person" of the Trust
shall submit the same quarterly report as required under paragraph (a),
but only for a transaction in a reportable security where he knew at the
time of the transaction or, in the ordinary course of fulfilling his
official duties as a trustee, should have known that during the 15-day
period immediately preceding or after the date of the transaction such
security is or was purchased or sold, or considered for purchase or sale,
by the Trust or the Fund. No report is required if the trustee had no
direct or indirect influence or control over the transaction.
For purposes of subparagraphs (a) and (b) above, a "reportable
security" does not include securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, bankers acceptances, bank
certificates of deposit and commercial paper, and shares of registered open-end
investment companies.
2. The Secretary shall notify each access person of the Trust or of
a Fund who may be required to make reports pursuant to this Code that such
person is subject to this reporting requirement and shall deliver a copy of this
Code to each such person.
3. The Secretary shall report to the Board of Trustees:
(a) at the next meeting following the receipt of any Securities
Transaction Report with respect to each reported transaction in a security
which was held or acquired by the Trust or a Fund within 15 days before or
after the date of the reported transaction or at a time when, to the
knowledge of the Secretary, the Trust, a Fund, or the respective
investment adviser for the Trust or a Fund, was considering the purchase
or sale of such security, unless the amount involved in the transaction
was less than $50,000;
- -------------------
substantially equivalent to those of ownership. He should also consider himself
the beneficial owner of securities if he can vest or revest title in himself now
or in the future.
- 3 -
<PAGE> 5
(b) with respect to any transaction not required to be reported to
the Board by the operation of subparagraph (a) that he believes
nonetheless may evidence a violation of this Code; and
(c) any apparent violation of the reporting requirement.
4. The Board shall consider reports made to it hereunder and shall
determine whether the policies established in section B above have been
violated, and what sanctions, if any, should be imposed.
5. The Board shall review the operation of this Code of Ethics at
least once a year. To that end, the appropriate officer(s) of the Trust shall
prepare an annual report to the Board that:
(1) summarizes existing procedures of the Trust and its investment
advisers concerning personal investing and any changes in the
procedures made during the past year;
(2) identifies any violations requiring significant remedial
action during the past year; and
(3) identifies any recommended changes in existing restrictions or
procedures of the Trust or its investment advisers based upon
the experience of the Trust or its investment advisers,
evolving industry practices, or developments in applicable
laws or regulations.
6. This Code, a copy of each Securities Transaction Report by an
access person, any written report hereunder by the Secretary, and lists of all
persons required to make reports shall be preserved with the Trust's records for
the period required by Rule 17j-1.
Adopted: December 6, 1994
The Board of Trustees
AmSouth Mutual Funds
-4-
<PAGE> 6
Exhibit A
AMSOUTH MUTUAL FUNDS
Securities Transaction Report
For the Calendar Quarter Ended: , 199__
To Ropes & Gray, legal counsel to the AmSouth Mutual Funds:
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership, and which are required to be
reported pursuant to the Trust's Code of Ethics:
<TABLE>
<CAPTION>
Broker/
Dealer
No. of Shares and Nature of or Bank
Principal Dollar Transaction Through
Date of Amount of (Purchase, Whom
Security Transaction Transaction (Price) Sale, Other) Effected
<S> <C> <C> <C>
</TABLE>
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) transactions not required to be
reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Date:_________________ Signature:________________________
<PAGE> 1
EXHIBIT (p)(2)
FORM OF AMSOUTH BANK CODE OF ETHICS
<PAGE> 2
FORM OF AMSOUTH BANK CODE OF ETHICS
STATEMENT OF RESPONSIBILITIES
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Forward 1
Summary and Key Points 3
Borrowings By Officers and Employees 5
Civic Responsibilities 5
Commitment of Sponsorship 6
Confidential and Insider Information 6
Conflicts of Interest 8
Dishonest Acts 14
Personal Conduct 15
Personal Investments 16
Political Activities 18
Reporting and Clearance Procedure 19
Trust Employees 19
Index
</TABLE>
FORWARD
The success of any bank or banking organization can be largely attributed
to the degree to which its directors, officers and employees act in all things
so as to inspire public trust and confidence. We can be extremely proud of our
past performance in this area and must constantly work to maintain and enhance
our reputation for integrity and trustworthiness. A written statement of
corporate and individual responsibilities to be followed by directors, officers
and employees of AmSouth Bancorporation and all of its subsidiaries has been in
effect for a number of years, and is now being presented in a new format as one
of the booklets in the AmSouth Employee Information Package.
This booklet has been prepared so that you will be well-informed of your
responsibilities. However, it is both impractical and unnecessary to set forth
rules to cover all conceivable situations in which a conflict of interest or
other unethical situation may arise. Therefore, the following pages give you
policy statements in several of the more sensitive areas where problems are
likely to occur. Particular attention should also be given to AmSouth's
Personnel Policy Manual and the summary of these policies contained in the "You
and AmSouth" booklet in your Employee Information Package. The Statement of
Responsibilities provides you only with certain guidelines; therefore, common
sense is an absolute necessity in avoiding potentially embarrassing situations.
IN NO WAY SHOULD THIS STATEMENT BE CONSTRUED AS ESTABLISHING MAXIMUM STANDARDS
OF CONDUCT RATHER THAN MINIMUM STANDARDS.
<PAGE> 3
This Statement of Responsibilities has been adopted by the Board of
Directors of AmSouth Bancorporation to apply to all officers, directors and
employees of the corporation and all of its subsidiaries. Following the
principles and guidelines contained herein are a condition of employment for
each and every employee. For the sake of convenience, the word "employee" is
used throughout to refer to officers, directors and employees, except where the
context clearly requires a different reading.
You are requested to read this material carefully and to retain this
booklet for future reference. Throughout this booklet AmSouth Bancorporation may
be referred to as "AmSouth", "the company" or the "Bank" and the principles and
guidelines herein shall apply to all such entities unless the context and
language specifically states otherwise. It is essential that the stated
principles be observed at all times and that any situation not consistent with
these principles immediately be discussed with the appropriate group, regional,
division, or affiliate executive officer.
C. Dowd Ritter
President and
Chief Executive Officer
AmSouth Bancorporation
-2-
<PAGE> 4
SUMMARY AND KEY POINTS
The following is a summary of the concepts contained within the Statement of
Responsibilities. This summary is not exhaustive and is not a substitute for
being familiar with the material contained herein. The guidelines established
herein and in the Statement of Responsibilities apply to all employees of
AmSouth Bancorporation and any subsidiary or affiliate.
1. You are expected to conduct your financial affairs in a manner which
will be above criticism.
2. You are encouraged to take part in community, charitable, church,
civic, educational, and fraternal activities to the extent that it
does not significantly affect time spent on AmSouth business. Prior
to seeking election or appointment to a political office, you must
discuss the situation with the area executive or department head and
where appropriate, gain their approval.
3. You cannot commit AmSouth as a sponsor of any organization or
function without prior written consent of the appropriate executive.
4. You are prohibited from using confidential information obtained
through your employment for your own benefit or for the benefit of
your family, friends or others. Confidential information is to be
used solely in the performance of your job. Upon the termination of
your employment, all information and documents must be promptly
returned to AmSouth. This information remains the property of
AmSouth.
5. You must manage your personal and business affairs in a manner which
will avoid situations that lead to a conflict of interest or even
the appearance of such a conflict. For example, you should not
borrow money from a customer or accept a gift of more than nominal
value from a customer. You should not solicit, receive or accept any
item or any advantage with the intent of being influenced in
connection with AmSouth business.
6. You are to avoid transactions for accounts in which you have some
personal interest, including family members and close, personal
friends.
7. If you are known or are suspected to have committed a dishonest or
fraudulent act, AmSouth is required by law to report the act to
Federal law enforcement agencies.
8. If you become aware, or reasonably suspect, that another employee
has committed a dishonest act in the course of his/her employment,
you must report the facts to a member of management.
