1 As filed with the Securities and Exchange Commission on November 19, 1999 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PRE-EFFECTIVE AMENDMENT NO. POST-EFFECTIVE AMENDMENT NO. (Check appropriate box or boxes) AMSOUTH FUNDS (Exact Name of Registrant as Specified in Charter) 3435 Stelzer Road Columbus, OH 43219 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 1-800-451-8382 (AREA CODE AND TELEPHONE NUMBER) ALAN G. PRIEST, ESQUIRE Ropes & Gray One Franklin Square 1301 K Street, N.W., Suite 800 East Washington, D.C. 20005 (NAME AND ADDRESS OF AGENT FOR SERVICE) Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective. It is proposed that this filing will become effective on December 19, 1999 pursuant to Rule 488. Title of securities being registered: Units of beneficial interest An indefinite amount of the Registrant's securities has been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under The Investment Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at this time. 2 CROSS-REFERENCE SHEET FORM N-14 ITEM CAPTION IN COMBINED PROSPECTUS/PROXY STATEMENT - -------------- ---------------------------------------------- 1 Cross-Reference Sheet; Front Cover 2 Table of Contents 3 Synopsis and Principal Risks 4 Proposal (1) -- Approval of Agreement and Plan of Reorganization; Introduction; Proposal Regarding Approval or Disapproval of Agreement and Plan of Reorganization; Background and Reasons for the Proposed Reorganization; Information about the Reorganization 5 Front Cover -- Incorporated by reference to specified documents; AmSouth Funds; Financial Statements; Information filed with the Securities and Exchange Commission; Management Discussion of Fund Performance 6 Front Cover -- Incorporated by Reference to Specified Documents; ISG Funds; Financial Statements; Information filed with the Securities and Exchange Commission 7 Introduction; Proposal Regarding Approval or Disapproval of Agreement and Plan of Reorganization; Information About the Reorganization; Voting Information Proposal (2) -- Approval of Investment Advisory Agreement; Introduction; Proposal Regarding Approval or Disapproval of Investment Advisory Agreement Proposal (3) -- Approval of Investment Sub-Advisory Agreements; Introduction; Proposal Regarding Approval or Disapproval of Investment Sub- Advisory Agreements 8 Interest of Certain Persons in the Transaction 9 Not Applicable CAPTION IN COMBINED PROSPECTUS/PROXY STATEMENT 10, 11 Cover Page 12 Cover Page -- Incorporated by reference to specified documents 13 Cover Page -- Incorporated by reference to specified documents 14 Pro Forma Financial Statements Part C The information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. 2 3 IMPORTANT SHAREHOLDER INFORMATION ISG FUNDS The document you hold in your hands contains your Combined Prospectus/Proxy Statement and proxy card. A proxy card is, in essence, a ballot. When you vote your proxy, it tells us how to vote on your behalf on important issues relating to your ISG Funds. If you simply sign the proxy without specifying a vote, your shares will be voted in accordance with the recommendations of the Board of Directors. We urge you to spend a few minutes with the Combined Prospectus/Proxy Statement, fill out your proxy card, and return it to us. By voting your proxy, and doing so promptly, you help us avoid having to make additional mailings. Please take a few moments to exercise your right to vote. Thank you. The Combined Prospectus/Proxy Statement constitutes the Proxy Statement of the ISG Funds for the meeting of their shareholders. It also constitutes the Prospectus of AmSouth for 21 of its Funds which are to issue shares in connection with the proposed reorganization of the ISG Funds with AmSouth Funds described in the enclosed materials. 3 4 ISG FUNDS Columbus, OH 43219 December 22, 1999 To the Shareholders: Enclosed you will find several documents being furnished to you in connection with a special meeting of the shareholders of the ISG Funds to be held on February 11, 2000 at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219. We hope this material will receive your immediate attention and that, if you cannot attend the meeting in person, you will vote your proxy promptly. As you may know, First American Corporation recently merged with AmSouth Bancorporation on October 1, 1999. As a result, the new organization has since taken steps to consolidate the mutual fund investment advisory activities of both bank holding companies. Currently, First American National Bank, a wholly-owned subsidiary of AmSouth Bancorporation, provides investment advisory services to ISG Funds. AmSouth Bank, a wholly-owned subsidiary of AmSouth Bancorporation, currently provides investment advisory services to AmSouth Funds ("AmSouth"). As the next step in the consolidation process, we are asking you to consider and approve a proposed Agreement and Plan of Reorganization for your ISG Fund. The Plan of Reorganization provides that each ISG Fund transfer all of its assets to the corresponding AmSouth Fund, as listed in the chart below, in return for Trust or Class A or Class B shares (collectively, "Shares") of such AmSouth Fund and the assumption by such AmSouth Fund of all of the liabilities of such ISG Fund. After the transfer, Shares of the corresponding AmSouth Fund will be distributed to the ISG Fund's shareholders tax-free in liquidation of such ISG Fund. As a result of these transactions, your ISG Fund shares, in effect, would be exchanged at their net asset value and on a tax-free basis for Shares of such AmSouth Fund. All ISG Fund shareholders will receive shares of the AmSouth Class (Class A, Class B or Trust Class) that corresponds to the class of ISG Fund shares ("ISG Shares") they hold. Each AmSouth Fund listed below as a "New AmSouth Fund" recently has been organized for the purpose of continuing the investment operations of the corresponding ISG Fund, and has no assets or prior history of investment operations. ISG FUNDS NEW AMSOUTH FUNDS --------- ----------------- ISG International Equity Fund AmSouth International Equity Fund ISG Mid-Cap Fund AmSouth Mid Cap Fund ISG Capital Growth Fund AmSouth Capital Growth Fund ISG Large-Cap Equity Fund AmSouth Large Cap Fund ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio 4 5 ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio ISG FUNDS PRE-EXISTING AMSOUTH FUNDS ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund ISG Equity Income Fund AmSouth Equity Income Fund ISG Income Fund AmSouth Bond Fund ISG Government Income Fund AmSouth Government Income Fund ISG Limited Term Income Fund AmSouth Limited Term Bond Fund ISG Municipal Income Fund AmSouth Municipal Bond Fund ISG Prime Money Market Fund AmSouth Prime Money Market Fund ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund First American National Bank has advised the ISG Funds' Directors that it believes that the above-described transactions regarding the ISG Funds and the AmSouth Funds offer the shareholders of the ISG Funds an opportunity to pursue similar investment objectives more effectively with potentially lower expense ratios over time. The reorganization of each ISG Fund will be tax-free and will not involve any sales loads, commissions or transaction charges. We also are asking you to approve the current investment advisory agreement with First American National Bank and, if you are a shareholder of ISG International Equity Fund, ISG Small-Cap Opportunity Fund or ISG Mid-Cap Fund, the current sub-investment advisory agreement between First American National Bank and the respective sub-adviser to those ISG Funds. These agreements became effective as of the date First American Corporation merged with AmSouth Bancorporation--October 1, 1999--and will remain in effect, if approved by shareholders, until the relevant ISG Fund's reorganization. YOUR FUND'S DIRECTORS BELIEVE THAT THE PROPOSED COMBINATIONS OF THE ISG FUNDS WITH THE AMSOUTH FUNDS AND APPROVAL OF THE INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS ARE IN THE BEST INTERESTS OF THE ISG FUNDS AND THEIR SHAREHOLDERS AND RECOMMEND THAT YOU VOTE IN FAVOR OF SUCH PROPOSALS. The Notice of Special Meeting of Shareholders, the accompanying Combined Prospectus/Proxy Statement and proxy cards are enclosed. Please read them carefully. If you are unable to attend the meeting in person, we urge you to sign, date, and return the proxy card so that your shares may be voted in accordance with your instructions. SINCE THE MEETING IS LESS THAN EIGHT WEEKS AWAY, WE URGE YOU TO GIVE THE ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO AS TO AVOID THE EXPENSE OF ADDITIONAL MAILINGS. 5 6 Your vote is important to us. Thank you for taking the time to consider this important proposal. Sincerely yours, [ ] 6 7 ISG FUNDS NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To the Shareholders of : ISG International Equity Fund ISG Small-Cap Opportunity Fund ISG Mid-Cap Fund ISG Capital Growth Fund ISG Large-Cap Equity Fund ISG Equity Income Fund ISG Income Fund ISG Government Income Fund ISG Limited Term Income Fund ISG Limited Term U.S. Government Fund ISG Tennessee Tax-Exempt Fund ISG Limited Term Tennessee Tax-Exempt Fund ISG Municipal Income Fund ISG Prime Money Market Fund ISG Treasury Money Market Fund ISG Tax-Exempt Money Market Fund ISG Aggressive Growth Portfolio ISG Growth Portfolio ISG Growth & Income Portfolio ISG Moderate Growth & Income Portfolio ISG Current Income Portfolio NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the above-referenced funds (collectively, the "ISG Funds"), separate series of The Infinity Mutual Funds, Inc. ("the Company"), will be held at BISYS Fund Services, 3435 Stelzer Road, Columbus, OH on February 11, 2000 at TIME, Eastern time, for the following purposes: EACH ISG FUND WILL VOTE SEPARATELY ON PROPOSAL ONE 1. To consider and act upon an Agreement and Plan of Reorganization ("Agreement") pursuant to which each ISG Fund will transfer all of its assets to a corresponding AmSouth Fund as listed below in exchange for Trust, Class A and Class B shares (collectively, "Shares") of such AmSouth Fund and the assumption by such AmSouth Fund of all of the liabilities of such ISG Fund, followed by the dissolution and liquidation of such ISG Fund, and the distribution of Shares of such AmSouth Fund to the shareholders of such ISG Fund: ISG International Equity Fund AmSouth International Equity Fund ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund ISG Mid-Cap Fund AmSouth Mid Cap Fund ISG Capital Growth Fund AmSouth Capital Growth Fund ISG Large-Cap Equity Fund AmSouth Large Cap Fund ISG Equity Income Fund AmSouth Equity Income Fund 7 8 ISG Income Fund AmSouth Bond Fund ISG Government Income Fund AmSouth Government Income Fund ISG Limited Term Income Fund AmSouth Limited Term Bond Fund ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund ISG Municipal Income Fund AmSouth Municipal Bond Fund ISG Prime Money Market Fund AmSouth Prime Money Market Fund ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio EACH ISG FUND WILL VOTE SEPARATELY ON PROPOSAL TWO 2. To consider and act upon a new Investment Advisory Agreement between the Company, with respect to the ISG Funds, and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Funds. The new Investment Advisory Agreement was approved by the Board of Directors, effective as of the date of the merger (the "Merger") of First American Corporation, the former parent of the ISG Funds' investment adviser, First American National Bank, with and into AmSouth Bancorporation. ISG INTERNATIONAL EQUITY FUND, ISG MID-CAP FUND AND ISG SMALL-CAP OPPORTUNITY FUND ONLY WILL EACH VOTE SEPARATELY ON PROPOSAL THREE 3. (a) To consider and act upon a new Sub-Investment Advisory Agreement between Lazard Asset Management, the present sub-adviser to the ISG International Equity Fund, and First American National Bank, with respect to the ISG International Equity Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for ISG International Equity Fund; (b) To consider and act upon a new Sub-Investment Advisory Agreement between Bennett Lawrence Management, LLC, the present sub-adviser to the ISG Mid-Cap Fund, and First American National Bank, on behalf of the ISG Mid-Cap Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for ISG Mid-Cap Fund; and 8 9 (c) To consider and act upon a new Sub-Investment Advisory Agreement between Womack Asset Management, Inc., the present sub-adviser to the ISG Small-Cap Opportunity Fund, and First American National Bank, on behalf of the ISG Small-Cap Opportunity Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for the ISG Small-Cap Opportunity Fund. The new Sub-Investment Advisory Agreements were approved by the Board of Directors, effective as of the date of the Merger. 4. To transact such other business as may properly come before the Meeting or any adjournment or adjournments thereof. The proposed transaction is described in the attached Combined Prospectus/Proxy Statement. A copy of the Agreement is appended as Appendix A thereto. Pursuant to instructions of the Company's Board of Directors, the close of business on December 2, 1999, has been designated as the record date for determination of shareholders entitled to notice of, and to vote at, the Meeting. SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON. By Order of the Directors [ ] [ ] Columbus, OH December 22, 1999 9 10 PROSPECTUS/PROXY STATEMENT December 22, 1999 AmSouth Funds ISG Funds Columbus, OH 43219 Columbus, OH 43219 Tel. No. 1-800-451-8382 Tel. No. 1-800-852-0045 COMBINED PROSPECTUS/PROXY STATEMENT This Combined Prospectus/Proxy Statement is furnished in connection with the solicitation of proxies from the shareholders of the ISG Funds for use at a Special Meeting of Shareholders of the ISG Funds for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders. Shareholders of record at the close of business on December 2, 1999, are entitled to receive notice of and to vote at the Meeting. It is proposed that each ISG Fund transfer all of its assets and liabilities to the corresponding AmSouth Fund in exchange for Trust Class, Class A and Class B shares (collectively "Shares"), followed by the dissolution and liquidation of the respective ISG Fund and the distribution of Shares to the shareholders of the ISG Fund (the "Transaction"). As a result of the proposed Transaction, each ISG Shareholder will receive on a tax-free basis, a number of full and fractional Shares of the corresponding AmSouth Fund equal in value at the date of the exchange to the net asset value of the ISG Shares transferred by each Shareholder to the corresponding AmSouth Fund. All ISG shareholders will receive shares of the AmSouth Class (Class A, Class B or Trust Class) that correspond to the class of ISG Shares that they hold. It is proposed that each ISG Fund transfer all of its assets, subject to liabilities, to a corresponding AmSouth Fund as indicated below. Each AmSouth Fund listed below as a "New AmSouth Fund" recently has been organized for the purpose of continuing the investment operations of the corresponding ISG Fund, and has no assets or prior history of investment operations. ISG FUNDS NEW AMSOUTH FUNDS ISG International Equity Fund AmSouth International Equity Fund ISG Mid-Cap Fund AmSouth Mid Cap Fund ISG Capital Growth Fund AmSouth Capital Growth Fund ISG Large-Cap Equity Fund AmSouth Large Cap Fund ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio 10 11 ISG FUNDS PRE-EXISTING AMSOUTH FUNDS ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund ISG Equity Income Fund AmSouth Equity Income Fund ISG Income Fund AmSouth Bond Fund ISG Government Income Fund AmSouth Government Income Fund ISG Limited Term Income Fund AmSouth Limited Term Bond Fund ISG Municipal Income Fund AmSouth Municipal Bond Fund ISG Prime Money Market Fund AmSouth Prime Money Market Fund ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund The Meeting also is being called to permit Shareholders of each ISG Fund to consider and act upon a new Investment Advisory Agreement (the "New Advisory Agreement") with First American National Bank. In addition, shareholders of the ISG International Equity are asked to consider and act upon a new Sub-Investment Advisory Agreement between First American National Bank and Lazard Asset Management; shareholders of the ISG Mid-Cap are asked to consider and act upon a new Sub-Investment Advisory Agreement between First American National Bank and Bennett Lawrence Management, LLC; and shareholders of the ISG Small-Cap Opportunity are asked to consider and act upon a new Sub-Investment Advisory Agreement between First American National Bank and Womack Asset Management, Inc. The new Sub-Investment Advisory Agreements are collectively referred to as the "New Sub-Advisory Agreements," and each may individually be referred to as a "New Sub-Advisory Agreement." Consideration of the New Advisory Agreement and the New Sub-Advisory Agreements has been made necessary by the merger (the "Merger") of First American Corporation, the parent of First American National Bank prior to the Merger, with and into AmSouth Bancorporation. The New Advisory Agreement and the New Sub-Advisory Agreements took effect on the date that the Merger was consummated -- October 1, 1999 -- and will continue, if approved by Shareholders, until the relevant ISG Fund's reorganization, referred to above. If a proposal is approved by one or more ISG Funds, and disapproved by the other ISG Funds, the Proposal will be implemented only for each ISG Fund that approved the Proposal. The AmSouth Funds are separate series of AmSouth Funds ("AmSouth"), an open-end management investment company. The ISG Funds are separate series of The Infinity Mutual Funds, Inc. ("the Company"), an open-end management investment company. This Combined Prospectus/Proxy Statement explains concisely what you should know before investing in the AmSouth Funds. Please read it and keep it for future reference. This Combined Prospectus/Proxy Statement is accompanied by the prospectuses relating to the AmSouth Funds, dated December 1, 1999 and December 14, 1999 (the "AmSouth Prospectuses"), which contain information about the AmSouth Funds, as well as the current prospectuses relating to the ISG Funds dated May 1, 1999 (the "ISG Prospectuses"), which contain information about the ISG Funds, all of which are incorporated into this Combined Prospectus/Proxy Statement by reference. The current Statements of Additional Information of the AmSouth Funds, dated December 1, 1999 and December 14, 1999, and of the ISG Funds, dated May 1, 1999, have been filed with the Securities and Exchange Commission and are incorporated into this Combined Prospectus/Proxy Statement by reference. The Statements of Additional Information may be obtained, without charge, by writing to the relevant Fund, 3435 Stelzer Road, Columbus, Ohio 43219 or by calling 1-800-451-8382 for the AmSouth Funds or 1-800-852-0045 for the ISG Funds. In addition, a Statement of Additional Information dated [_________, 1999] relating to the Transaction described in this Combined Prospectus/Proxy Statement has been filed with the Securities and Exchange Commission and is also incorporated into this Combined Prospectus/Proxy Statement by reference. 11 12 Such Statement of Additional Information may be obtained, without charge, by writing AmSouth Funds at the above-listed address or by calling 1-800-451-8382. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT OR DETERMINED WHETHER THIS COMBINED PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. AN INVESTMENT IN SHARES OF AN AMSOUTH FUND IS NOT A BANK DEPOSIT. IT IS NOT GUARANTEED, ENDORSED OR INSURED BY ANY BANK, FINANCIAL INSTITUTION OR GOVERNMENT ENTITY SUCH AS THE FDIC. YOU COULD LOSE MONEY, BUT YOU ALSO HAVE THE POTENTIAL TO MAKE MONEY. 12 13 [BACK COVER PAGE] NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT IN CONNECTION WITH THE OFFERING MADE BY THIS COMBINED PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISG FUNDS OR BY AMSOUTH. THIS COMBINED PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFERING BY AMSOUTH IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. 13 14 TABLE OF CONTENTS Page ---- PROPOSAL (1) APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION ............................................................ FEE TABLES ......................................................................... SYNOPSIS ........................................................................... PRINCIPAL RISKS .................................................................... INTRODUCTION ....................................................................... PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION .............................................. BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION ..................................................................... INFORMATION ABOUT THE REORGANIZATION .............................................. APPROVAL OR DISAPPROVAL OF CERTAIN ADVISORY AGREEMENTS ............................ AMSOUTH FUNDS ...................................................................... ISG FUNDS .......................................................................... FINANCIAL STATEMENTS ............................................................... VOTING INFORMATION ................................................................. INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ................................................................ FORM OF AGREEMENT AND PLAN OF REORGANIZATION ...................................... APPENDIX A ........................................................................ FEE TABLES -- APPENDIX B ........................................................... AMSOUTH ANNUAL REPORT -- APPENDIX C ................................................ NEW ADVISORY AGREEMENT -- APPENDIX D ............................................... NEW SUB-ADVISORY AGREEMENT (ISG MID-CAP FUND) -- APPENDIX E ................................................... 14 15 NEW SUB-ADVISORY AGREEMENT (ISG INTERNATIONAL EQUITY FUND)-- APPENDIX F ....................................... NEW SUB-ADVISORY AGREEMENT (ISG SMALL-CAP OPPORTUNITY FUND)-- APPENDIX G ...................................... EXECUTIVE OFFICERS AND DIRECTORS OF AMSOUTH BANK-- APPENDIX H ....................................................... 15 16 PROPOSAL (1) -- APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION At a meeting held on November 18, 1999, all of the Directors of the Company unanimously approved the Agreement providing for the transfer of all of the assets of each ISG Fund to its corresponding AmSouth Fund in exchange for Shares of beneficial interest of such AmSouth Fund and the assumption by such AmSouth Fund of all of the liabilities of such ISG Fund. Following the transfer, each ISG Fund will be dissolved and the Shares received by the ISG Fund will be distributed to its shareholders in liquidation of the ISG Fund. As a result of the proposed Transaction, shareholders of each ISG Fund will receive, on a tax-free basis, a number of full and fractional Shares equal in value at the date of the exchange to the net asset value of the ISG Shares transferred by such Shareholder to the corresponding AmSouth Fund attributable to the shareholder. All ISG Fund shareholders will receive shares of the AmSouth Fund Class (Class A, Class B or Trust Class) that corresponds to the class of ISG Shares that they hold. For the reasons set forth below under "Background and Reasons for the Proposed Reorganization," the Board of Directors of the Company and the Board of Trustees of AmSouth, including those Board members who are not "interested persons" of either the ISG Funds or the AmSouth Funds as defined in the Investment Company Act of 1940 (the "1940 Act") (the "Independent Board Members"), unanimously concluded that participation in the proposed Transaction is in the best interests of the respective Funds and their existing shareholders and that the economic interests of their respective existing shareholders will not be diluted as a result of effecting the proposed Transaction. In reaching this conclusion, each Board considered, among other things, the qualifications and experience of AmSouth Bank (the "Advisor"); the projected expense ratios of each AmSouth Fund compared to the corresponding ISG Fund, and the potential economies of scale which could be realized over time by former ISG Fund shareholders as each AmSouth Fund increases in size; the services to be provided to AmSouth shareholders, including the availability of Funds with objectives, policies and services similar to those of the ISG Funds; the recommendation of the Advisor in favor of the Transaction; and the fact that the Transaction will be free from Federal income taxes to the ISG Funds and the AmSouth Funds and their shareholders. FEE TABLES Fee tables showing the current fees for the ISG Funds and AmSouth Funds, as well as the pro forma fees after the reorganization, can be found in Appendix B at the end of this Combined Prospectus/Proxy Statement. AmSouth Bank, the investment adviser to the AmSouth Funds, has agreed that until October 1, 2001, it will maintain for each AmSouth Fund total fund operating expenses that are less than or equal to those of its corresponding ISG Fund as of the date of the Merger (October 1, 1999). Thereafter, total fund operating expenses for the AmSouth Funds may be higher since, in many cases, the rate of investment advisory fee payable will be higher than the rate currently payable by the corresponding ISG Funds. 16 17 SYNOPSIS OF PROSPECTUSES Investment Objectives and Policies. Below is a brief comparison of the investment objectives and policies of each ISG Fund and the corresponding AmSouth Fund. The following discussion is qualified in its entirety by the disclosure on such subjects contained in the AmSouth Prospectuses and the ISG Prospectuses accompanying this Combined Prospectus/Proxy Statement. For a full and detailed description of permitted investments, see the applicable AmSouth and ISG Prospectuses. The securities currently held by each ISG Fund are substantially similar to those securities which the corresponding AmSouth Fund may hold. Consequently, the proposed reorganizations of the ISG Funds should not result in higher than normal portfolio turnover due to the corresponding AmSouth Fund's disposal of investment securities. EQUITY FUNDS (OR CAPITAL APPRECIATION FUNDS) -- These Funds seek capital appreciation and invest primarily in equity securities, principally common stocks and, to a limited extent, preferred stocks and convertible securities. AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth Fund and AmSouth Large Cap Equity Fund recently were organized for the purpose of continuing the investment operations of the corresponding ISG Fund, and such AmSouth Funds have no assets or prior history of investment operations. ISG INTERNATIONAL EQUITY FUND AND AMSOUTH INTERNATIONAL EQUITY FUND Fund Investment Objective/Goals As their investment objectives, both ISG International Equity and AmSouth International Equity Funds seek to provide investors with capital appreciation. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth International Equity Fund are identical to those of ISG International Equity Fund. Like ISG International Equity Fund, AmSouth International Equity Fund will invest primarily in equity securities of large non-U.S. companies (i.e., incorporated or organized outside the United States). Lazard Asset Management, the Sub-Adviser of each Fund, looks for established companies in economically developed countries that it believes are undervalued based on their return on total capital or equity. The Sub-Adviser attempts to identify undervalued securities through traditional measures of value, including low price to earnings ratio, high yield, unrecognized assets, potential for management change and the potential to improve profitability. As it currently does for ISG International Equity Fund, the Sub-Adviser will focus on individual stock selection (a "bottom-up" approach) rather than on forecasting stock market trends (a "top-down" approach). The percentage of the Funds' assets invested in particular geographic sectors may shift from time to time in accordance with the judgment of the Adviser and Sub-Adviser. Ordinarily, the Fund will invest in at least three different foreign countries. Although the Fund will invest primarily in the stocks of companies located in developed foreign countries, it may invest up to 25% of its total assets in typically large companies located, or doing significant business in emerging markets. In addition, the Fund may have substantial investments in American and Global Depositary Receipts. ISG International Equity and AmSouth International Equity are non-diversified Funds. ISG SMALL-CAP OPPORTUNITY FUND AND AMSOUTH SMALL CAP FUND Fund Investment Objective/Goals As their investment objectives, both ISG Small-Cap Opportunity and AmSouth Small Cap seek to provide investors with capital appreciation. Principal Investment Strategies of the Funds ISG Small-Cap Opportunity invests primarily in equity securities of U.S. companies with market capitalizations of less than $1.5 billion. Womack Asset Management, the ISG Fund's Sub-Adviser, seeks investment opportunities in smaller, well-managed U.S. companies whose shares are undervalued relative to the companies' growth potential. The Sub-Adviser employs a growth-oriented approach 17 18 which involves fundamental analysis of the company's published financial statements with technical analysis (which relies on price and volume movements of the company's stock) to discern potential and risk. The Sub-Adviser focuses on individual stock selection (a "bottom-up" approach) rather than on forecasting stock market trends (a "top-down" approach). The Sub-Adviser considers, among other factors: projected earnings growth, relative price strength and business fundamentals. Similarly, AmSouth Small Cap Fund invests primarily in common stocks of companies with market capitalizations at the time of purchase in the range of companies in the Russell 2000(R) Growth Index (currently between $50 million and $2 billion). Womack Asset Management however, is not be the Sub-Adviser for AmSouth Small Cap Fund. Sawgrass Asset Management, Inc., the AmSouth Fund's Sub-Adviser, seeks smaller companies with above-average growth potential. The Sub-Adviser considers factors including positive changes in earnings estimates for future growth, higher than market average profitability, a strategic position in a specialized market, earnings growth consistently above market and fundamental value. ISG Small-Cap Opportunity and AmSouth Small Cap are diversified Funds. ISG MID-CAP FUND AND AMSOUTH MID CAP FUND Fund Investment Objective/Goals As their investment objectives, both ISG Mid-Cap and AmSouth Mid Cap Funds seek to provide investors with capital appreciation. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Mid Cap Fund are substantially similar to those of ISG Mid-Cap Fund. ISG Mid-Cap invests primarily in equity securities of companies publicly traded on U.S. exchanges that have market capitalizations of $500 million to $5 billion. Similarly, AmSouth Mid Cap will invest primarily in equity securities of companies publicly traded on U.S. exchanges that are either included in the Russell Mid-Cap Growth Index or have market capitalizations within the range of such included companies (from $________ to $_________ as of ____________, 1999). Bennett Lawrence Management, the Sub-Adviser of each Fund, seeks to identify industries that are benefiting from major demand trends or themes and are therefore growing at a much faster rate than the overall economy. The Sub-Adviser then typically gathers information on the companies that are benefiting from these trends or themes. Generally, the Fund will not invest in a company unless the Sub-Adviser has met with the company's top management. The Sub-Adviser also seeks to talk to suppliers, purchasers, and competitors to reinforce its analysis and monitor each Fund's holdings. The Sub-Adviser's experience has been that when mid-sized companies are backed by major demand trends, they can create attractive gains for investors. ISG Mid-Cap and AmSouth Mid Cap are diversified Funds. ISG CAPITAL GROWTH FUND AND AMSOUTH CAPITAL GROWTH FUND Fund Investment Objective/Goals As their investment objectives, both ISG Capital Growth and AmSouth Capital Growth Funds seek to provide investors with capital growth. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Capital Growth Fund are identical to those of ISG Capital Growth Fund. Like ISG Capital Growth Fund, AmSouth Capital Growth Fund will invest primarily in equity securities of U.S. companies with market capitalizations of at least $500 million that the Adviser believes offer opportunities for capital appreciation and growth of earnings. The Adviser first will identify industries that it believes will expand over the next few years or longer. The Adviser then will use fundamental analyses of company financial statements to find large U.S. companies within these industries that offer the prospect of solid earnings growth. The Adviser also 18 19 may consider other factors in selecting investments for the Fund, including the development of new or improved products or services, opportunities for greater market share, more effective management or other signs that the company will have greater than average earnings growth and capital appreciation. ISG Capital Growth and AmSouth Capital Growth are non-diversified Funds. ISG LARGE-CAP EQUITY FUND AND AMSOUTH LARGE CAP FUND Fund Investment Objective/Goals As their investment objectives, both ISG Large-Cap Equity and AmSouth Large Cap Funds seek to provide investors with long-term capital appreciation and, as a secondary objective, current income. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Large-Cap Equity Fund are identical to those of ISG Large-Cap Equity Fund. Like ISG Large-Cap Equity Fund, AmSouth Large Cap Fund will invest primarily in equity securities of large U.S. companies with market capitalizations over $1 billion that the Adviser believes have the potential to provide capital appreciation and growth of income. The Adviser's strategy, as it currently is for ISG Large-Cap Equity Fund, will be to select well-managed U.S. companies that have demonstrated sustained patterns of profitability, strong balance sheets, and the potential to achieve predictable, above-average earnings growth. The Adviser will seek to diversify the Fund's portfolio within the various industries typically comprising, what the Adviser believes to be, the classic growth segments of the U.S. economy: Technology, Consumer Non-Durables, Health Care, Business Equipment and Services, Retail, and Capital Goods. ISG Large-Cap Equity and AmSouth Large Cap are diversified Funds. ISG EQUITY INCOME FUND AND AMSOUTH EQUITY INCOME FUND Fund Investment Objective/Goals As its investment objective, ISG Equity Income seeks to provide investors with current income and capital appreciation. Similarly, AmSouth Equity Income seeks above average income and capital appreciation by investing primarily in a diversified portfolio of common stocks, preferred stocks, and securities that are convertible into common stocks, such as convertible bonds and convertible preferred stock. Principal Investment Strategies of the Funds ISG Equity Income invests primarily in dividend-paying equity securities of U.S. companies that the Adviser expects to provide reasonable income and to have capital appreciation potential. The Fund's Adviser's strategy is to identify financially stable, mature companies that pay above-average dividends. The Adviser will select those companies that it believes have the capacity to increase dividend payments in the future. The Adviser takes into account factors, such as price-earnings ratios, cash flow and the relationship of a company's asset value to the market price of its securities. The Fund may invest in the securities of companies of any size depending on the relative attractiveness of the company and the industry in which it operates. Similarly, the manager of AmSouth Equity Income seeks equity securities which he believes represent investment value. In choosing individual securities, the manager emphasizes those common stocks in each sector that have good value, attractive yield, and dividend growth potential. The manager also will consider higher valued companies that show the potential for growth. Factors affecting selection include industry and company fundamentals, historical price relationships, and/or underlying asset value. The Fund also utilizes convertible securities because these securities typically offer higher yields and good potential for capital appreciation as well as some downside protection. ISG Equity Income is a non-diversified Fund while AmSouth Equity Income is a diversified Fund. 19 20 FIXED INCOME FUNDS -- These Funds seek current income and invest primarily in fixed income securities, such as U.S. Government securities, or corporate, bank and commercial obligations. AmSouth Limited Term U.S. Government Fund recently was organized for the purpose of continuing the investment operations of ISG Limited Term U.S. Government Fund, and has no assets or prior history of investment operations. ISG INCOME FUND AND AMSOUTH BOND FUND Fund Investment Objective/Goals As its investment objective, ISG Income seeks to provide investors with current income without assuming undue risk. Similarly, AmSouth Bond seeks current income consistent with the preservation of capital. Principal Investment Strategies of the Funds ISG Income invests primarily in a broad range of investment grade, U.S. dollar denominated fixed income securities of U.S. issuers. These securities include corporate and government bonds, debentures and notes, convertible debt obligations, money market instruments, municipal obligations, mortgage-related securities and asset-backed securities. Investment grade securities are those rated at the time of purchase in one of the four highest rating categories by a nationally recognized statistical rating organization (an "NRSRO"), or are determined by the Fund's Adviser to be of comparable quality. In choosing fixed income securities for the Fund, the Fund's Adviser follows a controlled duration strategy which limits the Fund's portfolio duration to 50% to 150% of the duration of its benchmark--the Merrill Lynch Corporate/Government Master Index. Duration is an indication of how sensitive a bond or mutual fund portfolio may be to changes in interest rates. Typically, the Fund will have an effective duration of between four and seven years. When assessing a potential investment, the Adviser looks at a variety of factors, including the company's credit history and financial strength, the long-term economic trends of the industry or sector it belongs to, the company's management and whether there is sufficient equity value in the company. Similarly, AmSouth Bond invests in bonds and other fixed-income securities, including primarily U.S. corporate bonds and debentures and notes or bonds issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund invests in debt securities only if they are high grade (rated at time of purchase in one of the three highest rating categories by an NRSRO, or are determined by the portfolio manager to be of comparable quality). The Fund also invests in zero-coupon obligations which are securities that do not provide current income but represent ownership of future interest and principal payments on U.S. Treasury bonds. The Fund may purchase fixed-income securities of any maturity and although there is no limit on the Fund's average maturity, it is normally expected to be between five and ten years. The Fund's manager uses a "top down" investment management approach focusing on a security's maturity. The manager sets, and continually adjusts, a target for the interest rate sensitivity of the Fund based upon expectations about interest rates. The manager then selects individual securities whose maturities fit this target and which the manager believes are the best relative values. ISG Income is a non-diversified Fund while AmSouth Bond is a diversified Fund. ISG GOVERNMENT INCOME FUND AND AMSOUTH GOVERNMENT INCOME FUND Fund Investment Objective/Goals As its investment objective, ISG Government Income seeks to provide investors with current income. Similarly, AmSouth Government Income seeks current income consistent with the preservation of capital. Principal Investment Strategies of the Funds Both ISG Government Income and AmSouth Government Income invest primarily in securities issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities. ISG Government Income may enter into repurchase agreements, and for additional yield, invest in high quality (AA/Aa) corporate bonds, mortgage-related securities, asset-backed 20 21 securities and bank obligations. ISG Government Income Fund also may purchase securities of any maturity (the average maturity of the Fund's investments is less than 10 years). Investments of AmSouth Government Income are principally mortgage-related securities, but may also include U.S. Treasury obligations. The AmSouth Government Income Fund's manager uses a "top down" investment management approach focusing on a security's maturity. The manager sets, and continually adjusts, a target for the interest rate sensitivity of the Fund based upon expectations about interest rates. The manager then selects individual securities whose maturities fit this target and which the manger believes are the best relative values. ISG Government Income and AmSouth Government Income are diversified Funds. ISG LIMITED TERM INCOME FUND AND AMSOUTH LIMITED TERM BOND FUND Fund Investment Objective/Goals As its investment objective, ISG Limited Term Income seeks to provide investors with current income without assuming undue risk. Similarly, AmSouth Limited Term Bond seeks current income consistent with the preservation of capital. Principal Investment Strategies of the Funds Each Fund invests primarily in a broad range of U.S. dollar denominated fixed income securities of U.S. issuers. These securities include corporate and government bonds, debentures and notes, convertible debt obligations, money market instruments, municipal obligations, mortgage-related securities and asset-backed securities. For ISG Limited Term Income Fund, these securities must be considered investment grade (rated at the time of purchase in one of the four highest rating categories by an NRSRO, or are determined by the portfolio manager to be of comparable quality). In choosing fixed income securities for ISG Limited Term Income, the Adviser attempts to reduce interest rate risk by maintaining a portfolio duration between one and four years and a dollar-weighted average portfolio life between one and five years, depending on market conditions. Duration is an indication of how sensitive a bond or mutual fund portfolio may be to changes in interest rates. When assessing a potential investment, the Adviser looks at a variety of factors, including the company's credit history and financial strength, the long-term economic trends of the industry or sector it belongs to, the company's management and whether there is sufficient equity value in the company. Similarly, AmSouth Limited Term Bond invests primarily in short-term fixed income securities with maturities of five years or less, principally corporate bonds and securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund invests in debt securities only if they are high-grade (rated at the time or purchase in one of the three highest rating categories by an NRSRO, or are determined by the portfolio manager to be of comparable quality). The AmSouth Fund's manager uses a "top down" investment management approach focusing on a security's maturity. The manager sets, and continually adjusts, a target for the interest rate sensitivity of the Fund based upon expectations about interest rates and other economic factors. The manager then selects individual securities whose maturities fit this target and which the manager believes are the best relative values. ISG Limited Term Income is a non-diversified Fund while AmSouth Limited Term Bond is a diversified Fund. ISG LIMITED TERM U.S. GOVERNMENT FUND AND AMSOUTH LIMITED TERM U.S. GOVERNMENT FUND Fund Investment Objective/Goals As their investment objectives, both ISG Limited Term U.S. Government and AmSouth Limited Term U.S. Government Funds seek to provide investors with high current income without assuming undue risk. 21 22 Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Limited Term U.S. Government Fund are identical to those of ISG Limited Term U.S. Government Fund. Like ISG Limited Term U.S. Government Fund, AmSouth Limited Term U.S. Government Fund will invest in securities issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities, and enter into repurchase agreements in respect of such securities. The Fund's Adviser will follow a controlled duration strategy which limits how much the Fund's portfolio durations will differ from its benchmark--the Merrill Lynch 1-5 Year Government Bond Index. Typically, the Fund will have a portfolio duration between one and four years and a dollar weighted average portfolio life between one and five years, depending on market conditions. Duration is an indication of how sensitive a bond or mutual fund portfolio may be to changes in interest rates. The market price of a bond with a duration of six years should increase or decline twice as much as the market price of a bond with a three-year duration. ISG Limited Term U.S. Government is a non-diversified Fund while AmSouth Limited Term U.S. Government is a diversified Fund. TAX-EXEMPT FIXED INCOME FUNDS -- These Funds seek tax-exempt income and invest primarily in municipal obligations which are exempt from Federal and, in the case of the Tennessee Funds, Tennessee income taxes. AmSouth Tennessee Tax-Exempt Fund and AmSouth Limited Term Tennessee Tax-Exempt Fund recently were organized for the purpose of continuing investment operations of ISG Tennessee Tax-Exempt Fund and ISG Limited Term Tennessee Tax-Exempt Fund, respectively, and such AmSouth Funds have no assets or prior history of investment operations. ISG TENNESSEE TAX-EXEMPT FUND AND AMSOUTH TENNESSEE TAX-EXEMPT FUND Fund Investment Objective/Goals As their investment objectives, both ISG Tennessee Tax-Exempt and AmSouth Tennessee Tax-Exempt Funds seek to provide investors with current income exempt from Federal and Tennessee income taxes without assuming undue risk. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Tennessee Tax-Exempt Fund are identical to those of ISG Tennessee Tax-Exempt Fund. Like ISG Tennessee Tax-Exempt Fund, AmSouth Tennessee Tax-Exempt Fund will invest substantially all of its assets in municipal obligations of the State of Tennessee, its political subdivisions, authorities and corporations, that provide income exempt from Federal and Tennessee personal income taxes. The average dollar-weighted credit rating of the municipal obligations held by the Fund will be at least A-. To further limit credit risk, the Fund will invest only in investment grade municipal obligations or the unrated equivalent as determined by the Adviser. The Advisers will evaluate municipal obligations based on credit quality, financial outlook and yield potential. Although the Fund will concentrate its assets in Tennessee municipal obligations, as is the case with ISG Tennessee Tax-Exempt Fund, the Adviser will strive to diversify the portfolios across sectors and issuers within Tennessee. The Fund may purchase securities of any maturity. Generally, the average maturity of the Fund's investments will continue to be primarily between six and ten years. ISG Tennessee Tax-Exempt and AmSouth Tennessee Tax-Exempt are non-diversified Funds. ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND AND AMSOUTH LIMITED TERM TENNESSEE TAX-EXEMPT FUND Fund Investment Objective/Goals As their investment objectives, both ISG Limited Term Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt Funds seek to provide investors with current income exempt from Federal and Tennessee income taxes without assuming undue risk. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Limited Term Tennessee Tax-Exempt Fund are identical to those of ISG Limited Term Tennessee Tax- 22 23 Exempt Fund. Like ISG Limited Term Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund will invest substantially all of its assets in municipal obligations of the State of Tennessee, its political subdivisions, authorities and corporations, that provide income exempt from Federal and Tennessee personal income taxes. The Fund's Adviser will attempt to reduce interest rate risk by maintaining a portfolio duration of under five years and an effective average portfolio maturity between three and five years, depending on market conditions. Duration is an indication of how sensitive a bond or mutual fund portfolio may be to changes in interest rates. The average dollar-weighted credit rating of the municipal obligations held by the Funds will be at least A-. To further limit credit risk, the Fund will invest only in investment grade municipal obligations or the unrated equivalent as determined by the Adviser. The Adviser will evaluate municipal obligations based on credit quality, financial outlook and yield potential. Although the Fund will concentrate its assets in Tennessee municipal obligations, as is the case with ISG Limited Term Tennessee Tax-Exempt Fund, the Adviser will strive to diversify the portfolio across sectors and issuers within Tennessee. ISG Limited Term Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt are non-diversified Funds. ISG MUNICIPAL INCOME FUND AND AMSOUTH MUNICIPAL BOND FUND Fund Investment Objective/Goals As its investment objective, ISG Municipal Income seeks to provide investors with current income exempt from Federal income tax. Similarly, AmSouth Municipal Bond seeks to produce as high a level of current Federal tax-exempt income as is consistent with the preservation of capital. Principal Investment Strategies of the Funds ISG Municipal Income normally invests substantially all of its assets in investment grade municipal obligations, or the unrated equivalent as determined by the Adviser, that provide income exempt from Federal income tax. The Adviser evaluates municipal obligations based on credit quality, financial outlook and yield potential, and seeks to diversify the Fund's investments across several different states, sectors and issuers. Similarly, AmSouth Municipal Bond invests primarily in municipal securities that provide income that is exempt from Federal income tax and not subject to the Federal alternative minimum tax for individuals. However, unlike ISG Municipal Income, AmSouth Municipal Bond currently has a high concentrated (approximately %) of its investments in municipal securities issued by the State of Alabama and its political subdivisions. The Fund invests in debt securities only if they are high-grade (rated at the time or purchase in one of the three highest rating categories by an NRSRO, or are determined by the portfolio manager to be of comparable quality). The Fund manager uses a "top down" investment management approach focusing on a security's maturity. The manager sets, and continually adjust, a target for the interest rate sensitivity of the Fund based upon expectations about interest rates and other economic factors. The manager then selects individual securities whose maturities fit this target, have a certain level of credit quality, and which the manager believes are the best relative values. Both ISG Municipal Income and AmSouth Municipal Bond may purchase securities of any maturity. The average maturity of the ISG Municipal Income is primarily between one and five and six and ten years while that of AmSouth Municipal Bond is years. ISG Municipal Income and AmSouth Municipal Bond are diversified Funds. MONEY MARKET FUNDS -- These Funds seek current income and liquidity and invest primarily in short-term securities. Each Fund seeks to maintain a stable price of $1.00 per share. AmSouth Treasury Reserve Money Market Fund recently was organized for the purpose of continuing the investment operations of ISG Treasury Money Market Fund, and has no assets or prior history of investment operations. ISG PRIME MONEY MARKET FUND AND AMSOUTH PRIME MONEY MARKET FUND 23 24 Fund Investment Objective/Goals As its investment objective, ISG Prime Money Market seeks to provide investors with as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. Similarly, as a money market fund, AmSouth Prime Money Market seeks current income with liquidity and stability of principal. Principal Investment Strategies of the Funds Both ISG Prime Money Market and AmSouth Prime Money Market invest only in U.S. dollar-denominated, "high-quality" short-term debt securities, including the following: -obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; -certificates of deposit, time deposits, bankers' acceptances and other short-term securities issued by domestic or foreign banks or their subsidiaries or branches; -domestic and foreign commercial paper and other short-term corporate debt obligations, including those with floating or variable rates of interest; -obligations issued or guaranteed by one or more foreign governments or their agencies or instrumentalities, including obligations of supranational entities; -asset-backed securities; and -repurchase agreements collateralized by the types of securities listed above. ISG Prime Money Market buys and sells securities based on considerations of safety of principal and liquidity, which means that the Fund may not necessarily invest in securities paying the highest available yield at a particular time. The Fund will attempt to increase its yield by trading to take advantage of short-term market variations. The Adviser evaluates Fund investments based on credit analysis and the interest rate outlook. The Fund normally will invest at least 25% of its total assets in domestic or foreign bank obligations. The manager of AmSouth Prime Money Market first considers safety of principal and the quality of an investment. The manager then focuses on generating a high level of income. The manager generally evaluates investments based on interest rate sensitivity selecting those securities whose maturities fit the Fund's interest rate sensitivity target and which the manager believes to be the best relative values. The Fund does not have a policy of investing over 25% of its assets in the banking industry, or in any other industry. ISG Prime Money Market and AmSouth Prime Money Market are diversified Funds. ISG TREASURY MONEY MARKET FUND AND AMSOUTH TREASURY RESERVE MONEY MARKET FUND Fund Investment Objective/Goals As their investment objectives, both ISG Treasury Money Market and AmSouth Treasury Reserve Money Market Funds seek to provide investors with as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Treasury Reserve Money Market Fund are identical to those of ISG Treasury Money Market Fund. Like ISG Treasury Money Market Fund, AmSouth Treasury Reserve Money Market Fund will invest primarily in U.S. Treasury securities and repurchase agreements in respect thereof. The Fund also may invest up to 35% of its assets in other securities guaranteed as to payment of principal and interest by the U.S. Government and repurchase agreements in respect thereof. Similarly, AmSouth Treasury Reserve Money Market Fund will invest based on considerations of safety of principal and liquidity, which means that the Fund may not necessarily invest in securities paying the highest available yield at a particular time. The Fund will attempt to increase its yield by trading to take advantage of short-term market variations. The Fund's Adviser generally will evaluate investments based on interest rate sensitivity. Both ISG Treasury Money Market and AmSouth Treasury Reserve Money Market are diversified Funds. ISG TAX-EXEMPT MONEY MARKET FUND AND AMSOUTH TAX-EXEMPT MONEY MARKET FUND 24 25 Fund Investment Objective/Goals As its investment objective, ISG Tax-Exempt Money Market seeks as high a level of current interest income exempt from Federal income tax as is consistent with the preservation of capital and the maintenance of liquidity. Similarly, as a money market fund, AmSouth Tax-Exempt Money Market seeks as high a level of current interest income exempt from Federal income taxes as is consistent with the preservation of capital and relative stability of principal. Principal Investment Strategies of the Funds ISG Tax-Exempt Money Market normally invests substantially all of its assets in short-term municipal obligations that provide income exempt from Federal income tax. Municipal obligations are debt obligations issued by states, territories and possessions of the United States and their political subdivisions, agencies and instrumentalities, and certain other entities. Similarly, AmSouth Tax-Exempt Money Market invests primarily in short-term municipal securities that provide income that is exempt from federal income tax and not subject to the federal alternative minimum tax for individuals. Municipal securities purchased by the Fund may include rated and unrated variable and floating rate tax-exempt notes which may have a stated maturity in excess of one year but which will be subject to a demand feature permitting the Fund to demand payment within a year. The Fund may also invest up to 10% of its total assets in the securities of money market mutual funds which invest primarily in obligations exempt from Federal income tax. The Fund's manager first considers safety of principal and the quality of an investment. The manager then focuses on generating a high-level of income. The manager generally evaluates investments based on interest rate sensitivity selecting those securities whose maturities fit the Fund's interest rate sensitivity target and which the manager believes to be the best relative values. ISG Tax-Exempt Money Market and AmSouth Tax-Exempt Money Market are diversified Funds. STRATEGIC PORTFOLIOS -- These Funds are "fund of funds" which will invest substantially all of their assets in Institutional Class shares of the ISG Funds or, after the reorganizations, Trust shares of the AmSouth Funds ("Underlying Funds") as described below. The Underlying Funds are described above and in the relevant Fund Prospectus. AmSouth Strategic Portfolios: Aggressive Growth Portfolio ("Aggressive Growth Portfolio"), AmSouth Strategic Portfolios: Growth Portfolio ("Growth Portfolio"), AmSouth Strategic Portfolios: Growth and Income Portfolio ("Growth and Income Portfolio"), AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ("Moderate Growth and Income Portfolio") and AmSouth Strategic Portfolios: Current Income Portfolio ("Current Income Portfolio") recently were organized for the purpose of continuing the investment operations of the corresponding ISG Fund, and such AmSouth Funds have no assets or prior history of investment operations. ISG AGGRESSIVE GROWTH PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: AGGRESSIVE GROWTH PORTFOLIO Fund Investment Objective/Goals As their investment objectives, both ISG Aggressive Growth and AmSouth Aggressive Growth Portfolios seek to provide investors with capital growth. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Aggressive Growth Portfolio are identical to those of ISG Aggressive Growth Portfolio. Like ISG Aggressive Growth Portfolio, AmSouth Strategic Portfolios: Aggressive Growth Portfolio ("AmSouth Aggressive Growth Portfolio") will allocate its assets among the Underlying Funds within predetermined strategy ranges, as set forth below. The Fund's Adviser will make allocation decisions according to its outlook for the economy, financial markets and relative market valuation of the Underlying Funds. The Fund will invest up to 100% of their total assets in five Underlying Funds which invest primarily in equity securities and up to 30% of their total assets in one Underlying Fund which invests in money market instruments. ISG Aggressive Growth Portfolio currently invests, and AmSouth Aggressive Growth Portfolio, after the reorganization, will invest, in the following Underlying Funds within the strategy ranges (expressed as a percentage of each Fund's total assets) indicated below: ISG Aggressive Growth Underlying Fund Strategy Ranges ISG Large-Cap Equity Fund 0-70% 25 26 ISG Capital Growth Fund 0-45% ISG Mid-Cap Fund 0-30% ISG Small-Cap Opportunity Fund 0-30% ISG International Equity Fund 0-20% ISG Prime Money Market Fund 0-30% AmSouth Aggressive Growth Underlying Fund Strategy Range --------------- -------------- AmSouth Large Cap Fund 0-70% AmSouth Capital Growth Fund 0-45% AmSouth Mid Cap Fund 0-30% AmSouth Small Cap Fund 0-30% AmSouth International Equity Fund 0-20% AmSouth Prime Money Market Fund 0-30% ISG Aggressive Growth is a non-diversified Fund while AmSouth Aggressive Growth is a diversified Fund. ISG GROWTH PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: GROWTH PORTFOLIO Fund Investment Objective/Goals As their investment objectives, both ISG Growth and AmSouth Strategic Portfolios: Growth Portfolios ("AmSouth Growth Portfolio") seek to provide investors with long-term capital growth. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Growth Portfolio are identical to those of ISG Growth Portfolio. Like ISG Growth Portfolio, AmSouth Growth Portfolio will allocate its assets among the Underlying Funds within predetermined strategy ranges, as set forth below. The Fund's Adviser will make allocation decisions according to its outlook for the economy, financial markets and relative market valuation of the Underlying Funds. The Fund will invest up to 100% of its total assets in six Underlying Funds which invest primarily in equity securities, up to 25% of their total assets in one Underlying Fund which invests primarily in fixed income securities and up to 20% of their total assets in one Underlying Fund which invests in money market instruments. ISG Growth Portfolio currently invest, and AmSouth Growth Portfolio, after the reorganization, will invest, its assets in the following Underlying Funds within the strategy ranges (expressed as a percentage of each Fund's total assets) indicated below: ISG Growth Underlying Fund Strategy Ranges --------------- --------------- ISG Large-Cap Equity Fund 0-65% ISG Capital Growth Fund 0-25% ISG Equity Income Fund 0-25% ISG Mid-Cap Fund 0-25% ISG Small-Cap Opportunity Fund 0-25% ISG International Equity Fund 0-15% ISG Government Income Fund 0-25% ISG Prime Money Market Fund 0-20% AmSouth Growth Underlying Fund Strategy Ranges --------------- --------------- AmSouth Large Cap Fund 0-65% AmSouth Capital Growth Fund 0-25% AmSouth Equity Income Fund 0-25% AmSouth Mid Cap Fund 0-25% AmSouth Small Cap Fund 0-25% 26 27 AmSouth International Equity Fund 0-15% AmSouth Government Income Fund 0-25% AmSouth Prime Money Market Fund 0-20% ISG Growth is a non-diversified Fund while AmSouth is a diversified Fund. ISG GROWTH & INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: GROWTH AND INCOME PORTFOLIO Fund Investment Objective/Goals As their investment objectives, both ISG Growth & Income and AmSouth Strategic Portfolios: Growth and Income Portfolios ("AmSouth Growth and Income Portfolio") seek to provide investors with long-term capital growth and a moderate level of current income. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Growth and Income Portfolio are identical to those of ISG Growth & Income Portfolio. Like ISG Growth & Income Portfolio, AmSouth Growth and Income Portfolio will allocate its assets among the Underlying Funds within predetermined strategy ranges, as set forth below. The Funds' Adviser will make allocation decisions according to its outlook for the economy, financial markets and relative market valuation of the Underlying Funds. The Fund will invest up to 100% of their s total assets in six Underlying Funds which invest primarily in equity securities, up to 80% of their total assets in two Underlying Funds which invest primarily in fixed income securities and up to 20% of their total assets in one Underlying Fund which invests in money market instruments. ISG Growth & Income Portfolio currently invests, and AmSouth Growth and Income Portfolio, after the reorganization, will invest, its assets in the following Underlying Funds within the strategy ranges (expressed as a percentage of each Fund's total assets) indicated below: ISG Growth & Income Underlying Fund Strategy Range --------------- -------------- ISG Large-Cap Equity Fund 0-60% ISG Capital Growth Fund 0-25% ISG Equity Income Fund 0-25% ISG Mid-Cap Fund 0-20% ISG Small-Cap Opportunities Fund 0-20% ISG International Equity 0-15% ISG Government Income Fund 0-60% ISG Limited Term Income Fund 0-20% ISG Prime Money Market Fund 0-20% AmSouth Growth and Income Underlying Funds Strategy Ranges ---------------- --------------- AmSouth Large Cap Fund 0-60% AmSouth Capital Growth Fund 0-25% AmSouth Equity Income Fund 0-25% AmSouth Mid Cap Fund 0-20% AmSouth Small Cap Fund 0-20% AmSouth International Equity Fund 0-15% AmSouth Government Income Fund 0-60% AmSouth Limited Term Bond Fund 0-20% AmSouth Prime Money Market Fund 0-20% ISG Growth & Income is a non-diversified Fund while AmSouth Growth and Income is a diversified Fund. ISG MODERATE GROWTH & INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: MODERATE GROWTH AND INCOME PORTFOLIO 27 28 Fund Investment Objective/Goals As their investment objectives, both ISG Moderate Growth and Income and AmSouth Strategic Portfolios: Moderate Growth and Income Portfolios ("AmSouth Moderate Growth and Income Portfolio") seek to provide investors with current income and a moderate level of capital growth. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Moderate Growth and Income Portfolio are identical to those of ISG Moderate Growth & Income Portfolio. Like ISG Moderate Growth & Income Portfolio, AmSouth Moderate Growth and Income Portfolio will allocate its assets among the Underlying Funds within predetermined strategy ranges, as set forth below. The Fund's Adviser will make allocation decisions according to its outlook for the economy, financial markets and relative market valuation of the Underlying Funds. The Fund will invest up to 80% of their total assets in three Underlying Funds which invest primarily in equity securities, up to 100% of their total assets in two Underlying Funds which invest primarily in fixed income securities and up to 20% of their total assets in one Underlying Fund which invests in money market instruments. ISG Moderate Growth and Income Portfolio currently invests, and AmSouth Moderate Growth and Income Portfolio, after the reorganization, will invest, its assets in the following Underlying Funds within the strategy ranges (expressed as a percentage of each Fund's total assets) indicated below: ISG Moderate Growth & Income Underlying Fund Strategy Range --------------- -------------- ISG Government Income Fund 0-70% ISG Limited Term Income Fund 0-45% ISG Large-Cap Equity Fund 0-50% ISG Capital Growth Fund 0-15% ISG Equity Income Fund 0-15% ISG Prime Money Market Fund 0-20% AmSouth Moderate Growth and Income Underlying Fund Strategy Range --------------- -------------- AmSouth Government Income Fund 0-70% AmSouth Limited Term Bond Fund 0-45% AmSouth Large Cap Fund 0-50% AmSouth Capital Growth Fund 0-15% AmSouth Equity Income Fund 0-15% AmSouth Prime Money Market Fund 0-20% ISG Moderate Growth & Income is a non-diversified Fund while AmSouth Moderate Growth and Income is a diversified Fund. ISG CURRENT INCOME PORTFOLIO AND AMSOUTH STRATEGIC PORTFOLIOS: CURRENT INCOME PORTFOLIO Fund Investment Objective/Goals As their investment objectives, both ISG Current Income and AmSouth Strategic Portfolios: Current Income ("AmSouth Current Income") seek to provide investors with current income. Principal Investment Strategies of the Funds As a New AmSouth Fund, the principal investment strategies of AmSouth Current Income are identical to those of ISG Current Income. Like ISG Current Income, AmSouth Current Income will allocate its assets among the Underlying Funds within predetermined strategy ranges as set forth below. The Fund's Adviser will make allocation decisions according to its outlook for the economy, financial markets and relative market valuation of the Underlying Funds. The Fund will invest 75% to 100% of its total assets in two Underlying Funds which invest primarily in fixed income securities and up to 30% of its total assets in one Underlying Fund which invests in money market instruments. ISG Current Income currently 28 29 invests, and AmSouth Current Income, after the reorganization, will invest, its assets in the following Underlying Funds within the strategy ranges (expressed as a percentage of each Fund's total assets) indicated below: ISG Current Income Underlying Fund Strategy Range --------------- -------------- ISG Limited Term Income Fund 40-60% ISG Income Fund 35-55% ISG Prime Money Market Fund 0-25% AmSouth Current Income Underlying Fund Strategy Range --------------- -------------- AmSouth Limited Term Bond Fund 40-60% AmSouth Bond Fund 35-55% AmSouth Prime Money Market Fund 0-25% ISG Current Income is a non-diversified Fund while AmSouth Current Income is a diversified Fund. MANAGEMENT DISCUSSION OF FUND PERFORMANCE Management discussion of fund performance for the pre-existing AmSouth Funds -- AmSouth Government Income, AmSouth Limited Term Bond, AmSouth Equity Income, AmSouth Municipal Bond, AmSouth Small Cap, AmSouth Bond, AmSouth Tax-Exempt Money Market and AmSouth Prime Money Market is incorporated by reference from the annual report of the AmSouth Funds, dated July 31, 1999, and attached hereto as Appendix C. No management discussion of fund performance is included for the New AmSouth Funds -- AmSouth Current Income, AmSouth Moderate Growth and Income, AmSouth Growth and Income, AmSouth Growth, AmSouth Aggressive Growth, AmSouth Mid Cap, AmSouth Large Cap, AmSouth International Equity, AmSouth Capital Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee Tax-Exempt, AmSouth Limited Term U.S. Government, and AmSouth Treasury Reserve Money Market - -- which had not yet commenced operations. Management discussion of fund performance for the ISG Funds is incorporated by reference from the current prospectuses, annual report dated December 31, 1998 and semi-annual report dated June 30, 1999 of ISG Funds, which are available upon request without charge by calling 1-800-852-0045. OPERATING PROCEDURES. DISTRIBUTIONS. The dividends and distributions policies of each AmSouth Fund and its corresponding ISG Fund (except for AmSouth Equity Income Fund and ISG Equity Income Fund) are substantially similar. With respect to AmSouth Equity Income Fund, distributions to shareholders are made quarterly; whereas ISG Equity Income makes distributions to shareholders monthly. For all Fixed Income Funds and Tax-Exempt Fixed Income Funds and ISG Current Income Portfolio and its corresponding AmSouth Fund, dividends are declared and paid monthly to all shareholders of record at the close of business on the day of declaration. Distributions are made quarterly for all Equity Funds (other than ISG International Equity and AmSouth International Equity Funds) and ISG Aggressive Growth, ISG Growth, ISG Growth & Income, ISG Moderate Growth & Income Portfolios and their corresponding AmSouth Funds. Distributions are made annually for the ISG International Equity Fund and the AmSouth International Equity Fund. Dividends on Money Market Funds are declared daily and generally paid monthly although they are paid in cash not later than seven business days after a shareholder's complete redemption of his or her shares. 29 30 Net realized capital gains, if any, are distributed at least annually to shareholders of record. All distributions will be automatically reinvested in additional Fund Shares unless the shareholder requests to receive all distributions in cash. Dividends and distributions, when received in shares, are reinvested without a sales charge as of the ex-dividend date using the net asset value determined on that date and are credited to a shareholder's account on the payment date. Dividends paid in additional shares receive the same tax treatment as dividends paid in cash. The amount of dividends payable on Institutional Shares of the ISG Funds and Trust Shares of the AmSouth Funds generally will be more than dividends payable on Class A and Class B Shares of the ISG Funds and AmSouth Funds because of the distribution expenses charged to Class A and Class B Shares but not charged to Institutional or Trust Shares. PURCHASE PROCEDURES. Because the distributor for both ISG and AmSouth is BISYS Fund Services Limited Partnership (the "Distributor"), purchase procedures are generally identical for the two Fund groups. Purchase orders for Shares are executed at a per Share price equal to the net asset value next determined after the purchase order is effective (plus any applicable sales charge). No sales charges are imposed on Institutional shares of the ISG Funds or Trust shares of AmSouth Funds. A maximum sales charge of 4.5% of the offering price is imposed on Class A Shares of AmSouth International Equity, AmSouth Mid Cap, AmSouth Capital Growth, AmSouth Large Cap, AmSouth Aggressive Growth, AmSouth Growth, AmSouth Growth and Income, AmSouth Moderate Growth and Income, AmSouth Equity Income and AmSouth Small Cap, and a maximum sales charge of 4.75% of the offering price is imposed on Class A Shares of ISG International Equity, ISG Mid-Cap, ISG Capital Growth, ISG Large-Cap Equity, ISG Aggressive Growth, ISG Growth, ISG Growth & Income, ISG Moderate Growth & Income, ISG Equity Income and ISG Small-Cap Opportunity. A maximum sales charge of 4.0% is imposed on Class A Shares of AmSouth Limited Term U.S. Government, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee Tax-Exempt, AmSouth Current Income, AmSouth Bond, AmSouth Government Income, AmSouth Limited Term Bond and AmSouth Municipal Bond, and a maximum sales charge of 3.0% is imposed on Class A Shares of ISG Limited Term U.S. Government, ISG Tennessee Tax-Exempt, ISG Limited Term Tennessee Tax-Exempt, ISG Current Income, ISG Income, ISG Government Income, ISG Limited Term Income and ISG Municipal Income. However, no sales charge will be imposed on the Shares of the AmSouth Funds distributed by AmSouth in the Transaction. In addition, until October 1, 2001, each Shareholder who participates in the Transaction will be able to purchase additional Class A Shares of the relevant AmSouth Fund subject to the lower initial sales charge, if any, applicable to the AmSouth Class A Shares or the corresponding ISG Fund shares exchanged by the Shareholder. For a comparison of the schedules of the initial sales charge imposed on shares of the applicable ISG Funds and their corresponding AmSouth Funds, see the relevant Fund's Prospectus. Shares of both the ISG Funds and the AmSouth Funds are sold on a continuous basis by the Distributor, either by mail, by wire, through an Automatic Investment Plan or through financial institutions. The ISG Funds have a minimum investment requirement of $1,000 for Class A and for Class B, $250 for Automatic Investment, $100 for Retirement, and $100,000 for Institutional Class, while the AmSouth Funds have a minimum investment requirement of $1,000 for Class A, Class B and Automatic Investment, and $250 for Retirement. The ISG Funds have a subsequent minimum investment requirement of $100 for Class A and for Class B, $50 for Retirement, and $25 for Automatic Investment whereas the AmSouth Funds generally have no subsequent minimum investment requirement for Class A and for Class B, and $50 for Automatic Investment and for Retirement. Purchases and redemption of Shares of the ISG Funds and the AmSouth Funds may be made on days on which both The New York Stock Exchange ("NYSE") and the Federal Reserve wire system are open for business ("Business Days"). EXCHANGE PRIVILEGE. Shares will be exchanged at the next determined net asset value. Shareholders of ISG Funds can exchange shares in one Fund for shares of the same class of another ISG Fund, usually without 30 31 paying additional sales charges. When exchanging from a Fund that has no sales charge or a lower sales charge to a Fund with a higher sales charge, the shareholder will pay the difference. No transaction fees are charged for exchanges. Shareholders must meet the minimum investment requirements for the Fund into which Shares are being exchanged, and the Shares being exchanged must have a current value of at least $500. If Shares of the Fund are purchased by check, those Shares cannot be exchanged until the check has cleared. This could take 15 days or more. The Fund may reject an exchange request from a shareholder who has made more than five exchanges between investment portfolios offered by Fund management in a year, or more than three exchanges in a calendar quarter. Although unlikely, the Funds may reject any exchanges or, upon 60-days' notice to shareholders, change or terminate the exchange privilege. Each AmSouth Fund's Shares may be exchanged for Shares of the class of the various other Funds of AmSouth which the shareholder qualifies to purchase directly so long as the shareholder maintains the applicable minimum account balance in each Fund in which he or she owns Shares and satisfies the minimum initial and subsequent purchase amounts of the Fund into which the Shares are exchanged. AmSouth shareholders may exchange their Class A Shares for Trust Shares of the same Fund if the shareholder becomes eligible to purchase Trust Shares. No transaction fees are currently charged for exchanges. When exchanging Trust Shares of a Fund for Class A Shares of a Fund, the shareholder will be exempt from any applicable sales charge. For Class A Shares, when exchanging from a Fund that has no sales charge or a lower sales charge to a Fund with a higher sales charge, the shareholder will pay the difference. The Exchange Privilege (including automatic exchanges) may be changed or eliminated at any time upon 60-days' notice to shareholders. Exchange privileges for shareholders in both the ISG Funds and the AmSouth Funds are available only in states where the Shares of such Fund may be legally sold. Exercise of the exchange privilege is generally treated as a sale for Federal income tax purposes and, depending on the circumstances, a short or long-term capital gain or loss may be realized by the exchanging shareholder. Exchanges are made on the basis of the relative net asset values of the shares exchanged plus any applicable sales charge. Neither ISG Funds nor AmSouth Funds imposes a charge for processing exchanges of shares. REDEMPTION PROCEDURES. Because the ISG Funds and the AmSouth Funds are distributed by the same Distributor -- BISYS Fund Services Limited Partnership - -- redemption procedures are generally identical for the two Fund groups. Both ISG Funds and AmSouth redeem shares at their net asset value next determined after receipt by the Distributor of the redemption request. Redemptions will be made on any Business Day without charge, except that the AmSouth Funds presently charge $7 for wiring redemption proceeds to a shareholder's designated account. Shares may be redeemed by mail, by telephone or through a pre-arranged systematic withdrawal plan. Each of the ISG Funds and AmSouth Funds reserves the right to make payment on redemptions in securities rather than cash. Each of the ISG Funds and AmSouth reserve the right to redeem shares at net asset value if a shareholder's account has a value of less than the minimum initial purchase amount. Before a Fund exercises its right to redeem such shares, a shareholder is given notice that the value of shares in his or her account is less than the minimum amount and is allowed 60 days to make an additional investment in the Fund. The minimum for an ISG Fund is $500 while the minimum for an AmSouth Fund is $50. NET ASSET VALUE. The net asset value of shares of the non-money market ISG Funds and the non- money market AmSouth Funds is determined daily as of 4:00 p.m., Eastern time on any Business Day. The net asset value of shares of the ISG Money Market Funds (except the ISG Tax-Exempt Money Market which is calculated as of 11:00 a.m. Eastern time) is calculated as of 2:00 p.m., on each Business Day, based on the amortized cost method. The net asset value of shares of the AmSouth money market funds (except 31 32 the Tax-Exempt Money Market which is calculated at 12:00 p.m. and 4:00 p.m. Eastern time) is calculated as of 1:00 p.m. and 4:00 p.m. Eastern time, on each Business Day, based on the amortized cost method. The amortized cost method involves valuing an instrument at its cost initially, and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The net asset value per Share of the ISG Strategic Portfolios and the AmSouth Strategic Portfolios will be established on the basis of current valuations of their portfolio securities provided by Muller Data Corporation or Kenny S&P Evaluation Services, whose procedures are monitored by the Administrator, and which valuations are the fair market value of such securities. FEDERAL TAX CONSIDERATIONS. Consummation of each reorganization is subject to the condition that the relevant ISG Fund and the corresponding AmSouth Fund receive an opinion of Ropes & Gray, Counsel to AmSouth Funds, to the effect that, based upon certain representations and assumptions and subject to certain qualifications, the reorganization will not result in the recognition of gain or loss for Federal income tax purposes to any of the ISG Funds, their shareholders or the AmSouth Funds. PRINCIPAL RISKS The investment objective and policies of each ISG Fund and its corresponding AmSouth Fund are substantially similar. However, in some instances, an AmSouth Fund may invest in certain securities in which the corresponding ISG Fund may not invest. In some cases, although both the AmSouth Fund and the corresponding ISG Fund may invest in the same securities, they may do so subject to varying limitations. Each Fund is actively managed and, thus, is subject to the risk that the Fund's principal investment strategies might not achieve the Fund's goal. This discussion is qualified in its entirety by the disclosure set forth in the AmSouth and ISG Funds Prospectuses accompanying this Combined Prospectus/Proxy Statement. EQUITY FUNDS -- Stocks and other equity securities fluctuate in price, often based on factors unrelated to the issuers' value, and such fluctuations can be pronounced. The value of your investment in any of these Funds will fluctuate in response to movements in the stock market and the activities of individual portfolio companies. As a result, you could lose money by investing in an Equity Fund, ISG or AmSouth, particularly if there is a sudden decline in share prices of the Fund's holdings or an overall decline in the stock market. With respect to each of ISG International Equity Fund and AmSouth International Equity Fund, the Fund's performance will be influenced by political, social and economic factors affecting companies in foreign countries. The securities of foreign issuers fluctuate in price, often based on factors unrelated to the issuers' value, and such fluctuations can be pronounced. Foreign securities include special risks such as exposure to currency fluctuations, a lack of adequate company information, political instability, and differing auditing and legal standards. Emerging market countries in which these Funds may invest have economic structures that are generally less diverse and mature, and political systems that are less stable, than those of developed countries. As a result, their markets are more volatile. The ISG Small-Cap Opportunity Fund and AmSouth Small Cap Fund each invest in small-cap companies which carry additional risks. Smaller companies typically have more limited product lines, markets and financial resources, and have less predictable earnings than larger companies and their securities trade less frequently and in more limited volume than those of larger, more established companies. As a result, small-cap stocks and thus their Funds' shares may fluctuate significantly more in value than larger-cap stocks and funds that focus on them. The ISG Mid-Cap Fund and AmSouth Mid Cap Fund each invest in mid-cap companies which carry additional risks. These companies typically have less predictable earnings than larger companies and their 32 33 securities trade less frequently and in more limited volume than those of larger, more established companies. AS a result, mid-cap stocks and thus these Funds' shares may fluctuate more in value than larger-cap stocks and funds that focus on them. Each of ISG International Equity Fund, AmSouth International Equity Fund, ISG Capital Growth Fund, AmSouth Capital Growth Fund and ISG Equity Income Fund is non-diversified and may invest a greater percentage of its assets in a particular company compared with other funds. Accordingly, the Fund's portfolio may be more sensitive to changes in the market value of a single company or industry. FIXED INCOME FUNDS -- These Funds' investments in fixed income securities will be subject primarily to interest rate, credit and, for mortgage-related and asset-backed securities, prepayment risk. Prices of fixed income securities, including U.S. Government securities, tend to move inversely with changes in interest rates. The most immediate effect of a rise in rates is usually a drop in the prices of such securities, and therefore in the Fund's share price as well. Interest rate risk is usually greater for fixed income securities with longer maturities or durations. To the extent the Fund maintains a comparatively long duration, its share price will react more to interest rate movements. A security backed by the U.S. Government is guaranteed only as to timely payment of interest and principal when held to maturity. Neither the market value of such securities nor the Fund's share price is guaranteed. As a result, the value of your investment in a Fixed Income Fund, ISG or AmSouth, will fluctuate and you could lose money by investing in the Fund. A Fixed Income Fund's investments in corporate bonds also are subject to credit risk, which is the risk that the issuer of the security will fail to make timely payments of interest or principal, or otherwise honor its obligations. Credit risk includes the possibility that any of the Funds' investments will have its credit rating downgraded or will default. Mortgage-related and asset-backed securities, which are derivative instruments, are subject to both credit and prepayment risk, any may be more volatile and less liquid than more traditional debt securities. If the borrowers prepay some or all of the principal owed to the issuer much earlier than expected, the Fund may have to replace the security by investing the proceeds in a less attractive security which could reduce the Fund's share price or yield. Each of ISG Income Fund, ISG Limited Term U.S. Government Fund and ISG Limited Term Income Fund is non-diversified and may invest a greater percentage of its assets in a particular issuer compared with other funds. Accordingly, the Fund's portfolio may be more sensitive to changes in the market value of a single issuer or industry. TAX-EXEMPT FIXED INCOME FUNDS -- These Funds' investments in municipal obligations will be subject primarily to interest rate and credit risk. Prices of municipal obligations tend to move inversely with changes in interest rates. The most immediate effect of a rise in rates is usually a drop in the prices of such securities, and therefore in the Fund's share price as well. Interest rate risk is usually greater for fixed income securities with longer maturities or durations. If interest rates fall, it is possible that issuers of callable bonds with high interest coupons will "call" (or prepay) their bonds before their maturity date. If a call were exercised by the issuer during a period of declining interest rates, the Fund is likely to replace such called security with a lower yielding security. If that were to happen, it could decrease the Fund's dividends. As a result, the value of your investment in a Tax-Exempt Fixed Income Fund, ISG or AmSouth, will fluctuate and you could lose money by investing in the Fund. 33 34 These Funds' investments also are subject to credit risk, which is the risk that the issuer of the security will fail to make timely payments of interest or principal, or to otherwise honor its obligations. Credit risk includes the possibility that any of the Fund's investments will have its credit rating downgraded or will default. Because of the Tennessee Funds' concentration in Tennessee municipal obligations, these Funds will be vulnerable to any development in Tennessee's economy that weakens or jeopardizes the ability of Tennessee municipal obligation issuers to pay interest and principal. As a result, the value of a Tennessee Fund's shares may fluctuate more widely than those of a fund investing in municipal obligations from a number of different states. Although each ISG Tax-Exempt Fixed Income Fund's objective is to generate income exempt from Federal and, in the case of each Tennessee Fund, Tennessee income taxes, interest from some of the Fund's holdings may be subject tot he Federal alternative minimum tax. Each of ISG Tennessee Tax-Exempt Fund, AmSouth Tennessee Tax-Exempt Fund, ISG Limited Term Tennessee Tax-Exempt Fund and AmSouth Limited Term Tennessee Tax-Exempt Fund is non-diversified and may invest a greater percentage of its assets in a particular issuer compared with other funds. Accordingly, the Fund's portfolio may be more sensitive to changes in the market value of a single issuer or industry. MONEY MARKET FUNDS -- Although each of these Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Money Market Fund, ISG or AmSouth. An investment in the Funds is not insured or guaranteed by the FDIC or any other government agency. Each Money Market Fund is subject to the risk that changes in interest rates will affect the yield or value of the Fund's investment. The investments of the ISG Prime Money Market Fund, AmSouth Prime Money Market Fund, ISG Tax-Exempt Money Market Fund and AmSouth Tax-Exempt Money Market Fund also are subject to credit risk, which is the risk that the issuer or guarantor of a debt security will be unable or unwilling to make timely interest or principal payments, or to otherwise honor its obligations. Credit risk includes the possibility that any of the Fund's investments will have its credit rating downgraded or will default. The ISG Prime Money Market Fund usually invests at least 25% of its assets in domestic and/or U.S. dollar denominated foreign bank obligations. Thus, it will have correspondingly greater exposure to the risks generally associated with investments in the banking industry. Sustained increases in interest rates, for example, can adversely affect the availability and cost of capital funds for a bank's lending activities, and a deterioration in general economic conditions could increase the bank's exposure to credit losses. In addition, economic or regulatory developments in or related to the banking industry, and competition within the banking industry as well as with other types of financial institutions will affect the Fund's return. The Fund, however, seeks to minimize its exposure to such risks by investing only in debt securities which are determined to be of high quality. STRATEGIC PORTFOLIOS -- These Funds' investments are concentrated in the Underlying Fund, so the Fund's investment performance is directly related to the performance of those Underlying Fund. Before investing in a Strategic Portfolio, investors should assess the risks associated with the Underlying Funds in which the Strategic Portfolio invests and the types of investments made by such Underlying Funds. In addition, since each Strategic Portfolio must allocate its investments among the Underlying Funds, the Strategic Portfolio does not have the same flexibility to invest as a mutual fund without such constraints. As a result, you could lose 34 35 money by investing in a Strategic Portfolio, ISG or AmSouth, particularly if there is a sudden decline in the share prices of the Underlying Fund's holdings. With respect to those Strategic Portfolios investing in Underlying Funds that invest primarily in equity securities, stocks and other equity securities fluctuate in price, often based on factors unrelated to the issuers' value, and such fluctuations can be pronounced. With respect to those Strategic Portfolios investing in Underlying Funds that invest primarily in fixed income securities, such securities are subject to interest rate and credit risk. Interest rate risk is the potential for a decline in bond prices due to rising interest rates. Credit risk is the possibility that the issuer of a fixed-income security will fail to make timely payments of interest or principal, or that the security will have its credit rating downgraded. Each ISG Strategic Portfolio is a non-diversified and may invest a greater percentage of its assets in a particular issuer compared with other funds. Accordingly, the Fund's portfolio may be more sensitive to changes in the market value of a single issuer or industry. * * * * * There are also risks attached to particular types of investments made by the ISG Funds and the AmSouth Funds. For a discussion of the risks associated with a particular investment, see the Statement of Additional Information and "Investment Objectives, Principal Investment Strategies and Related Risk" in any AmSouth Prospectus or "Additional Strategies and Risks" in the relevant ISG Prospectus accompanying this Combined Prospectus/Proxy Statement. The above discussion is qualified in its entirety by the disclosure in the ISG and AmSouth Prospectuses and Statements of Additional Information. SPECIAL MEETING OF SHAREHOLDERS Proxies will be solicited by and on behalf of the Company's Directors for use at a Special Meeting of Shareholders of the ISG Funds. The Meeting is to be held on February 11, 2000 at TIME, Eastern standard time, at the office of BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219. This Combined Prospectus/Proxy Statement and the enclosed form of proxy are being mailed to shareholders on or about December 22, 1999. Any shareholder giving a proxy has the power to revoke it. The shareholder revoking such proxy must either submit to ISG a subsequently dated proxy, deliver to ISG a written notice of revocation, or otherwise give notice of revocation in open meeting. All properly executed proxies received in time for the meeting will be voted as specified in the proxy, or, if no specification is made, FOR the proposals (set forth in items (1), (2) and (3) of the Notice of Special Meeting) to implement the reorganization of the ISG Funds by the transfer of all of their assets to the corresponding AmSouth Funds, in exchange for AmSouth Class A, Class B and Trust Class shares of the corresponding AmSouth Fund (collectively, "Shares") and the assumption by the corresponding AmSouth Fund of all of the liabilities of the ISG Fund followed by the dissolution and liquidation of each ISG Fund and the distribution of Shares to the shareholders of the ISG Funds--all ISG shareholders will receive shares of the AmSouth Class (Class A, Class B or Trust Class) that corresponds to the Class of ISG that they hold; to consider and act upon a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Funds. The new Investment Advisory Agreement was approved by the Board of Directors, effective as of the date of the merger (the "Merger") of First American Corporation, the former parent of the ISG Funds' investment adviser, First American National Bank, with and into AmSouth Bancorporation; to consider and act upon a new Sub- Investment Advisory Agreement between Lazard Asset Management, the present sub-adviser to the ISG International Equity Fund, and First American National Bank, on behalf of the ISG International Equity Fund, the 35 36 terms of which are identical in all material respects to the prior sub-advisory agreement for ISG International Equity Fund; to consider and act upon a new Sub-Investment Advisory Agreement between Bennett Lawrence Management, LLC, the present sub-adviser to the ISG Mid-Cap Fund, and First American National Bank, on behalf of the ISG Mid-Cap Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for ISG Mid-Cap Fund; and to consider and act upon a new Sub-Investment Advisory Agreement between Womack Asset Management, Inc., the present sub-adviser to the ISG Small-Cap Opportunity Fund, and First American National Bank, on behalf of the ISG Small-Cap Opportunity Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for the ISG Small-Cap Opportunity Fund. The new Sub-Investment Advisory Agreements were approved by the Board of Directors, effective as of the date of the Merger. As of November 11, 1999, there was outstanding the following amount of shares of the Class A, Class B and Institutional Class of each ISG Fund: ISG Current Income 333.048 Class A shares 3,040.401 Class B shares 61,093.561 Institutional Class shares ISG Treasury Money Market 130,764,303.955 Class A shares 302,250,711.305 Institutional Class shares ISG Moderate Growth & Income 14,040.522 Class A shares 96,999.570 Class B shares 2,069,630.209 Institutional Class shares ISG Growth & Income 53,691.046 Class A shares 153,899.411 Class B shares 8,030,059.491 Institutional Class shares ISG Growth 13,124.886 Class A shares 74,339.283 Class B shares 864,084.113 Institutional Class shares ISG Aggressive Growth 32,245.330 Class A shares 42,004.670 Class B shares 1,573,512.950 Institutional Class shares ISG Mid-Cap 95,230.333 Class A shares 52,632.155 Class B shares 1,466,108.704 Institutional Class shares ISG Large-Cap Equity 2,483,076.982 Class A shares 533,714.521 Class B shares 22,903,083.666 Institutional Class shares ISG International Equity 69,281.663 Class A shares 9,108.945 Class B shares 2,933,547.885 Institutional Class shares ISG Capital Growth 620,986.267 Class A shares 36 37 456,976.325 Class B shares 14,603,598.082 Institutional Class shares ISG Tennessee Tax-Exempt 324,769.191 Class A shares 136,142.748 Class B shares 8,165,969.910 Institutional Class shares ISG Limited Term Tennessee 1,971,200.317 Class A shares Tax-Exempt 71,287.838 Class B shares N/A Institutional Class shares ISG Limited Term U.S. Government 337,195.786 Class A shares 48,211.116 Class B shares 4,366,161.854 Institutional Class shares ISG Government Income 241,517.789 Class A shares 61,709.971 Class B shares 36,996,047.920 Institutional Class shares ISG Limited Term Income 693,038.122 Class A shares 72,190.341 Class B shares 9,734,234.622 Institutional Class shares ISG Equity Income 628,193.117 Class A shares 774,966.627 Class B shares 8,286,154.411 Institutional Class shares ISG Municipal Income 296,081.151 Class A shares 33,840.208 Class B shares 7,247,931.572 Institutional Class shares ISG Small-Cap Opportunity 1,092,348.724 Class A shares 28,741.741 Class B shares 6,673,692.251 Institutional Class shares ISG Tax-Exempt Money Market 10,402,505.630 Class A shares 107,598,528.370 Institutional Class shares ISG Prime Money Market 492,117,600.391 Class A shares 575,615.020 Class B shares 239,720,486.684 Institutional Class shares ISG Income 348,671.457 Class A shares 136,195.361 Class B shares 9,817,088.894 Institutional Class shares Only shareholders of record on the close of business on December 2, 1999, will be entitled to notice of and to vote at the meeting. Each share is entitled to one vote as of the close of business on December 2, 1999. 