-3-
<PAGE> 5
9. You should not give legal, tax or investment advice (unless
designated to do so), nor should you recommend attorneys,
accountants or insurance brokers to customers or other third
parties.
10. You should use extreme caution in investing directly or indirectly
in the stock or in the business of a customer, borrower, supplier or
competitor of AmSouth to avoid a conflict of interest.
-4-
<PAGE> 6
BORROWINGS BY OFFICERS AND EMPLOYEES
BORROWINGS BY EMPLOYEES
Subject to specific rules and regulations contained in AmSouth's Loan
Policy Manual, employees are encouraged to meet their credit needs by borrowing
from AmSouth.
BORROWINGS BY OFFICERS
(a) Regulation O. Regulation O of the Federal Reserve Board places
limitations on the borrowings by certain bank officers from their employer. Each
banking subsidiary of AmSouth Bancorporation has designated, by action of its
Board of Directors, the senior officers to whom Regulation O applies. Any
officer in doubt about the applicability of this regulation should check with
the Secretary of AmSouth Bancorporation.
(b) Non-regulation O Officers. Loans to such officers may be made by their
employer on a sound credit basis, subject to rules and regulations contained in
AmSouth's Loan Policy Manual and in accordance with all applicable laws and
related regulations.
(c) Borrowing from Non-affiliated Lending Institutions. Subject to rules
contained in AmSouth's Loan Policy Manual and to applicable banking regulations,
principally as to reporting requirements, all officers are authorized to borrow
from other banks or reputable financial institutions on customary terms and
conditions to meet proper credit needs. Although there are no limitations on the
amount of indebtedness to such outside institutions, all officers are expected
to conduct their financial affairs in a manner which will be above criticism.
(d) Special attention should be paid to the applicable provisions,
particularly regarding "insider" loans, of Titles I, VIII and IX of the
Financial Institutions Regulatory and Interest Rate Control Act of 1978 in order
to insure full compliance.
CIVIC RESPONSIBILITIES
AmSouth is dedicated to discovering and meeting, to the best of its
ability, the legitimate banking needs of individuals, organizations and
businesses within all of the communities served by the bank. Employee
involvement in local communities is a vital part of this effort and provides a
most important resource in helping to assess and meet the banking needs of
customers and potential customers. All employees are encouraged to participate
and be fully involved in community activities and to establish meaningful and
ongoing contacts with community groups and governmental entities. Employees are
encouraged to take part in community, charitable, church, civic, educational and
fraternal activities, to the extent that their time and talents permit. However,
if the nature and extent of the activity would significantly encroach on the
time usually spent on business, THE PRIOR APPROVAL OF THE APPROPRIATE DIVISION
OR REGIONAL EXECUTIVE SHOULD BE OBTAINED.
-5-
<PAGE> 7
COMMITMENT OF SPONSORSHIP
No employee should commit AmSouth or any of its subsidiaries as a sponsor
of any organization or function in connection with which AmSouth's name would or
might be used without THE PRIOR WRITTEN CONSENT OF THE APPROPRIATE DIVISION OR
REGIONAL EXECUTIVE.
CONFIDENTIAL AND INSIDER INFORMATION
PERSONAL USE
Information received as an employee of a bank has traditionally been
considered to be, and is, confidential in nature. Such information is to be held
in the strictest possible confidence.
The use of confidential information obtained through your employment for
your own benefit or for the benefit of your family or friends is prohibited. The
use of the confidential information about one customer to benefit the private
interests of another customer or any other person is also prohibited.
Financial information concerning AmSouth Bancorporation and its
subsidiaries should not be released to anyone unless it has previously been
published in reports to our shareholders or otherwise made generally available
to the public.
Confidential information may, in some circumstances, be considered
"insider information" which, if used or disclosed, could subject the employee
and anyone to whom the information has been communicated to legal liability,
Insider information is material information which has not been publicly
disclosed. Information is material if it might, if generally known, have an
effect on the market price of the company's stock. The rules against disclosing
or acting on insider information are very difficult to apply. Therefore, all
employees must be extremely cautious in discussing corporate affairs with any
outsiders, and any doubt should be resolved in favor of non-disclosure and
non-action.
BETWEEN DEPARTMENTS
Often, employees are in possession of confidential credit or other
information which, if disclosed, could have a material effect on the market
price of the customer's securities. Under no circumstances should information be
revealed to employees of the Trust Division when this information might
influence the purchase or sale of securities in which the Trust Division has an
interest. Trust employees should neither obtain nor review commercial credit
files.
-6-
<PAGE> 8
INFORMATION PROTECTION AND DISCLOSURE
Information and data are essential to the business of AmSouth
Bancorporation and its subsidiaries ("AmSouth"). Therefore, information and data
concerning AmSouth and its customers are to be protected by every officer and
employee from unauthorized modification, destruction, theft, or disclosure,
whether accidental or intentional.
In the course of your employment with AmSouth, you may have access to
confidential information about AmSouth, its plans, its policies and procedures,
its products, its electronic data systems, and its customers' banking accounts,
loans, and personal or business finances. As an employee, you must assure that
this confidential information will not be disclosed to anyone outside the
employment of AmSouth except in those situations where AmSouth is authorized by
a customer to release information about that customer or where AmSouth is
required to release information pursuant to a subpoena, court order or other
legal process. Confidential information will be used solely in the performance
of your job responsibilities, and you have a responsibility to adhere to the
security precautions and procedures of this institution, including, but not
limited to, the specific ones stated below:
1. Your use of all confidential information and assigned computer user
identification code(s) will be limited to the performance of your
specific job responsibilities with AmSouth. Further, you must
promptly notify the Information Protection Services Department upon
discovery of the improper use of such confidential information or
the use of your assigned user identification code and password by
any other party.
2. It is a specific violation of AmSouth's security policy and of
various laws to force balance any account, remove any bank funds for
your personal benefit, change bank documents or computer files for
your personal benefit, or inaccurately record any information with
bank documents for your personal benefit. If guilty of such actions,
you will be subject to immediate termination or employment and
probably criminal prosecution.
3. Upon termination of your employment, whether voluntary or otherwise,
you will immediately return to AmSouth all papers, documents,
computer generated lists, computer files, disks or diskettes,
computer programs, flowcharts, customer lists, and any other data
which are property of AmSouth.
4. All computer programs, software, algorithms and computer processing
systems of AmSouth are to be considered the confidential and
exclusive property of AmSouth.
5. Your access and use of customer or employee information for personal
gain, or other unauthorized activities, may constitute a violation
of federal statutes and
-7-
<PAGE> 9
can result in the incident being reported to the U.S. Attorney for
prosecution on criminal charges. Federal Law (18 U.S.C. Section
1030) makes it a crime for anyone to knowingly access a computer
without authorization or, having accessed a computer with
authorization, to use the opportunity such access provides for
purposes to which their access does not extend. This statute would
preclude the unauthorized obtaining of information contained in
records of the bank. Violation of any or all of these information
security procedures may result in termination of your employment and
criminal prosecution.
CONFLICTS OF INTEREST
INTRODUCTION
A conflict of interest of the appearance of a conflict of interest can
arise whenever an employee or member of his other immediate family has a
financial or other interest in a customer, borrower, supplier or other person or
company dealing with AmSouth Bancorporation or any of its subsidiaries. In this
context, "immediate family" includes the employee's spouse, parents, children,
brothers, sisters, in-laws and any relative living in the same household with
the employee. Each employee must manage his personal and business affairs in a
manner which will avoid situations that might lead to a conflict, or even the
appearance of a conflict between the employee's own interests and his or her
duty to AmSouth Bancorporation and its subsidiaries, shareholders and customers.
Directors are subject to various federal regulations designed to prevent
conflicts of interest. The following statements do not, therefore, apply to
directors, except as specifically indicated.
PROCESSING TRANSACTIONS
Employees generally should avoid processing transactions for accounts in
which they have some personal interest. Such accounts include an employee's
personal account or an account on which the employee signs with another person,
accounts belonging to members of any employee's family or to close personal
friends of the employee. The term transaction should be broadly interpreted to
include, but not to be limited to, the acceptance of a deposit in a demand
deposit account, the processing of a loan payment, or the waiver of an overdraft
charge or other fees. As a rule, employees' actions and decisions should reflect
the objective of serving the interest of AmSouth rather than favoring any one
person or group at the expense of AmSouth. For example, in most instances,
employees should serve co-workers, family members and friends just as they would
other customers of the Bank. Exceptions should be discussed with the supervising
management of the unit. Employees should also avoid participation in
transactions that circumvent established bank policies, for example, using
internal bank accounts (such as the Intrabank Settlement account) for purposes
other than those for which the accounts are intended. Processing personal
transactions through internal accounts to avoid possible overdrafts or the
required paperwork is not appropriate. All transactions should be properly run
and validated through a teller window. Transactions
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should not be placed in a teller's work without the teller's knowledge. In
addition, employees should not be asked to document another person's approval of
a transaction by forgoing that person's signature or initials on the documents,
such as general ledger or intrabank settlement tickets.
These examples are not a comprehensive list of possible conflicts of
interest. Situations not covered above or elsewhere in the Statement of
Responsibilities should result in consultation with a supervisor or a
representative of the Law Department.
To reiterate, any action that could be construed to be primarily for the
benefit of the employee, a co-worker or someone in a close personal relationship
to the employee, rather than primarily for the benefit of AmSouth's customers
and stockholders, should be questioned. Those questions should be directed to a
supervisor or more senior manager, or a representative of the Law Department.
DEALING WITH CUSTOMERS IN BUSINESS VENTURES
The participation, directly or indirectly, by any employee in any business
venture with a customer or supplier subjects the employee and his or her
employer to a possible conflict of interest. The conflict would arise if the
participation is to such an extent that it does affect or might seem to affect
judgments or decisions which the employee would need to make on behalf of his
employer.
Clearly, the facts surrounding each such participations will determine
whether a potential conflict of interest is present. However, BUSINESS
ASSOCIATIONS OF ANY KIND SHOULD BE CLOSELY EVALUATED AND SHOULD BE APPROVED IN
WRITING BY THE APPROPRIATE DIVISION OR REGIONAL EXECUTIVE AS WELL AS BEING
REPORTED TO THE PRESIDENT OF AMSOUTH BANCORPORATION. Further, the employee
should disqualify himself from participating in decisions concerning any loan or
other transaction with any company in which he has a material interest. This
prohibition is not intended to apply to ownership of less than 5% of the common
stock of corporations traded on a national securities exchange. See also,
PERSONAL INVESTMENTS, page 16.
BORROWING FROM CUSTOMERS
Employees may not borrow from customers or suppliers of AmSouth
Bancorporation or its subsidiaries, other than recognized lending institutions.
Employees calling on and doing business with correspondent banks may not become
personally indebted to such banks. The term "borrow" does not apply to normal
credit granted by merchants in connection with the purchase of goods and
services carried on open account, nor does it apply to credit obtained from a
member of one's family.
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GIFTS OR FEES
A. Receiving Gifts (Bank Bribery Act). Under the Bank Bribery Act, 18 U.S.C.
215, it is a federal crime for any director or employee or any agent or
attorney of a bank or bank holding company to corruptly solicit, demand,
accept or agree to accept for his or her own benefit or the benefit of any
other person, anything of value (such as a gift or a fee) from ANYONE with
the intent of being influenced or rewarded in connection with any business
or transaction with a bank or bank holding company. All transactions and
business with the bank or holding company are covered, including (1) loans
and other extensions of credit, (2) underwriting transactions, (3)
investment advice, (4) trust matters, (5) deposit accounts, (6) purchases
from suppliers, (7) referral of business, etc. The statute is broadly
worded and appears to cover receipt of benefits such as (1) commissions,
(2) special discounts, (3) free services, or (4) other payments or
concessions from attorneys, insurance and real estate agents, salesmen and
the like who may offer inducements for giving or referring business to
them.
Liability extends also to any person who gives, offers or promises
anything of value to any person, with intent to influence or reward a
director, employee, agent, or attorney of a financial institution
connection with any business or transaction of such financial institution.
In other words, the Bank Bribery Act applies not only to the person
receiving or asking for a gift or fee, but also to any person who gives,
offers or promises it.
The penalty for a violation of the law is as follows: If the value
of the thing offered or received exceeds $100, the offense is a felony
punishable by up to five (5) years' imprisonment and a fine of $5000 or
three times the value of the bribe or gratuity. If the value does not
exceed $100, the offense is a misdemeanor punishable by up to one year's
imprisonment and a maximum fine of $1000.
In keeping with the law, directors and employees of AmSouth are
EXPRESSLY PROHIBITED from (1) soliciting for themselves or a third party
(other than the bank itself) anything of value from any customer,
prospective customer, competitor, supplier, attorney or any other person
in return for any business service or confidential information of the
bank; and (2) accepting anything of value (other than bona fide salary,
wages and fees referred to in 18 U.S.C. 215(c) from their employer) from
any customer, prospective customer competitor, supplier, attorney or any
other person in connection with the business of the bank, either before or
after a transaction is discussed or consummated.
Regulatory guidelines provide that acceptance, from someone doing or
seeking to do business with the bank, of the following gifts, favors and
entertainment is not prohibited:
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1. Acceptance of gifts, gratuities, amenities or favors based on
obvious family or personal relationships (such as those between the
parents, children or spouse of the director or employee) where the
circumstances make it clear that it is those relationships rather
than the business of the bank which are the motivating factors;
2. Acceptance of meals, refreshments, entertainment, accommodations or
travel arrangements, all of reasonable value, in the course of a
meeting or other occasion, the purpose of which is to hold bona fide
business discussions or to foster better business relations,
provided that the expense would be paid for by the bank as a
reasonable business expense if not paid for by the other party;
3. Acceptance of loans from other banks or financial institutions on
customary terms to finance proper and usual activities, such as home
mortgage loans, except where prohibited by law;
4. Acceptance of advertising or promotional material of reasonable
value, such as pens, pencils, note pads, key chains, calendars and
similar items;
5. Acceptance of discounts or rebates on merchandise or services that
do not exceed those available to other customers;
6. Acceptance of gifts of reasonable value (i.e., not in excess of
$75.00) that are related to commonly recognized events or occasions,
such as a promotion, new job, wedding, retirement, holiday or
birthday; or
7. Acceptance of civic, charitable, educational or religious
organization awards for recognition of service or accomplishment not
in excess of $100.00, except where specifically approved by the
Chief Executive Officer or President of AmSouth Bancorporation after
a full disclosure of the facts.
On a case-by-case basis, the President of AmSouth Bancorporation may
approve other circumstances, not described above, in which an employee may
accept something of value in connection with the bank's business. Approval may
be given (i) only in writing, (ii) on the basis of a full written disclosure of
all relevant facts submitted by the employee; and (iii) if acceptance is
consistent with the Bank Bribery Act.
Regardless of the source or value of any gift or favor, a director or
employee and members of their family must decline any gift offered under
circumstances indicating or appearing to indicate that its purpose is to
influence the director or employee in the performance of his or her job and any
gift that might have, or reasonably appear to have, such an effect.
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Gifts of cash (or cash equivalent) in any amount are expressly prohibited,
as well as any gift which would be viewed as lavish or expensive by a reasonable
person, such as the use of a vacation home or hunting lodge. Employees must also
refuse any gift, even of nominal value, if it is part of a pattern or practice
which when viewed as a whole would be considered lavish or expensive. An example
would be a pattern of expensive meals or entertainment.