37 38 ISG's Directors know of no matters other than those set forth herein to be brought before the meeting. If, however, any other matters properly come before the meeting, it is the Directors' intention that proxies will be voted on such matters in accordance with the judgment of the persons named in the enclosed form of proxy. PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION The shareholders of each ISG Fund are being asked to approve or disapprove the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth dated as of [ DATE ] (the "Agreement"), a copy of which is attached to this Combined Prospectus/Proxy Statement as Appendix A. The Agreement provides, among other things, for the transfer of all of the assets of each ISG Fund to the corresponding AmSouth Fund in exchange for the assumption by the corresponding AmSouth Fund of all of the liabilities of the ISG Fund and for a number of Shares calculated based on the value of the net assets of the ISG Fund acquired by the AmSouth Fund and the net asset value per share of the AmSouth Fund, all as more fully described below under "Information about the Reorganization." After receipt of Shares each ISG Fund will dissolve, distributing the Shares to its shareholders in complete liquidation, and each ISG Fund will be terminated. Prior to the date of such transfer (the "Exchange Date"), each ISG Fund will declare a distribution to their respective shareholders which, together with all previous distributions, will have the effect of distributing to their respective shareholders all of their investment company taxable income (computed without regard to the deduction for dividends paid) and net realized capital gains, if any, through the Exchange Date. At a meeting held on November 18, 1999, the Company's Directors in attendance voted unanimously to approve the Transaction and to recommend that shareholders of each ISG Fund also approve the Transaction. Approval of each reorganization of an ISG Fund requires the affirmative vote of a majority of all votes attributable to the voting securities of that ISG Fund voting separately as a Fund. A shareholder of any ISG Fund objecting to the proposed Transaction is not entitled under either Maryland law or the Company's Articles of Incorporation or Bylaws to demand payment for and an appraisal of his or her particular ISG Fund shares if the Transaction is consummated over his or her objection. However, shares of the AmSouth Funds are redeemable for cash at their net asset value on days on which the New York Stock Exchange is open for business ("Business Days"). In the event that this proposal is not approved by the shareholders of an ISG Fund, such ISG Fund will continue to be managed as a separate fund in accordance with its current investment objectives and policies, and the Company's Directors may consider alternatives in the best interests of shareholders. However, the reorganization of the ISG Funds for which approval of the Agreement is obtained will be consummated. BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION The primary reason for the Transaction is the recently completed Merger of First American Corporation, the former parent company of First American National Bank ("FANB") with AmSouth Bancorporation. The Transaction presents the opportunity to combine the separate ISG Funds and AmSouth Funds into a single, larger consolidated group. AmSouth Bank and FANB have recommended that each ISG Fund be reorganized into the corresponding AmSouth Fund as described in this Prospectus/Proxy Statement. A meeting was held on November 18, 1999, for the Company's Directors, and a meeting was held on November 23, 1999, for the AmSouth Trustees, at which meetings the Directors and Trustees of the respective Funds, including the Independent Board Members, unanimously determined that the reorganization would be in the best interests of their respective registered investment companies and existing Fund shareholders and that the economic interests of their respective existing shareholders would not be diluted as a result of effecting the reorganization. At these same meetings, the Directors and Trustees of the respective Funds, including the Independent Board Members, unanimously approved the proposed reorganization. The Company's Directors also unanimously recommended that each ISG Fund's shareholders approve the reorganization. 38 39 In electing to approve the Agreement and recommend it to shareholders of the ISG Funds, the Company's Directors acted upon information provided to them, indicating that the proposed transaction would be in the best interests of ISG shareholders. In particular, the Directors determined that the proposed transaction offered the following benefits: - Participation in the Larger Fund Complex: The Directors were informed that the proposed transaction would, if effected, result in a mutual fund complex consisting of thirty-one portfolios and total anticipated assets in excess of $7 billion. ISG Fund shareholders who would, as part of the proposed transaction, become part of the AmSouth complex, would be able to exchange their shares for shares of a significantly larger number of funds than is currently the case within the ISG Funds and would find compatibility of the ISG and AmSouth Funds' investment objectives, policies and shareholder services. In addition, the Directors received information to the effect that a larger, more diverse complex can appeal to a broader class of institutional and retail investors, may be able to achieve economies of scale more quickly or efficiently and may be able to reduce costs by taking advantage of its relatively larger size. - Continuity of Management: The Directors were provided with information detailing the consolidation efforts involving First American National Bank, the adviser to the ISG Funds from its inception, and AmSouth Bank. It was represented to the Directors that, in many instances the post-reorganization portfolios of AmSouth would be managed on a day-to-day basis by the same persons who had previously been responsible for managing various ISG Fund portfolios. - Tax-Free Nature of Transaction, Lack of Dilution: The Directors were informed that the proposed transaction involving ISG and AmSouth would be accomplished without the imposition of Federal income taxes on any ISG Fund or its shareholders. In addition, the Directors received representations from AmSouth Bank to the effect that AmSouth Bank would defray the ISG Fund's costs directly associated with participation in the proposed transaction. Finally, the Directors were informed that the interests of ISG Fund shareholders would not be diluted as a result of the proposed transaction, and that the ISG Fund shareholders would receive shares of the corresponding AmSouth Fund equal in value to the market value (or, where relevant, amortized cost value) of the ISG Fund's assets. - Performance of AmSouth; Fees and Expenses: The Board received information relating to the performance of various AmSouth Funds into which the interests of shareholders of the ISG Funds would be merged. The Directors were given details on the performance record for each pre-existing AmSouth Fund, both on an absolute basis and in comparison to relevant benchmarks and industry averages. The Directors also received information about the fees and expenses charged or to be charged to AmSouth shareholders, which information tended to show that, after implementation of expense caps, ISG Fund shareholders who become AmSouth shareholders as a result of the proposed transaction would be subject to fees and expenses that were no higher than the fee and expense level previously approved by the ISG Board. The Directors received a commitment from AmSouth Bank that fees and expenses of AmSouth Funds combining with ISG Funds would not exceed the approved levels of fees and expenses for the respective ISG Funds for a period of two years following the proposed reorganization. INFORMATION ABOUT THE REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION. The proposed Agreement provides that each AmSouth Fund will acquire all of the assets of the corresponding ISG Fund in exchange for the assumption by the AmSouth Fund of all of the liabilities of the corresponding ISG Fund and for all Shares as of the Exchange Date (defined in the Agreement to be March 13, 2000 or such other date as mutually agreed upon by the Company and AmSouth). 39 40 The following discussion of the Agreement is qualified in its entirety by reference to the form of Agreement attached as Appendix A to this Combined Prospectus/Proxy Statement. As a result of the Transaction, each shareholder of the ISG Funds will receive that number of full and fractional Shares equal in value at the Exchange Date to the value of the portion of the net assets of the ISG Fund transferred to the corresponding AmSouth Fund attributable to the shareholder (based on the proportion of the outstanding shares of the ISG Fund owned by the shareholder as of the Valuation Time). The portfolio securities of the ISG Funds will be valued in accordance with the generally employed valuation procedures of the relevant ISG Fund. Each reorganization is being accounted for as a tax-free business combination. At separate meetings held on November 18, 1999, for ISG Directors and November 23, 1999, for AmSouth Trustees, all of the Directors and Trustees of each of ISG and AmSouth, including the Independent Board Members, unanimously determined that the reorganization would be in the best interests of their respective registered investment companies and existing shareholders and that the economic interests of their respective existing shareholders would not be diluted as a result of effecting the reorganization. Immediately following the Exchange Date, each ISG Fund will distribute pro rata to its respective shareholders of record as of the close of business on the Exchange Date the full and fractional Shares received by it and such ISG Fund will be liquidated and dissolved. Such distribution will be accomplished by the establishment of accounts on the share records of the AmSouth Funds in the name of such ISG Fund's shareholders, each account representing the respective number of full and fractional Shares due such shareholder. All ISG Fund shareholders will receive shares of the AmSouth Class (Class A, Class B or Trust Class) that corresponds to the Class of ISG Fund shares that they hold. The consummation of the reorganization is subject to the conditions set forth in the Agreement. The Agreement may be terminated and the reorganization abandoned at any time, before or after approval by the shareholders, prior to the Exchange Date by mutual consent of the Company and AmSouth or, if any condition set forth in the Agreement has not been fulfilled and has not been waived by the party entitled to its benefits, by such party. All fees and expenses, including accounting expenses, portfolio transfer taxes (if any) or other similar expenses incurred directly in connection with the consummation of the Transaction contemplated by the Agreement will be borne by AmSouth Bank including the costs of proxy materials, proxy solicitation, and legal expenses. Fees and expenses not incurred directly in connection with the consummation of the Transaction will be borne by the party incurring such fees and expenses. The Board of Trustees of AmSouth and the Board of Directors of the Company have determined that the interests of the existing shareholders of AmSouth and the ISG Funds will not be diluted as a result of the Transaction. Full and fractional Shares will be issued to the ISG Funds' shareholders in accordance with the procedure under the Agreement as described above. Each AmSouth Share will be fully paid and nonassessable when issued, will be transferable without restriction, and will have no preemptive or conversion rights. AmSouth's Declaration of Trust permits AmSouth to divide its shares of any series, without shareholder approval, into one or more classes of shares having such preferences and special or relative rights and privileges as the Trustees may determine. Shares of certain of the AmSouth Funds are currently divided into three classes: Class A, Class B and Trust Shares. AmSouth Treasury Reserve Money Market and AmSouth Tax-Exempt Money Market do not offer Class B shares. Class A, Class B and Trust shares will be distributed as applicable by AmSouth in connection with the Transaction. The Company's Articles of Incorporation and Bylaws also permit multiple classes of shares, and shares of certain of the ISG Funds are currently divided into three classes: Class A, Class B and Institutional Class shares. ISG Treasury Money Market and ISG Tax-Exempt Money Market Funds do not offer Class B shares. Under Massachusetts law, AmSouth shareholders, could, under certain circumstances, be held personally liable for the obligations of AmSouth. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of AmSouth. The Declaration of Trust provides for indemnification out of AmSouth property for 40 41 all loss and expense of any shareholder held personally liable for the obligations of AmSouth. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which AmSouth would be unable to meet its obligations. The likelihood of such circumstances is remote. FEDERAL INCOME TAX CONSEQUENCES. The Federal income tax consequences of each reorganization will be as follows: (i) under Section 361 of the Code, no gain or loss will be recognized by an ISG Fund upon the transfer of its assets to the corresponding AmSouth Fund in exchange for AmSouth Fund Shares and the assumption by the AmSouth Fund of the liabilities of the ISG Fund, or upon the distribution of the AmSouth Fund Shares by the ISG Fund to its Shareholders in liquidation; (ii) under Section 354 of the Code, no gain or loss will be recognized by the ISG Fund shareholders upon the exchange of their shares of the ISG Fund for the Shares; (iii) under Section 358 of the Code, the aggregate basis of Shares an ISG shareholder receives in connection with the reorganization will be the same as the aggregate basis of his or her ISG Fund shares exchanged therefor; (iv) under Section 1223(1) of the Code, an ISG Fund's shareholder's holding period for his or her Shares will be determined by including the period for which he or she held the ISG Fund shares exchanged therefor provided that he or she held the ISG shares as capital assets; (v) no gain or loss will be recognized by an AmSouth Fund upon the receipt of the assets of the corresponding ISG Fund in exchange for Shares and the assumption by the AmSouth Fund of the liabilities of the ISG Fund, (vi) the basis in the hands of an AmSouth Fund of the assets of the corresponding ISG Fund transferred to the AmSouth Fund in the reorganization will be the same as the basis of such assets in the hands of the ISG Fund immediately prior to the transfer; and (vii) the holding period of the assets of an ISG Fund in the hands of the corresponding AmSouth Fund will include the periods during which such assets were held by the ISG Fund. As a condition to AmSouth and ISG Fund's obligations to consummate the reorganization, ISG and AmSouth will receive an opinion from Ropes & Gray, counsel to AmSouth, to the effect that, on the basis of the existing provisions of the Code, current administrative rules, court decisions, and certain representations by the AmSouth and ISG, for federal income tax purposes the above stated tax consequences will be applicable to each reorganization. VOTING RIGHTS. Each shareholder of an AmSouth Fund and an ISG Fund is entitled to one vote per share and a proportionate fractional vote for any fractional share. Holders of Class A or Class B Shares of the AmSouth Funds will vote separately as a fund or a class on matters relating solely to that fund or class. On all other matters, they vote in the aggregate with shareholders of all of the AmSouth Funds. When the former shareholders of each ISG Fund vote in the aggregate as shareholders of each corresponding AmSouth Fund, the voting power they will have will be less than the voting power they had when the ISG Funds voted in the aggregate. For a more detailed discussion of AmSouth's voting procedures, see the AmSouth Prospectuses "GENERAL INFORMATION -- Miscellaneous." CAPITALIZATION. The following tables set forth as of September 30, 1999, (i) the capitalization of each ISG Fund, (ii) the capitalization of each AmSouth Fund, and (iii) the pro forma capitalization of each AmSouth Fund as adjusted giving effect to the proposed acquisition of assets at net asset value: 41 42 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Current Income Portfolio and AmSouth Current Income Portfolio (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 3,157 28,913 264,475 N/A N/A N/A 3,157 28,913 264,475 - ---------------------------------------------------------------------------------------------------------------------------- Shares 331 3,024 27,590 N/A N/A N/A 331 3,024 27,590 - ---------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.54 9.56 9.59 N/A N/A N/A 9.54 9.56 9.59 - ---------------------------------------------------------------------------------------------------------------------------- ISG Treasury Money Market Fund and AmSouth Treasury Reserve Money Market Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ------------------------------------------------------------------------------------------------------------- CLASS A INSTITUTIONAL CLASS A TRUST CLASS A TRUST - ------------------------------------------------------------------------------------------------------------- Net Assets ($) 147,468,354 327,667,608 N/A N/A 147,468,354 327,667,608 - ------------------------------------------------------------------------------------------------------------- Shares 147,475,842 327,681,802 N/A N/A 147,475,842 327,681,802 - ------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 1.00 1.00 N/A N/A 1.00 1.00 - ------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 42 43 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Moderate Growth & Income Portfolio and AmSouth Moderate Growth and Income Portfolio (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 134,231 883,919 7,068,796 N/A N/A N/A 134,231 883,919 7,068,796 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 13,842 91,178 727,960 N/A N/A N/A 13,842 91,178 727,960 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.70 9.69 9.71 N/A N/A N/A 9.70 9.69 9.71 - ---------------------------------------------------------------------------------------------------------------------------------- ISG Growth & Income Portfolio and AmSouth Growth and Income Portfolio (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 529,923 1,566,791 42,168,011 N/A N/A N/A 529,923 1,566,791 42,168,011 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 53,571 158,244 4,252,549 N/A N/A N/A 53,571 158,244 4,252,549 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.89 9.90 9.92 N/A N/A N/A 9.89 9.90 9.92 - ---------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 43 44 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Growth Portfolio and AmSouth Growth Portfolio (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 130,735 715,281 5,575,213 N/A N/A N/A 130,735 715,281 5,575,213 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 13,418 73,472 570,475 N/A N/A N/A 13,418 73,472 570,475 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.74 9.74 9.77 N/A N/A N/A 9.74 9.74 9.77 - ---------------------------------------------------------------------------------------------------------------------------------- ISG Aggressive Growth Portfolio and AmSouth Aggressive Growth Portfolio (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 318,933 298,867 11,249,486 N/A N/A N/A 318,933 298,867 11,249,486 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 31,744 29,946 1,121,629 N/A N/A N/A 31,744 29,946 1,121,629 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 10.05 9.98 10.03 N/A N/A N/A 10.05 9.98 10.03 - ---------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 44 45 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Mid-Cap Fund and AmSouth Mid Cap Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 990,932 583,691 14,674,325 N/A N/A N/A 990,932 583,691 14,674,325 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 86,316 50,956 1,276,810 N/A N/A N/A 86,316 50,956 1,276,810 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 11.48 11.45 11.49 N/A N/A N/A 11.48 11.45 11.49 - ---------------------------------------------------------------------------------------------------------------------------------- ISG Large-Cap Equity Fund and AmSouth Large Cap Fund (unaudited) - ---------------------------------------------------------------------------------------------------------------------------------- ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 71,311,649 14,289,404 655,207,824 N/A N/A N/A 71,311,649 14,289,404 655,207,824 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 2,505,610 505,257 23,026,809 N/A N/A N/A 2,505,610 505,257 23,026,809 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 28.46 28.28 28.45 N/A N/A N/A 28.46 28.28 28.45 - ---------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 45 46 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG International Equity Fund and AmSouth International Equity Fund (unaudited) - ---------------------------------------------------------------------------------------------------------------------------------- ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 681,422 76,374 34,651,938 N/A N/A N/A 681,422 76,374 34,657,938 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 57,991 6,527 2,951,412 N/A N/A N/A 57,991 6,527 2,951,412 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 11.75 11.70 11.74 N/A N/A N/A 11.75 11.70 11.74 - ---------------------------------------------------------------------------------------------------------------------------------- ISG Capital Growth Fund and AmSouth Capital Growth Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ----------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ----------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 8,673,676 6,171,630 209,604,962 N/A N/A N/A 8,673,676 6,171,630 209,604,962 - ----------------------------------------------------------------------------------------------------------------------------------- Shares 605,222 441,275 14,713,283 N/A N/A N/A 605,222 441,275 14,713,283 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 14.33 13.99 14.25 N/A N/A N/A 14.33 13.99 14.25 - ----------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 46 47 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Tennessee Tax-Exempt Fund and AmSouth Tennessee Tax-Exempt Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - --------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - --------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 3,034,667 1,386,106 80,481,316 N/A N/A N/A 3,034,667 1,386,106 80,481,316 - --------------------------------------------------------------------------------------------------------------------------------- Shares 312,343 142,370 8,284,294 N/A N/A N/A 312,343 142,370 8,284,294 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.72 9.74 9.71 N/A N/A N/A 9.72 9.74 9.71 - --------------------------------------------------------------------------------------------------------------------------------- ISG Limited Term Tennessee Tax-Exempt Fund and AmSouth Limited Term Tennessee Tax-Exempt Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ------------------------------------------------------------------------------------------------------------------------------ CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 19,238,246 787,525 N/A N/A N/A N/A 19,238,246 787,525 N/A - ------------------------------------------------------------------------------------------------------------------------------ Shares 1,957,905 80,158 N/A N/A N/A N/A 1,957,905 80,158 N/A - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value per Share ($) 9.83 9.82 N/A N/A N/A N/A 9.83 9.82 N/A - ------------------------------------------------------------------------------------------------------------------------------ (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 47 48 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Limited Term U.S. Government Fund and AmSouth Limited Term U.S. Government Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 3,207,783 484,877 43,994,681 N/A N/A N/A 3,207,783 484,877 43,994,681 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 322,103 48,650 4,418,101 N/A N/A N/A 322,103 48,650 4,418,101 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.96 9.97 9.96 N/A N/A N/A 9.96 9.97 9.96 - ---------------------------------------------------------------------------------------------------------------------------------- ISG Government Income Fund and AmSouth Government Income Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 2,263,107 599,607 364,909,326 4,600,945 N/A 3,428,859 6,864,052 599,607 368,338,185 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 231,424 61,504 37,351,764 477,828 N/A 356,003 712,778 62,264 38,249,033 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.78 9.75 9.77 9.63 N/A 9.63 9.63 9.63 9.63 - ---------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 48 49 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Limited Term Income Fund and AmSouth Limited Term Bond Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - --------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - --------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 6,766,653 698,989 9,356,262 2,903,115 2,027,331 107,105,408 9,669,768 2,726,320 116,461,670 - --------------------------------------------------------------------------------------------------------------------------------- Shares 693,960 71,974 959,616 282,887 197,860 10,436,855 942,473 265,982 11,351,040 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.75 9.71 9.75 10.26 10.25 10.26 10.26 10.25 10.26 - --------------------------------------------------------------------------------------------------------------------------------- ISG Equity Income Fund and AmSouth Equity Income Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - --------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - --------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 5,808,153 7,302,260 77,415,127 19,856,727 7,485,633 10,941,793 25,664,880 14,847,893 88,356,920 - --------------------------------------------------------------------------------------------------------------------------------- Shares 616,356 781,774 8,209,415 1,559,312 590,035 859,179 2,016,094 1,170,047 6,935,394 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.42 9.34 9.43 12.73 12.69 12.74 12.73 12.69 12.74 - --------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 49 50 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Municipal Income Fund and AmSouth Municipal Bond Fund (unaudited) - --------------------------------------------------------------------------------------------------------------------------------- ISG AMSOUTH PRO FORMA COMBINED (1) - --------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - --------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 3,064,056 342,822 75,796,243 2,855,942 65,853 322,939,140 5,919,998 408,675 398,735,383 - --------------------------------------------------------------------------------------------------------------------------------- Shares 301,466 33,824 7,458,651 292,135 6,743 33,024,456 605,317 41,830 40,770,489 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 10.16 10.14 10.16 9.78 9.77 9.78 9.78 9.77 9.78 - --------------------------------------------------------------------------------------------------------------------------------- ISG Small Cap Opportunity Fund and AmSouth Small Cap Fund (unaudited) ISG AMSOUTH PRO FORMA COMBINED (1) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 8,592,761 340,945 82,094,192 977,508 858,551 23,784,982 9,570,269 1,199,496 105,879,174 - ---------------------------------------------------------------------------------------------------------------------------------- Shares 697,283 27,925 6,679,370 114,344 101,594 2,768,509 1,119,330 141,952 12,325,864 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 12.32 12.21 12.29 8.55 8.45 8.59 8.55 8.45 8.59 - ---------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 50 51 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Tax-Exempt Money Market Fund and AmSouth Tax-Exempt Money Market Fund ISG AMSOUTH PRO FORMA COMBINED (1) - ------------------------------------------------------------------------------------------------------------------------ CLASS A INSTITUTIONAL CLASS A TRUST CLASS A TRUST - ------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 10,860,885 94,548,102 24,707,467 68,733,102 35,568,352 163,281,204 - ------------------------------------------------------------------------------------------------------------------------ Shares 10,866,588 94,663,829 24,707,340 68,734,370 35,573,928 163,398,199 - ------------------------------------------------------------------------------------------------------------------------ Net Asset Value per Share ($) 1.00 1.00 1.00 1.00 1.00 1.00 - ------------------------------------------------------------------------------------------------------------------------ ISG Prime Money Market Fund and AmSouth Prime Money Market Fund ISG AMSOUTH PRO FORMA COMBINED (1) - -------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - -------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 443,019,384 347,030 211,833,097 154,031,214 468,095 559,375,905 597,050,598 815,125 771,209,002 - -------------------------------------------------------------------------------------------------------------------------------- Shares 443,055,722 347,070 211,899,694 154,036,885 468,095 559,391,132 597,092,607 815,165 771,290,826 - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - -------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 51 52 CAPITALIZATION TABLES AS OF SEPTEMBER 30, 1999 ISG Income Fund and AmSouth Bond Fund ISG AMSOUTH PRO FORMA COMBINED (1) - -------------------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B INSTITUTIONAL CLASS A CLASS B TRUST CLASS A CLASS B TRUST - -------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 3,392,384 1,309,865 93,694,072 7,359,492 2,377,261 383,905,716 10,751,876 3,687,126 477,599,788 - -------------------------------------------------------------------------------------------------------------------------------- Shares 348,245 134,549 9,621,662 694,888 224,974 36,244,789 1,015,286 348,829 45,099,130 - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value per Share ($) 9.74 9.74 9.74 10.59 10.57 10.59 10.59 10.57 10.59 - -------------------------------------------------------------------------------------------------------------------------------- (1) The adjusted balances are presented as if the Reorganization were effective as of September 30, 1999 for information purposes only. The actual Effective Time of the Reorganization is expected to be March 13, 2000 at which time the results would be reflective of the actual composition of the shareholders' equity at that date. 52 53 Unaudited pro forma combined financial statements of each ISG Fund and each AmSouth Fund as of and for the period ended July 31, 1999 are included in the Statement of Additional Information. Because the Agreement provides that the AmSouth Funds will be the surviving funds following the reorganization and because the AmSouth Funds' investment objectives and policies will remain unchanged, the pro forma combined financial statements reflect the transfer of the assets and liabilities of each ISG Fund to the corresponding AmSouth Fund as contemplated by the Agreement. PROPOSALS TWO AND THREE APPROVAL OR DISAPPROVAL OF CERTAIN ADVISORY AGREEMENTS INTRODUCTION At the Meeting, Shareholders of each ISG Fund also will be asked to approve or disapprove the New Advisory Agreement, which is being submitted in connection with the Merger of First American Corporation, the former parent corporation of First American National Bank ("FANB"), with and into AmSouth Bancorporation on October 1, 1999, and the payment of advisory fees to FANB during the interim period from the date of the Merger through the earlier of the date of Shareholder approval or March 31, 2000. In addition, in connection with the Merger, Shareholders of ISG Mid-Cap Fund, ISG International Equity Fund, and ISG Small-Cap Opportunity Fund will be asked to ratify and approve or disapprove the New Sub-Advisory Agreements between FANB and Bennett Lawrence Management, LLC ("Bennett Lawrence"), Lazard Asset Management ("Lazard"), and Womack Asset Management, Inc. ("Womack"), respectively. As a result of the Merger, the investment advisory agreement with FANB then in effect (the "Former Advisory Agreement") automatically terminated in accordance with its terms and as required by the 1940 Act. Similarly, the sub-investment advisory agreement between FANB and Bennett Lawrence then in effect (the "Former Bennett Lawrence Sub-Advisory Agreement"), the sub-investment advisory agreement between FANB and Lazard then in effect (the "Former Lazard Sub-Advisory Agreement"), and the sub-investment advisory agreement between FANB and Womack then in effect (the "Former Womack Agreement") each automatically terminated as a result of the Merger. To assure the continued supervision of the investments of the ISG Funds after the Merger, at a meeting held on September 22, 1999, the Company's Board of Directors, including a majority of the Independent Board Members, approved, subject to Shareholder approval, the New Advisory Agreement and the New Sub-Advisory Agreements. Since the date of the Merger, FANB has provided advisory services to the ISG Funds under the New Advisory Agreement dated October 1, 1999, which provides for the same services at the same advisory fee rate for the relevant ISG Fund as the Former Advisory Agreement. Bennett Lawrence, Lazard, and Womack also have provided sub-advisory services since the date of the Merger to ISG Mid-Cap Fund, ISG International Equity Fund, and ISG Small-Cap Opportunity Fund, respectively, under the relevant New Sub-Advisory Agreement dated October 1, 1999, which each provides for the same services at the same sub-advisory fee rate as the relevant Former Sub-Advisory Agreement. Under the 1940 Act, investment advisory agreements such as the New Advisory Agreement and New Sub-Advisory Agreements must be approved by shareholders. The ISG Funds, FANB, Bennett Lawrence, Lazard, and Womack have received from the Securities and Exchange Commission an order of exemption (the "Order") permitting the implementation, without shareholder approval, of the New Advisory Agreement and New Sub-Advisory Agreements during the interim period commencing on the date of the Merger until such time as the relevant ISG Fund's shareholders vote on the approval of the New Advisory Agreement and New Sub-Advisory Agreements, but in no event later than March 31, 2000 (the "Interim Period"). As a condition to receiving the Order, the fees payable to FANB, Bennett Lawrence, Lazard, and Womack under the respective new agreements during the Interim Period are paid into an interest-bearing escrow account maintained by an independent escrow agent. The escrow agent will release the amounts held in the escrow account (including any interest earned) to 53 54 FANB and Bennett Lawrence, Lazard, and Womack as the case may be, only upon approval of the relevant new agreement by the shareholders of the relevant ISG Fund. If the requisite shareholder approval is not received for an ISG Fund or new agreement prior to the end of the Interim Period, the relevant amounts held in the escrow account will be released to the appropriate ISG Fund. The terms of the New Advisory Agreement and the New Sub-Advisory Agreements with Bennett Lawrence, Lazard, and Womack are identical in all material respects to the Former Advisory Agreement and Former Bennett Lawrence Sub-Advisory Agreement, Former Lazard Sub-Advisory Agreement, and Former Womack Agreement, respectively, except for the effective dates and escrow provisions. In each case, the effective date is the date of the Merger--October 1, 1999. Shareholders should consider the following factors in determining whether it is fair to compensate the ISG Fund's adviser for their continued services during the Interim Period and thus to ratify and approve the New Advisory Agreement (and, in the case of shareholders of the ISG Mid-Cap Fund, the ISG International Equity Fund, and the ISG Small-Cap Opportunity Fund, whether to ratify and approve the respective New Sub-Advisory Agreement): - the Board of Directors of ISG has unanimously approved the New Advisory Agreement for all of the ISG Funds, and the New Sub-Advisory Agreements for the affected ISG Funds; - no change in any ISG Fund's investment objective or investment policies and restrictions has taken or will take place during the Interim Period; - there has been and will be no change in the fees payable by an ISG Fund to FANB for advisory services or the fees payable by FANB to any sub-adviser during the Interim Period; - investment personnel presently employed by FANB, who are experienced in managing the ISG Funds, have managed and are expected to continue to manage the ISG Funds' investment programs under the New Advisory Agreement during the Interim Period; and - there has not been nor is there expected to be any change in the personnel at the sub-advisers who manage the assets of the ISG Mid-Cap Fund, the ISG International Equity Fund, and the ISG Small-Cap Opportunity Fund during the Interim Period. If the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of an ISG Fund do not approve the New Advisory Agreement or a New Sub-Advisory Agreement (if applicable), the Board of Directors will consider what action to take in the best interests of the shareholders of that ISG Fund. PROPOSAL 2: APPROVAL OR DISAPPROVAL OF THE NEW ADVISORY AGREEMENT Under the New Advisory Agreement, FANB continues to be responsible for providing advisory services to the ISG Funds. A copy of the New Advisory Agreement is attached as Appendix D to this Prospectus/Proxy Statement. As more fully described below, the terms and conditions of the New Advisory Agreement are identical in all material respects to the Former Advisory Agreement. The sole differences between the Former Advisory Agreement and the New Advisory Agreement are the effective date which, in the case of the New Advisory Agreement, is the Merger Date, and the escrow provisions. THE NEW ADVISORY AGREEMENT DOES NOT INCREASE THE RATE OF ADVISORY FEES PAYABLE BY ANY ISG FUND, AND DOES NOT CHANGE THE TYPE OR EXTENT OF SERVICES PROVIDED TO THE ISG FUNDS BY FANB. 54 55 INFORMATION ABOUT THE FORMER ADVISORY AGREEMENT The Former Advisory Agreement was most recently approved by the Company's Board of Directors, including a majority of the Independent Board Members, with respect to each ISG Fund, on November 18, 1998. The Distributor, as the initial shareholder of each ISG Fund, approved the Former Advisory Agreement for each ISG Fund prior to the Fund's commencement of operations. The Former Advisory Agreement provided that FANB provide investment management services to the ISG Funds, subject to the supervision of the Company's Board of Directors. The table below sets forth: (i) the net assets for each ISG Fund as of December 31, 1998; (ii) the rates of advisory fees, computed daily and payable daily, to which FANB was entitled for the services provided and expenses assessed pursuant to the Former Advisory Agreement; (iii) the effective rates of each of the advisory fees (net of waivers) expressed as a percentage of average net assets for the fiscal year ended December 31, 1998; and (iv) advisory fees (net of waivers) paid by each ISG Fund for the fiscal year ended December 31, 1998: ASSETS OF ISG FUND AND ADVISORY FEES PAID TO FANB - ------------------------------------------------------------------------------------------------------------------------- Net Assets as of Annual Actual Advisory Fee December 31, Advisory Fee Advisory Fee Paid (Net of 1998 ($) Rate (Based Rate Paid (Net Waivers)* on Average of Waivers) ($) Net Assets) (%) (%) - ------------------------------------------------------------------------------------------------------------------------- ISG International Equity Fund 28,125,923 1.00 .68 162,141 - ------------------------------------------------------------------------------------------------------------------------- ISG Small-Cap Opportunity Fund 107,453,528 .95 .95 874,343 - ------------------------------------------------------------------------------------------------------------------------- ISG Mid-Cap Fund n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Capital Growth Fund 181,027,242 .65 .64 995,024 - ------------------------------------------------------------------------------------------------------------------------- ISG Large-Cap Equity Fund 844,333,854 .75 .75 4,767,781 - ------------------------------------------------------------------------------------------------------------------------- ISG Equity Income Fund 83,688,877 .65 .64 496,950 - ------------------------------------------------------------------------------------------------------------------------- ISG Income Fund 81,970,472 .50 .49 390,583 - ------------------------------------------------------------------------------------------------------------------------- ISG Government Income Fund 295,429,554 .60 .60 1,364,121 - ------------------------------------------------------------------------------------------------------------------------- ISG Limited Term Income Fund 93,509,941 .50 .50 457,120 - ------------------------------------------------------------------------------------------------------------------------- ISG Limited Term U.S. Government Fund 49,211,391 .50 .34 72,623 - ------------------------------------------------------------------------------------------------------------------------- ISG Tennessee Tax-Exempt Fund 96,002,354 .50 .49 491,735 - ------------------------------------------------------------------------------------------------------------------------- ISG Limited Term Tennessee Tax-Exempt Fund 20,171,315 .50 .39 87,062 - ------------------------------------------------------------------------------------------------------------------------- ISG Municipal Income Fund 56,558,693 .60 .30 136,582 - ------------------------------------------------------------------------------------------------------------------------- ISG Prime Money Market Fund 377,102,322 .25 .25 328,794 - ------------------------------------------------------------------------------------------------------------------------- 55 56 - ------------------------------------------------------------------------------------------------------------------------- ISG Treasury Money Market Fund 477,454,108 .25 .25 480,809 - ------------------------------------------------------------------------------------------------------------------------- ISG Tax-Exempt Money Market Fund n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Aggressive Growth Portfolio n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Growth Portfolio n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Growth & Income Portfolio n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Moderate Growth & Income Portfolio n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- ISG Current Income Portfolio n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------- TOTAL ISG FUNDS $2,792,039,574 ============== - ------------------------------------------------------------------------------------------------------------------------- *A fee waiver represents a percentage of daily net assets of the ISG Fund calculated at an annualized rate. Fee waivers and reimbursements are voluntary and may be modified or terminated by FANB at any time at its sole discretion. For the fiscal year or periods ended December 31, 1998, the amounts paid by the indicated Funds for brokerage commissions, gross spreads and concessions on principal transactions, none of which was paid to the Distributor, were as follows: Fund 1998 - ---- ---- ISG Large-Cap Equity $76,036(1) ISG Capital Growth $494,130 ISG Small-Cap Opportunity $318,620(1) ISG Equity Income $314,269 ISG International Equity $68,007(1) - ---------------------- (1) For the period March 1, 1998 through December 31, 1998. The ISG Income Fund, ISG Government Income Fund, ISG Limited Term Income Fund, ISG Limited Term U.S. Government Fund, ISG Tennessee Tax-Exempt Fund, ISG Limited Term Tennessee Tax-Exempt Fund, ISG Municipal Income Fund, ISG Prime Money Market Fund and ISG Treasury Money Market Fund paid no brokerage commissions and did not enter into any brokerage transactions during the fiscal year ended December 31, 1999, however, engaged in transactions with dealers acting as principal and the costs of such transactions involve dealer spreads rather than brokerage commissions. INFORMATION ABOUT THE NEW ADVISORY AGREEMENT Under the New Advisory Agreement, FANB continues to manage the ISG Funds' investments. Subject to the direction of the Company's Board of Directors, FANB provides investment research and supervision of the investments of each ISG Fund, and conducts a continuous program of investment evaluation and of appropriate sale or other disposition and reinvestment of each ISG Fund's assets. The New Advisory Agreement provides that FANB shall continue to determine from time to time what securities or other instruments will be purchased, retained or sold by ISG with respect to each ISG Fund. FANB, in its supervision of the assets of each ISG Fund, is guided by each ISG Fund's investment objective and policies, and the provisions and restrictions contained in the Company's Articles of Incorporation and Bylaws and as set forth in the ISG Funds' prospectuses and statements of additional information that are on file with the Securities and Exchange Commission. The New Advisory Agreement states that the Adviser shall pay all expenses incurred by it in performing its services and duties as investment adviser and shall pay all fees of each Sub-Adviser in connection with such Sub-Adviser's duties in respect of the Company. All other expenses incurred in the operation of the Company will be borne by the Company, except to the extent specifically assumed by others. The expenses to be borne by the Company include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, if any, fees of Directors who are not officers, directors, employees or holders of 5% or more of the outstanding voting securities of the Adviser, any Sub-Adviser or the Administrator, or any of their affiliates, Commission fees, state Blue Sky qualification fees, advisory and administration fees, charges of custodians, transfer and dividend disbursing agents' fees, certain insurance premiums, industry association fees, auditing and legal 56 57 expenses, costs of maintaining corporate existence, costs of independent pricing services, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of calculating the net asset value of the ISG Funds' shares, costs of shareholders' reports and corporate meeting, costs of preparing and printing certain prospectuses and statements of additional information, any extraordinary expenses. NEW ADVISORY AGREEMENT. THE RATE OF ADVISORY FEES PAYABLE TO FANB BY THE ISG FUNDS UNDER THE NEW ADVISORY AGREEMENT IS IDENTICAL TO THAT PAYABLE TO FANB UNDER THE FORMER ADVISORY AGREEMENT. The rate of advisory fees payable under the New Advisory Agreement by each ISG Fund is equal to the rate for such Fund payable under the Former Advisory Agreement as listed above. From time to time, FANB may waive its fee or reimburse an ISG Fund for certain of its expenses in order to reduce the ISG Fund's expense ratio. As a result, the ISG Fund's return and yield would be higher than it would be if the fees and such expenses had been paid by the ISG Fund. As in the Former Advisory Agreement, the New Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of the obligations or duties of FANB under the New Advisory Agreement, FANB and its affiliates shall not be liable to ISG or to any shareholder for any act or omission in the course of, or connected in any way with, rendering services or for any losses that may be sustained in the purchase, holding, or sale of any security. If approved by shareholders of the ISG Funds at the Meeting, the New Advisory Agreement will continue until December 31, 2000, unless terminated, and may be continued from year to year thereafter by the Board of Directors. The continuation of the New Advisory Agreement must be approved by a majority vote of the Directors, including a majority of the Independent Board Members, cast in person at a meeting called for that purpose. Under the New Advisory Agreement, FANB has the right, in any year, to notify ISG in writing at least 60 days before the New Advisory Agreement's anniversary date that it does not desire a renewal of the New Advisory Agreement. The Directors, or a majority of the outstanding voting shares of ISG, may terminate the New Advisory Agreement at any time without penalty by giving FANB 60 days' written notice. The New Advisory Agreement may not be assigned by FANB and will terminate automatically in the event of its assignment. The New Advisory Agreement will terminate automatically, with respect to the relevant ISG Fund, upon consummation of the reorganization of such ISG Fund. INFORMATION ABOUT FANB FANB has served as the investment adviser to the ISG Funds since February 15, 1994, the date the ISG Funds were established. FANB is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), providing investment management services to individuals and institutional clients. FANB's address is 315 Deaderick Street, Nashville, Tennessee 37237. FANB, a national banking association, is a wholly-owned subsidiary of AmSouth Bancorporation. FANB and its affiliates provide personal trust, estate, employee benefit trust, corporate trust and custody services to over 7,000 accounts and investment advisory services. As of June 30, 1999, FANB and its affiliates had approximately $11 billion under trust and approximately $6 billion under management. AmSouth Bancorporation is a registered bank holding company and a financial services company headquartered in Birmingham, Alabama. Through its related banking subsidiaries, including AmSouth Bank, AmSouth Bancorporation provides retail and commercial banking and trust operation services. On DATE, AmSouth Bancorporation and its affiliates had total assets of approximately $__________ under trust and approximately $ __________ under management. The principal executive officer and directors of AmSouth Bank are listed in Appendix H. DIRECTORS' CONSIDERATIONS The New Advisory Agreement was unanimously approved on behalf of each ISG Fund by the Company's Board of Directors, including the Independent Board Members, at a meeting held on September 22, 1999. The 57 58 Directors considered information relating to FANB, AmSouth Bancorporation, AmSouth Bank and the consolidated entity that would result from the consummation of the Merger, including information provided by AmSouth Bank concerning its capabilities and expertise in serving as investment adviser to the ISG Funds. The Directors reviewed the terms of the New Advisory Agreement and noted that the New Advisory Agreement is identical to the Former Advisory Agreement, except for its date and the escrow provisions. Specifically, in connection with approval of the New Advisory Agreement on behalf of each ISG Fund, the Board considered that the terms of the Merger did not require or result in any changes in the ISG Funds' investment objectives or policies, the investment management or operation of the ISG Funds, the investment personnel managing the ISG Funds, or the shareholder services or other business activities of the ISG Funds. In approving the New Advisory Agreement, the Board noted FANB's record of service to the ISG Funds and the expectation that the Merger should not have any material adverse effect on the ISG Funds' ongoing operations or on the extent or quality of services provided to the ISG Funds, or increase the cost to the ISG Funds of such services. Section 15(f) of the 1940 Act provides that in connection with the sale of any interest in any investment adviser which results in the "assignment" of an investment advisory agreement, an investment adviser of a registered investment company, such as the ISG Funds, or an affiliated person of such investment adviser, may receive any amount or benefit if (i) for a period of three years after the sale, at least 75% of the members of the board of the investment company are not interested persons of the investment adviser or the predecessor adviser, and (ii) there is no "unfair burden" imposed on the investment company as a result of such sale or any express or implied terms, conditions or understanding applicable thereto. For this purpose, "unfair burden" is defined to include any arrangement during the two-year period after the transaction, whereby the investment adviser or its predecessor or successor investment advisers, or any interested persons of any such adviser, receives or is entitled to receive any compensation directly or indirectly (i) from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company other than bona fide ordinary compensation as principal underwriter for such company, or (ii) from the investment company or its security holders for other than bona fide investment advisory or other services. This provision of the 1940 Act was enacted by Congress in 1975 to make it clear that an investment adviser (or an affiliated person of the adviser) can realize a profit on the sale of the adviser's business subject to the two safeguards described above. The Board has requested and received a written representation from FANB and assurances from AmSouth Bancorporation that no "unfair burden" will be imposed on the ISG Funds as a result of the Merger and the proposed transactions. Based upon the considerations set forth above, the Directors have determined that the New Advisory Agreement is in the best interest of each ISG Fund and its shareholders. In addition, management expects that there will be no diminution in the scope and quality of services provided to ISG as a result of these transactions. In fact, as described above, the New Advisory Agreement is identical in all material respects, except as to its date and the escrow provisions, as the Former Advisory Agreement. The Board believes that the ISG Funds will receive investment management services under the New Advisory Agreement equivalent to those that they received under the Former Advisory Agreement, and at the same fee and expense levels. REQUIRED VOTE AND DIRECTORS' RECOMMENDATION With respect to each ISG Fund, approval of this proposal requires the affirmative vote of (a) 67% of the ISG Fund's voting securities present at this Meeting, if the holders of more than 50% of the ISG Fund's outstanding voting securities are present or represented by proxy, or (b) more than 50% of the ISG Fund's outstanding voting securities, whichever is less. 58 59 THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW ADVISORY AGREEMENT. PROPOSAL 3: APPROVAL OR DISAPPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS A. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND BENNETT LAWRENCE MANAGEMENT (APPLIES ONLY TO ISG MID-CAP FUND) As indicated above, consummation of the Merger caused a change in ownership of FANB which, in turn, automatically terminated the Former Bennett Lawrence Sub-Advisory Agreement. Thus, although the Merger had no effect on Bennett Lawrence, the change in ownership of FANB requires approval by the Shareholders of ISG Mid-Cap Fund of a new Sub-Advisory Agreement (the "New Bennett Lawrence Sub-Advisory Agreement") between FANB, with respect to the ISG Mid-Cap Fund, and Bennett Lawrence. A copy of the New Bennett Lawrence Sub-Advisory Agreement is attached as Appendix E to this Prospectus/Proxy Statement. The terms of the New Bennett Lawrence Sub-Advisory Agreement are identical in all material respects to the Former Bennett Lawrence Sub-Advisory Agreement, except for the effective date, which, in the case of the New Bennett Lawrence Sub-Advisory Agreement, is the Merger date, and the escrow provisions. The Former Bennett Lawrence Sub-Advisory Agreement was approved by the Board of Directors, including a majority of the Independent Board Members on August 12, 1998. Pursuant to the terms of the Former Bennett Lawrence Sub-Advisory Agreement and the New Bennett Lawrence Sub-Advisory Agreement, subject to the direction of FANB, Bennett Lawrence makes all determinations with respect to the ISG Mid-Cap Fund's investments other than cash and cash equivalents, and takes such steps as may be necessary to implement such determinations, including the placement of purchase and sale orders on behalf of the ISG Mid-Cap Fund. The Former Bennett Lawrence Sub-Advisory Agreement and the New Bennett Lawrence Sub-Advisory Agreement provide that Bennett Lawrence will pay the expenses incurred by it and its staff in connection with the performance of its services under each Bennett Lawrence Sub-Advisory Agreement, including the payment of salaries of all officers and employees who are employed by Bennett Lawrence. Under the Former Bennett Lawrence Sub-Advisory Agreement and the New Bennett Lawrence Sub-Advisory Agreement, FANB has agreed to pay Bennett Lawrence an annual fee based on the average daily net assets of the Mid-Cap Fund as follows: 0.75% of the average daily net assets on the first $25 million; 0.625% of the average daily net assets on the next $50 million; 0.50% of the average daily net assets on assets in excess of $75 million. Applying the foregoing formula to the ISG Mid-Cap Fund's level of net assets on DATE, Bennett Lawrence would be entitled to a sub-advisory fee from FANB equal to ____% of the ISG Mid-Cap Fund's average daily net assets. THE FEE ARRANGEMENT BETWEEN FANB AND BENNETT LAWRENCE MANAGEMENT IS IDENTICAL IN THE FORMER BENNETT LAWRENCE SUB-ADVISORY AGREEMENT AND THE NEW BENNETT LAWRENCE SUB-ADVISORY AGREEMENT. The New Bennett Lawrence Sub-Advisory Agreement provides that, if approved by shareholders of the ISG Mid-Cap Fund, it will remain in effect until December 31, 2000 and may continue in effect for successive one-year periods thereafter, provided such continuance is specifically approved at least annually by vote of a majority of Directors, including a majority of the Independent Board Members, cast in person at a meeting called for the purpose of voting on such approval. Bennett Lawrence has the right, in any year, to notify FANB in writing, at least 60 days before the New Bennett Lawrence Sub-Advisory Agreement's anniversary date, that it does not desire a renewal of the New Bennett Lawrence Sub-Advisory Agreement. The New Bennett Lawrence Sub-Advisory Agreement may be terminated by the Directors at any time without penalty, or by a vote of a majority of 59 60 the outstanding shares of the ISG Mid-Cap Fund on 60 days' written notice. The New Bennett Lawrence Sub-Advisory Agreement will automatically terminate in the event of its assignment (as such term is defined in the 1940 Act) or in the event of the termination of ISG's then-effective advisory agreement with FANB. If the Transaction is approved by shareholders, then Bennett Lawrence will serve as Sub-Adviser to the AmSouth Mid Cap Fund. If the New Bennett Lawrence Sub-Advisory Agreement and the New Advisory Agreement are approved by shareholders of the ISG Mid-Cap Fund, the New Bennett Lawrence Sub-Advisory Agreement will become effective as of October 1, 1999. If the New Advisory Agreement is approved but the New Bennett Lawrence Sub-Advisory Agreement is not approved by the shareholders of the ISG Mid-Cap Fund, FANB would be fully responsible for the Fund's investment activities. If neither the New Advisory Agreement nor the New Bennett Lawrence Sub-Advisory Agreement is approved by the shareholders of the ISG Mid-Cap Fund, the Board of Directors will consider what actions should be taken. DIRECTORS' CONSIDERATIONS The New Bennett Lawrence Sub-Advisory Agreement was unanimously approved on behalf of the ISG Mid-Cap Fund by the Company's Board of Directors, including the Independent Board Members, at a meeting held on September 22, 1999. The Directors considered information relating to Bennett Lawrence, FANB, AmSouth Bancorporation, AmSouth Bank and the consolidated entity that would result from the completion of the Merger. The Board considered Bennett Lawrence Management's capabilities and expertise in serving as sub-adviser to the ISG Mid-Cap Fund. The Directors reviewed the terms of the New Bennett Lawrence Sub-Advisory Agreement, including the fact that the sub-advisory services would continue to be performed at the same costs and by the same personnel at Bennett Lawrence Management as they were under the Former Bennett Lawrence Sub-Advisory Agreement. The section entitled "Directors' Considerations" under Proposal 2 discusses additional factors considered by the Directors, as well as matters such as "assignment" of an investment advisory Agreement and "unfair burden" with respect to the realization of a profit by FANB or its parent as a result of the Merger. These statements are also applicable to shareholders of the ISG Mid-Cap Fund with respect to the ratification and approval or disapproval of the New Bennett Lawrence Sub-Advisory Agreement. Shareholders should therefore review this information prior to determining whether to ratify and approve the New Bennett Lawrence Sub-Advisory Agreement. REQUIRED VOTE AND DIRECTORS' RECOMMENDATION With respect to ISG Mid-Cap Fund, approval of this proposal requires the affirmative vote of (a) 67% of the ISG Mid-Cap Fund's voting securities present at this meeting, if the holders of more than 50% of the ISG Mid-Cap Fund's outstanding voting securities are present or represented by proxy, or (b) more than 50% of the ISG Mid-Cap Fund's outstanding voting securities, whichever is less. THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW BENNETT LAWRENCE SUB-ADVISORY AGREEMENT. B. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND LAZARD (APPLIES ONLY TO ISG INTERNATIONAL EQUITY FUND) As indicated above, consummation of the Merger caused a change in ownership of FANB which, in turn, automatically terminated the Former Lazard Sub-Advisory Agreement. Thus, although the Merger had no effect on Lazard, the change in ownership of FANB requires approval by the Shareholders of ISG International Equity Fund of a new Sub-Investment Advisory Agreement (the "New Lazard Sub-Advisory Agreement") between 60 61 FANB, with respect to the ISG International Equity Fund, and Lazard. A copy of the New Lazard Sub-Advisory Agreement is attached as Appendix F to this Prospectus/Proxy Statement. The terms of the New Lazard Sub-Advisory Agreement are identical in all material respects to the Former Lazard Sub-Advisory Agreement, except for the effective date, which, in the case of the New Lazard Sub-Advisory Agreement, is the Merger date, and the escrow provisions. The Former Lazard Sub-Advisory Agreement was approved by the Board of Directors, including a majority of the Independent Board Members on May 14, 1998. Under the terms of the Former Lazard Sub-Advisory Agreement and the New Lazard Sub-Advisory Agreement, subject to the direction of FANB, Lazard makes all determinations with respect to the ISG International Equity Fund's investments and takes all steps as may be necessary to implement its investment decisions, including the placement of purchase and sale orders on behalf of the ISG International Equity Fund. The Former Lazard Sub-Advisory Agreement and the New Lazard Sub-Advisory Agreement provide that Lazard will pay the expenses incurred by it and its staff in connection with the performance of its services under each Lazard Sub-Advisory Agreement, including the payment of salaries of all officers and employees who are employed by Lazard. FANB will pay Lazard an annual sub-advisory fee equal to 0.50% of the average daily net assets of the ISG International Equity Fund. The sub-advisory fee is calculated by FANB, is accrued daily, and paid monthly, to Lazard. THE FEE ARRANGEMENT BETWEEN FANB AND LAZARD IS IDENTICAL IN THE FORMER LAZARD SUB-ADVISORY AGREEMENT AND THE NEW LAZARD SUB-ADVISORY AGREEMENT. If approved by shareholders of the ISG International Equity Fund at the Meeting, the New Lazard Sub-Advisory Agreement will remain in effect until December 31, 2000, unless terminated, and may be continued from year to year thereafter by the Board of Directors. The continuation of the New Lazard Sub-Advisory Agreement must be approved by a majority vote of the Directors, including a majority of the Independent Board Members, cast in person at a meeting called for that purpose. Lazard has the right, in any year, to notify FANB in writing at least 60 days before the New Lazard Sub-Advisory Agreement's anniversary date, that it does not desire a renewal of the New Lazard Sub-Advisory Agreement. The Directors, or a majority of the outstanding voting shares of the ISG International Equity Fund, may terminate the New Lazard Sub-Advisory Agreement at any time without penalty by giving Lazard 60 days' written notice. The New Lazard Sub-Advisory Agreement will terminate automatically in the event of any assignment (as defined in the 1940 Act) or in the event of the termination of the Advisor Agreement with FANB. If the Transaction is approved by shareholders, then Lazard will serve as Sub-Adviser to the AmSouth International Equity Fund. If the New Lazard Sub-Advisory Agreement and the New Advisory Agreement are approved by shareholders of the ISG International Equity Fund, the New Lazard Sub-Advisory Agreement will become effective as of October 1, 1999. If the New Advisory Agreement is approved but the New Lazard Sub-Advisory Agreement is not approved by the shareholders of the ISG International Equity Fund, FANB would be fully responsible for the ISG International Equity Fund's investment activities. If neither the New Advisory Agreement nor the New Lazard Sub-Advisory Agreement is approved by the shareholders of the ISG International Equity Fund, the Board of Directors will consider what actions should be taken. DIRECTORS' CONSIDERATIONS The Lazard New Sub-Advisory Agreement was unanimously approved on behalf of the ISG International Equity Fund by the Company's Board of Directors, including the Independent Board Members, at a meeting held on September 22, 1999. The Directors considered information relating to Lazard, FANB, AmSouth Bancorporation, AmSouth Bank and the consolidated entity that would result from the completion of the Merger. The Board considered Lazard's capabilities and expertise in serving as sub-adviser to the ISG International Equity Fund. The Directors reviewed the terms of the New Lazard Sub-Advisory Agreement, including the fact that the sub-advisory services would continue to be performed at the same costs and by the same personnel at Lazard as they 61 62 were under the Former Lazard Sub-Advisory Agreement. It was noted that Lazard has served as the sub-adviser to the ISG International Equity Fund's predecessor since its inception. The section entitled "Directors' Considerations" under Proposal 2 discusses additional factors considered by the Directors, as well as matters such as "assignment" of an investment advisory Agreement and "unfair burden" with respect to the realization of profit by FANB or its parent as a result of the Merger. These statements are also applicable to shareholders of the ISG International Equity Fund with respect to the ratification and approval or disapproval of the New Lazard Sub-Advisory Agreement. Shareholders should therefore review this information prior to determining whether to ratify and approve the New Lazard Sub-Advisory Agreement. REQUIRED VOTE AND DIRECTORS' RECOMMENDATION With respect to ISG International Equity Fund, approval of this proposal requires the affirmative vote of (a) 67% of the ISG International Equity Fund's voting securities present at this meeting, if the holders of more than 50% of the ISG International Equity Fund's outstanding voting securities are present or represented by proxy, or (b) more than 50% of the ISG International Equity Fund's outstanding voting securities, whichever is less. THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW LAZARD SUB-ADVISORY AGREEMENT. C. NEW SUB-ADVISORY AGREEMENT BETWEEN FANB AND WOMACK (APPLIES ONLY TO ISG SMALL-CAP OPPORTUNITY FUND) As indicated above, consummation of the Merger caused a change in ownership of FANB which, in turn, automatically terminated the Former Womack Sub-Advisory Agreement. Thus, although the Merger had no effect on Womack, the change in ownership of FANB requires approval by the Shareholders of ISG Small-Cap Opportunity Fund of a new Sub-Advisory Agreement (the "New Womack Sub-Advisory Agreement") between FANB, with respect to the ISG Small-Cap Opportunity Fund, and Womack. A copy of the New Womack Sub-Advisory Agreement is attached as Appendix G to this Prospectus/Proxy Statement. The terms of the New Womack Sub-Advisory Agreement are identical in all material respects to the Former Womack Sub-Advisory Agreement, except for the effective date, which, in the case of the New Womack Sub-Advisory Agreement, is the Merger date, and the escrow provisions. The Former Womack Sub-Advisory Agreement was approved by the Board of Directors, including a majority of the Independent Board Members on May 14, 1998. Pursuant to the terms of the Former Womack Sub-Advisory Agreement and the New Womack Sub-Advisory Agreement, subject to the direction of FANB, Womack makes all determinations with respect to the ISG Small-Cap Opportunity Fund's investments, and takes such steps as may be necessary to implement such determinations, including the placement of purchase and sale orders on behalf of the ISG Small-Cap Opportunity Fund. The Former Womack Sub-Advisory Agreement and the New Womack Sub-Advisory Agreement provide that Womack will pay the expenses incurred by it and its staff in connection with the performance of its services under each Womack Sub-Advisory Agreement, including the payment of salaries of all officers and employees who are employed by Womack. Under the Former Womack Sub-Advisory Agreement and the New Womack Sub-Advisory Agreement, FANB will pay Womack a monthly fee at the annual rate of .35% of the average daily net assets of the Small-Cap Opportunity Fund. THE FEE ARRANGEMENT BETWEEN FANB AND WOMACK 62 63 IS IDENTICAL IN THE FORMER WOMACK SUB-ADVISORY AGREEMENT AND THE NEW WOMACK SUB-ADVISORY AGREEMENT. The New Womack Sub-Advisory Agreement provides that, if approved by shareholders of the ISG Small-Cap Opportunity Fund, it will remain in effect until December 31, 2000 unless terminated, and will continue in effect for successive one-year periods, provided such continuance is specifically approved at least annually by vote of a majority of Directors, including a majority of the Independent Board Members, cast in person at a meeting called for the purpose of voting on such approval. Womack has the right, in any year, to notify FANB in writing, at least 60 days before the New Womack Sub-Advisory Agreement's anniversary date, that it does not desire a renewal of the New Womack Sub-Advisory Agreement. The New Womack Sub-Advisory Agreement may be terminated by the Directors at any time without penalty, or by a vote of a majority of the outstanding shares of the ISG Small-Cap Opportunity Fund on 60 days' written notice. The New Womack Sub-Advisory Agreement will terminate automatically in the event of its assignment (as such term is defined in the 1940 Act) or in the event of the termination of ISG's then-effective advisory agreement with FANB. If the Transaction is approved by shareholders, then Sawgrass Asset Management, Inc. will serve as Sub-Adviser to the AmSouth Small Cap Fund, and Womack will no longer serve as Sub-Adviser to the AmSouth Small Cap Fund. If the New Womack Sub-Advisory Agreement and the New Advisory Agreement are approved by shareholders of the ISG Small-Cap Opportunity Fund, the New Womack Sub-Advisory Agreement will become effective as of October 1, 1999. If the New Advisory Agreement is approved but the New Womack Sub-Advisory Agreement is not approved by the shareholders of the ISG Small-Cap Opportunity Fund, FANB would be fully responsible for the Fund's investment activities. If neither the New Advisory Agreement nor the New Womack Sub-Advisory Agreement is approved by the shareholders of the ISG Small-Cap Opportunity Fund, the Board of Directors will consider what actions should be taken. DIRECTORS' CONSIDERATIONS The New Womack Sub-Advisory Agreement was unanimously approved on behalf of the ISG Small-Cap Opportunity Fund by the Company's Board of Directors, including the Independent Board Members, at a meeting held on September 22, 1999. The Directors considered information relating to Womack, FANB, AmSouth Bancorporation, AmSouth Bank and the consolidated entity that would result from the completion of the Merger. The Board considered Womack's capabilities and expertise in serving as sub-adviser to the ISG Small-Cap Opportunity Fund. The Directors reviewed the terms of the New Womack Sub-Advisory Agreement, including the fact that the sub-advisory services would continue to be performed at the same costs and by the same personnel at Womack as they were under the Former Womack Sub-Advisory Agreement. It was also noted that Womack has served as the sub-adviser to the ISG Small-Cap Opportunity Fund's predecessor since March 1997, and that Mr. Womack has acted as the Fund's portfolio manager since its inception. The section entitled "Directors' Considerations" under Proposal 2 discusses additional factors considered by the Directors, as well as matters such as "assignment" of an investment advisory Agreement and "unfair burden" with respect to the realization of a profit by FANB or its parent as a result of the Merger. These statements are also applicable to shareholders of the ISG Small-Cap Opportunity Fund with respect to the ratification and approval or disapproval of the New Womack Sub-Advisory Agreement. Shareholders should therefore review this information prior to determining whether to ratify and approve the New Womack Sub-Advisory Agreement. REQUIRED VOTE AND DIRECTORS' RECOMMENDATION With respect to ISG Small-Cap Opportunity Fund, approval of this proposal requires the affirmative vote of (a) 67% of the ISG Small-Cap Opportunity Fund's voting securities present at this meeting, if the holders of more than 50% of the ISG Small-Cap Opportunity Fund's outstanding voting securities are present or represented by proxy, or (b) more than 50% of the ISG Small-Cap Opportunity Fund's outstanding voting securities, whichever is less. 63 64 THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW WOMACK SUB-ADVISORY AGREEMENT. INTEREST OF CERTAIN PERSONS IN THE TRANSACTION AmSouth Bancorporation and its subsidiaries, AmSouth Bank and FANB may be deemed to have an interest in the Agreement and Plan of Reorganization and the Transaction because AmSouth Bank and First American National Bank provide investment advisory services to the AmSouth Funds and the ISG Funds, respectively, pursuant to separate advisory agreements with each Fund group. AmSouth Bank and First American National Bank receive compensation from the AmSouth Funds and the ISG Funds, respectively, for services they provide pursuant to these agreements. The terms and provisions of these arrangements are described in the AmSouth and ISG Prospectuses. In addition, AmSouth Bank also serves as custodian and sub-administrator to the AmSouth Funds for which services it receives a fee as described in the AmSouth Prospectuses. AmSouth Bank may also act as a service provider pursuant to the Shareholder Services Plan adopted by AmSouth for which services it would also receive a fee as described in the AmSouth Prospectuses. THE AMSOUTH FUNDS GENERAL For a general discussion of the AmSouth Funds, see the AmSouth Prospectuses. For the convenience of ISG shareholders, certain cross-references to those prospectuses are set forth below. FINANCIAL INFORMATION For information on per-share income and capital changes of an AmSouth Fund, see "Financial Highlights" in the AmSouth Prospectus pertaining to such Fund. EXPENSES For a discussion of an AmSouth Fund's expenses, see "Fee Table" in the AmSouth Prospectus pertaining to such Fund. INVESTMENT OBJECTIVES AND POLICIES For a discussion of an AmSouth Fund's investment objective and policies, see "Investment Objective" and "Investment Policies" in the AmSouth Prospectus pertaining to such Fund. TRUSTEES Overall responsibility for management of AmSouth rests with its Board of Trustees who are elected by the shareholders of AmSouth. There are currently five Trustees, one of whom is considered to be an "interested person" of AmSouth as defined in the 1940 Act. The Trustees, in turn, elect the officers of AmSouth to supervise actively its day-to-day operations. The Trustees of AmSouth, their addresses and principal occupations during the past five years are set forth as follows: 64 65 POSITION(S) HELD PRINCIPAL OCCUPATION NAME AND ADDRESS AGE WITH AMSOUTH DURING PAST 5 YEARS - ---------------- --- ---------------- ------------------- 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, 459 DER Building Emeritus Professor and Eminent Scholar 1808 7th Avenue South Chair, Univ. of Alabama at Birmingham; UAB Medical Center from October 1979 to present, Birmingham, Alabama 35294 Physician, Univ. of Alabama Health Services Foundation; from 1981 to 1995, Professor and Vice Chairman, Dept. of Birmingham School of Medicine; from 1988 to 1992, President, CEO and Medical Director, Univ. of Alabama Health Services Foundation Wendell D. Cleaver 64 Trustee From September 3, 1993 to present, 209 Lakewood Drive, West retired; from December 1988 to 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; 751 Cary Drive until June 1991, Vice President, Auburn, Alabama 36830-2505 Birmingham Division, Alabama Power Company James H. Woodward, Jr. 59 Trustee From July 1989 to present, chancellor, The University of North The University of North Carolina at Carolina at Charlotte Charlotte; from April 1997 to present, Charlotte, North Carolina 28223 Trustee, BISYS Variable Insurance Funds; from 1996 to present, Trustee, the Sessions Group; from August 1984 to July 1989, Senior Vice President, University College, University of Alabama at Birmingham * Mr. Huber is considered to be an "interested person" of AmSouth as defined in the 1940 Act. INVESTMENT ADVISER For a discussion of AmSouth Bank and the services performed by it and its fees with respect to an AmSouth Fund, see "The Adviser" in the AmSouth Prospectus pertaining to such Fund. For a discussion of Lazard, which serves as sub-adviser to AmSouth International Equity, Bennett Lawrence, which serves as sub-adviser to AmSouth Mid Cap, Rockhaven Asset Management, LLC, which serves as sub-adviser to AmSouth Equity Income, and Sawgrass Asset Management, LLC, which serves as sub-adviser to AmSouth Small Cap, see "The Sub-Adviser" in the applicable AmSouth Prospectuses. 65 66 ADMINISTRATOR For a discussion of ASO Services Company's activities as the AmSouth Funds' administrator, the services performed by it and its fees with respect to an AmSouth Fund, see "The Administrator" in the AmSouth Prospectus pertaining to such Fund. DISTRIBUTOR For a discussion of the Distributor's activities, see "The Distributor" in any AmSouth Prospectus. SHARES For a discussion of voting rights of the AmSouth Funds, see "Miscellaneous" in any AmSouth Prospectus. REDEMPTION OR REPURCHASE OF SHARES For a discussion concerning redemption or repurchase of shares of the AmSouth Funds, see "Redemption of Shares" in any AmSouth Prospectus. DIVIDENDS AND DISTRIBUTIONS For a discussion of the AmSouth Funds' policies with respect to dividends and distributions of an AmSouth Fund, see "Dividends" in the AmSouth Prospectus pertaining to such Fund. EXCHANGE PRIVILEGES For a discussion of an AmSouth shareholder's right to exchange particular Class shares of an AmSouth Fund for other Class shares of the same AmSouth Fund, or the same Class shares or other Class shares of another AmSouth Fund, see "Exchange Privileges" in any AmSouth Prospectus. LEGAL PROCEEDINGS There are no pending material legal proceedings to which AmSouth is a party. SHAREHOLDER INQUIRIES Shareholder inquiries relating to the AmSouth Funds may be addressed to AmSouth's administrator by writing to ASO Services Company, 3435 Stelzer Road, Columbus, Ohio 43219 or by calling 1-800-451-8382. ISG FUNDS GENERAL For a general discussion of the ISG Funds, see the ISG Prospectuses. For the convenience of ISG shareholders, certain cross-references to the ISG Prospectuses are set forth below. FINANCIAL INFORMATION 66 67 For information on per share income and capital changes of an ISG Fund, see "Financial Highlights" in the ISG Prospectus pertaining to such Fund. EXPENSES For a discussion of an ISG Fund's expenses, see "Description of the Funds -- Objectives, Risk/Return and Expenses -- Fees and Expenses" in the ISG Prospectus pertaining to such Fund. INVESTMENT OBJECTIVES AND POLICIES For a discussion of an ISG Fund's investment objective and policies, see "Description of the Funds -- Objectives, Risk/Return and Expenses -- Investment Objective" and "Principal Investment Strategies" in the ISG Prospectus. DIRECTORS Overall responsibility for management of the ISG Funds rests with the Company's Board of Directors. There are currently five Directors, one of whom is considered to be an "interested person" of the ISG Funds as defined in the 1940 Act. The Directors, in turn, elect the officers of the Company to supervise actively its day-to-day operations. The Directors of ISG Funds their addresses and principal occupations during the past five years are set forth as follows: POSITION(S) HELD PRINCIPAL OCCUPATION NAME AND ADDRESS AGE WITH AMSOUTH DURING PAST 5 YEARS - ---------------- --- ---------------- ------------------- William B. Blundin* 60 President and An employee of BISYS Fund Services, 90 Park Avenue Chairman of the Board Inc., general partner of the Distributor. New York, New York 10016 of Directors Mr. Blundin also is an officer of other investment companies administered by the Administrator or its affiliates Norma A. Coldwell 72 Director International Economist and Consultant; 3330 Southwestern Boulevard Executive Vice President of Coldwell Dallas, Texas 75225 Financial Consultants; Trustee and Treasurer of Meridian House International (International Education and Cultural Group); Member of the Board of Advisors of Meridian International Center and Emerging Capital markets, S.A. (Montevideo, Uruguay): formerly, Chief International Economist of Riggs National Bank, Washington, D.C. 67 68 Richard H. Francis 66 Director Former Executive Vice President and Chief 40 Grosvenor Road Financial Officer of Pan American World Short Hills, New Jersey 07078 Airways, Inc., March 1988 to October 1991; Senior Vice President and Chief Financial Officer of American Standard Inc., 1960 to March 1988. Mr. Francis is a director of Allendale Mutual Insurance and The Indonesia Fund, Inc. William W. McInnees 48 Director Private investor. From July 1978 to 116 30th Avenue South February 1993, he was Vice-President-- Nashville, Tennessee 37212 Finance and Treasurer of Hospital Corp. of America. He is also a director of Gulf South Medical Supply and Diversified Trust Co. Robert A Robertson 71 Director Private investor. Since 1991, President 2 Hathaway Common Emeritus, and from 1968 to 1991, President New Canaan, Connecticut 06840 of The Church Pension Group, NYC. From 1956 to 1966, Senior Vice President of Colonial Bank & Trust Co. He is also a director of Mariner Institutional Funds, Inc., Mariner Tax-Free Institutional Funds, Inc., UST Master Funds, UST Master Tax Exempt Funds, H.B. and F.H. Bugher Foundation, Morehouse-Barlow Co. Publishers, The Canterbury Cathedral Trust in America, The Living Church Foundation and Hoosac School. * Mr. Blundin is considered to be an "interested person" of ISG as defined in the 1940 Act. INVESTMENT ADVISER For a discussion of First American National Bank, and the services performed by it and its fees with respect to an ISG Fund, and of Womack, which serves as sub-adviser to ISG Small-Cap Opportunity, Lazard, which serves as sub-adviser to ISG International Equity and Bennett Lawrence, which serves as sub-adviser to ISG Mid-Cap, see "Fund Management -- Investment Adviser" in the applicable ISG Prospectus. ADMINISTRATOR For a discussion of BISYS Fund Services Ohio, Inc.'s activities as the ISG Funds' administrator, the services performed by it and its fees with respect to an ISG Fund, see "Fund Management -- Administrator and Distributor," in the ISG Prospectus pertaining to such Fund. DISTRIBUTOR For a discussion of the Distributor's activities, see "Fund Mangement - -- Administrator and Distributor" in any ISG Prospectus. 68 69 SHARES For a discussion of voting rights of the ISG Funds, see "Voting Rights" in any ISG Statement of Additional Information. REDEMPTION OR REPURCHASE OF SHARES For a discussion concerning redemption or repurchase of shares of the ISG Funds, see "Shareholder Information -- Selling Your Shares" in any ISG Prospectus. DIVIDENDS AND DISTRIBUTIONS For a discussion of the ISG Funds' policies with respect to dividends and distributions of an ISG Fund, see "Shareholder Information -- Dividends, Distributions and Taxes" in the ISG Prospectus pertaining to such Fund. EXCHANGE PRIVILEGES For a discussion of an ISG shareholder's right to exchange particular Class shares of an ISG Fund for particular Class shares of another ISG Fund, see "Shareholder Information -- Exchanging Your Shares" in the ISG Prospectus. LEGAL PROCEEDINGS There are no pending material legal proceedings to which ISG is a party. SHAREHOLDER INQUIRIES Shareholder inquiries relating to the ISG Funds may be addressed to ISG's administrator by writing to BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-3035 or by calling 1-800-852-0045. FINANCIAL STATEMENTS The financial statements and financial highlights for the ISG Funds included in the ISG Prospectuses and the related statement of additional information have been audited by KPMG LLP for the periods indicated in their report thereon which is also included in the statements of additional information. The financial statements and financial highlights audited by KPMG LLP have been incorporated herein by reference in reliance on their report given on their authority as experts in accounting and auditing. Unaudited financial statements and financial highlights for the ISG Funds for the period ended September 30, 1999 are filed herewith. The financial statements and financial highlights for the AmSouth Funds for each of the periods indicated therein included in the AmSouth Prospectuses and related statement of additional information have been incorporated by reference in this Combined Prospectus/Proxy Statement in reliance on the report of PricewaterhouseCoopers LLP, independent auditors, given on the authority of that Firm as experts in accounting and auditing. VOTING INFORMATION Proxies are being solicited from shareholders of each ISG Fund by the Company's Directors for the Special Meeting of Shareholders to be held on February 11, 2000, at the office of BISYS Fund Services, 3534 69 70 Stelzer Road, Columbus, OH 43219 at TIME p.m., Eastern time, or at such later time made necessary by adjournment. A proxy may be revoked at any time at or before the meeting by submitting to ISG a subsequently dated proxy, delivering a written notice of revocation to ISG at LOCATION. Unless revoked, all valid proxies will be voted in accordance with the instructions thereon or, in the absence of instructions, will be voted FOR approval of the Agreement and Plan of Reorganization. The Transaction contemplated by the Agreement and Plan of Reorganization will be consummated only if approved by the affirmative vote of a majority of all votes attributable to the voting securities of each ISG Fund voting separately as a Fund, as described above. In the event the shareholders do not approve the reorganization, the Directors will consider possible alternative arrangements in the best interests of the ISG Fund and shareholders. Proxies are being solicited by mail. Shareholders of record of each ISG Fund at the close of business on December 2, 1999 (the "Record Date"), will be entitled to vote at the Special Meeting of Shareholders or any adjournment thereof. The holders of one-third of votes attributable to the outstanding voting shares of an ISG Fund represented in person or by proxy at the meeting will constitute a quorum for such Fund for the meeting, and a majority of the shares of an ISG Fund entitled to vote on the Transaction is necessary to approve the Transaction. Shareholders are entitled to one vote per share and a proportionate fractional vote for any fractional share. Votes cast by proxy, telephone, Internet or in person at the meeting will be counted by the inspector of election appointed by ISG. The inspector of election will count the total number of votes cast "for" approval of the proposal for purposes of determining whether sufficient affirmative votes have been cast. The inspector of election will count shares represented by proxies that reflect abstentions as shares that are present and entitled to vote on the matter for purposes of determining the presence of a quorum; however, the inspector of election will not count "broker non-votes" (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or the persons entitled to vote and (ii) the broker or nominee does not have the discretionary voting power on a particular matter) as shares that are present and entitled to vote on the matter for purposes of determining the presence of a quorum. For purposes of determining whether an issue has been approved, abstentions have the effect of a negative vote on the proposal, and broker non-votes are treated as "against" votes in those instances where approval of an issue requires a certain percentage of all votes outstanding, but are given no effect in those instances where approval of an issue requires a certain percentage of the votes constituting the quorum for such issue. As of DATE, the officers and Directors of ISG Funds as a group beneficially owned less than 1% of the outstanding shares of Class A, Class B and Institutional Class shares of any of the ISG Funds. As of DATE, 1999, to the best of the knowledge of ISG Funds, the following shareholders owned beneficially 5% or more of the indicated Fund and Class: Name and Address Percent of Ownership - ---------------- -------------------- ISG CAPITAL GROWTH FUND: JC Bradford Company ____________% (Class A Shares) F/B/O Robert Jernigan 330 Commerce Street Nashville, TN 37201-1899 FTC & Company ____________% (Class A Shares) Attn: Datalynx No. 106 P.O. Box 173736 Denver, CO 80217-3736 70 71 First American National Bank ____________% (Class A Shares) Attn: ISG Investment Management and Trust ____________% (Institutional Class) 800 First American Center Nashville, TN 37237 ISG EQUITY INCOME FUND: First American National Bank ____________% (Class A Shares) Attn: ISG Investment Management and Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 ISG LARGE-CAP EQUITY FUND: First American National Bank ____________% (Institutional Shares) Attn: ISG Investment Management and Trust 800 First American Center Nashville, TN 37237 NFSC FEBO FAN-156833 Charles T. Duke ____________% (Class B Shares) 206 Bonnabrook Drive Hermitage, TN 37076 NFSC FEBO FAN-158690 Patricia A. Estes ____________% (Class B Shares) 104 Bill Stewart Blvd. Lavergne, TN 37086 NFSC FEBO FAN-159417 Albert Don Taylor ____________% (Class B Shares) 7492 Nolensville Road Nolensville, TN 37135 ISG SMALL-CAP OPPORTUNITY FUND: First American National Bank Attn: ISG Investment Management and Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 NFSC FEBO FAE-004251 First American National Bank, Custodian ____________% (Class B Shares) 738 Tobylynn Drive Nashville, TN 37211 NFSC FEBO FAE-110625 Rhonda K. Sheppard, Custodian ____________% (Class B Shares) 532 Emily Drive Smyrna, TN 37167 NFSC FEBO FAE-110833 Rhonda K. Sheppard, Custodian ____________% (Class B Shares) 71 72 532 Emily Drive Smyrna, TN 37167 NFSC FEBO FAE-110833 Janis G. Lopez ____________% (Class B Shares) 2723 Albany Court Murfreesboro, TN 37219 Sanwa Bank of California Wilshire Associates, Inc. ____________% (Class A Shares) 444 Market Street, 23rd Floor San Francisco, CA 94111-5325 JC Bradford Company RCIP Limited Partners 1 ____________% (Class A Shares) 330 Commerce Street Nashville, TN 37201-1899 ISG INCOME FUND: First American National Bank Attn: ISG Investment Management and Trust ____________% (Class A Shares) 800 First American Center ____________% (Institutional Shares) Nashville, TN 37237 NFSC FEBO FAN-107280 Mary M. McGavock ____________% (Class B Shares) 115 Woodmont Blvd., Apt. 220 Nashville, TN 37205 NFSC FEBO FAE-033243 ____________% (Class B Shares) NFSC FEBO FAN-109630 Mildred V. Morgan ____________% (Class B Shares) 1449 Fosterville Loop Bell Buckle, TN 37020 ISG LIMITED TERM U.S. GOVERNMENT FUND: First American National Bank Attn: ISG Investment Management and Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 Martha D. Waller Martha Sue Waller ____________% (Class A Shares) 2615 Poplar Springs Drive Meridian, MS 38305-4614 Anderson Support and Equipment Foundation, Inc. 1400 20th Avenue ____________% (Class A Shares) Meridian, MS 38301-4103 72 73 National Financial Services Corp. Raspberry Comm. Properties, L.P. ____________% (Class B Shares) 800 Spring Street S Bethany, LA 71007-9532 NFSC FEBO FAN-107280 Mary M. McGarock ____________% (Class B Shares) 115 Woodmont Blvd. Apt. 220 Nashville, TN 37205 NFSC FEBO FAD-029864 Ruby Page Morton ____________% (Class B Shares) 521 Fairfax Avenue Nashville, TN 37212 NFSC FEBO FAN-092312 Lois B. Hoge ____________% (Class B Shares) 20 Ridge Road Westminster, MD 21157 NFSC FEBO FAN-103012 Mary L. Binkley ____________% (Class B Shares) 309 Chesterfield Circle Madison, TN 37115 NFSC FEBO FAN-137383 Beatrice P. Rushing ____________% (Class B Shares) 430 Forrest Avenue Jackson, TN 38301 NFSC FEBO FAP-068025 First American National Bank, Custodian ____________% (Class B Shares) 306 Dye Road Bell Buckle, TN 37020 NFSC FEBO FAN-155306 Woodrow W. Billips ____________% (Class B Shares) 3701 Woodlawn Drive Nashville, TN 37215 ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND: First American National Bank Attn: ISG Investment Management & Trust ____________% (Class A Shares) 800 First American Center Nashville, TN 37237 NFSC FEBO FAN-000078 Rose S. Kennon ____________% (Class B Shares) 73 74 1603 Tyne Blvd. Nashville, TN 37216 NFSC FEBO FAD-024937 Mary Ann Pangle ____________% (Class B Shares) 3916 Caylor Drive Nashville, TN 37215 NFSC FEBO FAD-027499 Thomas I. Sutton ____________% (Class B Shares) 4616 Tara Drive Nashville, TN 37215 NFSC FEBO FAN-059580 Floyd W. Rhew ____________% (Class B Shares) 5009 D. Camelot Drive Columbia, TN 38401 NFSC FEBO FAN-090565 Mary Dye ____________% (Class B Shares) 1913 Truett Street Nashville, TN 37206 Name and Address NFSC FEBO FAN-109183 Louese H. Peace ____________% (Class B Shares) 7919 Lakeview Heights Baxter, TN 39544 NFSC FEBO FAN-142115 Yvonne P. Benson ____________% (Class B Shares) 4409 Belmont Terrace #246 Nashville, TN 37215 ISG TENNESSEE TAX-EXEMPT FUND: First American National Bank Attn: ISG Investment Management & Trust ____________% (Class A Shares) 800 First American Center Nashville, TN 37237 CoreLink Financial Inc. P.O. Box 4054 ____________% (Class A Shares) Concord, CA 94520 JC Bradford Company BTC SUC TUA Jeanne A ____________% (Class A Shares) 330 Commerce Street Nashville, TN 37201-1899 NFSC FEBO FAN-060623 James E. Richards, III ____________% (Class A Shares) 74 75 10 Castlewood Court Nashville, TN 37215 NFSC FEBO FAN-071587 Janet Myers Trent ____________% (Class A Shares) 1400 Kenesaw Avenue, Apt. 12R Knoxville, TN 37918 NFSC FEBO FAN-080438 Alan F. Cooper ____________% (Class A Shares) 3305 Honeywood Drive Johnson City, TN 37604 NFSC FEBO FAN-048933 Vivian M. Jones ____________% (Class B Shares) 5400 Park Avenue Unit - 306 Memphis, TN 34119 NFSC FEBO FAN-128732 Emil Fay Penley ____________% (Class B Shares) 1920 Bowster Drive, Apt C-8 Kingport, TN 37660 NFSC FEBO FAN-068340 Frances T. Harris ____________% (Class B Shares) 8045 Sunrise Circle Franklin, TN 37067 NFSC FEBO FAN-267880 Bobby L. Jones _____________% (Class B Shares) 9 Abbeywood Court Nashville, TN 37215 NFSC FEBO FAN-230626 Emet R. Ray Sr. ____________% (Class B Shares) Mary F. Ray 802 Davis Drive Brentwood, TN 37027 NFSC FEBO FAN-162552 Brenda K. Brasher ____________% (Class B Shares) 8244 Spring Ride Drive Nashville, TN 37221 ISG LIMITED TERM INCOME FUND: CoreLink Financial Inc. P.O. Box 4054 ____________% (Class A Shares) Concord, CA 94520 75 76 FTC & Company P.O. Box 173736 ____________% (Class A Shares) Denver, CO 80217-3736 First American National Bank Attn: ISG Investment Management and Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 NFSC FEBO FAN-107280 Mary M McGavook ____________% (Class B Shares) 115 Woodmont Blvd. Apt. 220 Nashville, TN 37206 NFSC FEBO FAN-092312 Lois B. Hoge ____________% (Class B Shares) 20 Ridge Road Westminster, MD 21157 NFSC FEBO FAN-109630 Mildred V. Morgan ____________% (Class B Shares) 1448 Footerville Loop Bell Buckle, TN 37020 NFSC FEBO FAN-121002 Faye Ellen Dunlap ____________% (Class B Shares) 4612 Singleton Station Road Louisville, TN 37777 NFSC FEBO FAN-129216 Margaret H. Leeper ____________% (Class B Shares) 137 Piney Flats Road Piney Flats, TN 37686 NFSC FEBO FAP-062073 First American National Bank, Custodian ____________% (Class B Shares) 202 Windsor Terr. Road Nashville, TN 37221 NFSC FEBO FAP-074845 First American National Bank, Custodian ____________% (Class B Shares) 347 Dafoe Circle Maryville, TN 37804 NFSC FEBO FAP-058025 First American National Bank, Custodian ____________% (Class B Shares) 306 Dye Road Bell Buckle, TN 37020 76 77 First American National Bank First American Center ____________% (Institutional Shares) 300 Union Street Nashville, TN 37237 ISG PRIME MONEY MARKET FUND: First American National Bank Attn: ISG Investment Management & Trust ____________% (Class A Shares) 800 First American Center ___________% (Institutional Shares) Nashville, TN 37237 National Financial Services Corp. Exclusively for the Benefit of our Customers ____________% (Class A Shares) 200 Liberty Street New York, New York 10281 NFSC FEBO FAD-034177 Sanh Huzl Huynh ____________% (Class B Shares) 4917 Franklin Road Nashville, TN 37220 NFSC FEBO FAN-064009121002 William E. Brazell ____________% (Class B Shares) 127 W End Dickson, TN 37055 NFSC FEBO FAN-104426 Norma I. Haden ____________% (Class B Shares) 272 Sailboat Drive Nashville, TN 37217 NFSC FEBO FAP-0065617 First American National Bank, Custodian ____________% (Class B Shares) 272 Sailboat Drive Nashville, TN 37217 NFSC FEBO FAN-102121 First American National Bank, Custodian ____________% (Class B Shares) 60 Henslee Drive Dickson, TN 37055 NFSC FEBO FAN-156019 Glynda B. Pendergrass ____________% (Class B Shares) 204 Village Circle West Dickson, TN 37055 NFSC FEBO FAD-044407 Scott A. Moore ____________% (Class B Shares) 77 78 753 Radiance Drive Cordova, TN 38018 ISG TREASURY MONEY MARKET FUND: First American National Bank Attn: ISG Investment Management and Trust ____________% (Class A Shares) 800 First American Center ___________% (Institutional Shares) Nashville, TN 37237 Hare & Co. c/o The Bank of New York ____________% (Class A Shares) Attn: Stif/Master Note One Wall Street New York, NY 10286 National Financial Services Corp. Exclusively for the Benefit of our Customers ____________% (Class A Shares) 200 Liberty Street New York, NY 10281 ISG GOVERNMENT INCOME FUND: National Financial Services Corp. Highland Plantation ____________% (Class A Shares) Attn: James D. Bell 1248 Highland Plantation Road Greenville, MS 36701-9252 NFSC FEBO OIC 800962 Hodding Carter Memorial YMCA ____________% (Class A Shares) 1688 Fairground Road Greenville, MS 38703-7805 NFSC FEBO BH2 379948 William F. Ford ____________% (Class A Shares) SH 2069 Shreveport, LA 71101-3666 NFSC FEBO BH2 190349 Johnny B. Mitchell ____________% (Class A Shares) Mary Sue Mitchell 904 Meadowbrook Drive West Monroe, LA 71291-5035 NFSC FEBO BH2 001392 Marie Gober ____________% (Class A Shares) 2326 Bienville Drive Monroe, LA 71201-2945 NFSC FEBO FAD-045543 James R. Wesson ____________% (Class B Shares) 78 79 612 Spring House Court Brentwood, TN 37027 First American National Bank Attn: ISG Investment Management & Trust ___________% (Institutional Shares) 800 First American Center Nashville, TN 37237 ISG MUNICIPAL INCOME FUND: Pullen Estate LP P.O. Box 5327 ____________% (Class A Shares) Jackson, MS 39296-5372 NFSC FEBO OIC 3-5128 Blanche R. Young ____________% (Class A Shares) 334 Williamsburg Road Columbia, MS 36701-1948 NFSC FEBO OIC 528730 Harvey C. Sanders ____________% (Class A Shares) Alds Sanders P.O. Box 4387 Jackson, MS 39296-4387 NFSC FEBO OIC 215384 James A. O'Neill, Jr. ____________% (Class A Shares) Marie D. O'Neill 2302 St. Charles Avenue, 3A New Orleans, LA 70130-5849 NFSC FEBO OIC 560251 Cheryl Jean Jones ____________% (Class A Shares) Max & Martha Jordan Family Trust 1175 Jordan Lane Raymond, MS 39154-8725 BISYS Fund Services, LP 3435 Stelzer Road ____________% (Class B Shares) Columbus, Ohio 43219-8001 First American National Bank Attn: ISG Investment Management & Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 ISG INTERNATIONAL EQUITY FUND: Houvis & Co. First American National Bank ____________% (Class A Shares) RPO Legwell & Sons, Enterprises 300 Union Street, NA 0052 Nashville, TN 37237-0001 79 80 NFSC FEBO OIC 054372 John R. Nunnery ____________% (Class A Shares) P.O. Box 1325 Meridian, MS 39302-1325 NFSC FEBO BH2 128899 David H. Nordyke ____________% (Class A Shares) 6113 River Road Shreveport, LA 71105-4833 NFSC FEBO OIC 176060215384 Mark A. Barger ____________% (Class A Shares) Lacy N. Langford P.O. Box 296 Greenwood, MS 38936-0295 BISYS Fund Services, LP 3435 Stelzer Road ____________% (Class B Shares) Columbus, Ohio 43219-9001 First American National Bank Attn: ISG Investment Management & Trust ____________% (Institutional Shares) 800 First American Center Nashville, TN 37237 ISG AGGRESSIVE GROWTH PORTFOLIO: Lorrie D. Madden James B. Madden ____________% ( Class A Shares) 1954 Hunstman CR Franklin, TN 37064 BISYS Fund Services, LP 3435 Stelzer Road __________% (Institutional Shares) Columbus, Ohio 43219-8001 ISG GROWTH PORTFOLIO: BISYS Fund Services, LP 3435 Stelzer Road __________% (Institutional Shares) Columbus, Ohio 43219-8001 ISG GROWTH & INCOME PORTFOLIO: BISYS Fund Services, LP 3435 Stelzer Road __________% (Class A Shares) Columbus, Ohio 43219-8001 BISYS Fund Services, LP 3435 Stelzer Road __________% (Institutional Shares) Columbus, Ohio 43219-8001 ISG MODERATE GROWTH & INCOME PORTFOLIO: BISYS Fund Services, LP 80 81 3435 Stelzer Road __________% (Class A Shares) Columbus, Ohio 43219-8001 BISYS Fund Services, LP 3435 Stelzer Road __________% (Institutional Shares) Columbus, Ohio 43219-8001 ISG CURRENT INCOME PORTFOLIO: BISYS Fund Services, LP 3435 Stelzer Road __________% (Class A Shares) Columbus, Ohio 43219-8001 BISYS Fund Services, LP 3435 Stelzer Road __________% (Institutional Shares) Columbus, Ohio 43219-8001 ISG MID-CAP FUND: ISG TAX-EXEMPT MONEY MARKET FUND: The votes of the shareholders of AmSouth are not being solicited, since their approval or consent is not necessary for approval of the Agreement. As of August DATE, the officers and Trustees of AmSouth as a group beneficially owned less than 1% of the outstanding Class A, Class B and Institutional Class shares of any of the AmSouth Funds. As of DATE, to the best of the knowledge of AmSouth, the following shareholders owned beneficially 5% or more of the indicated Fund and Class: Name and Address Percent of Ownership AMSOUTH PRIME MONEY MARKET FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 National Financial Services Corporation One World Financial Center __________% (Class B Shares) 200 Liberty Street New York, New York 10281 81 82 AMSOUTH TAX-EXEMPT MONEY MARKET FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 AMSOUTH BOND FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 National Financial Services Corporation One World Financial Center __________% (Class B Shares) 200 Liberty Street New York, New York 10281 AMSOUTH LIMITED TERM BOND FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 National Financial Services Corporation One World Financial Center __________% (Class B Shares) 200 Liberty Street New York, New York 10281 Morgan Keegan, Inc. Robert P. Hall, IRA __________% (Class A Shares) 19493 Scenic Hwy. 98 Fairhope, AL 36532 AMSOUTH GOVERNMENT INCOME FUND: 82 83 AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 AMSOUTH MUNICIPAL BOND FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation One World Financial Center __________% (Class A Shares) 200 Liberty Street New York, New York 10281 National Financial Services Corporation One World Financial Center __________% (Class B Shares) 200 Liberty Street New York, New York 10281 Sterne Agee Leach Inc. Plaza Suite 100B __________%(Class A Shares) 813 Shades Creek Parkway Birmingham, Alabama 35209 AMSOUTH EQUITY INCOME FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 AMSOUTH SMALL CAP FUND: AmSouth 1901 Sixth Avenue-North __________% (Trust Shares) Birmingham, Alabama 35203 National Financial Services Corporation __________% (Class A Shares) One World Financial Center 200 Liberty Street New York, New York 10281 National Financial Services Corporation __________% (Class B Shares) One World Financial Center 83 84 200 Liberty Street New York, New York 10281 THE BOARD OF DIRECTORS OF ISG, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN AND THE ADVISORY AND SUB- ADVISORY AGREEMENTS. INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION This Combined Prospectus/Proxy Statement and the related statement of additional information do not contain all of the information set forth in the registration statements and the exhibits relating thereto which AmSouth and ISG, respectively, have filed with the Securities and Exchange Commission under the Securities Act of 1933 and the 1940 Act to which reference is hereby made. The SEC file numbers for the ISG Prospectuses and the related statement of additional information which are incorporated by reference herein are Registration No. 33-34080 and 811-06076. The SEC file numbers for the AmSouth Prospectuses and related statement of additional information which are incorporated by reference herein are Registration No. 33-21660 and 811-5551. AmSouth and ISG are subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith file reports and other information with the SEC. Reports, proxy and information statements, registration statements and other information filed by AmSouth and ISG can be inspected and copied at the public reference facilities of the SEC at 450 Fifth Street, N.W. Washington, D.C. 20549. Copies of such filings may also be available at the following SEC regional offices: 90 Devonshire Street, Suite 700, Boston, MA 02109; 500 West Madison Street, Suite 1400, Chicago, IL 60611-2511; and 601 Walnut Street, Suite 1005E, Philadelphia, PA 19106. Copies of such materials can also be obtained by mail from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549 at prescribed rates. 