Any time a director or employee is offered or received something of value
from a customer, prospective customer or supplier beyond what is authorized in
this Statement of Responsibilities, this fact must be reported in writing to the
General Auditor of AmSouth Bancorporation. A REPORT MUST BE MADE EVEN IF THE
GIFT IS REFUSED. The General Auditor will maintain a file of all such
disclosures for a period of five years from the date of receipt. When questions
arise as to the legality of a gift, employees are urged to seek the advice of
the Law Department.
B. GIFT GIVING. Employees may not, on behalf of AmSouth or its subsidiaries
in connection with any transaction or business, directly or indirectly
give, offer or promise any gift, bribe, kickback, favor, discount, price
concession, loan, service or anything else of value to any individual,
business entity, organization, governmental unit, public official,
political party or other person for the purpose of influencing the action
of the recipient. This standard of conduct is not intended to prohibit
normal business practices such as providing meals, entertainment, tickets
to cultural and sporting events, promotional gifts, favors, discounts,
price concessions, gifts given as a token of friendship or special
occasion gifts (such as Christmas), so long as they are of a nominal and
reasonable value under the circumstances and promote legitimate business
development.
SIGNING ON CUSTOMER ACCOUNTS
Employees are not to sign on customers' accounts, act as deputy or
co-lessee of customers' safe deposit boxes, or otherwise represent customers.
This does not include situations which would exist if the person were not an
employee (i.e., blood or marriage relationship or officer of an organization).
SELF-DEALING
Employees and their immediate families, either acting individually or in a
fiduciary capacity, may not sell assets to nor purchase assets from AmSouth
Bancorporation or any of its subsidiaries unless such purchase or sale is at a
fair market value price and full documentation of the same is maintained in the
files of AmSouth Bancorporation or the subsidiary which is a party to the
transaction. No such purchases shall be made if the subject property was
acquired by AmSouth Bancorporation or any subsidiary by repossession or
foreclosure. This prohibition does not apply to the purchase of assets, such as
promotional premium items, offered by AmSouth Bancorporation or any subsidiary
to the general public. Employees and
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their immediate families are also prohibited from personally extending credit to
any person (other than a member of his or her family) who has applied for and
was denied such credit by AmSouth Bancorporation or any of its subsidiaries.
OUTSIDE DIRECTORSHIPS, PARTNERSHIPS AND SOLE PROPRIETORSHIPS
Service by an employee as a director or officer of, or other involvement
with, another business organization may create a potential conflict of interest.
Therefore, no employee should accept any directorship or officership of
any business or become a member of any partnership or other business venture
without the PRIOR WRITTEN APPROVAL OF THE APPROPRIATE DIVISION OR REGIONAL
EXECUTIVE AND THE WRITTEN CONCURRENCE OF THE PRESIDENT OF AMSOUTH
BANCORPORATION.
Indemnification of an employee serving as a director or officer of another
business may be available under the appropriate certificate of incorporation
only if the employee performs such service at the specific written request of
the Board of Directors of his employer.
OUTSIDE EMPLOYMENT
An officer or employee may have outside employment so long as the outside
employment is not incompatible with his or her employment with AmSouth and so
long as such employment is fulfilled solely during off-duty hours. Any outside
employment of officers should be discussed in advance with the appropriate
division or regional executive and written approval obtained from that person.
No such employment will be approved if it will or could result in conflict of
interest. Non-officer employees should refer to the Personnel Policy Manual.
FIDUCIARY APPOINTMENTS
No employees should accept an appointment as either a sole fiduciary or as
a co-fiduciary with someone other than his or her employer. Fiduciary services
are available through AmSouth Bank, and it is inappropriate for employees of
AmSouth Bancorporation or any of its subsidiaries to compete with the Bank.
Further, third parties might assume that such an employee could render
substantially the same professional services as offered by a bank trust
department.
In addition, an employee could well face the problem of having undue
demands placed on his or her time to perform fiduciary duties which can be
performed only during business hours, when full attention should be devoted to
his or her regular employment.
The above statements do not apply to those fiduciary appointments based
upon close family relationships, when accepting such an appointment would not
result in undue demands on the time of the employee. However, the acceptance of
any such appointment should be
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discussed in advance with the head of AmSouth Bank's Trust Division and written
approval obtained.
A supplement to this section for trust employees will be found beginning
on page 20.
LEGAL, TAX AND INVESTMENT ADVICE
On occasion, conversations with customers may result in a request by the
customer that an employee comment upon the legality or illegality of a proposed
transaction. In addition, questions are often raised concerning the tax
consequences of a contemplated financial transaction or the advisability of
making or retaining an investment. Extreme care must be exercised in such
discussions with customers, and no employee should say anything which might be
interpreted as the giving of legal advice or advice as to tax matters. Advice
concerning equity investments should only be given by the trust investment staff
and then only in accordance with adopted procedures. Employees should encourage
customers to consult with their own attorneys, accountants and investment
advisors on matters of this type.
RECOMMENDING OTHER FIRMS TO CUSTOMERS
Employees are not to recommend attorneys, accountants, insurance brokers
or agents, stock brokers, real estate agents or the like to customers unless, in
every case, several selections are given. The attorneys and accountants utilized
by AmSouth Bancorporation and its subsidiaries may properly be included among
the recommendations, but no preference should be expressed and they should never
constitute the sole recommendations. This section does not apply to situations
where AmSouth requires or recommends another firm for use in connection with a
business transaction between AmSouth and a customer.
DISHONEST ACTS
Federal statutes contain a number of criminal laws applicable to
employees.
These laws include, but are not limited to:
(1) Corruptly soliciting, demanding or receiving any fee, commission or
gift with the intention of being influenced or rewarded in
connection with any business of a bank or bank holding company (18
U.S.C. Section 215)
(2) Consenting to any corporate political contribution (18 U.S.C.
Section 610)
(3) Theft, embezzlement or misapplication of funds or assets (18 U.S.C.
Section 656)
(4) Making extortionate extension of credit (18 U.S.C. Sections 891-896)
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(5) Unauthorized issuance of obligations or the making of false entries
(18 U.S.C. Section 1005)
(6) Certifying a check drawn on an account in which there are not
sufficient collected funds (18 U.S.C. Section 501 and 18 U.S.C.
Section 1004)
(7) Making loans to bank examiners (18 U.S.C. Section 212)
(8) Unauthorized access to or use of confidential information through or
in connection with a computer (18 U.S.C. Section 1030)
(9) Knowingly permitting the proceeds of some form of illegal activity
to be utilized in a financial transaction or permitting a
transaction to be structured so as to avoid a transaction reporting
requirement under state or federal law (18 U.S.C. Section 1956) and
(10) Willfully failing to complete and file a required transaction report
(31 C.F.R. Section 103.49).
If any employee is known or suspected to have committed a dishonest or
fraudulent act, his employer is REQUIRED BY LAW TO REPORT THE ACT AS SOON AS IT
IS DISCOVERED TO FEDERAL LAW ENFORCEMENT AGENCIES AND TO REGULATORY AUTHORITIES.
Employees who become aware of, or reasonably suspect, that another
employee has committed a dishonest act in the course of his employment MUST
REPORT THE FACTS IMMEDIATELY TO THE DIRECTOR OF INTERNAL AUDIT OF AMSOUTH
BANCORPORATION. Federal criminal law provides that "whoever knowing that an
offense...(breach of federal criminal law) has been committed, received,
relieves, comforts or assists the offender in order to hinder or prevent his
apprehension, trial or punishment, is an accessory after the fact." (18 U.S.C.
Section 3). An accessory after the fact is subject to fines and imprisonment as
provided by law. In addition, the employee may be held personally liable for
damages resulting to his or her employer (12 U.S.C. Section 503).
PERSONAL CONDUCT
AmSouth Bancorporation and it subsidiaries have no intention of attempting
to control or regulate the private lives of employees. Each employee is expected
to monitor his personal conduct so that he or she does not bring discredit to
this organization.
Certain specific regulations governing personal conduct while at work are
contained in the Personnel Policy Manual.
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PERSONAL INVESTMENTS
INTRODUCTION
Because investments are an area in which a conflict of interest or an
appearance of a conflict of interest may very easily develop, extreme caution
should be taken by employees in investing directly or indirectly in the stock or
in the business of a customer, borrower, supplier or competitor of AmSouth
Bancorporation or any of its subsidiaries. Directors are subject to various
federal regulations governing conflicts of interest which might arise in
connection with investments. The following statements do not therefore, apply to
directors, except as specifically indicated.
INVESTMENTS IN COMPETITORS, CUSTOMERS OR SUPPLIERS
Employees, like any other individuals, may make and liquidate investments
in the stock and securities of AmSouth Bancorporation and other corporations.
However, no employee shall ever engage in such transactions as result of
material inside information obtained in the course of employment or from any
other source.
Any employee who has, either directly or beneficially, a material interest
in any customer, supplier or competitor of AmSouth Bancorporation or any of its
subsidiaries is to IMMEDIATELY DISCLOSE THAT FACT TO THE SECRETARY OF AMSOUTH
BANCORPORATION BY A WRITTEN MEMORANDUM to contain such detail as the Secretary
finds necessary or advisable.
DEFINITIONS:
(1) As used above, direct ownership and beneficial ownership are defined as
follows:
(a) Direct - Securities registered in your own name or held for your
benefit in the name of your broker or nominee.
(b) Beneficial - (1) Securities owned for your benefit in a partnership,
trust, profit-sharing plan or other entity, or (2) securities held
in the name of your spouse, minor children or other relatives who
live in your home.
(2) As used above, material interest is defined as follows:
(a) In situations where the employee is not in the position of
negotiating or approving transactions with the entity in which he or
s he has an interest, a material interest is either a 5% beneficial
ownership of the securities or an interest having a fair market
value of $50,000, whichever is less.
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(b) In cases where the employee is in a position of negotiating or
approving transactions with a customer, supplier or competitor in
which he or she has an interest, a material interest is either a 5%
beneficial ownership interest or an ownership interest having a fair
market value exceeding $10,000, whichever is less.
INVESTMENT IN AMSOUTH BANCORPORATION STOCK
While investment by employees in AmSouth Bancorporation stock and
securities is certainly appropriate, no employee should engage in such
transactions, or encourage others to do so, based on material inside information
obtained in the course of employment or otherwise. Such information includes
changes in earnings, proposed new services, unexpected losses or profits, etc.
The federal securities laws provide that any profit realized by a director
or certain officers of an issuer of registered securities, such as AmSouth
Bancorporation, from any purchase and sale, or sale and purchase, of the
issuer's equity securities within a six-month period, must be recovered by the
issuer:
The following suggestions by the New York Stock Exchange may serve as a
guide to directors and officers buying or selling AmSouth Bancorporation stock:
"1. One appropriate method of purchase might be a periodic investment
program where the directors or officers make regular purchases under
an established program administered by a broker and where the timing
of purchases is outside the control of the individual."
"2. It would also seem appropriate for officials to buy or sell stock in
their companies for a 30-day period commencing one week after the
annual report has been mailed to shareholders and otherwise broadly
circulated (provided, of course, that the annual report has
adequately covered important corporate developments and that no new
major undisclosed developments occur within that period)."
"3. Transactions may also be appropriate under the following
circumstances, provided that prior to making a purchase or sale a
director or officer contacts the chief executive officer of the
company to be sure there are no important developments pending which
need to be made public before an insider could properly participate
in the market."
"(a). Following a release of quarterly results, which includes
adequate comment on new developments during the period. This
timing of
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transactions might be even more appropriate where the report
has been mailed to shareholders."
"(b). Following the wide dissemination of information on the status
of the company and current results. For example, transactions
may be appropriate after a proxy statement or prospectus which
gives such information in connection with a merger or new
financing."
"(c) At those times when there is relative stability in the
company's operations and the market for its securities. Under
these circumstances, timing of transactions may be relatively
less important. Of course such periods of relative stability
will vary greatly from time to time and will also depend to a
large extent on the nature of the industry or the company."
"4. Where a development of major importance is expected to reach the
appropriate time for announcement within the next few months,
transactions by directors and officers should be avoided."
"5. Corporate officials should wait until after the release of earnings,
dividends or other important developments have appeared in the press
before making a purchase or sale. This permits the news to be widely
disseminated and negates the inference that officials had an inside
advantage. Similarly, transactions just prior to important press
releases should be avoided."
POLITICAL ACTIVITIES
AmSouth recognizes and believes in the importance of all citizens taking
an active interest in our political and governmental processes. Employees are
encouraged to keep themselves well-informed concerning political issues and
candidates and to take an active interest in all such matters. Voting is a
personal right and privilege and AmSouth will cooperate with employees to assure
that they are able to get to the polls on election days. However, participation
by employees in any election campaign must be undertaken in off-duty hours and
at their own expense without any use whatsoever of AmSouth facilities or
equipment, except with respect to administration of AmSouth authorized PACs
(political action committees). In every case, employees participating in
political activities do so as individual citizens and not as representatives of
AmSouth Bancorporation or any of its subsidiaries.
All corporations, which include AmSouth Bancorporation and all of its
subsidiaries, are forbidden from making contributions or expenditures, direct or
indirect, relating to any election, including the nominating process, for any
Federal office or offices. Similar restrictions apply to banks with respect to
state or local offices. AmSouth's policy is that there will not be any corporate
contributions to candidates for any offices. Expenditures for the
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administration costs of PACs are exempt from the above restrictions. AmSouth has
established political action committees to which directors and certain officers
may make contributions. Information concerning these PACs may be obtained from
AmSouth's Governmental Affairs Office in Birmingham.
AmSouth may make limited contributions in connection with a campaign to
gain passage or seek defeat of a referendum proposal, but such will be made only
with the approval of the chief executive officer of AmSouth Bancorporation.
Violations of the various political contributions laws constitute a criminal
offense both by the corporation and the corporate representative who consented
to the same. To avoid even the appearance of corporate sponsorship or
endorsement, neither AmSouth Bancorporation's nor any subsidiary's name or
address should be used in mailed material or fund collection, nor should AmSouth
Bancorporation or any subsidiary be identified in any advertisement or
literature.
Any officer or employee desiring to run for an elective political office
or to accept an appointment to a state or local government office should DISCUSS
THE MATTER IN ADVANCE WITH THE APPROPRIATE DIVISION OR REGIONAL EXECUTIVE in
order to make certain that the duties of the office and the time away from the
job will not materially interfere with assigned job responsibilities or create a
conflict of interest. If election or appointment would materially interfere or
create a conflict, it will be the executive's responsibility to make such
changes in duties and compensation as may be dictated. WRITTEN NOTICE OF AN
INTENT TO SEEK PUBLIC OFFICE MUST BE SENT TO THE PRESIDENT OF AMSOUTH
BANCORPORATION. For further information, see the Personnel Policy Manual.
Under no circumstances whatsoever are funds to be given to any
individual's political campaign in the name of AmSouth Bancorporation or any of
its subsidiaries. This prohibition applies not only to corporate funds, but also
to individual funds given in the name of the corporate entity. Any existing
AmSouth political action committee (PAC) is covered by numerous other rules and
regulations; this section does not apply to it.
REPORTING AND CLEARANCE PROCEDURE
Throughout this booklet references are made to the clearance of certain
activities by employees. Each employee should initially consult with his or her
immediate supervisor. Executive officers will communicate directly with the
chief executive officer of AmSouth Bancorporation. The chief executive officer
of AmSouth Bancorporation and all AmSouth Bancorporation directors will
communicate with the Audit Committee of the AmSouth Bancorporation Board of
Directors.