84 85 APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION 86 FORM OF AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization (the "Agreement") is made as of DATE, by and between AmSouth Funds ("AmSouth"), a Massachusetts business trust, and The Infinity Mutual Funds, Inc. ("Infinity"), a Maryland corporation, on behalf of the ISG Funds. The capitalized terms used herein shall have the meaning ascribed to them in this Agreement. PLAN OF REORGANIZATION (a) Infinity will sell, assign, convey, transfer and deliver to AmSouth, and AmSouth will acquire, on the Exchange Date, all of the properties and assets existing at the Valuation Time in the following funds: ISG Current Income Portfolio ("ISG Current Income") ISG Treasury Money Market Fund ("ISG Treasury Money Market") ISG Moderate Growth & Income Portfolio ("ISG Moderate Growth & Income") ISG Growth & Income Portfolio ("ISG Growth & Income") ISG Growth Portfolio ("ISG Growth") ISG Aggressive Growth Portfolio ("ISG Aggressive Growth") ISG Mid-Cap Fund ("ISG Mid-Cap") ISG Large-Cap Equity Fund ("ISG Large-Cap Equity") ISG International Equity Fund ("ISG International Equity") ISG Capital Growth Fund ("ISG Capital Growth") ISG Tennessee Tax-Exempt Fund ("ISG Tennessee Tax-Exempt") ISG Limited Term Tennessee Tax-Exempt Fund ("ISG Limited Term Tennessee Tax-Exempt") ISG Limited Term U.S. Government Fund ("ISG Limited Term U.S. Government") ISG Limited Term Income Fund ("ISG Limited Term Income") ISG Equity Income Fund ("ISG Equity Income") ISG Municipal Income Fund ("ISG Municipal Income") ISG Small-Cap Opportunity Fund ("ISG Small-Cap Opportunity") ISG Tax-Exempt Money Market Fund ("ISG Tax-Exempt Money Market") ISG Prime Money Market Fund ("ISG Prime Money Market") ISG Government Income Fund ("ISG Government Income") ISG Income Fund ("ISG Income") (such funds each are an "ISG Fund" and are collectively the "ISG Funds"). Such acquisition is to be made by the following funds: AmSouth Strategic Portfolios: Current Income Portfolio ("AmSouth Current Income") AmSouth Treasury Reserve Money Market Fund ("AmSouth Treasury Reserve Money A-1 87 Market") AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ("AmSouth Moderate Growth and Income") AmSouth Strategic Portfolios: Growth and Income Portfolio ("AmSouth Growth and Income") AmSouth Strategic Portfolios: Growth Portfolio ("AmSouth Growth") AmSouth Strategic Portfolios: Aggressive Growth Portfolio ("AmSouth Aggressive Growth") AmSouth Mid Cap Fund ("AmSouth Mid Cap") AmSouth Large Cap Fund ("AmSouth Large Cap") AmSouth International Equity Fund ("AmSouth International Equity") AmSouth Capital Growth Fund ("AmSouth Capital Growth") AmSouth Tennessee Tax-Exempt Fund ("AmSouth Tennessee Tax-Exempt") AmSouth Limited Term Tennessee Tax-Exempt Fund ("AmSouth Limited Term Tennessee Tax-Exempt") AmSouth Limited Term U.S. Government Fund ("AmSouth Limited Term U.S. Government") AmSouth Government Income Fund ("AmSouth Government Income") AmSouth Limited Term Bond Fund ("AmSouth Limited Term Bond") AmSouth Equity Income Fund ("AmSouth Equity Income") AmSouth Municipal Bond Fund ("AmSouth Municipal Bond") AmSouth Small Cap Fund ("AmSouth Small Cap") AmSouth Tax-Exempt Money Market Fund ("AmSouth Tax-Exempt Money Market") AmSouth Prime Money Market Fund ("AmSouth Prime Money Market") AmSouth Bond Fund ("AmSouth Bond") (such funds each are an "AmSouth Fund" and are collectively the "AmSouth Funds"). For purposes of this Agreement the respective ISG Funds correspond to the AmSouth Funds as follows: ISG Current Income AmSouth Current Income ISG Treasury Money Market AmSouth Treasury Reserve Money Market ISG Moderate Growth & Income AmSouth Moderate Growth and Income ISG Growth & Income AmSouth Growth and Income ISG Growth AmSouth Growth ISG Aggressive Growth AmSouth Aggressive Growth ISG Mid-Cap AmSouth Mid Cap A-2 88 ISG Large-Cap Equity AmSouth Large Cap ISG International Equity AmSouth International Equity ISG Capital Growth AmSouth Capital Growth ISG Tennessee Tax-Exempt AmSouth Tennessee Tax-Exempt ISG Limited Term Tennessee Tax-Exempt AmSouth Limited Term Tennessee Tax- Exempt ISG Limited Term U.S. Government AmSouth Limited Term U.S. Government ISG Government Income AmSouth Government Income ISG Limited Term Income AmSouth Limited Term Bond ISG Equity Income AmSouth Equity Income ISG Municipal Income AmSouth Municipal Bond ISG Small-Cap Opportunity AmSouth Small Cap ISG Tax-Exempt Money Market AmSouth Tax-Exempt Money Market ISG Prime Money Market AmSouth Prime Money Market ISG Income AmSouth Bond In consideration therefor, each AmSouth Fund shall, on the Exchange Date, assume all of the liabilities of the corresponding ISG Fund and transfer to the corresponding ISG Fund a number of full and fractional AmSouth Class A, Class B, or Trust shares of the corresponding AmSouth Fund (collectively, "Shares") having an aggregate net asset value equal to the value of all of the assets of each ISG Fund transferred to the corresponding AmSouth Fund on such date less the value of all of the liabilities of each ISG Fund assumed by the corresponding AmSouth Fund on that date. It is intended that each reorganization described in this Agreement shall be a tax-free reorganization under the Internal Revenue Code of 1986, as amended (the "Code"). (b) Upon consummation of the transactions described in paragraph (a) of this Agreement, each ISG Fund in complete liquidation shall distribute to its respective shareholders of record as of the Exchange Date the Shares received by it, each shareholder being entitled to receive that number of Shares equal to the proportion which the number of shares of common stock of the ISG Fund held by such shareholder bears to the number of such shares of the ISG Fund outstanding on such date. ISG Fund shareholders of record holding Institutional Class shares will receive AmSouth Trust shares; ISG Fund shareholders of record A-3 89 holding Class B shares will receive AmSouth Class B shares; and ISG Fund shareholders of record holding Class A shares will receive AmSouth Class A shares. AGREEMENT AmSouth and Infinity represent, warrant and agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF INFINITY. Each of Infinity and each ISG Fund represent and warrant to and agree with AmSouth and each AmSouth Fund that: (a) Infinity is a corporation duly established and validly existing under the laws of the State of Maryland and has power to own all of its properties and assets and to carry out its obligations under this Agreement. Infinity and each ISG Fund is not required to qualify as a foreign association in any jurisdiction. Infinity and each ISG Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted and to fulfill the terms of this Agreement, except for shareholder approval and as otherwise described in Section 1(l). (b) Infinity is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. Each ISG Fund has elected to qualify and has qualified as a regulated investment company under Part I of Subchapter M of the Code, as of and since its first taxable year, and qualifies and intends to continue to qualify as a regulated investment company for its taxable year ending upon its liquidation. Each ISG Fund has been a regulated investment company under such sections of the Code at all times since its inception. (c) The statements of assets and liabilities, statements of operations, statements of changes in net assets and schedules of portfolio investments (indicating their market values) for each ISG Fund at and for the year ended December 31, 1998, such statements and schedules having been audited by KPMG LLP, independent accountants to Infinity, have been furnished to AmSouth. Such statements of assets and liabilities and schedule fairly present the financial position of each ISG Fund as of their respective dates and said statements of operations and changes in net assets fairly reflect the results of operations and changes in net assets for the periods covered thereby in conformity with generally accepted accounting principles. The statements of assets and liabilities, statements of operations, statements of changes in net assets and schedules of investments (indicating their market values) for each ISG Fund for the six-month period ended June 30, 1999, which are unaudited, have also been furnished to AmSouth. Such statements of assets and liabilities and schedules fairly present the financial position of the ISG Funds as of their respective dates, and said statements of operations and changes in net assets fairly reflect the results of its operations and changes in financial position for the periods covered thereby in conformity with generally accepted accounting principles. (d) The prospectuses of the ISG Funds dated May 1, 1999 (the "ISG Prospectuses") and the Statement of Additional Information for the ISG Funds dated May 1, 1999 and on file A-4 90 with the Securities and Exchange Commission, which have been previously furnished to AmSouth, did not as of their dates and do not as of the date hereof contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (e) There are no material legal, administrative or other proceedings pending or, to the knowledge of Infinity or any ISG Fund, overtly threatened against Infinity or any ISG Fund which assert liability on the part of Infinity or any ISG Fund. (f) There are no material contracts outstanding to which Infinity, with respect to the ISG Funds, or any ISG Fund is a party, other than as disclosed in the ISG Prospectuses and the corresponding Statement of Additional Information or in the Registration Statement and the Proxy Statement. (g) Neither Infinity, with respect to the ISG Funds, nor any ISG Fund has any known liabilities of a material nature, contingent or otherwise, other than those shown as belonging to it on its statement of assets and liabilities as of June 30, 1999, and those incurred in the ordinary course of Infinity's business as an investment company since that date. Prior to the Exchange Date, Infinity will advise AmSouth of all known material liabilities, contingent or otherwise, incurred by it, with respect to the ISG Funds, and each ISG Fund subsequent to June 30, 1999, whether or not incurred in the ordinary course of business. (h) As used in this Agreement, the term "Investments" shall mean each ISG Fund's investments shown on the schedule of its portfolio investments as of June 30, 1999, referred to in Section 1(c) hereof, as supplemented with such changes as Infinity or each ISG Fund shall make after June 30, 1999, which changes shall be disclosed to AmSouth, and changes resulting from stock dividends, stock split-ups, mergers and similar corporate actions. (i) Each ISG Fund has filed or will file all federal and state tax returns which, to the knowledge of Infinity's officers, are required to be filed by each ISG Fund and has paid or will pay all federal and state taxes shown to be due on said returns or on any assessments received by each ISG Fund. To the best of such officers' knowledge, all tax liabilities of each ISG Fund have been adequately provided for on its books, and no tax deficiency or liability of any ISG Fund has been asserted, and no question with respect thereto has been raised, by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. (j) As of both the Valuation Time and the Exchange Date and except for shareholder approval and otherwise as described in Section 1(l), Infinity on behalf of each ISG Fund will have full right, power and authority to sell, assign, transfer and deliver the Investments and any other assets and liabilities of each ISG Fund to be transferred to the corresponding AmSouth Fund pursuant to this Agreement. At the Exchange Date, subject only to the delivery of the Investments and any such other assets and liabilities as contemplated by this A-5 91 Agreement, AmSouth will, on behalf of each AmSouth Fund, acquire the Investments and any such other assets subject to no encumbrances, liens or security interests in favor of any third party creditor of Infinity or an ISG Fund and, except as described in Section 1(k), without any restrictions upon the transfer thereof. (k) Except as to Investments otherwise disclosed as unregistered securities pursuant to Section 1(h) hereof, no registration under the Securities Act of 1933, as amended (the "1933 Act"), of any of the Investments would be required if they were, as of the time of such transfer, the subject of a public distribution by either of Infinity or AmSouth. (l) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by Infinity on behalf of the ISG Funds or any ISG Fund of the transactions contemplated by this Agreement, except such as may be required under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, state securities or blue sky laws (which term as used herein shall include the laws of the District of Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R Act"). (m) The registration statement (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") by AmSouth on Form N-14 relating to the Shares issuable hereunder, and the proxy statement of Infinity included therein (the "Proxy Statement"), on the effective date of the Registration Statement and insofar as they relate to Infinity and the ISG Funds, (i) will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; and at the time of the shareholders' meeting referred to in Section 8(a) below and on the Exchange Date, the prospectus contained in the Registration Statement of which the Proxy Statement is a part (the "Prospectus"), as amended or supplemented by any amendments or supplements filed with the Commission by AmSouth, insofar as it relates to Infinity and the ISG Funds, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided, however, that none of the representations and warranties in this subsection shall apply to statements in or omissions from the Registration Statement, the Prospectus or the Proxy Statement, made in reliance upon or in conformity with information furnished by AmSouth, or any AmSouth Fund, for use in the Registration Statement, Prospectus, or Proxy Statement. (n) All of the issued and outstanding shares of common stock of each ISG Fund have been offered for sale and sold in conformity with all applicable federal and state securities laws. A-6 92 2. REPRESENTATIONS AND WARRANTIES OF AMSOUTH. Each of AmSouth and each AmSouth Fund jointly and severally represent and warrant to and agree with Infinity and each ISG Fund that: (a) AmSouth is a business trust duly established and validly existing under the laws of The Commonwealth of Massachusetts and has power to carry on its business as it is now being conducted and to carry out this Agreement. AmSouth and each AmSouth Fund is not required to qualify as a foreign association in any jurisdiction. AmSouth and each AmSouth Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted and to fulfill the terms of this Agreement, except as set forth in Section 2(i). (b) AmSouth is registered under the 1940 Act as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. Each AmSouth Fund that has had active operations prior to the Exchange Date, has elected to qualify and has qualified as a regulated investment company under Part I of Subchapter M of the Code, as of and since its first taxable year, and qualifies and intends to continue to qualify as a regulated investment company for its taxable year ending upon its liquidation. Each AmSouth Fund that has had actual operations prior to the Exchange Date has been a regulated investment company under such sections of the Code at all times since its inception. AmSouth Current Income, AmSouth Treasury Reserve Money Market, AmSouth Moderate Growth and Income, AmSouth Growth and Income, AmSouth Growth, AmSouth Aggressive Growth, AmSouth International Equity, AmSouth Mid Cap, AmSouth Large Cap, AmSouth Capital Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee Tax-Exempt, and AmSouth Limited Term U.S. Government, which have not had active operations prior to the Exchange Date, intend to qualify as regulated investment companies under Part I of Subchapter M of the Code. (c) The statements of assets and liabilities, statements of operations, statements of changes in net assets and schedules of investments (indicating their market values) for each AmSouth Fund for the year ended JULY 31, 1999, such statements and schedules having been audited by PricewaterhouseCoopers LLP, independent accountants to AmSouth, have been furnished to Infinity. (d) The prospectuses of each AmSouth Fund dated December 1, 1999 and December 14, 1999, (collectively, the "AmSouth Prospectuses"), and the Statements of Additional Information for the AmSouth Funds, dated December 1, 1999 and December 14, 1999 and on file with the Securities and Exchange Commission, which have been previously furnished to Infinity, did not as of their dates and do not as of the date hereof contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to A-7 93 make the statements therein, in light of the circumstances under which they were made, not misleading. (e) There are no material legal, administrative or other proceedings pending or, to the knowledge of AmSouth or any AmSouth Fund, overtly threatened against AmSouth or any AmSouth Fund which assert liability on the part of AmSouth or any AmSouth Fund. (f) There are no material contracts outstanding to which AmSouth or any AmSouth Fund is a party, other than as disclosed in the AmSouth Prospectuses and the corresponding Statement of Additional Information or in the Registration Statement. (g) Neither AmSouth nor any AmSouth Fund has any known liabilities of a material nature, contingent or otherwise, other than those shown on its statement of assets and liabilities as of July 31, 1999, referred to above and those incurred in the ordinary course of the business of AmSouth as an investment company or any AmSouth Fund since such date. Prior to the Exchange Date, AmSouth will advise Infinity of all known material liabilities, contingent or otherwise, incurred by it and each AmSouth Fund subsequent to July 31, 1999, whether or not incurred in the ordinary course of business. (h) Each AmSouth Fund has filed or will file all federal and state tax returns which, to the knowledge of AmSouth's officers, are required to be filed by each AmSouth Fund and has paid or will pay all federal and state taxes shown to be due on said returns or on any assessments received by each AmSouth Fund. To the best of such officers' knowledge, all tax liabilities of each AmSouth Fund have been adequately provided for on its books, and no tax deficiency or liability of any AmSouth Fund has been asserted, and no question with respect thereto has been raised, by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. (i) No consent, approval, authorization or order of any governmental authority is required for the consummation by AmSouth or any AmSouth Fund of the transactions contemplated by this Agreement, except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act, state securities or Blue Sky laws or the H-S-R Act. (j) As of both the Valuation Time and the Exchange Date and otherwise as described in Section 2(i), AmSouth on behalf of each AmSouth Fund will have full right, power and authority to purchase the Investments and any other assets and assume the liabilities of each ISG Fund to be transferred to the corresponding AmSouth Fund pursuant to this Agreement. (k) The Registration Statement, the Prospectus and the Proxy Statement, on the effective date of the Registration Statement and insofar as they relate to AmSouth and the AmSouth Funds: (i) will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in A-8 94 which they were made, not misleading; and at the time of the shareholders' meeting referred to in Section 8(a) and at the Exchange Date, the Prospectus, as amended or supplemented by any amendments or supplements filed with the Commission by AmSouth or any AmSouth Fund, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that none of the representations and warranties in this subsection shall apply to statements in or omissions from the Registration Statement, the Prospectus or the Proxy Statement made in reliance upon and in conformity with information furnished by Infinity or any ISG Fund for use in the Registration Statement, the Prospectus or the Proxy Statement. (l) Shares to be issued to each ISG Fund have been duly authorized and, when issued and delivered pursuant to this Agreement and the Prospectus, will be legally and validly issued and will be fully paid and nonassessable by AmSouth and no shareholder of AmSouth will have any preemptive right of subscription or purchase in respect thereof. (m) The issuance of Shares pursuant to this Agreement will be in compliance with all applicable federal and state securities laws. (n) Each of AmSouth Government Income Fund, AmSouth Limited Term Bond Fund, AmSouth Equity Income Fund, AmSouth Municipal Bond Fund, AmSouth Small Cap Fund, AmSouth Tax-Exempt Money Market Fund, AmSouth Prime Money Market Fund, AmSouth Bond Fund, is qualified and will at all times through the Exchange Date qualify for taxation as a "regulated investment company" under Sections 851 and 852 of the Code. AmSouth Current Income, AmSouth Treasury Reserve Money Market, AmSouth Moderate Growth and Income, AmSouth Growth and Income, AmSouth Growth, AmSouth Aggressive Growth, AmSouth International Equity, AmSouth Mid Cap, AmSouth Large Cap, AmSouth Capital Growth, AmSouth Tennessee Tax-Exempt, AmSouth Limited Term Tennessee Tax-Exempt, and AmSouth Limited Term U.S. Government, upon filing of their first income tax returns at the completion of their first taxable year will elect to be regulated investment companies and until such time will take all steps necessary to ensure qualification as regulated investment companies under Sections 851 and 852 of the Code. (o) AmSouth through its administrator, transfer agent, custodian or otherwise, will cooperate fully and in a timely manner with Infinity and each ISG Fund in completing each of the actions required of it and its agents and necessary for consummation of the transactions described in Sections 3 (a) and (b) of this Agreement. 3. REORGANIZATION. (a) Subject to the requisite approval of the shareholders of each ISG Fund and to the other terms and conditions contained herein (including each ISG Fund's obligation to distribute to its respective shareholders all of its investment company taxable income and net capital gain as described in Section 9(k) hereof), Infinity and each ISG Fund agree to sell, assign, convey, transfer and deliver to the corresponding AmSouth Fund, and each AmSouth Fund agree to acquire from the corresponding ISG Fund, on the Exchange A-9 95 Date all of the Investments and all of the cash and other assets of each ISG Fund in exchange for that number of Shares of the corresponding AmSouth Fund provided for in Section 4 and the assumption by the corresponding AmSouth Fund of all of the liabilities of the ISG Fund. Pursuant to this Agreement, such ISG Fund will, as soon as practicable after the Exchange Date, distribute in liquidation all of the Shares received by it to its shareholders in exchange for their shares of common stock of such ISG Fund. (b) Infinity, on behalf of each ISG Fund, will pay or cause to be paid to the corresponding AmSouth Fund any interest and cash dividends received by it on or after the Exchange Date with respect to the Investments transferred to the AmSouth Funds hereunder. Infinity, on behalf of each ISG Fund, will transfer to the corresponding AmSouth Fund any rights, stock dividends or other securities received by Infinity or any ISG Fund after the Exchange Date as stock dividends or other distributions on or with respect to the Investments transferred, which rights, stock dividends and other securities shall be deemed included in the assets transferred to each AmSouth Fund at the Exchange Date and shall not be separately valued, in which case any such distribution that remains unpaid as of the Exchange Date shall be included in the determination of the value of the assets of the ISG Fund acquired by the corresponding AmSouth Fund. 4. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, AmSouth will deliver to Infinity a number of Shares having an aggregate net asset value equal to the value of the assets of the corresponding ISG Fund acquired by each AmSouth Fund, less the value of the liabilities of such ISG Fund assumed, determined as hereafter provided in this Section 4. (a) Subject to Section 4(d) hereof, the value of each ISG Fund's net assets will be computed as of the Valuation Time using the valuation procedures for the corresponding AmSouth Fund set forth in the AmSouth Prospectus and Statement of Additional Information. In no event shall the same security held by both Infinity and AmSouth be valued at different prices. (b) Subject to Section 4(d) hereof, the net asset value of a share of each AmSouth Fund will be determined to the nearest full cent as of the Valuation Time, using the valuation procedures set forth in the AmSouth Prospectus for the particular AmSouth Fund. (c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m. Eastern Standard time on MARCH 10, 2000 for all of the ISG Funds, or such earlier or later days as may be mutually agreed upon in writing by the parties hereto (the "Valuation Time"). (d) No formula will be used to adjust the net asset value of any ISG Fund or AmSouth Fund to take into account differences in realized and unrealized gains and losses. (e) Each AmSouth Fund shall issue its Shares to the corresponding ISG Fund on one share deposit receipt registered in the name of the corresponding ISG Fund. Each ISG Fund A-10 96 shall distribute in liquidation the Shares received by it hereunder pro rata to its shareholders by redelivering such share deposit receipt to AmSouth's transfer agent which will as soon as practicable set up open accounts for each ISG Fund shareholder in accordance with written instructions furnished by Infinity. (f) Each AmSouth Fund shall assume all liabilities of the corresponding ISG Fund, whether accrued or contingent, in connection with the acquisition of assets and subsequent dissolution of the corresponding ISG Fund or otherwise, except that recourse for assumed liabilities relating to a particular ISG Fund will be limited to the corresponding AmSouth Fund. 5. EXPENSES, FEES, ETC. (a) Subject to subsections 5(b) through 5(e), all fees and expenses, including accounting expenses, portfolio transfer taxes (if any) or other similar expenses incurred directly in connection with the consummation by AmSouth and Infinity of the transactions contemplated by this Agreement will be borne by AMSOUTH BANK, including the costs of proxy materials, proxy solicitation, and legal expenses; provided, however, that such expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of any AmSouth Fund or any ISG Fund, as the case may be, as a "regulated investment company" within the meaning of Section 851 of the Code. Fees and expenses not incurred directly in connection with the consummation of the Transaction will be borne by the party incurring such fees and expenses. (b) In the event the transactions contemplated by this Agreement are not consummated by reason of Infinity being either unwilling or unable to go forward (other than by reason of the nonfulfillment or failure of any condition to Infinity's obligations referred to in Section 8(a) or Section 10), Infinity shall pay directly all reasonable fees and expenses incurred by AmSouth in connection with such transactions, including, without limitation, legal, accounting and filing fees. (c) In the event the transactions contemplated by this Agreement are not consummated by reason of AmSouth being either unwilling or unable to go forward (other than by reason of the nonfulfillment or failure of any condition to AmSouth's obligations referred to in Section 8(a) or Section 9), AmSouth shall pay directly all reasonable fees and expenses incurred by Infinity in connection with such transactions, including without limitation legal, accounting and filing fees. (d) In the event the transactions contemplated by this Agreement are not consummated for any reason other than (i) AmSouth or Infinity being either unwilling or unable to go forward or (ii) the nonfulfillment or failure of any condition to Infinity or AmSouth's obligations referred to in Section 8(a), Section 9 or Section 10 of this Agreement, then each of Infinity and AmSouth shall bear the expenses it has actually incurred in connection with such transactions. A-11 97 (e) Notwithstanding any other provisions of this Agreement, if for any reason the transactions contemplated by this Agreement are not consummated, no party shall be liable to the other party for any damages resulting therefrom, including without limitation consequential damages, except as specifically set forth above. 6. PERMITTED ASSETS. AmSouth and Infinity agree to review the assets of the ISG Funds to ensure that at any time prior to the Exchange Date the assets of any ISG Fund do not include any assets that the corresponding AmSouth Fund is not permitted, or reasonably believes to be unsuitable for it, to acquire, including without limitation any security that, prior to its acquisition by any ISG Fund, is unsuitable for the corresponding AmSouth Fund to acquire. 7. EXCHANGE DATE. Delivery of the assets of the ISG Funds to be transferred, assumption of the liabilities of the ISG Funds to be assumed, and the delivery of Shares to be issued shall be made on March 13, 2000 at 10:00 a.m. or at such other times and dates agreed to by Infinity and AmSouth, the date and time upon which such delivery is to take place being referred to herein as the "Exchange Date." 8. SPECIAL MEETING OF SHAREHOLDERS; DISSOLUTION. (a) Infinity agrees to call a special meeting of the shareholders of each ISG Fund as soon as is practicable after the effective date of the Registration Statement for the purpose of considering the sale of all of the assets of each ISG Fund to and the assumption of all of the liabilities of each ISG Fund by the corresponding AmSouth Fund as herein provided, approving this Agreement, and authorizing the liquidation and dissolution of each ISG Fund, and, except as set forth in Section 13, it shall be a condition to the obligations of each of the parties hereto that the holders of the shares of common stock of each ISG Fund shall have approved this Agreement and the transactions contemplated herein in the manner required by law and Infinity's Articles of Incorporation and Bylaws at such a meeting on or before the Valuation Time. (b) Infinity and each ISG Fund agree that the liquidation and dissolution of each ISG Fund will be effected in the manner provided in Infinity's Articles of Incorporation and Bylaws in accordance with applicable law, that it will not make any distributions of any Shares to the shareholders of a ISG Fund without first paying or adequately providing for the payment of all of such ISG Fund's known debts, obligations and liabilities. (c) Each of AmSouth and Infinity will cooperate with the other, and each will furnish to the other the information relating to itself required by the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder to be set forth in the Registration Statement, including the Prospectus and the Proxy Statement. 9. CONDITIONS TO AMSOUTH'S OBLIGATIONS. The obligations of AmSouth and each AmSouth Fund hereunder shall be subject to the following conditions: A-12 98 (a) That this Agreement shall have been approved and the transactions contemplated hereby, including the liquidation and dissolution of the ISG Funds, shall have been approved by the shareholders of each ISG Fund in the manner required by law. (b) Infinity shall have furnished to AmSouth a statement of each ISG Fund's assets and liabilities, with values determined as provided in Section 4 of this Agreement, together with a list of Investments with their respective tax costs, all as of the Valuation Time, certified on Infinity's behalf by its President (or any Vice President) and Treasurer, and a certificate of both such officers, dated the Exchange Date, to the effect that as of the Valuation Time and as of the Exchange Date there has been no material adverse change in the financial position of any ISG Fund since June 30, 1999, other than changes in the Investments since that date or changes in the market value of the Investments, or changes due to net redemptions of shares of the ISG Funds, dividends paid or losses from operations. (c) As of the Valuation Time and as of the Exchange Date, all representations and warranties of Infinity and each ISG Fund made in this Agreement are true and correct in all material respects as if made at and as of such dates, Infinity and each ISG Fund has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to each of such dates, and Infinity shall have furnished to AmSouth a statement, dated the Exchange Date, signed by Infinity's President (or any Vice President) and Treasurer certifying those facts as of such dates. (d) Infinity shall have delivered to AmSouth a letter from KPMG LLP dated the Exchange Date stating that such firm reviewed the federal and state income tax returns of each ISG Fund for the year ended December 31, 1999 and that, in the course of such review, nothing came to their attention which caused them to believe that such returns did not properly reflect, in all material respects, the federal and state income taxes of each ISG Fund for the periods covered thereby, or that each ISG Fund would not qualify as a regulated investment company for federal income tax purposes. (e) There shall not be any material litigation pending with respect to the matters contemplated by this Agreement. (f) AmSouth shall have received an opinion of Stroock & Stroock & Lavan LLP, in form reasonably satisfactory to AmSouth and dated the Exchange Date, to the effect that (i) Infinity is a corporation duly established and validly existing under the laws of the State of Maryland, (ii) this Agreement has been duly authorized, executed, and delivered by Infinity on behalf of the ISG Funds and, assuming that the Registration Statement, the Prospectus and the Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution and delivery of this Agreement by AmSouth, is a valid and binding obligation of Infinity with respect to the ISG Funds, subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, A-13 99 and such counsel shall not be required to express an opinion with respect to the application of equitable principles in any proceeding, whether at law or in equity, or with respect to the provisions of this Agreement intended to limit liability for particular matters to an ISG Fund and its assets, (iii) Infinity and each ISG Fund has power to sell, assign, convey, transfer and deliver the Investments and other assets contemplated hereby and, upon consummation of the transactions contemplated hereby in accordance with the terms of this Agreement, Infinity and each ISG Fund will have duly sold, assigned, conveyed, transferred and delivered such Investments and other assets to AmSouth, (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, violate Infinity's Articles of Incorporation and Bylaws or any provision of an agreement known to such counsel to which Infinity, with respect to the ISG Funds, or any ISG Fund is a party or by which it is bound, it being understood that with respect to investment restrictions as contained in Infinity's Articles of Incorporation and Bylaws, such counsel may rely upon a certificate of an officer of Infinity whose responsibility it is to advise Infinity with respect to such matters, and (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by Infinity or any ISG Fund of the transactions contemplated hereby, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities or blue sky laws and the H-S-R Act, and it being understood that such opinion shall not be deemed to apply to AmSouth's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state securities or blue sky laws and H-S-R Act. (g) AmSouth shall have received an opinion of Ropes & Gray, counsel to AmSouth addressed to AmSouth and each AmSouth Fund, and to Infinity and ISG Funds in form reasonably satisfactory to AmSouth and dated the Exchange Date (which opinion would be based upon certain factual representations and subject to certain qualifications), to the effect that, on the basis of the existing provisions of the Code, current administrative rules and court decisions, for Federal income tax purposes: (i) no gain or loss will be recognized by any ISG Fund or its Shareholders upon the transfer of the assets to the corresponding AmSouth Fund in exchange for Shares and the assumption by such AmSouth Fund of the liabilities of the ISG Fund or upon the distribution of Shares by the ISG Fund to its shareholders in liquidation pursuant to this Agreement; (ii) the basis of the Shares an Infinity Shareholder receives in connection with the transaction will be the same as the basis of his or her ISG Fund shares exchanged therefor; (iii) an Infinity shareholder's holding period with respect to his or her Shares will be determined by including the period for which he or she held the ISG Fund shares exchanged therefor, provided that he or she held such ISG Fund shares as capital assets; (iv) no gain or loss will be recognized by any AmSouth Fund upon the receipt of the assets of the corresponding ISG Fund in exchange for Shares and the assumption by the AmSouth Fund of the liabilities of the corresponding ISG Fund; (v) the basis in the hands of the AmSouth Fund of the assets of the corresponding ISG Fund transferred to the AmSouth Fund will be the same as the basis of the assets in the hands of the corresponding ISG Fund immediately prior to the transfer; and (vi) each AmSouth Fund's holding periods with respect to the assets of the corresponding ISG Fund will include the periods for which such assets were held by the A-14 100 corresponding ISG Fund. (h) Subject to the parties' compliance with Section 6 hereof, the assets of each ISG Fund to be acquired by the corresponding AmSouth Fund will include no assets which the corresponding AmSouth Fund, by reason of limitations contained in its Declaration of Trust or of investment restrictions disclosed in the AmSouth Prospectuses in effect on the Exchange Date, may not properly acquire. AmSouth shall not change the AmSouth Declaration of Trust and the AmSouth Prospectuses so as to restrict permitted investments for each AmSouth Fund except as required by the Commission or any state regulatory authority. (i) The Registration Statement shall have become effective under the 1933 Act and applicable Blue Sky provisions, and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of AmSouth, contemplated by the Commission and or any state regulatory authority. (j) All proceedings taken by Infinity in connection with the transactions contemplated by this Agreement and all documents incidental thereto reasonably shall be satisfactory in form and substance to AmSouth. (k) Prior to the Exchange Date, each ISG Fund (other than an ISG Fund that will combine with a AmSouth Fund in a manner qualifying for treatment under Section 368(a)(1)(F) of the Code) shall have declared a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of its investment company taxable income for its taxable year ended December 31, 1999 and the short taxable year beginning January 1, 2000 and ending on the Exchange Date (computed without regard to any deduction for dividends paid), and all of the ISG Fund's net capital gain realized in its taxable year ended December 31, 1999 and the short taxable year beginning on January 1, 2000 and ending on the Exchange Date (after reduction for any capital loss carryover). (l) Infinity shall have furnished to AmSouth a certificate, signed by the President (or any Vice President) and the Treasurer of Infinity, as to the tax cost to Infinity of the securities delivered to AmSouth pursuant to this Agreement, together with any such other evidence as to such tax cost as AmSouth may reasonably request. (m) ISG Funds' custodian shall have delivered to AmSouth a certificate identifying all of the assets of each ISG Fund held by such custodian as of the Valuation Time. (n) ISG Funds' transfer agent shall have provided to AmSouth's transfer agent (i) the originals or true copies of all of the records of each ISG Fund in the possession of such ISG transfer agent as of the Exchange Date, (ii) a record specifying the number of shares of each ISG Fund outstanding as of the Valuation Time and (iii) a record specifying the name and address of each holder of record of any such shares of each ISG Fund and the number of shares A-15 101 held of record by each such shareholder as of the Valuation Time. ISG's transfer agent shall also have provided AmSouth with a certificate confirming that the acts specified in the preceding sentence have been taken and that the information so supplied is complete and accurate to the best knowledge of the transfer agent. (o) All of the issued and outstanding shares of common stock of each ISG Fund shall have been offered for sale and sold in conformity with all applicable federal or state securities or blue sky laws and, to the extent that any audit of the records of Infinity or any ISG Fund or its transfer agent by AmSouth or its agents shall have revealed otherwise, either (i) Infinity and each ISG Fund shall have taken all actions that in the reasonable opinion of AmSouth are necessary to remedy any prior failure on the part of Infinity to have offered for sale and sold such shares in conformity with such laws or (ii) Infinity shall have furnished (or caused to be furnished) surety, or deposited (or caused to be deposited) assets in escrow, for the benefit of AmSouth in amounts sufficient and upon terms satisfactory, in the opinion of AmSouth or its counsel, to indemnify AmSouth against any expense, loss, claim, damage or liability whatsoever that may be asserted or threatened by reason of such failure on the part of Infinity to have offered and sold such shares in conformity with such laws. (p) AmSouth shall have received from Ernst & Young LLP a letter addressed to AmSouth dated as of the Exchange Date reasonably satisfactory in form and substance to AmSouth and Infinity to the effect that, on the basis of limited procedures agreed upon by AmSouth and Infinity and described in such letter (but not an examination in accordance with generally accepted auditing standards), as of the Valuation Time the value of the assets of each ISG Fund to be exchanged for the Shares have been determined in accordance with the valuation procedures for the corresponding AmSouth Fund as set forth in the AmSouth Prospectus and Statement of Additional Information. (q) Infinity shall have duly executed and delivered to AmSouth bills of sale, assignments, certificates and other instruments of transfer ("Transfer Documents") as AmSouth may deem necessary or desirable to transfer all of Infinity's and each ISG Fund's entire right, title and interest in and to the Investments and all other assets of each ISG Fund. 10. CONDITIONS TO INFINITY'S OBLIGATIONS. The obligations of Infinity and each ISG Fund hereunder shall be subject to the following conditions: (a) This Agreement shall have been adopted and the transactions contemplated hereby, including the liquidation and dissolution of the ISG Funds, shall have been approved by the shareholders of each ISG Fund in the manner required by law. (b) AmSouth shall have furnished to Infinity a statement of each AmSouth Fund's net assets, together with a list of portfolio holdings with values determined as provided in Section 4, all as of the Valuation Time, certified on AmSouth's behalf by its President (or any Vice President) and Treasurer (or any Assistant Treasurer), and a certificate of both such officers, A-16 102 dated the Exchange Date, to the effect that as of the Valuation Time and as of the Exchange Date there has been no material adverse change in the financial position of any AmSouth Fund since July 31, 1999, other than changes in its portfolio securities since that date, changes in the market value of its portfolio securities, changes due to net redemptions, dividends paid or losses from operations. (c) AmSouth shall have executed and delivered to Infinity an Assumption of Liabilities dated as of the Exchange Date pursuant to which each AmSouth Fund will assume all of the liabilities of the corresponding ISG Fund existing at the Valuation Time in connection with the transactions contemplated by this Agreement. (d) As of the Valuation Time and as of the Exchange Date, all representations and warranties of AmSouth and each AmSouth Fund made in this Agreement are true and correct in all material respects as if made at and as of such dates, AmSouth and each AmSouth Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to each of such dates, and AmSouth shall have furnished to Infinity a statement, dated the Exchange Date, signed by AmSouth's President (or any Vice President) and Treasurer certifying those facts as of such dates. (e) There shall not be any material litigation pending with respect to the matters contemplated by this Agreement. (f) Infinity shall have received an opinion of Ropes & Gray, in form reasonably satisfactory to Infinity and dated the Exchange Date, to the effect that (i) AmSouth is a business trust and validly existing in conformity with the laws of The Commonwealth of Massachusetts, and, to the knowledge of such counsel, neither AmSouth nor any AmSouth Fund is required to qualify to do business as a foreign association in any jurisdiction, (ii) the Shares to be delivered to Infinity as provided for by this Agreement are duly authorized and upon such delivery will be validly issued and will be fully paid and nonassessable by AmSouth and no shareholder of AmSouth has any preemptive right to subscription or purchase in respect thereof, (iii) this Agreement has been duly authorized, executed and delivered by AmSouth and, assuming that the Prospectus, the Registration Statement and the Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution and delivery of this Agreement by Infinity, is a valid and binding obligation of AmSouth, (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, violate AmSouth's Declaration of Trust, as amended, or Code of Regulations, or any provision of any agreement known to such counsel to which AmSouth or any AmSouth Fund is a party or by which it is bound, it being understood that with respect to investment restrictions as contained in AmSouth's Declaration of Trust, as amended, Code of Regulations or then-current prospectus or statement of additional information of each AmSouth Fund, such counsel may rely upon a certificate of an officer of AmSouth whose responsibility it is to advise AmSouth with respect to such matters, (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by AmSouth or A-17 103 any AmSouth Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities or blue sky laws and the H-S-R Act and it being understood that such opinion shall not be deemed to apply to Infinity's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state securities or blue sky laws and the H-S-R Act; and (vi) the Registration Statement has become effective under the 1933 Act, and to the best of the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the 1933 Act. (g) Infinity shall have received an opinion of Ropes & Gray addressed to Infinity and each ISG Fund in a form reasonably satisfactory to Infinity and dated the Exchange Date (which opinion would be based upon certain factual representations and subject to certain qualifications), with respect to the matters specified in Section 9(g) of this Agreement. (h) All proceedings taken by AmSouth in connection with the transactions contemplated by this Agreement and all documents incidental thereto reasonably shall be satisfactory in form and substance to Infinity. (i) The Registration Statement shall have become effective under the 1933 Act and applicable Blue Sky provisions, and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of AmSouth, contemplated by the Commission or any state regulatory authority. (j) At the Exchange Date, each of the ISG Funds will have sold such of its assets, if any, if informed by AmSouth in writing that such sale is necessary to assure that, after giving effect to the acquisition of the assets pursuant to this Agreement, each of the AmSouth Funds designated as a "diversified company" will remain a "diversified company" within the meaning of Section 5(b)(1) of the 1940 Act and in compliance with such other mandatory investment restrictions as are set forth in the AmSouth Prospectuses previously furnished to Infinity. (k) Infinity and ISG Funds receive an order from the Securities and Exchange Commission exempting from the reorganization from the provisions of Section 17(a) of the 1940 Act. 11. INDEMNIFICATION. (a) Infinity will indemnify and hold harmless AmSouth, its trustees and its officers (for purposes of this subsection, the "Indemnified Parties") against any and all expenses, losses, claims, damages and liabilities at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to Infinity or any ISG Fund contained in the Registration Statement, the Prospectus or the Proxy Statement or any amendment or supplement to any of the foregoing, or arising out of or based upon the omission or alleged omission to state in any of the foregoing a material fact relating to Infinity or any ISG Fund required to be stated therein or necessary to make the statements relating to Infinity or any ISG Fund therein not misleading, including, without limitation, any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the prior consent of Infinity. The Indemnified Parties will notify Infinity in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 11(a). A-18 104 Infinity shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 11(a), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and if Infinity elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their expense. Infinity's and the ISG Funds' obligation under this Section 11(a) to indemnify and hold harmless the Indemnified Parties shall constitute a guarantee of payment so that the ISG Funds will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by them under this Section 11(a) without the necessity of the Indemnified Parties' first paying the same. (b) AmSouth will indemnify and hold harmless Infinity, its directors and its officers (for purposes of this subparagraph, the "Indemnified Parties") against any and all expenses, losses, claims, damages and liabilities at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to AmSouth or any AmSouth Fund contained in the Registration Statement, the Prospectus or the Proxy Statement, or any amendment or supplement to any of the foregoing, or arising out of or based upon the omission or alleged omission to state in any of the foregoing a material fact relating to AmSouth or any AmSouth Fund required to be stated therein or necessary to make the statements relating to AmSouth or any AmSouth Fund therein not misleading, including, without limitation, any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the prior consent of AmSouth. The Indemnified Parties will notify AmSouth in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 11(b). AmSouth shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 11(b), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and, if AmSouth elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their own expense. The AmSouth Funds' obligation under this Section 11(b) to indemnify and hold harmless the Indemnified Parties shall constitute a guarantee of payment so that the AmSouth Funds will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by them under this Section 11(b) without the necessity of the Indemnified Parties' first paying the same. A-19 105 12. NO BROKER, ETC. Each of AmSouth and Infinity represents that there is no person who has dealt with it who by reason of such dealings is entitled to any broker's or finder's or other similar fee or commission arising out of the transactions contemplated by this Agreement. 