TRUST EMPLOYEES
Employees of AmSouth's Trust Division are, by law, held to the highest
standards of fiduciary responsibility. To assist trust personnel in the
performance of these responsibilities
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within the letter and spirit of the law, this section contains information and
material which is specifically applicable to trust personnel. Trust employees
are to be guided by this section as well as by the other principles set forth in
this Statement of Responsibilities.
FIDUCIARY APPOINTMENTS
Trust employees should review with particular care the material set forth
under the heading Fiduciary Appointments on page 13. Before accepting any
personal fiduciary appointment whatsoever, a trust employee should obtain the
written approval of the head of AmSouth's Trust Division. Such approval will be
given only in extraordinary circumstances.
LOANS OF TRUST FUNDS
Federal law makes it a crime for a bank to loan to any employee any funds
held in trust by the bank. In additions, any employee who participates in making
such a loan or to whom such a loan is made, is subject to fine or imprisonment,
or both.
CONFIDENTIAL AND INSIDER INFORMATION
If a trust employee receives material inside information about a
corporation, the employee should immediately and exclusively report the receipt
of such information to the head of the Trust Division in order that appropriate
action, as legally permissible, can be taken to protect the interests of AmSouth
and its trust customers.
A commercial loan officer may well receive material inside information
from a corporate borrower to assist in evaluating a proposed loan. Such
information is highly confidential and is to be restricted to those who need to
know it. Trust employees are strictly prohibited from any access to such
information, whether the access is on a formal or informal basis. It is also
inappropriate for trust employees to discuss or exchange information regarding
any particular issuer of securities with employees from the commercial banking
area.
PERSONAL INVESTMENTS
In addition to complying with the principles set forth under the heading
PERSONAL INVESTMENTS on page 16, the following specific principles are
applicable to trust and brokerage service employees.
(1) An employee may not use his or her position to obtain leverage to
purchase new issues or other thinly-traded securities.
(2) Employees who are in a position to influence the selection of
brokers or placement of commissions should not accept any favors,
direct or indirect, from members of the brokerage community which
could in any way result in the
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employee being obligated to, or appearing to be obligated to, the
broker or brokers.
(3) No employee shall purchase or sell a security based on knowledge of
a probable change in his or her employer's investment attitude
toward, or action with respect to, that security. Persons who
perform investment research activities are specifically cautioned
against transactions in securities which they anticipate
recommending at a subsequent time for purchase or sale.
(4) Employees who have knowledge that their employer is effecting or
proposes to effect transactions in a security must not effect
personal transactions in such securities if these transactions would
have an adverse effect on the execution prices obtained by their
employer.
(5) An employee who knows that his or her employer either intends to
purchase a new corporate issue or has not completed its purchase of
a new issue shall not subscribe to the same issue for his or her own
account until the employer has completed its transactions.
OUTSIDE DIRECTORSHIPS
Trust employees are sometimes called upon to act as directors or officers
of corporations, all or substantially all of the stock of the stock of which is
owned and controlled by one or more trusts or estates of which the Trust
Division is executor or trustee. A typical case would be that of a family
company created by a testator during his lifetime or pursuant to his will. In
such cases, the employee must receive authorization from the head of the Trust
Division before he can accept the appointment. No employee of the Trust Division
shall personally receive a fee or honorarium for serving as an officer or
director of such company. If a fee is received, it shall be deposited to the
relevant trust account.
BENEFICIARY UNDER A WILL OR TRUST
In order to prevent real or apparent conflicts of interest and to be
certain that no reasonable, disinterested third party could allege a conflict of
interest, extreme care must be taken in connection with bequests under wills or
trusts. All trust employees must report to the head of the Trust Division any
gift of a beneficial interest or legacy under wills or trusts of customers of
their employer, other than those from a relative. This report must be made as
soon as the employee learns of the proposed or actual gift. If the head of the
Trust Division determines that a real or apparent conflict of interest exists,
or could exist, by reason of the bequest of gift, it will be necessary for the
employee to renounce the bequest or make every reasonable effort to be relieved
of the beneficial designation under the will or trust agreement.
-21-
<PAGE> 23
INVESTMENT ADVICE
On occasion a member of the investment staff may be requested to provide
investment advice to someone other than a customer or a prospective customer of
the Trust Division. Requests for free advice when there is no continuing
relationship with the recipient of the advice should be discouraged. A
characteristic of the securities market is change. The qualities of a sound
investment may change over time to the point where the security is financially
unsound. Investment staff personnel have no way of following recommendations
made to persons who are not continuing customers since they are not recorded on
the records of the Trust Division. By the time they become aware of a prior
recommendation to an outsider, that person may have suffered a financial loss.
Therefore, extreme care should be exercised in offering investment advice to
people other than those with whom Trust Division personnel have a continuing
relationship.
-22-
<PAGE> 1
EXHIBIT (p)(3)
FORM OF BISYS FUND SERVICES CODE OF ETHICS
<PAGE> 2
Ex(p)(3)
FORM OF
BISYS FUND SERVICES
CODE OF ETHICS
I. INTRODUCTION
This Code of Ethics (the "Code") sets forth the basic policies of ethical
conduct for all directors, officers and associates (hereinafter referred to as
"Covered Persons") of the BISYS Fund Services companies listed on Exhibit A
hereto (hereinafter collectively referred to as "BISYS").
Rule 17j-1(b) under the Investment Company Act of 1940, as amended, (the
"1940 Act") makes it unlawful for BISYS companies operating as a principal
underwriter of a registered investment company (hereinafter referred to
individually as a "Fund" or collectively as the "Funds"), or any affiliated
person of such principal underwriter, in connection with the purchase or sale by
such person of a security "HELD OR TO BE ACQUIRED"(1) by any Fund:
(1) to employ any device, scheme or artifice to defraud the Fund;
(2) to make to the Fund any untrue statement of a material fact or omit
to state to the Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(3) to engage in any act, practice or course of business that operates
or would operate as a fraud or deceit upon the Fund; or
(4) to engage in any manipulative practice with respect to the Fund.
Any violation of this provision by a Covered Person shall be deemed to be
a violation of this Code.
II. RISKS OF NON-COMPLIANCE
Any violation of this Code may result in the imposition by BISYS of
sanctions against the Covered Person, or may be grounds for the immediate
termination of the Covered Person's position with BISYS. In addition, in some
cases (e.g., the misuse of inside information), a violation of federal and state
civil and criminal statutes may subject the Covered Person to fines,
imprisonment and/or monetary damages.
- --------
(1) A security "HELD OR TO BE ACQUIRED" is defined under Rule 17j-l(a)(10) as
any COVERED SECURITY which, within the most recent fifteen (15) days: (A) is or
has been held by a Fund, or (B) is being or has been considered by a Fund or the
investment adviser for a Fund for purchase by the Fund. A purchase or sale
includes the writing of an option to purchase or sell and any security that is
convertible into or exchangeable for, any security that is held or to be
acquired by a Fund. "COVERED SECURITIES", as defined under Rule 17j-1(a)(4), DO
NOT INCLUDE: (i) securities issued by the United States Government; (ii)
bankers' acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt instruments, including repurchase agreements; (iii)
shares of open-end investment companies; (iv) transactions which you had no
direct or indirect influence or control; (v) transactions that are not
initiated, or directed, by you; and (vi) securities acquired upon the exercise
of rights issued by the issuer to all shareholders pro rata.
<PAGE> 3
III. ETHICAL STANDARDS
The foundation of this Code consists of basic standards of conduct
including, but not limited to, the avoidance of conflicts between personal
interests and interests of BISYS or its Fund clients. To this end, Covered
Persons should understand and adhere to the following ethical standards:
(a) THE DUTY AT ALL TIMES TO PLACE THE INTERESTS OF FUND SHAREHOLDERS
FIRST;
This duty requires that all Covered Persons avoid serving their own
personal interests ahead of the interests of the shareholders of any
Fund for which BISYS serves as the administrator, distributor,
transfer agent or fund accountant.
(b) THE DUTY TO ENSURE THAT ALL PERSONAL SECURITIES TRANSACTIONS BE
CONDUCTED IN A MANNER THAT IS CONSISTENT WITH THIS CODE TO AVOID ANY
ACTUAL OR POTENTIAL CONFLICT OF INTEREST OR ANY ABUSE OF SUCH
COVERED PERSON'S POSITION OF TRUST AND RESPONSIBILITY; AND
Covered Persons should study this Code and ensure that they
understand its requirements. Covered Persons should conduct their
activities in a manner that not only achieves technical compliance
with this Code but also abides by its spirit and principles.
(c) THE DUTY TO ENSURE THAT COVERED PERSONS DO NOT TAKE INAPPROPRIATE
ADVANTAGE OF THEIR POSITION WITH BISYS.
Covered Persons engaged in personal securities transactions should
not take inappropriate advantage of their position or of information
obtained during the course of their association with BISYS. Covered
Persons should avoid situations that might compromise their judgment
(e.g., the receipt of perquisites, gifts of more than de minimis
value or unusual investment opportunities from persons doing or
seeking to do business with BISYS or the Funds).
A "PERSONAL SECURITIES TRANSACTION" is considered to be a
transaction in a Covered Security of which the Covered Person is
deemed to have "BENEFICIAL OWNERSHIP."(2) This includes, but is not
limited to, transactions in accounts of the Covered Person's spouse,
minor children, or other relations residing in the Covered Person's
household, or accounts in which the Covered Person has discretionary
investment control.
IV. RESTRICTIONS AND PROCEDURES
This section is divided into two (2) parts. Part A relates to restrictions
and procedures applicable to all Covered Persons in addition to the
aforementioned Rule 17j-1(b) provisions. Part B imposes additional restrictions
and reporting requirements for those Covered Persons who are listed on Exhibit B
hereto (hereinafter referred to as "ACCESS PERSONS"(3)).
- -------------
(2) "BENEFICIAL OWNERSHIP" of a security is defined under Rule 16a-1(a)(2) of
the Securities Exchange Act of 1934, which provides that a Covered Person should
consider himself/herself the beneficial owner of securities held by his/her
spouse, his/her minor children, a relative who shares his/her home, or other
persons, directly or indirectly, if by reason of any contract, understanding,
relationship, agreement or other arrangement, he/she obtains from such
securities benefits substantially equivalent to those of ownership. He/she
should also consider himself/herself the beneficial owner of securities if
he/she can vest or revest title in himself/herself now or in the future.
(3) An "ACCESS PERSON" is defined under Rule 17j-1(a)(1)(ii) to include any
director, officer or general partner of a principal underwriter for a Fund who,
in the ordinary course of business, makes, participates in or OBTAINS
INFORMATION regarding the purchase or sale of securities for such Fund or whose
functions or duties in the ordinary course of business relate to the making of
any recommendation to such Fund regarding the purchase or sale of
2
<PAGE> 4
A. RESTRICTIONS AND PROCEDURES FOR ALL COVERED PERSONS:
1. Prohibition Against Use of Material Inside Information
Covered Persons may have access to information about Funds that is
confidential and not available to the general public, such as (but
not limited to) information concerning securities held in, or traded
by, Fund portfolios, information concerning certain underwritings of
broker/dealers affiliated with a Fund that may be deemed to be
"MATERIAL INSIDE INFORMATION", and information which involves a
merger or acquisition that has not been disclosed to the public.
"MATERIAL INSIDE INFORMATION" IS DEFINED AS ANY INFORMATION ABOUT A
COMPANY WHICH HAS NOT BEEN DISCLOSED TO THE GENERAL PUBLIC AND WHICH
EITHER A REASONABLE PERSON WOULD DEEM TO BE IMPORTANT IN MAKING AN
INVESTMENT DECISION OR THE DISSEMINATION OF WHICH IS LIKELY TO
IMPACT THE MARKET PRICE OF THE COMPANY'S SECURITIES.
Covered Persons in possession of material inside information must
not trade in or recommend the purchase or sale of the securities
concerned until the information has been properly disclosed and
disseminated to the public.
2. Initial and Annual Certifications
Within ten (10) days following the commencement of their employment
or otherwise becoming subject to this Code and at least annually
following the end of the calendar year, all Covered Persons shall be
required to sign and submit to the Code Compliance Officer a written
certification, in the form of Exhibit C hereto, affirming that
he/she has read and understands this Code to which he/she is
subject. In addition, the Covered Person must certify annually that
he/she has complied with the requirements of this Code and has
disclosed and reported all personal securities transactions that are
required to be disclosed and reported by this Code. The Code
Compliance Officer will circulate the Annual Certifications and
Holdings Reports for completion following the end of each calendar
year.
B. RESTRICTIONS AND REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS:
Each Access Person must refrain from engaging in a PERSONAL
SECURITIES TRANSACTION when the Access Person knows, or in the
ordinary course of fulfilling his/her duties would have reason to
know, that at the time of the personal securities transaction a Fund
has a pending buy or sell order in the same Covered Security.
1. Initial and Annual Holdings Reports
All Access Persons must file a completed Initial and Annual Holdings
Report, in the form of Exhibit D hereto, with the Code Compliance
Officer WITHIN TEN (10) DAYS OF COMMENCEMENT OF THEIR EMPLOYMENT OR
OTHERWISE BECOMING SUBJECT TO THIS CODE AND THEREAFTER ON AN ANNUAL
BASIS FOLLOWING THE END OF THE CALENDAR YEAR IN ACCORDANCE WITH
PROCEDURES ESTABLISHED BY THE CODE COMPLIANCE OFFICER.
2. Transaction/New Account Reports
- --------------------------------------------------------------------------------
securities. This Code has included BISYS associates that are not directors,
officers or general partners of any BISYS Fund Services company but would
otherwise be deemed Access Persons for purposes of this Code.
3
<PAGE> 5
All Access Persons must file a completed Transaction/New Account
Report, in the form of Exhibit E hereto, with the Code Compliance
Officer WITHIN TEN (10) DAYS AFTER (I) OPENING AN ACCOUNT WITH A
BROKER, DEALER OR BANK IN WHICH COVERED SECURITIES ARE HELD; OR (II)
ENTERING INTO ANY PERSONAL SECURITIES TRANSACTION IN WHICH AN ACCESS
PERSON HAS ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP.
Personal securities transactions are those involving any COVERED
SECURITY(1) in which the person has, or by reason of such personal
securities transaction acquires, any direct or indirect, "BENEFICIAL
OWNERSHIP."(2)
3. Confirmations and Statements
In order to provide BISYS with information to determine whether the
provisions of this Code are being observed, each Access Person shall
direct his/her broker, dealer or bank to supply to the Code
Compliance Officer, on a timely basis, duplicate copies of
confirmations of all personal securities transactions and copies of
monthly statements for all Covered Securities accounts. The
confirmations should match the Transaction/New Account Reports.
These confirmations and statements should be mailed, on a
confidential basis, to the Code Compliance Officer at the following
address:
4
<PAGE> 6
ATTN: Code Compliance Officer
Regulatory Services
BISYS Fund Services
3435 Stelzer Road,Suite 1000
Columbus, Ohio 43219-8001
C. REVIEW OF REPORTS AND ASSESSMENT OF CODE ADEQUACY:
The Code Compliance Officer shall review and maintain the Initial
and Annual Certifications, Initial and Annual Holdings Reports and
Transaction/New Account Reports (the "Reports") with the records of
BISYS. Following receipt of the Reports, the Code Compliance Officer
shall consider in accordance with Procedures designed to prevent
Access Persons from violating this Code:
(a) whether any personal securities transaction
evidences an apparent violation of this Code; and
(b) whether any apparent violation of the reporting
requirement has occurred pursuant to Section B above.