13. TERMINATION. AmSouth and Infinity may, by mutual consent of their respective trustees, terminate this Agreement, and AmSouth or Infinity, after consultation with counsel and by consent of their respective trustees or an officer authorized by such trustees, may waive any condition to their respective obligations hereunder. If the transactions contemplated by this Agreement have not been substantially completed by June 30, 2000, this Agreement shall automatically terminate on that date unless a later date is agreed to by AmSouth and Infinity. Notwithstanding any other provision in this Agreement, in the event shareholder approval of this Agreement and the transactions contemplated by this Agreement is obtained with respect to only one or more ISG Funds but not all of the ISG Funds, AmSouth and Infinity agree to consummate those transactions with respect to those ISG Funds that have approved this Agreement and those transactions. 14. COVENANTS, ETC. DEEMED MATERIAL. All covenants, agreements, representations and warranties made under this Agreement and any certificates delivered pursuant to this Agreement shall be deemed to have been material and relied upon by each of the parties, notwithstanding any investigation made by them or on their behalf. 15. SOLE AGREEMENT; AMENDMENTS. This Agreement supersedes all previous correspondence and oral communications between the parties regarding the subject matter hereof, constitutes the only understanding with respect to such subject matter, may not be changed except by a letter of agreement signed by each party hereto, and shall be construed in accordance with and governed by the laws of The Commonwealth of Massachusetts. 16. AGREEMENT AND DECLARATION OF TRUST AmSouth Funds is a business trust organized under Massachusetts law and under a Declaration of Trust, to which reference is hereby made and a copy of which is on file at the office of the Secretary of The Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "AmSouth Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, employees or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, employees, agents or shareholders of AmSouth personally, but bind only the assets of AmSouth and all persons dealing with any series or funds of AmSouth, such as the AmSouth Funds, must look solely to the assets of AmSouth belonging to such series or funds for the enforcement of any claims against AmSouth. A-20 106 This Agreement may be executed in any number of counter-parts, each of which, when executed and delivered, shall be deemed to be an original. THE INFINITY MUTUAL FUNDS, INC. On Behalf of its ISG Funds By:___________________________ AMSOUTH FUNDS By:____________________________ A-21 107 APPENDIX B COMPARATIVE FEE TABLES 108 PART A APPENDIX B COMPARATIVE FEE TABLE FOR EACH PORTFOLIO ISG AmSouth Current Income Current Income Combined Portfolio Portfolio Fund Pro Forma ------------------------- ------------------------ ------------------------ Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2)5.00% None Redemption Fees None None None 0%(5) 0%(5) 0%(5) 0%(5) 0%(5) 0%(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .20% .20% .20% .20% .20% .20% .20% .20% .20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .79% .79% .69% .79% .79% .69% Total Fund Operating Expenses(6), (7) .99% 1.59% .74% .99% 1.74% .89% .99% 1.74% .89% (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, which is charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements in effect. For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Current Income Portfolio. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly bear your pro rata share of fees and expenses incurred by the Underlying Funds in which the fund invests, so that the investment returns of the Fund will be net of the expenses of the Fund with those of the Underlying Funds. After combining the total estimated operating expenses of the Fund with those of the Underlying Funds, the estimated average weighted expense ratios for the ISG Funds are as follows: Class A, 2.09%; Class B, 2.69%, Class I, 1.84%; and for the AmSouth Funds and fund pro formas are as follows: Class A, 2.06%; Class B, 2.81%; Trust, 1.96%. 1 109 ISG Current Income Portfolio AmSouth Current Income Portfolio EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Current Income Portfolio Class A Shares............................................... $506 $ 935 Class B Shares............................................... $672 $1,135 Class I Shares............................................... $187 $ 579 AmSouth Current Income Portfolio Class A Shares............................................... $601 $1,020 Class B Shares............................................... $784 $1,171 Trust Shares................................................. $199 $ 615 Combined Fund Pro Forma Class A Shares............................................... $601 $1,020 Class B Shares............................................... $784 $1,171 Trust Shares................................................. $199 $ 615 - --------------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Current Income Portfolio Class B Shares............................................... $272 $835 AmSouth Current Income Portfolio Class B Shares............................................... $284 $871 Combined Fund Pro Forma Class B Shares............................................... $284 $871 2 110 ISG AmSouth Treasury Money Market Treasury Reserve Money Combined Fund Market Fund Fund Pro Forma ------------------------- ------------------------ ----------------------- Class A Class I Class A Trust Class A Trust ------- ------- ------- ----- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None None None None None None Sales Charge on Reinvested Dividends None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None None None None None None Redemption Fees None None None(1) None None(1) None Exchange Fees None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .25% .25% .40% .40% .40% .40% 12b-1 Fees None None None None None None Other Expenses .53% .43% .57% .47% .57% .47% Total Fund Operating Expenses .78%(2) .68%(2) .97%(3) .87%(3) .97%(3) .87%(3) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a (.23%) (.23%) Net Expenses n/a n/a n/a n/a .72%(4) .62%(4) (1) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (2) Other expenses have been restated for Class I to reflect current fees. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. Total expenses after fee waivers and expense reimbursements for each Class were: Class A, .60%, Class I, .60%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (3) Other expenses are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (4) Total expenses after fee waivers and expense reimbursements through April 30, 2000 are as follows: Class A, .60%; and Trust Class, .60%, and thereafter will be: Class A, .72%; and Trust Class, .62%. 3 111 ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Treasury Money Market Fund Class A Shares............................................... $80 $249 $433 $ 966 Class I Shares............................................... $69 $218 $379 $ 847 AmSouth Treasury Reserve Money Market Fund Class A Shares............................................... $99 $309 $536 $1,190 Trust Shares................................................. $89 $278 $482 $1,073 Combined Fund Pro Forma Class A Shares............................................... $99 $309 $536 $1,190 Trust Shares................................................. $89 $278 $482 $1,073 4 112 ISG AmSouth Moderate Growth & Moderate Growth and Combined Income Portfolio Income Portfolio Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .20% .20% .20% .20% .20% .20% .20% .20% .20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .79% .79% .69% .79% .79% .69% Total Fund Operating Expenses(6) (7) .99% 1.59% .74% .99% 1.74% .89% .99% 1.74% .89% (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, which is charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Moderate Growth & Income Portfolio. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly bear your pro rata share of fees and expenses incurred by the Underlying Funds in which the fund invests, so that the investment returns of the Fund will be net of the expenses of the Fund with those of the Underlying Funds. After combining the total estimated operating expenses of the Fund with those of the Underlying Funds, the estimated average weighted expense ratios for the ISG Funds are as follows: Class A, 1.91%; Class B, 2.51%, Class I, 1.66%; and for the AmSouth Funds and fund pro formas are as follows: Class A, 2.20%; Class B, 2.95%; Trust, 2.10%. 5 113 ISG Moderate Growth & Income Portfolio AmSouth Moderate Growth and Income Portfolio EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Moderate Growth & Income Portfolio Class A Shares............................................... $660 $1,047 Class B Shares............................................... $654 $1,082 Class I Shares............................................... $169 $ 523 AmSouth Moderate Growth and Income Portfolio Class A Shares............................................... $663 $1,107 Class B Shares............................................... $798 $1,213 Trust Shares................................................. $213 $ 658 Combined Fund Pro Forma Class A Shares............................................... $663 $1,107 Class B Shares............................................... $798 $1,213 Trust Shares................................................. $213 $ 658 - ---------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Moderate Growth & Income Portfolio Class B Shares............................................... $254 $ 782 AmSouth Moderate Growth and Income Portfolio Class B Shares............................................... $298 $ 913 Combined Fund Pro Forma Class B Shares............................................... $298 $ 913 6 114 ISG AmSouth Growth & Income Growth and Income Combined Portfolio Portfolio Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None(2) Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .20% .20% .20% .20% .20% .20% .20% .20% .20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .79% .79% .69% .79% .79% .69% Total Fund Operating Expenses(6), (7) .99% 1.59% .74% .99% 1.74% .89% .99% 1.74% .89% (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, which is charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that were or are in effect. For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Growth & Income Portfolio.Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly bear your pro rata share of fees and expenses incurred by the Underlying Funds in which the fund invests, so that the investment returns of the Fund will be net of the expenses of the Fund with those of the Underlying Funds. After combining the total estimated operating expenses of the Fund with those of the Underlying Funds, the estimated average weighted expense ratios for the ISG Funds are as follows: Class A, 1.93%; Class B, 2.53%, Class I, 1.68%; and for the AmSouth Funds and fund pro formas are as follows: Class A, 2.34%; Class B, 3.09%; Trust, 2.24%. 7 115 ISG Growth & Income Portfolio AmSouth Growth and Income Portfolio EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Growth & Income Portfolio Class A Shares............................................... $662 $1,052 Class B Shares............................................... $656 $1,088 Class I Shares............................................... $171 $ 530 AmSouth Growth and Income Portfolio Class A Shares............................................... $676 $1,148 Class B Shares............................................... $812 $1,254 Trust Shares................................................. $227 $ 700 Combined Fund Pro Forma Class A Shares............................................... $676 $1,148 Class B Shares............................................... $812 $1,254 Trust Shares................................................. $227 $ 700 - ---------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Growth & Income Portfolio Class B Shares............................................... $256 $ 788 AmSouth Growth and Income Portfolio Class B Shares............................................... $312 $ 954 Combined Fund Pro Forma Class B Shares............................................... $312 $ 954 8 116 ISG AmSouth Growth Growth Combined Portfolio Portfolio Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust -------- -------- ------- ------- ------- ----- -------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .20% .20% .20% .20% .20% .20% .20% .20% .20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .79% .79% .69% .79% .79% .69% Total Fund Operating Expenses(6), (7) .99% 1.59% .74% .99% 1.74% .89% .99% 1.74% .89% (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, which is charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer.For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Current Income Portfolio. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements in effect. For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Growth Portfolio. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly bear your pro rata share of fees and expenses incurred by the Underlying Funds in which the fund invests, so that the investment returns of the Fund will be net of the expenses of the Fund with those of the Underlying Funds. After combining the total estimated operating expenses of the Fund with those of the Underlying Funds, the estimated average weighted expense ratios for the ISG Funds are as follows: Class A, 2.24%; Class B, 2.84%, Class I, 1.99%; and for the AmSouth Funds and fund pro formas are as follows: Class A, 2.38%; Class B, 3.13%; Trust, 2.28%. 9 117 ISG Growth Portfolio AmSouth Growth Portfolio EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Growth Portfolio Class A Shares............................................... $691 $1,142 Class B Shares............................................... $687 $1,180 Class I Shares............................................... $202 $ 624 AmSouth Growth Portfolio Class A Shares............................................... $680 $1,159 Class B Shares............................................... $816 $1,266 Trust Shares................................................. $231 $ 712 Combined Fund Pro Forma Class A Shares............................................... $680 $1,159 Class B Shares............................................... $816 $1,266 Trust Shares................................................. $231 $ 712 - ---------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Growth Portfolio Class B Shares............................................... $287 $ 880 AmSouth Growth Portfolio Class B Shares............................................... $316 $ 966 Combined Fund Pro Forma Class B Shares............................................... $316 $ 966 10 118 ISG AmSouth Aggressive Growth Aggressive Growth Combined Portfolio Portfolio Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .20% .20% .20% .20% .20% .20% .20% .20% .20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .79% .79% .69% .79% .79% .69% Total Fund Operating Expenses(6), (7) .99% 1.59% .74% .99% 1.74% .89% .99% 1.74% .89% (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, which is charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements in effect. For the period from inception through October 31, 1999, significant fee waivers occurred with respect to the ISG Aggressive Growth Portfolio. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) If you buy and hold Shares of a Strategic Portfolio, you will indirectly bear your pro rata share of fees and expenses incurred by the Underlying Funds in which the fund invests, so that the investment returns of the Fund will be net of the expenses of the Fund with those of the Underlying Funds. After combining the total estimated operating expenses of the Fund with those of the Underlying Funds, the estimated average weighted expense ratios for the ISG Funds are as follows: Class A, 2.38%; Class B, 2.98%, Class I, 2.13%; and for the AmSouth Funds and fund pro formas are as follows: Class A, 2.51%; Class B, 3.26%; Trust, 2.41%. 11 119 ISG Aggressive Growth Portfolio AmSouth Aggressive Growth Portfolio EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Aggressive Growth Portfolio Class A Shares............................................... $705 $1,182 Class B Shares............................................... $701 $1,221 Class I Shares............................................... $216 $ 667 AmSouth Aggressive Growth Portfolio Class A Shares............................................... $693 $1,196 Class B Shares............................................... $829 $1,304 Trust Shares................................................. $244 $ 751 Combined Fund Pro Forma Class A Shares............................................... $693 $1,196 Class B Shares............................................... $829 $1,304 Trust Shares................................................. $244 $ 751 - ---------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Aggressive Growth Portfolio Class B Shares............................................... $301 $ 921 AmSouth Aggressive Growth Portfolio Class B Shares............................................... $329 $1,004 Combined Fund Pro Forma Class B Shares............................................... $329 $1,004 12 120 ISG AmSouth Mid-Cap Mid Cap Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- -------- ------- ----- -------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses 1.75% 1.85% 1.75% 1.34% 1.34% 1.24% 1.34% 1.34% 1.24% Total Fund Operating Expenses 3.00%(6) 3.60%(6) 2.75%(6) 2.34%(7) 3.09%(7) 2.24%(7) 2.34%(7) 3.09%(7) 2.24%(7) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements in effect. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements in effect. 13 121 ISG Mid-Cap Fund AmSouth Mid Cap Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Mid-Cap Fund Class A Shares............................................... $764 $1,358 Class B Shares............................................... $763 $1,403 Class I Shares............................................... $278 $ 853 AmSouth Mid Cap Fund Class A Shares............................................... $676 $1,148 Class B Shares............................................... $812 $1,254 Trust Shares................................................. $227 $ 700 Combined Fund Pro Forma Class A Shares............................................... $676 $1,148 Class B Shares............................................... $812 $1,254 Trust Shares................................................. $227 $ 700 - ---------- Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years ------ ------- ISG Mid-Cap Fund Class B Shares............................................... $363 $1,103 AmSouth Mid Cap Fund Class B Shares............................................... $312 $ 954 Combined Fund Pro Forma Class B Shares............................................... $312 $ 954 14 122 ISG AmSouth Large-Cap Equity Large Cap Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .75% .75% .75% .80% .80% .80% .80% .80% .80% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .35% .45% .35% .57% .57% . 47% .57% .57% .47% Total Fund Operating Expenses 1.35%(6) 1.95%(6) 1.10%(6) 1.37%(7) 2.12%(7) 1.27%(7) 1.37%(7) 2.12%(7) 1.27%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a n/a (.10%) (.10%) Net Expenses n/a n/a n/a n/a n/a n/a n/a 2.02%(8) 1.17%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements for each Class through April 30, 2000 will not exceed the following: Class A, 1.04%; and Class I Class, 1.04% and thereafter will be: Class B, 2.02%; and Institutional Class, 1.17%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 15 123 ISG Large-Cap Equity Fund AmSouth Large Cap Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Large-Cap Equity Fund Class A Shares............................................... $606 $882 $1,179 $2,022 Class B Shares............................................... $598 $912 $1,292 $2,044 Class I Shares............................................... $112 $350 $ 606 $1,340 AmSouth Large Cap Fund Class A Shares............................................... $583 $864 $1,166 $2,022 Class B Shares............................................... $715 $964 $1,339 $2,171 Trust Shares................................................. $129 $403 $ 697 $1,534 Combined Fund Pro Forma Class A Shares............................................... $583 $864 $1,166 $2,022 Class B Shares............................................... $715 $964 $1,339 $2,171 Trust Shares................................................. $129 $403 $ 697 $1,534 - ---------- ** Class B shares of the ISG Large-Cap Equity Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Large Cap Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Large-Cap Equity Fund Class B Shares............................................... $198 $612 $1,052 $2,044 AmSouth Large Cap Fund Class B Shares............................................... $215 $664 $1,139 $2,171 Combined Fund Pro Forma Class B Shares............................................... $215 $664 $1,139 $2,171 - ---------- ** Class B shares of the ISG Large-Cap Equity Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Large Cap Equity Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 16 124 ISG AmSouth International Equity International Equity Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees 1.00% 1.00% 1.00% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .88% .98% .88% 1.21% 1.21% 1.11% 1.21% 1.21% 1.11% Total Fund Operating Expenses 2.13%(6) 2.73%(6) 1.88%(6) 2.46%(7) 3.21%(7) 2.36%(7) 2.46%(7) 3.21%(7) 2.36%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.15%) (.30%) (.30%) Net Expenses n/a n/a n/a n/a n/a n/a 2.31%(8) 2.91%(8) 2.06%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements for each Class through April 30, 2000 will be as follows: Class A, 1.77%; Institutional Class, 1.77% and thereafter will be: Class A, 2.31%; Class B, 2.91%; Class I, 2.06%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 17 125 ISG International Equity Fund AmSouth International Equity Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG International Equity Fund Class A Shares............................................... $681 $1,110 $1,565 $2,820 Class B Shares............................................... $676 $1,147 $1,645 $2,846 Class I Shares............................................... $191 $ 591 $1,016 $2,201 AmSouth International Equity Fund Class A Shares............................................... $688 $1,182 $1,702 $3,120 Class B Shares............................................... $824 $1,289 $1,878 $3,260 Trust Shares................................................. $239 $ 736 $1,260 $2,696 Combined Fund Pro Forma Class A Shares............................................... $688 $1,182 $1,702 $3,120 Class B Shares............................................... $824 $1,289 $1,878 $3,260 Trust Shares................................................. $239 $ 736 $1,260 $2,696 - ---------- ** Class B shares of the ISG International Equity Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth International Equity Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG International Equity Fund Class B Shares............................................... $276 $847 $1,445 $2,846 AmSouth International Equity Fund Class B Shares............................................... $324 $989 $1,678 $3,260 Combined Fund Pro Forma Class B Shares............................................... $324 $989 $1,678 $3,260 - ---------- ** Class B shares of the ISG International Equity Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth International Equity Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 18 126 ISG AmSouth Capital Growth Capital Growth Combined Fund Fund Fund Pro Forma ------------------------- ------------------------- ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .65% .65% .65% .80% .80% .80% .80% .80% .80% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .54% .64% .54% .61% .61% .51% .61% .61% .51% Total Fund Operating Expenses 1.44%(6) 2.04%(6) 1.19%(6) 1.41%(7) 2.16%(7) 1.31%(7) 1.41%(7) 2.16%(7) 1.31%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.07%) (.20%) (.20%) Net Expenses n/a n/a n/a n/a n/a n/a 1.36%(8) 1.96%(8) 1.11%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, 1.36%; Class B, 1.96%; Trust Class, 1.11%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 19 127 ISG Capital Growth Fund AmSouth Capital Growth Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Capital Growth Fund Class A Shares............................................... $615 $909 $1,225 $2,117 Class B Shares............................................... $607 $940 $1,298 $2,140 Class I Shares............................................... $121 $378 $ 654 $1,443 AmSouth Capital Growth Fund Class A Shares............................................... $587 $876 $1,186 $2,065 Class B Shares............................................... $719 $976 $1,359 $2,213 Trust Shares................................................. $133 $415 $ 718 $1,579 Combined Fund Pro Forma Class A Shares............................................... $587 $876 $1,186 $2,065 Class B Shares............................................... $719 $976 $1,359 $2,213 Trust Shares................................................. $133 $415 $ 718 $1,579 - -------- ** Class B shares of the ISG Capital Growth Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Capital Growth Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Capital Growth Fund Class B Shares............................................... $207 $640 $1,098 $2,140 AmSouth Capital Growth Fund Class B Shares............................................... $219 $676 $1,159 $2,213 Combined Fund Pro Forma Class B Shares............................................... $219 $676 $1,159 $2,213 - ---------- ** Class B shares of the ISG Capital Growth Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Growth Opportunities Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 20 128 ISG AmSouth Tennessee Tax-Exempt Tennessee Tax-Exempt Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .50% .50% .50% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .60% .70% .60% .67% .67% .57% .67% .67% .57% Total Fund Operating Expenses 1.35%(6) 1.95%(6) 1.10%(6) 1.32%(7) 2.07%(7) 1.22%(7) 1.32%(7) 2.07%(7) 1.22%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%) Net Expenses n/a n/a n/a n/a n/a n/a 1.27%(8) 1.87%(8) 1.02%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, 1.27%; Class B, 1.87%; Trust Class, 1.02%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 21 129 ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Tennessee Tax-Exempt Fund Class A Shares............................................... $433 $715 $1,017 $1,875 Class B Shares............................................... $598 $912 $1,252 $2,044 Class I Shares............................................... $112 $350 $ 606 $1,340 AmSouth Tennessee Tax-Exempt Fund Class A Shares............................................... $529 $802 $1,095 $1,927 Class B Shares............................................... $710 $949 $1,314 $2,118 Trust Shares................................................. $124 $387 $ 670 $1,477 Combined Fund Pro Forma Class A Shares............................................... $529 $802 $1,095 $1,927 Class B Shares............................................... $710 $949 $1,314 $2,118 Trust Shares................................................. $124 $387 $ 670 $1,477 - ---------- ** Class B shares of the ISG Tennessee Tax-Exempt Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Tennessee Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Tennessee Tax-Exempt Fund Class B Shares............................................... $198 $612 $1,052 $2044 AmSouth Tennessee Tax-Exempt Fund Class B Shares............................................... $210 $649 $1,114 $2,118 Combined Fund Pro Forma Class B Shares............................................... $210 $649 $1,114 $2,118 - ---------- ** Class B shares of the ISG Tennessee Tax-Exempt Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Tennessee Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 22 130 ISG AmSouth Limited Term Tennessee Limited Term Tennessee Combined Tax-Exempt Fund Tax-Exempt Fund Fund Pro Forma -------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .50% .50% .50% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .92% 1.02 .92% 1.00% 1.00% .90% 1.00% 1.00% .90% Total Fund Operating Expenses 1.67%(6) 2.27%(6) 1.42%(6) 1.65%(7) 2.40%(7) 1.55%(7) 1.65%(7) 2.40%(7) 1.55%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%) Net Expenses n/a n/a n/a n/a n/a n/a 1.60%(8) 2.20%(8) 1.35%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, 1.60%; Class B, 2.20%; Trust Class, 1.35%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 23 131 ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term Tennessee Tax-Exempt Fund Class A Shares............................................... $465 $ 811 $1,180 $2,217 Class B Shares............................................... $630 $1,009 $1,415 $2,381 Class I Shares............................................... $145 $ 449 $ 776 $1,702 AmSouth Limited Term Tennessee Tax-Exempt Fund Class A Shares............................................... $561 $ 900 $1,261 $2,276 Class B Shares............................................... $743 $1,048 $1,480 $2,463 Trust Shares................................................. $158 $ 490 $ 845 $1,845 Combined Fund Pro Forma Class A Shares............................................... $561 $ 900 $1,261 $2,276 Class B Shares............................................... $743 $1,048 $1,480 $2,463 Trust Shares................................................. $158 $ 900 $1,261 $2,276 - ---------- ** Class B shares of the ISG Limited Term Tennessee Tax-Exempt Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term Tennessee Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term Tennessee Tax-Exempt Fund Class B Shares............................................... $203 $ 709 $1,215 $2,381 AmSouth Limited Term Tennessee Tax-Exempt Fund Class B Shares............................................... $243 $ 748 $1,280 $2,463 Combined Fund Pro Forma Class B Shares............................................... $243 $ 748 $1,280 $2,463 - ---------- ** Class B shares of the ISG Limited Term Tennessee Tax-Exempt Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term Tennessee Tax-Exempt Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 24 132 ISG AmSouth Limited Term U.S. Limited Term U.S. Combined Government Fund Government Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None(2) 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .50% .50% .50% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .79% .75% .65% .76% .76% .66% .76% .76% .66% Total Fund Operating Expenses 1.54%(6) 2.00%(6) 1.15%(6) 1.49%(7) 2.24%(7) 1.39%(7) 1.41%(7) 2.16%(7) 1.31%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.05%) (.20%) (.20%) Net Expenses n/a n/a n/a n/a n/a n/a 1.36%(8) 1.96%(8) 1.11%(8) (1) Sales charges may be reduced depending upon the amount invested, or in certain circumstances, waived. (2) Class A Shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B Share investors of the ISG Funds, waivers are in place on the CDSC, charged if Class B Shares are sold within six years of purchase, which will decline as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. For all other holders of B Shares, the CDSC declines over the same seven year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Approximately eight years after purchase, Class B Shares automatically convert to Class A Shares. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, 1.36%; Class B, 1.96%; Trust Class, 1.11%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 25 133 ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term U.S. Government Fund Class A Shares............................................... $452 $ 772 $1,114 $2,079 Class B Shares............................................... $603 $ 927 $1,278 $2,152 Class I Shares............................................... $117 $ 365 $ 633 $1,398 AmSouth Limited Term U.S. Government Fund Class A Shares............................................... $546 $ 852 $1,181 $2,108 Class B Shares............................................... $727 $1,000 $1,400 $2,297 Trust Shares................................................. $142 $ 440 $ 761 $1,669 Combined Fund Pro Forma Class A Shares............................................... $538 $ 828 $1,140 $2,023 Class B Shares............................................... $719 $ 976 $1,359 $2,213 Trust Shares................................................. $133 $ 415 $ 718 $1,579 - ---------- ** Class B shares of the ISG Limited Term U.S. Government Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term U.S. Government Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term U.S. Government Fund Class B Shares............................................... $203 $627 $1,078 $2,152 AmSouth Limited Term U.S. Government Fund Class B Shares............................................... $227 $700 $1,200 $2,297 Combined Fund Pro Forma Class B Shares............................................... $219 $676 $1,159 $2,213 - ---------- ** Class B shares of the ISG Limited Term U.S. Government Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term U.S. Government Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 26 134 ISG AmSouth Government Income Government Income Combined Fund Fund Fund Pro Forma ------------------------- ------------------------- ------------------------ Class A Class B Class I Class A Class B Trust Class A Class B Trust -------- ------- ------- ------- ------- ----- -------- ------- ------ SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .60% .60% .60% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .38% .48% .38% .69% .69% .59% .69% .69% .59% Total Fund Operating Expenses 1.23%(6) 1.83%(6) .98%(6) 1.34%(7) 2.09%(7) 1.24%(7) 1.34%(7) 2.09%(7) 1.24%(7)(8) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.06%) (.21%) (.21%) Net Expenses n/a n/a n/a n/a n/a n/a 1.28%(8) 1.88%(8) 1.03%(8) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for Class B shares and Class I shares are based on estimated amounts for the current fiscal year, and have been restated for Class A to reflect current fees. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement is voluntary and my be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, 1.28%; Class B, 1.88%; Trust Class, 1.03%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 27 135 ISG Government Income Fund AmSouth Government Income Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Government Income Fund Class A Shares............................................... $422 $679 $ 955 $1,744 Class B Shares............................................... $586 $876 $1,190 $1,915 Class I Shares............................................... $100 $312 $ 542 $1,201 AmSouth Government Income Fund Class A Shares............................................... $531 $808 $1,105 $1,948 Class B Shares............................................... $710 $949 $1,314 $2,126 Trust Shares................................................. $126 $393 $ 681 $1,500 Combined Fund Pro Forma Class A Shares............................................... $531 $808 $1,105 $1,948 Class B Shares............................................... $710 $949 $1,314 $2,126 Trust Shares................................................. $126 $393 $ 681 $1,500 - ---------- ** Class B shares of the ISG Government Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Government Income Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Government Income Fund Class B Shares............................................... $186 $576 $ 990 $1,915 AmSouth Government Income Fund Class B Shares............................................... $210 $649 $1,114 $2,126 Combined Fund Pro Forma Class B Shares............................................... $210 $649 $1,114 $2,126 - ---------- ** Class B shares of the ISG Government Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Government Income Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 28 136 ISG AmSouth Limited Term Income Limited Term Bond Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .50% .50% .50% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .60% .70% .60% .54% .54% .44% .54%. .54% .44% Total Fund Operating Expenses 1.35%(6) 1.95%(6) 1.10%(6) 1.19%(7) 1.94%(7) 1.09%(7) 1.19%(7) 1.94%(7) 1.09%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a n/a (.11%) (.11%) Net Expenses n/a n/a n/a n/a n/a n/a n/a 1.83%(8) .98%(8) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses have been restated for Class A and Class I to reflect current fees. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class B, 1.83%; Trust Class, .98%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 29 137 ISG Limited Term Income Fund AmSouth Limited Term Bond Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term Income Fund Class A Shares............................................... $433 $715 $1,017 $1,875 Class B Shares............................................... $598 $912 $1,252 $2,044 Class I Shares............................................... $112 $350 $ 606 $1,340 AmSouth Limited Term Bond Fund Class A Shares............................................... $516 $763 $1,028 $1,785 Class B Shares............................................... $697 $909 $1,247 $1,979 Trust Shares................................................. $111 $347 $ 601 $1,329 Combined Fund Pro Forma Class A Shares............................................... $516 $763 $1,028 $1,785 Class B Shares............................................... $697 $909 $1,247 $1,979 Trust Shares................................................. $111 $347 $ 601 $1,329 - ---------- ** Class B shares of the ISG Limited Term Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Limited Term Income Fund Class B Shares............................................... $198 $612 $1,052 $2,044 AmSouth Limited Term Bond Fund Class B Shares............................................... $197 $609 $1,047 $1,979 Combined Fund Pro Forma Class B Shares............................................... $197 $609 $1,047 $1,979 - --------- ** Class B shares of the ISG Limited Term Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Limited Term Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 30 138 ISG AmSouth Equity Income Equity Income Combined Fund Fund Fund Pro Forma ------------------------- ------------------------- -------------------------- Class A Class B Class I Class A Class B Class I Class A Class B Class I ------- ------- ------- ------- ------- ------- ------- ------- ------- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .65% .65% .65% .80% .80% .80% .80% .80% .80% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .70% .80% .70% .58% .58% .98% .58% .58% .48% Total Fund Operating Expenses 1.60%(6) 2.20%(6) 1.35%(6) 1.38%(7) 2.13%(7) 1.28%(7) 1.38%(7) 2.13%(7) 1.28(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a n/a (.07%) (.07%) Net Expenses n/a n/a n/a n/a n/a n/a n/a 2.06%(8) 1.21%(8) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses have been restated for Class A and Class I to reflect current fees. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class B, 2.06%; Trust Class, 1.21%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 31 139 ISG Equity Income Fund AmSouth Equity Income Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Equity Income Fund Class A Shares............................................... $630 $956 $1,304 $2,285 Class B Shares............................................... $623 $988 $1,380 $2,309 Class I Shares............................................... $137 $428 $ 739 $1,624 AmSouth Equity Income Fund Class A Shares............................................... $584 $867 $1,171 $2,033 Class B Shares............................................... $716 $967 $1,344 $2,182 Trust Shares................................................. $130 $406 $ 702 $1,545 Combined Fund Pro Forma Class A Shares............................................... $584 $867 $1,171 $2,033 Class B Shares............................................... $716 $967 $1,344 $2,182 Trust Shares................................................. $130 $406 $ 702 $1,545 - ---------- ** Class B shares of the ISG Equity Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Equity Income Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Equity Income Fund Class B Shares............................................... $223 $688 $1,180 $2,309 AmSouth Equity Income Fund Class B Shares............................................... $216 $667 $1,114 $2,182 Combined Fund Pro Forma Class B Shares............................................... $216 $667 $1,114 $2,182 - ---------- ** Class B shares of the ISG Equity Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Equity Income Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 32 140 ISG AmSouth Municipal Income Municipal Bond Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None(2) None(4) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .60% .60% .60% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .56% .66% .56% .53% .53% .43% .53% .53% .43% Total Fund Operating Expenses 1.41%(6) 2.01%(6) 1.16%(6) 1.18%(7) 1.93%(7) 1.08%(7) .18%(7) 1.93%(7) 1.08%(7) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount. (6) Other expenses have been for Class B and Class I are based on estimated amounts for the current fiscal year, and have been restated for Class A to reflect current fees. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 33 141 ISG Municipal Income Fund AmSouth Municipal Bond Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Municipal Income Fund Class A Shares............................................... $439 $733 $1,048 $1,940 Class B Shares............................................... $604 $930 $1,283 $2,108 Class I Shares............................................... $118 $368 $ 638 $1,409 AmSouth Municipal Bond Fund Class A Shares............................................... $515 $760 $1,023 $1,775 Class B Shares............................................... $696 $906 $1,242 $1,968 Trust Shares................................................. $110 $343 $ 595 $1,317 Combined Fund Pro Forma Class A Shares............................................... $515 $760 $1,023 $1,775 Class B Shares............................................... $696 $906 $1,242 $1,968 Trust Shares................................................. $110 $343 $ 595 $1,317 - ---------- ** Class B shares of the ISG Municipal Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Municipal Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Municipal Income Fund Class B Shares............................................... $204 $630 $1,083 $2,108 AmSouth Municipal Bond Fund Class B Shares............................................... $196 $606 $1,042 $1,968 Combined Fund Pro Forma Class B Shares............................................... $196 $606 $1,042 $1,968 - ---------- ** Class B shares of the ISG Municipal Income Fund automatically convert to Class A Shares approximately after seven (7) years. AmSouth Municipal Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 34 142 ISG AmSouth Small-Cap Opportunity Small Cap Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- -------- ------- ----- -------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%(1) None None 4.50%(1) None None 4.50%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .95% .95% .95% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .55% .65% .55% .55% .55% .45% .55% .55% .45% Total Fund Operating Expenses 1.75%(6) 2.35%(6) 1.50%(6) 1.75%(7) 2.50%(7) 1.65%(7) 1.75%(7) 2.50%(7) 1.65%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a n/a (.15%) (.15%) Net Expenses n/a n/a n/a n/a n/a n/a n/a 2.35%(8) 1.50%(8) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses for Class B and Class I are based on estimated amounts for the current fiscal year, and have been restated for Class A to reflect current fees. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. Total expenses after fee waivers and expense reimbursements will be as follows: Class B, 2.35 %; Trust Class, 1.50%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 35 143 ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Small-Cap Opportunity Fund Class A Shares............................................... $636 $ 974 $1,334 $2,347 Class B Shares............................................... $629 $1,006 $1,410 $2,371 Class I Shares............................................... $144 $ 446 $ 771 $1,691 AmSouth Small Cap Fund Class A Shares............................................... $620 $ 976 $1,356 $2,420 Class B Shares............................................... $753 $1,079 $1,531 $2,565 Trust Shares................................................. $168 $ 520 $ 897 $1,955 Combined Fund Pro Forma Class A Shares............................................... $620 $ 976 $1,356 $2,420 Class B Shares............................................... $753 $1,079 $1,531 $2,565 Trust Shares................................................. $168 $ 520 $ 897 $1,955 - ---------- ** Class B shares of the ISG Small-Cap Opportunity Fund automatically convert to Class A Shares after seven (7) years. AmSouth Small Cap Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Small-Cap Opportunity Fund Class B Shares............................................... $229 $706 $1,210 $2,371 AmSouth Small Cap Fund Class B Shares............................................... $253 $779 $1,331 $2,565 Combined Fund Pro Forma Class B Shares............................................... $253 $779 $1,331 $2,565 - ---------- ** Class B shares of the ISG Small-Cap Opportunity Fund automatically convert to Class A Shares after seven (7) years. AmSouth Small Cap Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 36 144 ISG AmSouth Tax-Exempt Money Tax-Exempt Money Combined Market Fund Market Fund Fund Pro Forma ------------------------- ------------------- ----------------------- Class A Class I Class A Trust Class A Trust ------- ------- -------- ----- -------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None(1) None None None None(1) None Sales Charge on Reinvested Dividends None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) None None None None(2) None Redemption Fees None None None(3) None(3) None(3) None(3) Exchange Fees None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .35% .35% .40% .40% .40% .40% 12b-1 Fees None None None None None None Other Expenses .57% .47% .53% .43% .53% .43% Total Fund Operating Expenses .92%(4) .82%(4) .93%(4) .83%(4) .93%(5) .83%(5) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a (.03%) (.03%) Net Expenses n/a n/a n/a n/a .90%(6) .80%(6) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (4) Other expenses for each class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (5) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses do not reflect any fee waivers or expense reimbursement arrangements. (6) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, .90%; Trust Class, .80%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 37 145 ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years ------ ------- ISG Tax-Exempt Money Market Fund Class A Shares............................................... $ 94 $293 Class I Shares............................................... $ 84 $262 AmSouth Tax-Exempt Money Market Fund Class A Shares............................................... $ 95 $296 Trust Shares................................................. $ 85 $265 Combined Fund Pro Forma Class A Shares............................................... $ 95 $296 Trust Shares................................................. $ 85 $265 38 146 ISG AmSouth Prime Money Market Prime Money Market Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None(1) None None None None None None(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .25% .25% .25% .40% .40% .40% .40% .40% .40% 12b-1 Fees None .75% None None .75% None None .75% None Other Expenses .57% .58% .48% .53% .53% .43% .53% .53% .43% Total Fund Operating Expenses .82%(6) 1.58%(6) .73%(6) .93%(7) 1.68%(7) .83%(7) .93%(7)1.68%(7) .83%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a (.16%) (.16%) (.16%) Net Expenses n/a n/a n/a n/a n/a n/a .77%(8)1.52%(8) .67%8 (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other fees have been restated for Class I to reflect current fees. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class A, .77%; Class B, 1.52%; Trust Class, .67%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 39 147 ISG Prime Money Market Fund AmSouth Prime Money Market Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Prime Money Market Fund Class A Shares............................................... $ 84 $262 $ 455 $1,014 Class B Shares............................................... $561 $799 $1,060 $1,576 Class I Shares............................................... $ 75 $233 $ 406 $ 906 AmSouth Prime Money Market Fund Class A Shares............................................... $ 95 $296 $ 515 $1,143 Class B Shares............................................... $671 $830 $1,113 $1,694 Trust Shares................................................. $ 85 $265 $ 460 $1,025 Combined Fund Pro Forma Class A Shares............................................... $ 95 $296 $ 515 $1,143 Class B Shares............................................... $671 $830 $1,113 $1,694 Trust Shares................................................. $ 85 $265 $ 460 $1,025 - ---------- ** Class B shares of the ISG Prime Money Market Fund automatically convert to Class A Shares after seven (7) years. AmSouth Prime Money Market Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Prime Money Market Fund Class B Shares............................................... $161 $499 $860 $1,576 AmSouth Prime Money Market Fund Class B Shares............................................... $171 $530 $ 913 $1,694 Combined Fund Pro Forma Class B Shares............................................... $171 $530 $913 $1,694 - ---------- ** Class B shares of the ISG Prime Money Market Fund automatically convert to Class A Shares after seven (7) years. AmSouth Prime Money Market Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 40 148 ISG AmSouth Income Bond Combined Fund Fund Fund Pro Forma ------------------------- ------------------------ ------------------------- Class A Class B Class I Class A Class B Trust Class A Class B Trust ------- ------- ------- ------- ------- ----- ------- ------- ----- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.00%(1) None None 4.00%(1) None None 4.00%(1) None None Sales Charge on Reinvested Dividends None None None None None None None None None Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable) None(2) 4.00%(3) None None 5.00%(4) None None(2) 5.00%(4) None Redemption Fees None None None None(5) None(5) None(5) None(5) None(5) None(5) Exchange Fees None None None None None None None None None ANNUAL OPERATING EXPENSES (as a percentage of average daily net assets) Advisory Fees .50% .50% .50% .65% .65% .65% .65% .65% .65% 12b-1 Fees .25% .75% None None .75% None None .75% None Other Expenses .63% .73% .63% .53% .53% .43% .53% .53% .43% Total Fund Operating Expenses 1.38%(6) 1.98%(6) 1.13%(6) 1.18%(7) 1.93%(7) 1.08%(7) 1.18%(7) 1.93%(7) 1.08%(7) Fee Waiver and/or Expense Reimbursement n/a n/a n/a n/a n/a n/a n/a (.07%) (.07%) Net Expenses n/a n/a n/a n/a n/a n/a n/a 1.86%(8) 1.01%(8) (1) Sales changes may be reduced or, in certain circumstances, waived. (2) Class A shares bought as part of an investment of $1 million or more are not subject to an initial sales charge, but may be charged a CDSC of 1.00% if sold within one year of purchase. (3) The CDSC, charged if Class B Shares are sold within six years of purchase, declines as follows: 4%, 3%, 3%, 2%, 2%, 1% to 0% in the seventh year. Approximately seven years after purchase, Class B Shares automatically convert to Class A Shares. (4) For former B share investors of ISG Funds, waivers are in place on the CDSC as follows: 4%, 3%, 3%, 2%, 2%, 1%, 0%. For all other B shareholders, the CDSC declines over the same seven-year period as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. (5) A wire transfer fee of $7.00 will be deducted from the amount of your redemption if you request a wire transfer. (6) Other expenses have been restated for class A and Class I to reflect current fees. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. There was no fee waiver or expense reimbursement for Class B. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. (7) Other expenses for each Class are based on estimated amounts for the current fiscal year. The expenses noted above do not reflect any fee waivers or expense reimbursement arrangements that are or were in effect. (8) Total expenses after fee waivers and expense reimbursements will be as follows: Class B, 1.86%; Trust Class, 1.01%. Any fee waiver or expense reimbursement arrangement is voluntary and may be discontinued at any time. 41 149 ISG Income Fund AmSouth Bond Fund EXAMPLE: An investor would pay the following expenses on $10,000 investment, assuming (1) 5% annual return, (2) no changes in the Fund's operating expenses, and (3) redemption at the end of each time period. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Income Fund Class A Shares............................................... $436 $724 $1,033 $1,908 Class B Shares............................................... $601 $921 $1,268 $2,076 Class I Shares............................................... $115 $359 $ 622 $1,375 AmSouth Bond Fund Class A Shares............................................... $515 $760 $1,023 $1,775 Class B Shares............................................... $696 $906 $1,242 $1,968 Trust Shares................................................. $110 $343 $ 595 $1,317 Combined Fund Pro Forma Class A Shares............................................... $515 $760 $1,023 $1,775 Class B Shares............................................... $696 $906 $1,242 $1,968 Trust Shares................................................. $110 $343 $ 595 $1,317 - ---------- ** Class B shares of the ISG Income Fund automatically convert after seven (7) years. AmSouth Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. Assuming no redemption of Class B shares at the end of the period, the dollar amounts in the above example would be as follows: 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- ISG Income Fund Class B Shares............................................... $201 $621 $1,068 $2,076 AmSouth Bond Fund Class B Shares............................................... $196 $606 $1,042 $1,968 Combined Fund Pro Forma Class B Shares............................................... $196 $606 $1,042 $1,968 - ---------- ** Class B shares of the ISG Income Fund automatically convert after seven (7) years. AmSouth Bond Fund and the Combined Fund automatically convert to Class A Shares approximately after eight (8) years. Therefore, the "10 Years" example above reflects these conversions. 42 150 AmSouth Mutual Funds ANNUAL REPORT July 31, 1999 AMSOUTH AmSouth MUTUAL FUNDS AMSOUTH BANK Investment Advisor BISYS Fund Services, Distributor [LOGO OF AMSOUTH MUTUAL FUNDS APPEARS HERE] [LOGO OF AMSOUTH BANK APPEARS HERE] Not FDIC Insured 151 Table of Contents Message From the Chairman and Investment Advisor Page 1 Report of Independent Accountants Page 33 Statements of Assets and Liabilities Page 34 Statements of Operations Page 38 Statements of Changes in Net Assets Page 42 Schedules of Portfolio Investments Page 48 Notes to Financial Statements Page 94 Financial Highlights Page 108 - -------------------------------------------------------------------------------- The AmSouth Mutual Funds, like all mutual funds, are NOT FDIC INSURED nor insured by any other agency and are not obligations or deposits of, or endorsed or guaranteed by, AmSouth Bank or any of its affiliates. Investment products involve investment risk, including the possible loss of principal. - -------------------------------------------------------------------------------- 152 Message From the Chairman and Investment Advisor Dear Shareholders: We are pleased to send you this annual report for the 12 months ended July 31, 1999, a period full of the soaring volatility that has become customary in recent years. It was also a time when two portfolios in our fund family achieved noteworthy milestones. First, the AmSouth Bond Fund was recognized by The Wall Street Journal as one of the top 15 funds in its sector--not just once, but for 11 consecutive months through July 1999. Based on data provided by Lipper Analytical Services, the AmSouth Bond Fund was a consistent leader in the A-Rated Bond Fund category (for trailing 12-month performance). In the most recent period that ended July 31, the Fund's Classic Shares ranked eighth out of more than 159 funds in its peer group./1/ What is truly remarkable about this accomplishment is that the AmSouth Bond Fund was ranked highly as stated above during both the bull market, which bonds enjoyed last autumn and into the winter, and the bear market that has depressed the fixed-income sector in the last six months. A second achievement that bears mention was that the AmSouth Equity Fund as of July 31, had portfolio assets under management of $1.03 billion, a testament to the Fund's long-term performance and service to shareholders. These feats had a direct bearing on another of our portfolios, the AmSouth Balanced Fund--which draws upon the AmSouth Equity Fund's style for the stock portion of its portfolio and follows the AmSouth Bond Fund's lead for its fixed-income allocation. Stocks Finish On An Upswing The summer of 1998 seems like it was a very long time ago, but it was the start of our latest fiscal year, and it was a treacherous time to be an investor. Waves of bad news swept through the markets: Asia was still a depressed region; Russia defaulted on tens of billions of dollars of government debt; an enormously leveraged hedge fund, Long-Term Capital Management, threatened to collapse and take the world's credit stability down with it. The stock market plummeted. The Federal Reserve Board's (the Fed's) decision to lower short-term interest rates not once, but three times in just four months, sparked one of the most dramatic recoveries ever. Investors rode back into the market on a wave of liquidity. As had been the case for much of the previous four years, large-cap growth issues were the biggest winners, along with just about any stock that had a "dot.com" at the end of its name. -1- 153 The bull market kept its momentum into early spring. On March 29, for the first time ever, the Dow Jones Industrial Average/2/ closed above 10,000, a near-mythical level. In relatively short order, the 11,000 mark was breached as well. And as we write this letter in the middle of August, the Dow has recovered again--this time, from a brief drop this summer--to stand within a few percentage points of its all-time high. The individual fund reports that follow will detail the stock market's gyrations and rotations more fully. But suffice it to say that most equity investors who stuck with their long-term strategy for the full 12 months, and remained unshaken by bouts of volatility, are most likely pleased with their funds' returns. Where the Fed Led, Bonds Followed Veteran investors in the fixed-income market know that bond prices are at the mercy of interest rates; when rates decline, bond prices rise, and vice versa. This fact was never more evident than during the last 12 months. The first and last six months of the period were almost mirror images of one another. Spurred by a flight to quality in the U.S. Treasury market, and then by the Fed's rate cuts, fixed-income instruments of nearly every stripe rose sharply through January. Then just as quickly, the tide turned against bonds. The fear of a global financial disaster abated, making Treasuries less attractive. Inflation remained mild, but in an almost-perverse display of looking for trouble where little existed, many observers began to evoke the specter of rising prices. The Fed did not raise rates immediately, not until June 30, but just the notion of a rate hike was enough to push rates significantly higher. Funds For Every Investor's Needs Both stocks and bonds sold off modestly in July, the last month of our fiscal year (though municipal bonds bucked the trend by remaining mostly unchanged). So where does that leave you, and us, as we begin a new 12-month period? As we look ahead, we believe bonds are a bit more attractive than stocks, on a relative basis. That does not mean we think the stock market is troubled, but rather, that bonds offer a better return on a risk-adjusted basis. In the first two weeks of August, interest rates have continued to be volatile; the yield on the bellwether 30-year Treasury bond spiked up to 6.26%, then fell rapidly below the critical 6% level. It is our feeling that, while interest rates could dance around for the next few months, the Fed could very well raise rates a number of times before the end of 1999 bonds should produce decent returns. Factor in historically low inflation, and the fixed-income sector could prove to be hospitable. At the same time, we are not abandoning stocks. Any long-term investor with a plan that includes an equity allocation should not bail out at the first, or even -2- 154 second, sign of trouble. We remain encouraged by the growth potential of stocks. With the addition to our fund family of the AmSouth Select Equity Fund, the AmSouth Enhanced Market Fund and the AmSouth Institutional Prime Obligations Fund, we now offer shareholders an impressively diversified array of funds. This full complement of portfolios, in our opinion, allowed many shareholders to do well in the markets over the last year, and regardless of future shifts in the market, this diversification can serve you well in the months and years ahead. Sincerely, /s/ J. DAVID HUBER - ---------------------- J. David Huber Chairman AmSouth Mutual Funds /s/ BRIAN B. SULLIVAN - ---------------------- Brian B. Sullivan Senior Investment Officer AmSouth Bank /1/ The AmSouth Bond Fund (Classic Shares) was ranked 8 out of 159 Corporate A-Rated Debt Funds for the one-year period, 20 out of 130 funds for the three-year period, 25 out of 90 funds for the five-year period, and 21 out of 42 funds for the ten-year period, respectively. All rankings are as of July 31, 1999. Lipper rankings are based on total return with dividends and capital gains reinvested and do not reflect a sales charge. /2/ The Dow Jones Industrial Average is a price-weighted average based on the price-only performance of 30 blue-chip stocks (the average is computed by adding the prices of the 30 stock's splits, stock dividends and substitutions of stocks). -3- 155 [THIS PAGE INTENTIONALLY LEFT BLANK] -4- 156 The AmSouth Equity Income Fund The AmSouth Equity Income Fund is subadvised by Rockhaven Asset Management, LLC and is managed by Christopher Wiles, CFA. President and chief investment officer of Rockhaven, Mr. Wiles has more than 15 years of investment management experience. He holds an MBA and a bachelor's degree in finance. Low Risk, High Income For the 12 months ended July 31, 1999, the AmSouth Equity Income Fund produced a total return of 14.17% (Classic Shares at NAV). In comparison, the S&P 500 Stock Index rose 20.20%, and the Lipper Equity Income Fund Index/1/ gained 11.26%. We provided our shareholders with solid market participation with below-average risk and above-average income. As of July 31, 1999, the Fund's yield was 2.82%, more than twice the S&P 500's yield of just 1.26%. We Made Good Money With Convertibles In many ways, this was one of the most phenomenal 12-month periods in stock market history. Last summer, we thought we might be in the throes of a potentially disastrous, deflationary environment throughout the world. There was serious trouble in Asia and Russia, with Latin America also looking vulnerable. Consequently, even though the U.S. economy was strong, the Federal Reserve acted quickly--lowering short-term interest rates three times in the latter part of 1998--to stave off a global financial collapse. In a deflationary environment, it is prudent to hold securities with the longest duration you can get your hands on. Those long-duration securities were large-cap growth stocks and, to some degree, Internet stocks. Then all of a sudden in 1999, the world looked much more stable, and deflationary fears subsided. Therefore, interest rates began to rise sharply. This turnaround favored short-duration securities. With regard to stocks, this favored deep-value stocks. The Fund participated in the climb from the October 1998 lows to the March 1999 highs. With the abrupt change away from large-cap growth, we gave up some ground--though not that much. One significant change in the portfolio during the last 12 months was an increase in our allocation to convertible securities. Due to an active merger-and-acquisition environment, we found some very attractive convertible opportunities. For instance, when Centocor, a biotech company, was acquired by Johnson & Johnson (0.91% of the Fund's net assets), we found ourselves holding JNJ convertible (1.42%), which yielded 3.7%. Another example was Level One Communications, which was taken over by Intel (0.75%). By buying Level One convertible, which became Intel convertible (0.91%), we were getting significantly more income than was available through Intel common stock.* As of July 31, 1999, the Fund's top five holdings were BCE, Inc. (3.04%), Lincoln National Corp. (2.94%), Nextel STRYPES (2.92%), Skytel/Worldcom Communications, Inc. (2.85%) and General Electric Co. (2.81%).* A Blase Market For the Next Few Months Going forward, we believe there will be many things happening in the next six months. The main event remains the Year 2000 (Y2K) situation. One factor that helped the U.S. economy grow robustly in the first seven months of 1999 was a significant amount of Y2K-related buying of goods before the end of the year. Many made their purchases early in 1999. Therefore, we expect the economy to show some signs of slowing in the fourth quarter of 1999, and interest rates could fall from their relatively high levels. We do not see the stock market making much of a move either way for the next six months, but we think conditions could be ripe for an increase in stock prices in the early part of next year. /1/ The Lipper Equity Income Fund Index is comprised of funds that seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. * The Fund's portfolio composition is subject to change. -5- 157 The AmSouth Equity Income Fund [THE AMSOUTH EQUITY INCOME FUND APPEARS HERE] AmSouth Equity AmSouth Equity AmSouth Equity S&P 500 Lipper Equity Income Fund Income Fund Income Fund Stock Income Fund Date (Classic Shares)* (Premier Shares) (B Shares)** Index Index - ---- ----------------- ---------------- -------------- ------- ------------- 3/20/97 9,550 10,000 10,000 10,000 10,000 7/97 11,409 11,948 11,421 12,633 11,786 7/98 12,073 12,669 12,142 15,136 12,918 7/99 13,784 14,497 13,915 18,193 14,373 - --------------------------------------------- Average Annual Total Return - --------------------------------------------- Since 1 Inception As of July 31, 1999 Year (3/20/97) - --------------------------------------------- Classic* 9.03% 14.54% - --------------------------------------------- Premier 14.43% 17.01% - --------------------------------------------- B Shares** 8.34% 15.00% - --------------------------------------------- * Reflects 4.50% sales charge ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Equity Income Fund is measured against the S&P 500 Stock Index and the Lipper Equity Income Fund Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Equity Income Fund Index, an index that consists of managed funds, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -6- 158 The AmSouth Equity Fund The AmSouth Equity Fund is managed by Pedro Verdu, CFA. Mr. Verdu has more than 26 years of investment experience as an analyst and portfolio manager. He holds an MBA in finance and a bachelor's degree in economics. We Benefited From a Return To Value For the 12 months ended July 31, 1999, the AmSouth Equity Fund produced a total return of 14.92% (Classic Shares at NAV). In comparison, the S&P 500 Stock Index rose 20.20%, while the Lipper Capital Appreciation Fund Index/1/ gained 20.76%. Looking at our fiscal year as a whole, we had two very good periods. First, the Fund performed well during the sharp market decline in August 1998; then during the second calendar quarter of 1999, again turning in strong numbers when the market became much broader and began to reward our value style of investing. In the month of April, we saw a sudden broadening of investor interest--some of which had to do with the significant signs of improvement in many foreign economies that had lagged earlier in the year. There was a rapid rotation in the second calendar quarter of 1999 and in our Fund. We continued to perform strongly during periods when the market was sloppy, which is what a value-oriented fund is structured to do. Energy and Shelter: Our Strong Suits In particular, we benefited from our holdings in energy and a sector we call "shelter," which includes forest products and paper. With regard to energy, many analysts did not believe that the Organization of Petroleum Exporting Countries (OPEC) members would abide by an agreement to limit production; OPEC has a long history of not holding together. But what was different this time was that, due to historically low oil prices, OPEC countries were feeling true economic pain. For the first time in four or five years, there not only was a political reason for holding true to an agreement, there also were compelling economic reasons. OPEC simply needed higher oil prices. Consequently, production among OPEC nations shrunk by a couple of million barrels a day. In a commodities market, when you suddenly go from a slight amount of surplus to a position where inventories are tight, you can have some dramatic price reactions--which is what happened. We believe a similar scenario will unfold in forest products over the next couple of quarters. Some of our favorite paper holdings include Weyerhaeuser Co. (2.29% of the Fund's net assets), Willamette Industries, Inc. (1.51%), International Paper Co. (2.35%) and Champion International Corp. (0.25%).* We are also fond of selected stocks in the consumer nondurables sector, including American Greetings Corp. (2.08%), Crown Cork & Seal, Inc. (0.70%) and Dole Food, Inc. (0.42%).* We Anticipate a Rise In Certain Commodities With overweightings in energy and shelter, the portfolio is structured to benefit from a continuation of moderate economic growth in the United States and abroad. Despite the run-up in oil stocks, for example, we do not believe we have yet seen a top. Even though the price of energy has risen significantly, that has only happened in the last quarter, and the bottom lines of many companies in the sector have not yet fully reflected those price increases. We have seen a significant tightening in refining capacity, and the oil squeeze could get even tighter. As of July 31, 1999, the Fund's top five holdings were Gannett Co., Inc. (2.74%), Marsh & McLennan Co., Inc. (2.62%), Texaco (2.58%), Newell Rubbermaid (2.57%) and Kerr McGee Corp. (2.52%).* /1/ Lipper Capital Appreciation Fund Index is comprised of funds that seek maximum capital appreciation, frequently by means of 100% or more portfolio turnover, leveraging, purchasing unregistered securities, purchasing options, etc. The funds in the index may take large cash positions. * The Fund's portfolio composition is subject to change. -7- 159 The AmSouth Equity Fund [THE AMSOUTH EQUITY FUND APPEARS HERE] AmSouth AmSouth Equity Equity AmSouth Fund Fund Equity S&P 500 Lipper Capital (Classic (Premier Fund Stock Appreciation Date Shares)* Shares) (B Shares) Index Index - ------ --------- -------- ---------- ------- -------------- 7/89 9,550 10,000 10,000 10,000 10,000 7/90 9,707 10,165 10,165 10,647 10,317 7/91 10,530 11,026 11,026 12,007 11,602 7/92 11,891 12,451 12,451 13,539 12,843 7/93 13,533 14,170 14,170 14,713 14,762 7/94 14,603 15,291 15,291 15,477 15,323 7/95 17,415 18,236 18,235 19,509 19,541 7/96 19,344 20,257 20,256 22,739 21,192 7/97 27,536 28,838 28,834 34,590 28,192 7/98 30,935 32,430 32,195 41,282 31,934 7/99 35,547 37,433 36,711 49,623 38,562 For performances purposes the above graph has not been adjusted for CDSC charges. - --------------------------------------------- Average Annual Total Return - --------------------------------------------- As of 1 5 10 July 31, 1999 Year Year Year - --------------------------------------------- Classic* 9.74% 18.38% 13.53% - --------------------------------------------- Premier 15.43% 19.61% 14.11% - --------------------------------------------- B Shares** 9.03% 18.95% 13.89% - --------------------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Equity Fund is measured against the S&P 500 Stock Index and the Lipper Capital Appreciation Funds Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Capital Appreciation Funds Index is an index that consists of managed funds. The Lipper Capital Appreciation Funds Index and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -8- 160 The AmSouth Enhanced Market Fund The AmSouth Enhanced Market Fund is subadvised by OakBrook Investments, LLC and managed by Neil Wright, Janna Sampson and Peter Jankovskis. Mr. Wright has 19 years of investment experience and received his Ph.D. in economics from the Massachusetts Institute of Technology. Ms. Sampson has 18 years of investment management experience and has a master's degree in economics from Georgia State University. Mr. Jankovskis has seven years of investment management experience and holds a Ph.D. in economics from the University of California at Santa Barbara. The Fund Outperformed the Market The AmSouth Enhanced Market Fund commenced operations on September 1, 1998. For the period ended July 31, 1999, which represents nearly 11 months of performance, the Fund produced a total return of 39.93% (Classic Shares at NAV). In comparison, the S&P 500 Index rose 35.29%. The Federal Reserve Board's (the Fed) three interest-rate cuts in the last few months of 1998 pumped liquidity into the market and caused a tremendous surge in stock prices. However, the benefits of those rate cuts were not evenly distributed. From November 1998 through January 1999, growth stocks outperformed value stocks by roughly 20%. What few people realize is that there was an even greater divergence between the performance of volatile stocks and more stable stocks. Thanks to the Fed's actions, these volatile stocks suddenly became very attractive. The difference in returns between stocks in these two groups during the same November 1998 through January 1999 period was more than 40%, with volatile stocks doing better. We define a "volatile stock" as one whose stock price tends to change by a large degree, up or down, from month to month. To be included in this group, a stock's average percentage change in its price over the past three years must rank it among the 100 most-volatile stocks in the S&P 500. A "stable stock" is one that ranks among the 100 least-volatile, in terms of its average change in price. The Enhanced Market Fund is carefully balanced to make sure its allocation compares to the S&P 500's along the lines of capitalization, in value versus growth and also in terms of stability versus volatility. Because of these strong risk controls, our ability to beat the S&P 500 was not influenced very much by the strong performance of volatile stocks or any other group. The risk controls worked as designed, allowing the strategy's strength in stock selection to shine through. The Fund did very well during the time when volatile stocks were in favor. Since the end of January, the Fund has continued to do well relative to its benchmark. A Wide Range Of Successes We found good stocks in a number of sectors. Our winners ranged from mega-cap technology powerhouse IBM Corp. (1.99% of the Fund's net assets) to smaller-cap issues such as King World Productions (0.04%) and Navistar International (0.05%). The Fund also benefited from positions in oil refiner Atlantic Richfield Co. (0.47%) and financial service provider American Express (0.64%).* A Challenging Climate In the Months Ahead It is our belief that over the next six months, the market could be pretty choppy. The Fed will probably raise rates once more before the end of 1999. Regardless of what the Fed chooses to do, if the yield on the 30-year Treasury bond stays above 6.00%, that is going to put some pressure on both corporate earnings and the valuations of the companies that led the last market rally. As of July 31, 1999, the Fund's top five holdings were Microsoft Corp. (3.85%), General Electric Co. (3.20%), Intel Corp. (2.20%), IBM Corp. (1.99%) and Lucent Technologies, Inc. (1.82%).* * The Fund's portfolio composition is subject to change. -9- 161 The AmSouth Enhanced Market Fund [THE AMSOUTH ENHANCED MARKET FUND APPEARS HERE] AmSouth Enhanced AmSouth Enhanced AmSouth Enhanced Market Fund Market Fund Market Fund S&P 500 Date (Classic Shares)* (Premier Shares) (B Shares)** Stock Index - ---- ----------------- ----------------- ---------------- ----------- 9/1/98 9,550 10,000 10,000 10,000 9/98 10,154 10,631 10,123 10,641 10/98 10,955 11,470 10,947 11,506 11/98 11,656 12,204 11,673 12,203 12/98 12,258 12,834 12,299 12,907 1/99 12,757 13,358 12,805 13,446 7/99 13,365 14,010 13,390 16,162 - ---------------------------------- Aggregate Total Return - ---------------------------------- Since As of Inception July 31, 1999 (9/1/98) - ---------------------------------- Classic* 33.65% - ---------------------------------- Premier 40.10% - ---------------------------------- B Shares** 33.90% - ---------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Premier Shares commenced operations on December 11, 1998. The performance figures for Premier Shares for periods prior to such date represent the performance for Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 2, 1998, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Enhanced Market Fund is measured against the S&P 500 Stock Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -10- 162 The AmSouth Capital Growth Fund The AmSouth Capital Growth Fund is subadvised by Peachtree Asset Management and managed by Dennis Johnson, CFA. President and Chief Investment Officer of Peachtree Asset Management, Mr. Johnson has more than 18 years of investment management experience. He holds a master of science degree in finance and a bachelor's degree in economics. Solid Performance In the Face Of Volatility For the 12 months ended July 31, 1999, the Fund produced a total return of 21.76% (Classic Shares at NAV). In comparison, the S&P 500 Stock Index rose 20.20%. The entire period was marked by bouts of volatility and windows of opportunity. As long-term investors, we rode through the volatility and took advantage of numerous opportunities--especially in such sectors as consumer cyclicals, consumer staples, financial services, health care, technology and telecommunications. We had either average or above-average exposure in all of these sectors. Returns Greater In Stocks, Not Cash We were fully invested throughout the period, which was very important to our performance. Stocks provided much greater returns than cash and cash-equivalent instruments. By minimizing cash, we enabled our shareholders to fully participate in the market's above-average performance. The second factor that was helpful was being invested in sectors in the market that performed very well, as noted above. Being overweighted in the right sectors was a result of our disciplined investment process. A third positive factor was judicious, individual security selection. We benefited from our holdings in Apple Computer, Inc. (1.61% of the Fund's net assets), Microsoft Corp. (3.64%), General Electric Co. (3.39%), Home Depot, Inc. (1.95%), Applied Materials, Inc. (2.73%), Lucent Technologies, Inc. (2.37%), Scientific Atlanta, Inc. (2.67%) and Tyco International (3.51%).* What do each of these companies have in common? They all exhibit above-average rates of earnings growth, dominant market positions and valuations that our research indicates are not fully reflective of these strong earnings trends. We have a well-defined approach to looking at the growth characteristics of companies--scrutinizing their earnings potential and cash flow. Therefore, regardless of the volatility that certain stocks may exhibit in the marketplace (based on changes in investor perceptions about fundamentals), we can remain firm in our convictions about individual issues. We validate our analysis with fundamental and quantitative research, and until we believe that a company's underlying numbers have changed for the worse, we do not make changes in the portfolio. This approach allows us to not be scared off by periodic volatility; we always know why we are in a stock and why we want to stay with a stock, despite that volatility. The Stock Market Is the Place To Be We continue to be optimistic about stocks. We would not want to assume that absolute returns, going forward, will be comparable to the returns we have experienced over the last 12 months. Nonetheless, we believe equity returns will be acceptable, and not far off historical norms. We believe sectors that offer opportunities for above-average performance include technology, health care, consumer cyclicals and energy. Energy is particularly appealing. We believe there is a profit recovery under way in both crude oil and natural gas that is not fully reflected in current valuations. As of July 31, 1999, the Fund's top five holdings were Microsoft Corp. (3.64%), Tyco International (3.51%), General Electric Co. (3.39%), Nextel Communications, Inc. (3.11%) and Applied Materials, Inc. (2.73%).* *The Fund's portfolio composition is subject to change. -11- 163 The AmSouth Capital Growth Fund [THE AMSOUTH CAPITAL GROWTH FUND APPEARS HERE] AmSouth Capital AmSouth Capital AmSouth Capital Growth Fund Growth Fund Growth Fund S&P 500 Date (Classic Shares)* (Premier Shares) (B Shares)** Stock Index - ---- ----------------- ---------------- --------------- ----------- 8/3/97 9,550 10,000 10,000 10,000 7/98 11,098 11,650 11,040 12,637 7/99 13,514 14,219 13,558 15,190 - -------------------------------------------------------- Average Annual Total Return - -------------------------------------------------------- Since As of 1 Inception July 31, 1999 Year (8/3/97) - -------------------------------------------------------- Classic Shares* 16.26% 16.34% - -------------------------------------------------------- Premier Shares 22.05% 19.36% - -------------------------------------------------------- B Shares** 15.96% 16.54% - -------------------------------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Capital Growth Fund is measured against the S&P 500 Stock Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -12- 164 The AmSouth Select Equity Fund The AmSouth Select Equity Fund is subadvised by OakBrook Investments, LLC and managed by Neil Wright, Janna Sampson and Peter Jankovskis. Mr. Wright has 19 years of investment experience and received his Ph.D. in economics from the Massachusetts Institute of Technology. Ms. Sampson has 18 years of investment management experience and has a master's degree in economics from Georgia State University. Mr. Jankovskis has seven years of investment management experience and holds a Ph.D. in economics from the University of California at Santa Barbara. A Marked Difference Between Volatility and Stability The AmSouth Select Equity Fund commenced operations on September 1, 1998. For the period ended, July 31, 1999, which represents nearly 11 months of performance, the Fund produced a total return of 19.44% (Classic Shares at NAV). In comparison, the S&P 500 Stock Index rose 35.29%. The Federal Reserve Board's (the Fed's) three interest-rate cuts in the last few months of 1998 pumped liquidity into the market and caused a tremendous surge in stock prices. However, the benefits of those rate cuts were not distributed evenly. What few people realize is that there was an even greater divergence between the performance of volatile stocks and more stable stocks. Thanks to the Fed's actions, these volatile stocks suddenly became attractive. The difference in returns between stocks in these two groups during the same November 1998 through January 1999 period was more than 40%, with volatile stocks doing better than stable ones. We define a "volatile stock" as one whose stock price tends to change by a large degree, up or down, from month to month. To be included in this group, a stock's average percentage change in its price over the past three years must rank it among the 100 most-volatile stocks in the S&P 500. A "stable stock" is one that ranks among the 100 least-volatile in terms of its average change in price. The AmSouth Select Equity Fund, by its nature, favors more stable stocks, and this caused the portfolio to underperform its benchmark during the November-January period. However, since the end of January and through the end of June, "stability" was the place to be, and the Fund outperformed its benchmark. Unfortunately, in July, one of the Fund's key holdings, Waste Management (3.59% of the Fund's net assets), announced disappointing news, and the subsequent drop in the stock's price dragged down the Fund's overall performance.* We Did Well With Food and Tax Preparation Names The Fund did have some compelling success stories during the period. One issue that did particularly well for us in the last few months was SYSCO Corp. (4.86%), a distributor of food and paper products to restaurants. SYSCO is the leader in its field, and three times larger than any of its competitors. Despite its dominance and cost advantage, SYSCO's market share is only 12% nationwide--which means the company has tremendous growth opportunities. Another good story is H&R Block, Inc. (6.60%), an income tax-preparation company. The peak tax period is past us, but trends are still good; and we are confident the stock will continue to outperform. We are also fond of Hershey Foods Corp. (3.87%), the leading North American manufacturer of quality chocolate, whose stock was bruised earlier in the year, when the company reported disappointing earnings.* A Bumpy Ride Ahead It is our belief that over the next six months, the market could be pretty choppy. The Fed will probably raise rates once more before the end of 1999. Regardless of what the Fed chooses to do, if the yield on the 30-year Treasury bond stays above 6.00%, that will put pressure on both corporate earnings and the valuations of the companies that led the last market rally. The Fund's emphasis on more stable holdings should serve us well in such an environment. As of July 31, 1999, the Fund's top five holdings were Hubbell, Inc. (10.71%), Emerson Electric Co. (10.27%), Bristol-Myers Squibb Co. (8.20%), H&R Block, Inc. (6.60%) and McDonald's Corp. (5.44%).* * The Fund's portfolio composition is subject to change. -13- 165 The AmSouth Select Equity Fund [THE AMSOUTH SELECT EQUITY FUND APPEARS HERE] AmSouth Select AmSouth Select AmSouth Select S&P 500 Equity Fund Equity Fund Equity Fund Stock (Classic Shares)* (Premier Shares) (B Shares)** Index ----------------- ---------------- -------------- ------- 9/1/98 9,550 10,000 10,000 10,000 9/98 10,032 10,504 10,000 10,641 10/98 10,885 11,396 10,890 11,506 11/98 11,168 11,693 11,170 12,203 12/98 11,519 12,051 11,526 12,907 1/99 11,405 11,940 11,395 13,446 7/99 11,408 11,962 11,359 16,162 - ------------------------------------ Aggregate Total Return - ------------------------------------ Since As of Inception July 31, 1999 (9/1/98) - ------------------------------------ Classic* 14.08% - ------------------------------------ Premier 19.62% - ------------------------------------ B Shares** 13.59% - ------------------------------------ * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Premier Shares commenced operations on December 3, 1998. The performance figures for Premier Shares for periods prior to such date represent the performance for Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 2, 1998, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Select Equity Fund is measured against the S&P 500 Stock Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -14- 166 The AmSouth Regional Equity Fund+ The AmSouth Regional Equity Fund is managed by Pedro Verdu, CFA. Mr. Verdu has more than 26 years of investment experience as an analyst and portfolio manager. He holds an MBA in finance and a bachelor's degree in economics. A Rough Start, a Firm Recovery For the 12 months ended July 31, 1999, the AmSouth Regional Equity Fund produced a total return of -9.85% (Classic Shares at NAV). In comparison, the S&P 500 Index rose 20.20%, while the Lipper Capital Appreciation Fund Index/1/ returned 20.76%. The Fund's performance suffered during the first part of the period, due to the narrowness of the market and the fact that the groups we embrace, and the geographic requirements of the Fund's investment objective, worked against us. However, in the second calendar quarter of 1999, circumstances changed dramatically. Our style of investing came back into favor, and the Fund recovered much of the ground it had lost earlier. Throughout the period, the Southeast remained a healthy economic region, with growth continuing at a pace above the national average. A Rare Venture Into Energy Proved Profitable We had a number of stocks that did very well, especially during the Fund's recovery period. Fort James Corp. (3.11% of the Fund's net assets), one of our favorite paper companies, had a sharp price increase. Scientific Atlanta, Inc. (1.77%) also came back very strongly; the stock had dropped early on, though not for any reasons that we thought to be valid. A couple of the energy stocks in the portfolio were strong performers, including Offshore Logistics, Inc. (2.43%), Mobil Corp. (1.24%) and Schlumberger, Ltd. (1.47%). Although the latter two would not ordinarily be identified as Southeast companies (we do not include Texas), they each bought firms based in the Southeast--which allowed us to buy their shares. Since it is difficult to get energy exposure in the region, we have continued to hold these names.* Any time you are in a geographic region that does not necessarily reflect the overall balance of the nation as a whole and the broader stock market, a key factor in determining your fund's relative performance is the performance of the sectors that can be found in your region. For example, our portfolio has few technology names. So, when the technology sector declines, as it did between April and June, the Fund's relative performance is enhanced. The Southeast Remains An Attractive Region One key advantage of a regional fund such as ours is that shareholders can benefit from the fund manager's acute and in-depth knowledge about a relatively narrow segment of the market. We are based in the Southeast and have established close and reliable contacts throughout the region; we base our investment decisions on decades of experience in this region. While it is not possible to predict exactly when a particular region will drift in or out of favor, the Southeast has produced some remarkable and profitable growth in the past. We believe the Fund remains positioned to take full advantage of such opportunities when they present themselves. As of July 31, 1999, the Fund's top five holdings were HEALTHSOUTH Corp. (5.06%), Bank of America Corp. (3.23%), Fort James Corp. (3.11%), Health Management Associates, Inc. (3.11%) and Modis Professional Services (3.08%).