Upon making a determination that a violation of this Code, including
its reporting requirements, has occurred, the Code Compliance
Officer shall report such violations to the General Counsel of BISYS
Fund Services who shall determine what sanctions, if any, should be
recommended to be taken by BISYS. The Code Compliance Officer shall
prepare quarterly reports to be presented to the Fund Boards of
Directors/Trustees with respect to any material trading violations
under this Code.
This Code, a copy of all Reports referenced herein, any reports of
violations, and lists of all Covered and Access Persons required to
make Reports, shall be preserved for the period(s) required by Rule
17j-1. BISYS shall review the adequacy of the Code and the operation
of its related Procedures at least once a year.
V. REPORTS TO FUND BOARDS OF DIRECTORS/TRUSTEES
BISYS shall submit the following reports to the Board of
Directors/Trustees for each Fund for which it serves as principal underwriter:
A. BISYS Fund Services Code of Ethics
A copy of this Code shall be submitted to the Board of each Fund no
later than September 1, 2000 or for new Fund clients, prior to BISYS
commencing operations as principal underwriter, for review and
approval. Thereafter, all material changes to this Code shall be
submitted to each Board for review and approval not later than six
(6) months following the date of implementation of such material
changes.
B. Annual Certification of Adequacy
The Code Compliance Officer shall annually prepare a written report
to be presented to the Board of each Fund detailing the following:
5
<PAGE> 7
1. Any issues arising under this Code or its related Procedures
since the preceding report, including information about
material violations of this Code or its related Procedures and
sanctions imposed in response to such material violations; and
2. A Certification to Fund Boards, in the form of Exhibit F
hereto, that BISYS has adopted Procedures designed to be
reasonably necessary to prevent Access Persons from violating
this Code.
6
<PAGE> 8
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT A
The following companies are subject to the BISYS Fund Services Code of
Ethics(1):
Barr Rosenberg Funds Distributor, Inc.
BISYS Fund Services, Inc.
BISYS Fund Services Limited Partnership
BISYS Fund Services Ohio, Inc.
BNY Hamilton Distributors, Inc.
CFD Fund Distributors, Inc.
Centura Funds Distributor, Inc.
Concord Financial Group, Inc.
Kent Funds Distributors, Inc.
Evergreen Distributor, Inc.
IBJ Funds Distributor, Inc..
Mentor Distributors, LLC
The One Group Services Company
Performance Funds Distributor, Inc.
VISTA Fund Distributors, Inc.
- -------------------------
(1) The companies listed on this Exhibit A may be amended from time to time,
as required.
AS OF JANUARY 11, 2000
A-1
<PAGE> 9
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT B
The following Covered Persons are considered ACCESS PERSONS under the BISYS Fund
Services Code of Ethics(1):
Client Services - all associates
CFD Fund Distributors, Inc. - all directors, officers and employees
Directors/Officers of each BISYS entity listed on Exhibit A that met the
statutory definition of Access Person under Rule 17j-1
Financial Services (Fund Accounting and Financial Administration) - all
associates
Fund Administration - all associates
Information Systems - all associates
Legal Services - all paralegals and attorneys
The One Group Services Company - all directors, officers and employees
Tax Services - all associates
VISTA Fund Distributors, Inc. - all officers, directors and employees
All wholesalers and telewholesalers employed by the BISYS companies listed on
Exhibit A
- -------------------------
(1) The Access Persons listed on this Exhibit B may be amended from time to
time, as required.
AS OF JANUARY 11, 2000
B-1
<PAGE> 10
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT C
INITIAL AND ANNUAL CERTIFICATIONS
I hereby certify that I have read and thoroughly understand and agree to
abide by the conditions set forth in the BISYS Fund Services Code of Ethics. I
further certify that, during the time of my affiliation with BISYS, I will
comply or have complied with the requirements of this Code and will
disclose/report or have disclosed/reported all personal securities transactions
required to be disclosed/reported by the Code.
If I am deemed to be an Access Person under this Code, I certify that I
will comply or have complied with the Transaction/New Account Report
requirements as detailed in the Code and submit herewith my Initial and Annual
Holdings Report. I further certify that I will direct or have directed each
broker, dealer or bank with whom I have an account or accounts to send to the
BISYS Code Compliance Officer duplicate copies of all confirmations and
statements relating to my account(s).
- --------------------------------
Print or Type Name
- ---------------------------------
Signature
- ---------------------------------
Date
C-1
<PAGE> 11
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT D
INITIAL AND ANNUAL HOLDINGS REPORT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF ACCOUNT NUMBER(S) IF NEW
ACCOUNT,
BROKER, DEALER OR BANK(S) DATE ESTABLISHED
<S> <C> <C>
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
- ----------------------------- ------------------ -----------------
</TABLE>
ATTACHED ARE THE COVERED SECURITIES BENEFICIALLY OWNED BY ME AS OF THE DATE OF
THIS INITIAL AND ANNUAL HOLDINGS REPORT.
- --------------------------------
Print or Type Name
- ---------------------------------
Signature
- ---------------------------------
Date
D-1
<PAGE> 12
<TABLE>
<CAPTION>
SECURITY NUMBER OF PRINCIPAL AMOUNT
DESCRIPTION COVERED
(SYMBOL/CUSIP) SECURITIES/
SHARES HELD
<S> <C> <C>
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ---------------- ---------------- ----------------
</TABLE>
D-2
<PAGE> 13
BISYS FUND SERVICES CODE OF ETHICS -TRANSACTION/NEW ACCOUNT
REPORT EXHIBIT E
I hereby certify that the Covered Securities described below (or attached
hereto in the annual statement from my broker, dealer or bank) were purchased or
sold on the date(s) indicated. Such Covered Securities were purchased or sold in
reliance upon public information lawfully obtained by me through independent
research. I have also listed below the account number(s) for any new account(s)
opened in which Covered Securities are held. My decision to enter into any
personal securities transaction(s) was not based upon information obtained as a
result of my affiliation with BISYS.
COVERED SECURITIES PURCHASED/ACQUIRED OR SOLD/DISPOSED
<TABLE>
<CAPTION>
Security Trade Number of Per Share Principal Interest Maturity Name of Broker, Dealer Bought (B)
Description Date Shares Price Amount Rate Rate or Bank(and Account Number or
(Symbol/CUSIP) (If Applicable) (If Applicable) and Date Established, If New) Sold (S)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
- -------- ----- ------- ------ -------- ------- -------- ------------------ ---------
</TABLE>
This Transaction/New Account Report is not an admission that you have or
had any direct or indirect beneficial ownership in the Covered Securities listed
above.
- --------------------------------
Print or Type Name
- -------------------------------- ----------------------------
Signature Date
E-1
<PAGE> 14
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT F
CERTIFICATION TO FUND BOARDS
BISYS Fund Services ("BISYS") requires that all directors, officers and
associates of BISYS ("Covered Persons") certify that they have read and
thoroughly understand and agree to abide by the conditions set forth in the
BISYS Code of Ethics (the "Code"). If such Covered Persons are deemed to be
Access Persons under the Code, they are required to submit Initial and Annual
Holdings Reports, as well as Transaction/New Account Reports, to the Code
Compliance Officer, listing all personal securities transactions in Covered
Securities for all such accounts in which the Access Person has any direct or
indirect beneficial interest within ten (10) days of entering into any such
transactions. Access Persons must direct their broker, dealer or bank(s) to send
duplicate trade confirmations and statements of all such personal securities
transactions directly to the Code Compliance Officer who compares them to the
required Transaction/New Account Reports. Additionally, the Code Compliance
Officer undertakes a quarterly review of all Access Person's personal securities
transactions against the Fund's Investment Adviser for all such Funds that BISYS
serves as principal underwriter.
The undersigned hereby certifies that BISYS has adopted Procedures designed to
be reasonably necessary to prevent Access Persons from violating BISYS' Code and
the required provisions of Rule 17j-1 under the Investment Company Act of 1940,
as amended.
- -------------------------------- ------------------
Kathleen McGinnis Date
Code Compliance Officer
BISYS Fund Services
F-1