* + Regional funds may be subject to additional risk, since the companies they invest in are located in one geographical location. Small capitalization funds carry additional risk and volatility. /1/ The Lipper Capital Appreciation Funds Index is comprised of funds that seek maximum capital appreciation, frequently by means of 100% or more portfolio turnover, leveraging, purchasing unregistered securities, purchasing options, etc. The funds in the index may take large cash positions. * The Fund's portfolio composition is subject to change. -15- 167 The AmSouth Regional Equity Fund+ [THE AMSOUTH REGIONAL EQUITY FUND APPEARS HERE] AmSouth AmSouth Regional Regional AmSouth Equity Fund Equity Fund Regional S&P 500 Lipper Capital (Classic (Premier Equity Fund Stock Appreciation Date Shares)* Shares) (B Shares) Index Index - ---- ----------- ----------- ----------- ------- -------------- 7/89 9,550 10,000 10,000 10,000 10,000 7/90 10,449 10,940 10,940 10,647 10,317 7/91 11,757 12,311 12,311 12,007 11,602 7/92 14,186 14,853 14,853 13,539 12,843 7/93 16,388 17,160 17,160 14,713 14,782 7/94 17,188 17,998 17,998 15,477 15,323 7/95 19,783 20,713 20,713 19,509 19,541 7/96 22,376 23,427 23,427 22,739 21,192 7/97 31,107 32,568 32,568 34,590 28,192 7/98 31,012 32,527 32,261 41,282 31,934 7/99 27,958 29,411 28,859 49,823 38,562 For performance purposes the above graph has not been adjusted for CDSC charges. - --------------------------------------------- Average Annual Total Return - --------------------------------------------- As of 1 5 10 July 31, 1999 Year Year Year - --------------------------------------------- Classic* -13.90% 9.20% 10.83% - --------------------------------------------- Premier -9.57% 10.32% 11.39% - --------------------------------------------- B Shares** -14.73% 9.63% 11.18% - --------------------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Regional Equity Fund is measured against the S&P 500 Stock Index and the Lipper Capital Appreciation Funds Index. The S&P 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Capital Appreciation Funds Index is an index that consists of managed funds. The Capital Appreciation Funds Index and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -16- 168 The AmSouth Small Cap Fund+ The AmSouth Small Cap Fund is subadvised by Sawgrass Asset Management, LLC and is managed by Dean McQuiddy, CFA. A principal of Sawgrass, Mr. McQuiddy has more than 16 years of investment management experience. He received his bachelor's degree in finance from the University of Florida. Tough Times In Small Caps For the 12 months ended July 31, 1999, the Fund produced a total return of - 8.10% (Classic Shares at NAV). In comparison, the Russell 2000 Growth Index rose 14.51%. Looking at the entire period from beginning to end, the equity markets dove up and down like a roller coaster. The period began with stocks going into a tailspin, hitting bottom in early October 1998. Then, buoyed by three successive interest-rate cuts by the Federal Reserve Board, many sectors surged higher--though the small-cap arena in which we operate did not fully participate in the recovery. The rally continued into the beginning of April 1999, when small caps experienced what we call a "capitulation bottom." We believe many small-cap funds--not including this one, fortunately--were forced to sell a portion of their holdings to raise cash for redemptions, a situation that drove small-cap stock prices even lower. Then, quite abruptly, investor bias shifted away from large-cap growth stocks and toward cyclical sectors. As sentiment broadened, the Fund experienced a solid rebound throughout April, May, June and July. However for the period as a whole, the Fund underperformed its benchmark, the Russell 2000 Growth Index. The primary reason was the huge impact Internet-related stocks had on the index--many issues in the sector rose an astonishing 400% to 500%, and the virtual absence of these stocks in our portfolio had an impact on Fund performance. One of the disciplines we follow is the requirement that all stocks we buy have current earnings. That is part of our risk-control approach. However, the vast majority of Internet stocks do not have current earnings. Not only do these stocks not have earnings, but they lack many of the characteristics we find attractive, including above-market sales, earnings growth rates that are rising, and estimates of future earnings, or valuation multiples that we consider to be reasonable. We Scored With Fiber Optic Cable and Handbags We have talked in the past about our stocks being very "cheap" relative to the overall market--at the end of the period, the average holding in our portfolio was selling for just 18 times this year's earnings, while the market as a whole was selling for close to 30 times earnings--and our strategy produced a number of spectacular winners. Dycom (2.19% of the Fund's net assets), a company that lays the fiber optic cable that brings the Internet into people's homes, more than doubled in price. Among retailers, we profited from our investment in Fossil (2.80%)--a manufacturer of fashionable watches, belts and handbags--which grew in sales and earnings very strongly, and was up 130% for the period. And going forward, we are optimistic about one of our newer holdings, Forest Oil (1.66%). The energy sector has done very well this year, and we feel Forest has a marvelous position in the oil-and-gas exploration segment of the industry.* Attractive Circumstances For Small Caps Going forward, we believe we are set up for a very nice rally in smaller stocks. They are selling at tremendous discounts to the overall market, really at historical lows. Normally, these high-growth stocks are priced at a premium to the market, not at a discount. The other essential element is that the market has begun broadening out, and investors are finally paying attention to this sector. We have endured a very long bear market for small-company shares, but it appears that liquidity has returned. As of July 31, 1999, the Fund's top five holdings were Commscope, Inc. (3.47%), Antec Corp. (3.03%), Priority Healthcare (3.02%), American Freightways (2.93%) and Copart, Inc. (2.92%).* + Small-capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure. Historically, smaller companies' stocks have experienced a greater degree of market volatility than average. * The Fund's portfolio composition is subject to change. -17- 169 The AmSouth Small Cap Fund+ [THE AMSOUTH SMALL CAP FUND APPEARS HERE] AmSouth Small AmSouth Small AmSouth Small Cap Fund Cap Fund Cap Fund Russell 2000 Date (Classic Shares)* (Premier Shares) (B Shares)** Growth Index - ------- ---------------- ---------------- -------------- ------------ 3/2/98 9,550 10,000 10,000 10,000 7/98 8,756 9,152 8,655 8,639 7/99 8,047 8,441 7,978 9,893 - -------------------------------------------------------- Average Annual Total Return - -------------------------------------------------------- Since As of 1 Inception July 31, 1999 Year (3/2/98) - -------------------------------------------------------- Classic Shares* -12.23% -14.27% - -------------------------------------------------------- Premier Shares -7.76% -11.30% - -------------------------------------------------------- B Shares** -13.34% -14.77% - -------------------------------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Classic Shares commenced operations on March 3, 1998. The performance figures for Classic Shares prior to such date represent the performance of Premier Shares of the Fund. The performance of the AmSouth Small Cap Fund is measured against the Russell 2000 Growth Index, an unmanaged index generally representative of domestically traded common stocks of small to mid-sized companies. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance does reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -18- 170 The AmSouth Balanced Fund The AmSouth Balanced Fund is managed by Pedro Verdu, CFA. Mr. Verdu has more than 26 years of investment experience as an analyst and portfolio manager. He holds an MBA in finance and a bachelor's degree in economics. Our "Balance" Provided Both Performance and Stability For the 12 months ended July 31, 1999, the AmSouth Balanced Fund produced a total return of 9.40% (Classic Shares at NAV). In comparison, the S&P 500 Stock Index rose 20.20%, while the Lehman Brothers Government/Corporate Bond Index gained 2.33%. For the same period, the Lipper Balanced Fund Index/1/ moved up 10.75%. Stocks: Big Gain In Energy and "Shelter" The equity portion of the portfolio did well during periods when market tends were not well established--times when judicious stock picking was very advantageous. During the second quarter of 1999, investor sentiment turned to the type of value stocks we favor. In particular, we benefited from our holdings in energy and a sector we call "shelter," which includes forest products and paper. Concerning energy, many analysts did not believe that OPEC members would abide by an agreement to limit production; OPEC has a long history of not holding together. However, what was different this time was that, due to historically low oil prices, OPEC countries were feeling true economic pain. For the first time in four or five years, there not only was a political reason for holding true to an agreement, there also were compelling economic reasons. OPEC simply needed higher oil prices. We believe a similar scenario will unfold in forest products over the next couple of quarters, and we are positioned to take advantage of such a situation. Bonds: We Actively Responded To Interest-Rate Moves The fixed-income portion of the portfolio moved up strongly during the first six months of the period, during which time interest rates fell sharply. However, in January, it seemed to us that rates had fallen so far, so quickly, that a further, significant drop appeared unlikely. Consequently we shortened the portfolio's average maturity and duration considerably. At the same time and even prior, spreads on corporate bonds had widened. We decided to swap the interest-rate risk inherent in long-term Treasuries for the credit risk of short-term corporate bonds--without diminishing our yield to maturity. At the same yield, we were trading a greater risk for a smaller risk. Therefore, when rates reversed direction and headed back up (driving bond prices lower), our shareholders' capital was protected somewhat. Since February, we have increased our average maturity and duration. What we have seen in the last six months is that agency paper and mortgage-backed securities have outperformed Treasuries. Our buying emphasis in recent months has been on improving the quality of the portfolio and pushing our maturity and duration out longer. As of July 31, 1999, the fixed-income securities within the Fund maintained an average credit quality of AAA, with an average maturity of 9.05 years. Bonds Offer More Relative Value As of July 31, 1999, the allocation of the portfolio indicated a slight bias toward bonds. Having less than 50% of our assets in stocks is a little bearish for us, but does not reflect that we feel particularly pessimistic toward equities; we do not anticipate a bear market. Rather, when we examine the risk/reward characteristics of both asset classes, we feel that bonds look a bit more attractive on a relative basis. As of July 31, 1999, the Fund's top five equity holdings were Washington Mutual, Inc. (1.38% ), Engelhard Corp. (1.38%), Texaco, Inc. (1.34%), Cabeltron Systems, Inc. (1.33%) and Kerr-McGee Corp. (1.24%).* /1/ The Lipper Balanced Fund Index is comprised of funds whose primary objective is to conserve principal by maintaining at all times a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio is approximately 60%/40% but may vary. * The Fund's portfolio composition is subject to change. -19- 171 The AmSouth Balanced Fund [THE AMSOUTH BALANCED FUND APPEARS HERE] Lehman AmSouth AmSouth AmSouth Brothers Lipper Balanced Balanced Balanced S&P 500 Government/ Balanced Fund (Classic Fund (Premier Fund (B Stock Corporate Fund Date Shares)* Shares) Shares)** Index Bond Index Index - ---- ------------- ------------- --------- ------- ----------- -------- 12/19/91 9,550 10,000 10,000 10,000 10,000 10,000 7/92 10,861 11,371 10,871 10,337 10,724 11,117 7/93 12,106 12,675 12,275 11,233 11,907 12,400 7/94 12,727 13,325 13,025 11,816 11,892 12,731 7/95 14,670 15,360 15,060 14,895 13,095 14,685 7/96 15,897 16,645 16,445 17,360 13,518 16,087 7/97 20,097 21,043 20,943 26,409 15,482 21,023 7/98 20,846 21,836 21,653 27,363 16,275 21,626 7/98 22,003 23,076 22,873 31,518 16,730 23,037 7/99 24,070 25,324 24,854 37,885 17,120 25,513 For performance purposes the above graph has not been adjusted for CDSC charges. - -------------------------------------------------------- Average Annual Total Return - -------------------------------------------------------- Since As of 1 5 Inception July 31, 1999 Year Year (12/19/91) - -------------------------------------------------------- Classic* 4.45% 12.55% 12.22% - -------------------------------------------------------- Premier 9.74% 13.71% 12.97% - -------------------------------------------------------- B Shares** 3.74% 13.04% 12.70% - -------------------------------------------------------- * Reflects 4.50% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Balanced Fund is measured against the S&P 500 Stock Index, an unmanaged index generally representative of the U.S. stock market as a whole; the Lehman Brothers Government/Corporate Bond Index, an unmanaged broad-based index representative of the total return of long-term government and corporate bonds; and the Lipper Balanced Fund Index. The S&P 500 Stock Index and the Lehman Brothers Government/Corporate Bond Index do not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Balanced Fund Index, a managed index, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -20- 172 The AmSouth Limited Maturity Fund The AmSouth Limited Maturity Fund is managed by John Boston, CFA. Mr. Boston, Senior Vice President of AmSouth Bank, has more than 10 years of experience as a fixed-income manager. He holds a bachelor's degree in economics. Our Short Orientation Led To Outperformance For the 12 months ended July 31, 1999, the AmSouth Limited Maturity Fund produced a total return of 4.01% (Classic Shares at NAV). In comparison, the Merrill Lynch 1-5-Year Government/Corporate Bond Index rose 2.33%, and the Lipper Short-Term Investment Grade Debt Index/1/ gained 3.84%. With volatility and credit concerns rampant in the bond market during much of the period, our shorter maturity and emphasis on quality were the keys to our relatively high returns and our significant outperformance relative to the Lipper benchmark. Further, continued low inflation resulted in inflation-adjusted returns that were generous by historical standards. The defensive characteristics of our portfolio enabled the Fund to hold up better than many longer-maturity funds during the last six months of the period, when skyrocketing interest rates ate away at the value of many portfolios (higher rates lead to lower bond prices). Upside Gains, Downside Protection As interest rates fell during the first six months of the period, the Fund showed a profit. Concurrently, we allowed the portfolio's average maturity to shorten. When rates turned around abruptly and began climbing higher, the Fund's shorter-than-average maturity preserved shareholder value. At that point, we felt it was prudent to begin allowing the portfolio's maturity to lengthen again, in order to be prepared to take advantage of any future decline in rates. As of July 31, 1999, approximately 80% of the portfolio's net assets was invested in high-quality corporates, with the remainder invested in Treasuries and agencies. Our allocation to corporate paper has fallen slightly over the last six months, as we have been buying longer-term Treasuries in order to extend the portfolio's maturity structure.* As of July 31, 1999, the Fund's average maturity was 2.7 years, up from 2.5 years six months earlier (but still lower than 2.9 years a year ago). The Fund's credit quality was AA. We Are Positioned For Neutral-To-Lower Rates We believe that interest rates have reached the upper end of their near-term band and should remain level or begin to fall again. With that in mind, we have extended the Fund's average maturity. At current levels, the Fund is providing shareholders with productive yields. If rates do fall--and we think this is probably six to 12 months down the road--we should realize capital gain profits that will be passed along to our investors. /1/ The Lipper Short-Term Investment Grade Debt Index is comprised of funds that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of one to five years. *The Fund's portfolio composition is subject to change. -21- 173 The AmSouth Limited Maturity Fund [THE AMSOUTH LIMITED MATURITY FUND APPEARS HERE] AmSouth AmSouth Limited Limited AmSouth Merrill Lynch Maturity Maturity Limited 1-5 Year Lipper Short Fund Fund Maturity Government/ Investment (Classic (Premier Fund Corporate Grade Debt Date Shares)* Shares) (B Shares) Bond Index Index - ---- --------- -------- ---------- ------------- ------------ 7/31/89 9,800 10,000 10,000 10,000 10,000 7/90 10,252 10,879 10,679 10,765 10,618 7/91 11,178 11,644 11,644 11,857 11,590 7/92 12,459 12,978 12,978 13,330 13,165 7/93 13,296 13,850 13,850 14,279 14,258 7/94 13,398 13,957 13,957 14,533 14,306 7/95 14,422 15,024 15,024 15,697 15,351 7/96 15,102 15,732 15,732 16,548 16,130 7/97 16,197 16,872 16,872 17,877 17,377 7/98 17,159 17,892 17,785 19,029 18,401 7/99 17,847 18,631 18,501 19,906 19,030 For performance purposes the above graph has not been adjusted for CDSC charges. - ------------------------------------------ Average Annual Total Return - ------------------------------------------ As of 1 5 10 July 31, 1999 Year Year Year - ------------------------------------------ Classic* -0.11% 5.03% 5.97% - ------------------------------------------ Premier 4.14% 5.95% 6.42% - ------------------------------------------ B Shares** -1.42% 5.48% 6.35% - ------------------------------------------ * Reflects 4.00% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on January 21, 1999, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Limited Maturity Fund is measured against the Merrill Lynch 1-5-Year Government/Corporate Bond Index and the Lipper Short-Term Investment Grade Debt Index. The Merrill Lynch 1-5-Year Government/Corporate Bond Index is unmanaged and generally representative of the total return of short-term government and corporate bonds. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Short-Term Investment Grade Debt Index, an index of managed funds, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -22- 174 The AmSouth Government Income Fund John Boston, CFA, manages the AmSouth Government Income Fund. Mr. Boston, Senior Vice President of AmSouth Bank, has over 10 years of experience as a fixed-income manager. He holds a bachelor's degree in economics. We Favored GNMA Securities For the 12 months ended July 31, 1999, the AmSouth Government Income Fund produced a total return of 2.62% (Classic Shares at NAV). In comparison, the Lehman Brothers Mortgage Index rose 2.78%, while the Lipper U.S. Mortgage Fund Index/1/ gained 1.49%. The Fund invests solely in debt instruments issued by the U.S. Treasury or backed by an agency of the federal government. This allocation allows the Fund to hold securities of superior quality, which can serve our shareholders well both in times of economic turmoil and relative stability. We generally favor mortgage-backed securities, principally Ginnie Maes (GNMAs) because they offer significantly higher yields than Treasuries. Ginnie Maes are the highest-quality bonds among mortgage-backed securities and are the only type of mortgage security backed by the full faith and credit of the U.S. Government. Mortgage-Backed Securities Supported the Portfolio Interest rates, the primary driver of bond prices (prices generally rise when rates fall, and vice versa) made two large, contrary moves during the period. First, rates declined sharply last autumn--pushed lower by concerns about the global economy, a flight to quality in U.S. government issues, and the Fed's decision to cut short-term rates three times. Then, during the last six months of our reporting period, rates rapidly climbed higher, retracing most if not all of their earlier levels. During this difficult latter period, the mortgage-backed sector was the best-performing area in the bond market. Our overweighting in this sector benefited our shareholders. Throughout this volatility, we saw little reason to make dramatic changes to our portfolio. For example, on a year-to-year basis, our allocation to GNMAs changed just one percentage point. The Fund's average maturity did rise a bit during the period, but such an increase is to be expected in a portfolio that holds a preponderance of mortgage securities--which normally extend in maturity as interest rates rise. As of July 31, 1999, the Fund's average maturity was 7.7 years, and its average credit quality was AAA (government-quality portfolio). Approximately 67% of the Fund was invested in GNMAs; 18% in noncallable, government agency debentures; 11% in U.S. Treasury securities and 4% in cash. This mix reflected only minor shifts from the portfolio's allocation six months earlier.* We Do Not Expect Rates To Rise We were a little surprised at the speed at which interest rates rose during the last six months; we had expected a less-volatile environment. The increase in market-set rates (as opposed to rate increases mandated by the Fed) will reinforce the prospects for the economic slowdown that we have been expecting. We think long-term rates in the 6.15% to 6.25% levels are attractive, meaning we do not believe they will go much higher and, in our opinion, they should be lower a year from now. /1/ The Lipper U.S. Mortgage Fund Index is comprised of funds that invest at least 65% of their assets in mortgages/securities issued or guaranteed as to principal and interest by the U.S. Government and certain federal agencies. * The Fund's portfolio composition is subject to change. -23- 175 The AmSouth Government Income Fund [THE AMSOUTH GOVERNMENT INCOME FUND APPEARS HERE] AmSouth Government AmSouth Government Lehman Brothers Lipper U.S. Income Fund Income Fund Mortgage Mortgage (Classic Shares)* (Premier Shares) Index Fund Index ------------------ ------------------ --------------- ----------- 10/93 9,600 10,000 10,000 10,000 7/94 9,572 9,974 9,924 9,833 7/95 10,378 10,814 10,798 10,432 7/96 10,888 11,345 11,688 10,945 7/97 12,000 12,504 12,933 12,057 1/98 12,581 13,115 13,506 12,573 7/98 12,900 13,443 13,897 12,797 7/99 13,248 13,807 14,284 12,988 - ----------------------------------------------- Average Annual Total Return - ----------------------------------------------- Since As of 1 5 Inception July 31, 1999 Year Year (10/1/93) - ----------------------------------------------- Classic* -1.47% 5.86% 4.94% - ----------------------------------------------- Premier 2.72% 6.72% 5.69% - ----------------------------------------------- * Reflects 4.00% sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. The performance of the AmSouth Government Income Fund is measured against the Lehman Brothers Mortgage Index and the Lipper U.S. Mortgage Fund Index. The Lehman Brothers Mortgage Index is an unmanaged index generally representative of the mortgage bond market as whole. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper U.S. Mortgage Fund Index, an index of managed funds, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -24- 176 The AmSouth Bond Fund Brian Sullivan, CFA, manages the AmSouth Bond Fund. Mr. Sullivan, Senior Vice President of AmSouth Bank, serves as Chairman of the Trust Investment Policy and Strategy Group and is AmSouth Bank's Senior Investment Officer. He has 14 years of fixed-income investment management experience and holds an MBA in finance and a bachelor's degree in economics. Above-Average Returns, Despite Extreme Volatility For the 12 months ended July 31, 1999, the AmSouth Bond Fund produced a total return of 2.58% (Classic Shares at NAV). In comparison, the Lehman Brothers Government/Corporate Bond Index rose 2.33%, and the Lipper Corporate A-Rated Debt Fund Index/1/ gained 0.73%. We were proud of the Fund's performance, which produced a positive return in the face of extraordinary interest-rate volatility. As with most fixed-income portfolios, we profited when rates declined sharply last fall, and we struggled when rates rose just as abruptly in the last six months of the period. Apart from total return, the Fund's inflation-adjusted yield was enhanced by the fact that inflation remained remarkably tame throughout the period. Making the Right Calls In January, it seemed to us that the optimism then prevalent in the bond market was overdone. Rates had fallen so far, so quickly--many rates were near 20-year lows--that a further, significant drop appeared unlikely. Consequently, we shortened the portfolio's average maturity and duration considerably. At the same time, and just prior, spreads on corporate bonds had widened. (A "spread" is the additional yield offered by an agency or corporate bond over a U.S. Treasury bond of like maturity.) We decided to swap the interest-rate risk inherent in long-term Treasuries for the credit risk of short-term corporate bonds--without diminishing our yield to maturity. At the same yield, we were, effectively, trading a greater risk for a smaller risk. Therefore, when rates reversed direction and headed back up (driving bond prices lower), our shareholders' capital was protected to some degree. Since February, we have increased our average maturity and duration. What we have seen in the last six months is that agency paper and mortgage-backed securities have outperformed Treasuries. Spreads have narrowed. Our buying emphasis in recent months has been on improving the quality of the portfolio and pushing our maturity and duration out longer.* As of July 31, 1999, approximately 46.8% of the portfolio was invested in corporate issues, 35.3% in securities issued by the U.S. Treasury, 12.8% in U.S. government agency paper and the remainder in cash and cash equivalents. The securities within the Fund maintained an average credit quality of AAA, with an average maturity of 7.84 years.* A Slower Economy Should Help the Fund We believe the domestic economy will slow in the coming months. Quite honestly, we have been surprised that the economy hasn't slowed much to this point--which makes us even more convinced that the market could lose a little steam from here on out. At this time, there is one dominant engine in the economy: the American consumer. There is a chance that foreign economies will improve and help to maintain our growth rate, but that scenario has not yet materialized and is, therefore, just a hope. A less robust economy should be positive for the fixed-income securities we hold. /1/ The Lipper Corporate A-Rated Debt Fund Index is comprised of funds that invest at least 65% of their assets in corporate debt issues rated "A" or better, or in government issues. * The Fund's portfolio composition is subject to change. -25- 177 The AmSouth Bond Fund [THE AMSOUTH BOND FUND APPEARS HERE] AmSouth AmSouth AmSouth Bond Fund Bond Fund Bond Fund Date (B Shares) (Classic Shares)* (Premier Shares) - ---- ---------- ----------------- ----------------- 7/89 10,000 9,600 10,000 7/90 10,553 10,131 10,553 7/91 11,393 10,938 11,393 7/92 13,258 12,728 13,258 7/93 14,559 13,979 14,559 7/94 14,591 14,011 14,591 7/95 16,000 15,363 16,000 7/96 16,699 16,035 16,699 7/97 18,447 17,714 18,448 7/98 19,682 19,034 19,840 7/99 19,995 19,524 20,374 Lehman Brothers Lipper Corporation Govt./Corp. A-Rated Debt Date Bond Index Fund Index - ---- --------------- ------------------ 7/89 10,000 10,000 7/90 10,623 10,515 7/91 11,712 11,556 7/92 13,543 13,468 7/93 15,037 15,004 7/94 15,019 14,815 7/95 16,539 16,302 7/96 17,417 17,138 7/97 19,296 19,106 7/98 20,853 20,501 7/99 21,338 20,652 For performance purposes the above graph has not been adjusted for CDSC charges. - ---------------------------------------------- Average Annual Total Return - ---------------------------------------------- As of 1 5 10 July 31, 1999 Year Year Year - ---------------------------------------------- Classic* -1.52% 6.00% 6.92% - ---------------------------------------------- Premier 2.68% 6.90% 7.38% - ---------------------------------------------- B Shares** -3.22% 6.19% 7.17% - ---------------------------------------------- * Reflects 4.00% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on September 3, 1997, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Bond Fund is measured against the Lehman Brothers Government/Corporate Bond Index, an unmanaged broad-based index representative of the total return of long-term government and corporate bond, and the Lipper Corporate A-Rated Debt Fund Index. The Lehman Brothers Government/Corporate Bond Index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Corporate A-Rated Debt Fund Index, an index of managed funds, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -26- 178 The AmSouth Municipal Bond Fund+ Dorothy Thomas, who has 16 years of experience as an investment portfolio manager for municipal bond accounts, personal trusts and endowments, manages the AmSouth Municipal Bond Fund. Ms. Thomas, Senior Vice President of AmSouth Bank, holds an MBA and a bachelor's degree in economics. Suitable Performance In a Challenging Environment For the 12 months ended July 31, 1999, the Fund produced a total return of 2.31% (Classic Shares at NAV). In comparison, the Merrill Lynch 3-7-Year Municipal Bond Index rose 3.83%, while the Lipper Intermediate Municipal Debt Index/1/ gained 2.44%. Roughly speaking, the first half of the period was very positive for fixed-income securities, including municipal bond funds, while the second half was unusually difficult. The Fund's performance followed suit in both instances. Preserving Total Returns Last summer, investors began to become very concerned about economic conditions in Asia and elsewhere. As a result, money flooded into the U.S. Treasury market. This flight to quality caused U.S. interest rates to plummet and bond prices to rise sharply (rates and prices move in opposite directions). At nearly the same time, the Fed cut short-term rates three times, in part to ensure that there would be plenty of liquidity in the financial markets. Together, these actions kept interest rates very low through the end of 1998. However, as the new year began, these trends started to reverse completely, and interest rates climbed sharply--pushing bond prices markedly lower. Fortunately for our shareholders, municipal bonds held their value more than comparable Treasury or corporate debt. In the last six months of the period, 10-year Treasury bond yields climbed 125 basis points (1.25%), while 10-year corporate bond yields surged 140 basis points (1.40%)--both substantial moves. But 10-year AA municipal bond yields rose just 60 basis points (0.60%), thereby preserving a greater measure of total return.* We Continued To Focus On Alabama Issues Because so many of our investors are Alabama residents, we kept 55% to 60% of the portfolio invested in municipal debt issued in this state (56.5% as of July 31, 1999). This strategy helped boost the tax-equivalent yield for Alabama shareholders.* The Alabama muni market did not produce an abundance of supply during the period. In fact, issuance in the national municipal market is lower this year than last year, especially in the last six months, with rising interest rates making it more expensive for government entities to borrow money. Based on the amount of quality debt available in Alabama, we have kept our allocation to Alabama paper as high as we can. If additional, high-quality debt is put on the market at a reasonable price, we will buy it. As of July 31, 1999, the securities within the Fund maintained an average credit quality of AA, with an average maturity of 5.96 years. Economic Growth Could Slow, One Way Or Another We are starting to see some signs of a possible economic slowdown in the United States. If that comes about, it would be good for the bond market. And if the economy does not slow down by itself, the Fed is likely to step in and raise rates in order to make it decelerate. Rates have gone up in recent months, as we noted, and in response, we have lengthened the portfolio's average maturity modestly. + The Fund's income may be subject to the federal alternative minimum tax and to certain state and local taxes. /1/ The Lipper Intermediate Municipal Debt Fund Index is comprised of funds that invest in municipal debt issues with dollar-weighted average maturities of five to ten years. * The Fund's portfolio composition is subject to change. -27- 179 The AmSouth Municipal Bond Fund+ [GRAPH APPEARS HERE] AmSouth Merrill Lynch Lipper AmSouth Municipal AmSouth 3-7-Year Intermediate Municipal Bond Fund Municipal Municipal Municipal Bond Fund Date (Classic Shares)* (B Shares)** Bond Index Debt Index (Premier Shares) - ------ -------------- ---------- ------------- ------------ ---------------- 7/1/97 9,500 10,000 10,000 10,000 10,000 7/98 10,199 10,624 10,480 10,460 10,643 7/99 10,434 10,525 10,881 10,715 10,889 - ------------------------------------------------------- Average Annual Total Return - ------------------------------------------------------- Since As of 1 Inception July 31, 1999 Year (7/1/97) - ------------------------------------------------------- Classic* -1.77% 2.04% - ------------------------------------------------------- Premier 2.30% 4.17% - ------------------------------------------------------- B Shares** -3.02% 2.48% - ------------------------------------------------------- * Reflects 4.00% sales charge. ** Reflects applicable contingent deferred sales charge Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on February 3, 1999, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Municipal Bond Fund is measured against the Merrill Lynch 3-7-Year Municipal Bond Index, an unmanaged index that is generally representative of municipal bonds with intermediate maturities. The Fund's performance is also measured against the Lipper Intermediate Municipal Debt Fund Index. The Merrill Lynch 3-7-Year Municipal Bond Index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Lipper Intermediate Municipal Debt Fund Index, an index of managed funds, and the Fund's performance do reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -28- 180 The AmSouth Florida Tax-Free Fund+,++ Steve L. Cass, Assistant Vice President of AmSouth Bank, manages the AmSouth Florida Tax-Free Fund. Mr. Cass has five years of experience as an investment portfolio manager and holds a bachelor's degree in economics. Relative Stability In a Swirl Of Volatility For the 12 months ended July 31, 1999, the AmSouth Florida Tax-Free Fund produced a total return of 2.06% (Classic Shares at NAV). In comparison, the Merrill Lynch 3-7-Year Municipal Bond Index rose 3.83%. Throughout the period, the Fund offered shareholders some measure of protection from the excessive volatility present in both the stock market and the long-term taxable bond market. Along with greater stability, we provided our investors with current income that was exempt from federal income tax and Florida intangible taxes--which is one of our primary objectives. We Took Action To Enhance Returns During the first months of the period, the Federal Reserve Board (the Fed) lowered short-term interest rates three times. While this action had only a moderate effect on the Fund--municipal bonds have less interest-rate sensitivity than, say, U.S. Treasuries--the constructive environment certainly provided a welcome boost to our performance. In the second half of the period, however, interest rates abruptly changed direction and headed back higher, effectively wiping out all of the gains that we and many other bond funds had accrued earlier. A factor that helped was a steady stream of new Florida bonds (at least during the first half of the period), which further tempered volatility. Even when supply became more scarce in the last few months of the period, the Fund benefited from already holding a portfolio of bonds that were in increasingly greater demand. Because a majority of our shareholders are residents of Florida, we also took steps to hold as high a proportion of in-state securities as possible; this enables Florida residents to reduce their exposure to the state's intangible tax. At the end of the period, 97.3% of the portfolio was invested in securities issued in the state of Florida, with the remainder in cash and cash equivalents. In addition, we were successful in keeping our turnover and trading costs at modest levels. With a fixed-income fund such as ours, lower expenses can translate into higher net returns for shareholders. It is our intent to find the best bonds we can and hold them to maturity whenever possible. Lower Rates Possible By the End Of the Year Looking forward, we believe the Fed quite possibly will raise rates at least once more in the near future. However, as we get closer to the end of 1999 and the economy begins to slow, rates should come back down. We remain committed to maintaining a high-quality portfolio, concentrating on general obligation bonds along with securities issued by water and sewer entities. The market is not paying a sufficient premium for taking on additional risk, so we are not pursuing lower-quality issues. As of July 31, 1999, the securities within the Fund maintained an average credit quality of AA1, with an average maturity of 5.83 years. + The Fund's income may be subject to the federal alternative minimum tax and to certain state and local taxes. ++ Regional funds may be subject to additional risk, since companies they invest in are located in one geographical location. -29- 181 The AmSouth Florida Tax-Free Fund+,++ [THE AMSOUTH FLORIDA TAX-FREE FUND APPEARS HERE] AmSouth Florida AmSouth Florida Merrill Lynch AmSouth Florida Tax Free Fund Tax Free Fund 3-7-Year Municipal Tax Free Fund (Classic Shares)* (Premier Shares) Bond Index (B Shares)** ----------------- ---------------- ------------------ ----------------- 9/1/94 9,600 10,000 10,000 10,000 7/95 10,224 10,653 10,670 10,152 7/96 10,658 11,105 11,147 10,702 7/97 11,392 11,870 11,943 11,567 7/98 11,896 12,420 12,516 12,096 7/99 12,142 12,688 12,995 12,410 - --------------------------------------------------- Average Annual Total Return - --------------------------------------------------- Since As of 1 Inception July 31, 1999 Year (9/30/94) - --------------------------------------------------- Classic Shares* -2.06% 4.10% - --------------------------------------------------- Premier Shares 2.16% 5.05% - --------------------------------------------------- B Shares** -3.15% 4.57% - --------------------------------------------------- * Reflects 4.00% sales charge. ** Reflects applicable contingent deferred sales charge. Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. The performance figures for Premier Shares for periods prior to such date represent the performance of Classic Shares of the Fund. Performance for the Class B Shares, which commenced operations on February 3, 1999, is based on the historical performance of the Classic Shares (without sales charge) prior to that date. The performance of Classic Shares does not reflect the higher 12b-1 fees or the contingent deferred sales charge (CDSC). Had the CDSC and higher 12b-1 fees been incorporated, total return and hypothetical growth figures would have been lower. The performance of the AmSouth Florida Tax-Free Fund is measured against the Merrill Lynch 3-7-Year Municipal Bond Index, an unmanaged index generally representative of intermediate-term municipal bonds. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance does reflect the deduction of fees for these value-added services. During the period shown, the Fund waived fees for various expenses. Had these waivers not been in effect, performance quoted would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. -30- 182 The AmSouth Money Market Funds The AmSouth Money Market Funds are managed by John Boston, CFA, Senior Vice President of AmSouth Bank. Mr. Boston has more than 10 years of experience as a fixed-income manager. He holds a bachelor's degree in economics. Interest Rates Fall, Then Rise Sharply During the first six months of the period, the Fed lowered the fed funds rate--the benchmark rate banks charge one another for overnight loans--three times. Remarkably, rates then reversed direction and began a steady climb over the last six months of the period. This was due to many factors, including the perception that the Fed would begin raising rates again--in effect, "taking back" the earlier rate cuts. By the time the Fed did take action, raising short-term rates by 25 basis points (0.25%) on June 30, the market had already pushed rates significantly higher on its own. The yields we generate in the money market funds depend, largely, on Fed policy. Consequently, our yields fell and rose in response to the Fed's actions. Throughout the period, inflation remained at very low levels, providing shareholders with "real returns" (total returns minus inflation) that were attractive on a historical basis. o As of July 31, 1999, the Prime Obligations Fund's average maturity was 66 days, compared to 54 days on January 31, 1999, and 63 days on July 31, 1998.* o As of July 31, 1999, the U.S. Treasury Fund's average maturity was 47 days, compared to 50 days on January 31, 1999, and 48 days on July 31, 1998.* o As of July 31, 1999, the Tax-Exempt Fund's+ average maturity was 53 days, compared to 54 days on January 31, 1999, and 81 days on July 31, 1998.* o As of July 31, 1999, the Institutional Prime Obligations Fund's average maturity was 48 days, compared to 23 days on January 31, 1999.* Investments in the Prime Obligations, the U.S. Treasury, the Tax-Exempt and the Institutional Prime Obligations Money Market Funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds. Although money market funds may produce higher returns than insured deposit products, the net asset value may be sensitive to interest rate movement. The total return set forth may reflect the waiver of a portion of a Fund's advisory or administrative fees for certain periods since the inception date. In such instances, and without waiver of fees, total return would have been lower. Past performance is no guarantee of future results. Investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original cost. + The Fund's income may be subject to the federal alternative minimum tax and to certain state and local taxes. * The composition of the Fund's holdings is subject to change. -31- 183 [THIS PAGE INTENTIONALLY LEFT BLANK] -32- 184 Report of Independent Accountants REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Trustees AmSouth Mutual Funds In our opinion, the accompanying statements of assets and liabilities, including the schedules of portfolio investments, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position 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 AmSouth Mutual Funds, hereafter referred to as the "Funds") at July 31, 1999, the results of each of their operations for the period then ended, the changes in each of their net assets for the periods presented, and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Columbus, Ohio September 21, 1999 -33- 185 AMSOUTH MUTUAL FUNDS Statements of Assets and Liabilities July 31, 1999 (Amounts in thousands, except per share amounts) Equity Enhanced Capital Income Equity Market Growth Fund Fund Fund Fund ------- ---------- -------- ------- ASSETS: Investments, at value (Cost $36,192, $711,667, $31,089 and $34,335, respectively)........................ $40,285 $1,043,170 $33,651 $38,274 Cash.................................. -- -- -- 1,708 Interest and dividends receivable..... 75 1,652 66 16 Receivable for capital shares issued.. 10 61 155 21 Receivable from brokers for investments sold..................... 1,037 2,830 1,000 -- Prepaid expenses and other assets..... 5 45 6 4 ------- ---------- ------- ------- Total Assets....................... 41,412 1,047,758 34,878 40,023 ------- ---------- ------- ------- LIABILITIES: Payable for capital shares redeemed... 19 334 37 1 Payable to brokers for investments purchased............................ 1,007 3,110 -- 433 Net payable for variation margin on futures contracts.................... -- -- 41 -- Accrued expenses and other payables: Investment advisory fees............. 15 379 7 14 Administration fees.................. 1 23 -- -- Distribution fees.................... 12 27 8 10 Accounting fees...................... -- 3 2 -- Transfer agent fees.................. 2 28 2 1 Custodian fees....................... -- 12 -- -- Other................................ 3 48 11 6 ------- ---------- ------- ------- Total Liabilities.................. 1,059 3,964 108 465 ------- ---------- ------- ------- NET ASSETS: Capital............................... 33,870 577,771 30,785 34,119 Undistibuted (distributions in excess of) net investment income............ 6 478 2 -- Net unrealized appreciation (depreciation) on investments and futures.............................. 4,093 331,503 2,432 3,939 Undistributed net realized gains (losses) from investment transactions......................... 2,384 134,042 1,551 1,500 ------- ---------- ------- ------- Net Assets......................... $40,353 $1,043,794 $34,770 $39,558 ======= ========== ======= ======= Net Assets Classic Shares....................... $21,526 $ 70,740 $14,365 $14,040 Premier Shares....................... 10,908 960,660 14,273 18,055 B Shares............................. 7,919 12,394 6,132 7,463 ------- ---------- ------- ------- Total.............................. $40,353 $1,043,794 $34,770 $39,558 ======= ========== ======= ======= Outstanding units of beneficial interest (shares) Classic Shares....................... 1,643 2,801 1,036 1,000 Premier Shares....................... 832 38,024 1,030 1,279 B Shares............................. 607 493 443 539 ------- ---------- ------- ------- Total.............................. 3,082 41,318 2,509 2,818 ======= ========== ======= ======= Net asset value Classic Shares--redemption price per share............................... $ 13.10 $ 25.25 $ 13.86 $ 14.04 ======= ========== ======= ======= Premier Shares--offering and redemption price per share.......... $ 13.10 $ 25.27 $ 13.86 $ 14.11 ======= ========== ======= ======= B Shares*--offering price per share.. $ 13.05 $ 25.14 $ 13.82 $ 13.85 ======= ========== ======= ======= Maximum Sales Charge (Classic Shares). 4.50% 4.50% 4.50% 4.50% ------- ---------- ------- ------- Maximum Offering Price (100%/(100%- Maximum Sales Charge) of net asset value adjusted to the nearest cent) per share (Classic Shares)........... $ 13.72 $ 26.44 $ 14.51 $ 14.70 ======= ========== ======= ======= - -------- * Redemption price per share varies by length of time shares are held. See notes to financial statements. -34- 186 AMSOUTH MUTUAL FUNDS Statements of Assets and Liabilities July 31, 1999 (Amounts in thousands, except per share amounts) Select Regional Equity Equity Small Cap Balanced Fund Fund Fund Fund ------- -------- --------- -------- ASSETS: Investments, at value (Cost $21,102, $69,670, $21,396 and $314,068, respectively)......................... $22,483 $82,223 $24,019 $369,272 Interest and dividends receivable...... 9 107 2 3,556 Receivable for capital shares issued... 18 -- 12 296 Receivable from brokers for investments sold.................................. 117 -- 1,343 -- Prepaid expenses and other assets...... 5 9 6 16 ------- ------- ------- -------- Total Assets........................ 22,632 82,339 25,382 373,140 ------- ------- ------- -------- LIABILITIES: Payable for capital shares redeemed.... -- 32 -- 266 Payable to brokers for investments purchased............................. -- -- 1,584 310 Accrued expenses and other payables: Investment advisory fees.............. 8 30 12 134 Administration fees................... -- 2 -- 8 Distribution fees..................... 4 6 1 18 Accounting fees....................... -- -- -- 2 Transfer agent fees................... 1 4 1 10 Custodian fees........................ -- 1 -- 4 Other................................. 8 3 5 18 ------- ------- ------- -------- Total Liabilities................... 21 78 1,603 770 ------- ------- ------- -------- NET ASSETS: Capital................................ 20,644 52,949 23,927 275,601 Undistibuted (distributions in excess of) net investment income............. -- 13 (1) 577 Net unrealized appreciation (depreciation) on investments......... 1,381 12,553 2,623 55,204 Undistributed net realized gains (losses) from investment transactions. 586 16,746 (2,770) 40,988 ------- ------- ------- -------- Net Assets.......................... $22,611 $82,261 $23,779 $372,370 ======= ======= ======= ======== Net Assets Classic Shares......................... $10,258 $20,911 $ 1,073 $ 43,223 Premier Shares......................... 10,420 60,385 21,777 319,016 B Shares............................... 1,933 965 929 10,131 ------- ------- ------- -------- Total............................... $22,611 $82,261 $23,779 $372,370 ======= ======= ======= ======== Outstanding units of beneficial interest (shares) Classic Shares........................ 863 913 128 2,895 Premier Shares........................ 877 2,631 2,581 21,368 B Shares.............................. 163 43 112 680 ------- ------- ------- -------- Total............................... 1,903 3,587 2,821 24,943 ======= ======= ======= ======== Net asset value Classic Shares--redemption price per share................................ $ 11.88 $ 22.90 $ 8.40 $ 14.93 ======= ======= ======= ======== Premier Shares--offering and redemption price per share........... $ 11.89 $ 22.95 $ 8.44 $ 14.93 ======= ======= ======= ======== B Shares*--offering price per share... $ 11.83 $ 22.68 $ 8.31 $ 14.90 ======= ======= ======= ======== Maximum Sales Charge (Classic Shares).. 4.50% 4.50% 4.50% 4.50% ------- ------- ------- -------- Maximum Offering Price (100%/(100%- Maximum Sales Charge) of net asset value adjusted to the nearest cent) per share (Classic Shares)............ $ 12.44 $ 23.98 $ 8.80 $ 15.63 ======= ======= ======= ======== - -------- * Redemption price per share varies by length of time shares are held. See notes to financial statements. -35- 187 AMSOUTH MUTUAL FUNDS Statements of Assets and Liabilities July 31, 1999 (Amounts in thousands, except per share amounts) Limited Government Municipal Florida Maturity Income Bond Bond Tax-Free Fund Fund Fund Fund Fund -------- ---------- -------- --------- -------- ASSETS: Investments, at value (Cost $112,420, $8,566, $385,361, $321,757 and $75,561, respectively)............... $111,905 $8,521 $383,287 $323,878 $75,486 Interest and dividends receivable.................. 1,999 78 6,731 4,967 844 Receivable for capital shares issued...................... -- 1 -- -- -- Prepaid expenses and other assets...................... 5 1 15 13 4 -------- ------ -------- -------- ------- Total Assets.............. 113,909 8,601 390,033 328,858 76,334 -------- ------ -------- -------- ------- LIABILITIES: Payable for capital shares redeemed.................... 2 8 83 -- -- Payable to brokers for investments purchased....... -- -- -- 4,754 -- Accrued expenses and other payables: Investment advisory fees.... 25 1 86 57 10 Administration fees......... 1 -- 5 4 1 Distribution fees........... 2 -- 3 -- 1 Accounting fees............. 1 1 2 2 1 Transfer agent fees......... 3 -- 9 8 2 Custodian fees.............. 1 -- 4 3 1 Other....................... 5 5 24 27 6 -------- ------ -------- -------- ------- Total Liabilities......... 40 15 216 4,855 22 -------- ------ -------- -------- ------- NET ASSETS: Capital...................... 115,003 8,967 389,653 319,649 76,062 Undistibuted (distributions in excess of) net investment income...................... 483 -- 1,421 599 130 Net unrealized appreciation (depreciation) on investments................. (515) (45) (2,074) 2,121 (75) Undistributed net realized gains (losses) from investment transactions..... (1,102) (336) 817 1,634 195 -------- ------ -------- -------- ------- Net Assets................ $113,869 $8,586 $389,817 $324,003 $76,312 ======== ====== ======== ======== ======= Net Assets Classic Shares.............. $ 2,716 $5,436 $ 7,070 $ 2,694 $12,195 Premier Shares.............. 109,554 3,150 380,226 321,293 63,548 B Shares.................... 1,599 -- 2,521 16 569 -------- ------ -------- -------- ------- Total..................... $113,869 $8,586 $389,817 $324,003 $76,312 ======== ====== ======== ======== ======= Outstanding units of beneficial interest (shares) Classic Shares.............. 264 565 665 273 1,194 Premier Shares.............. 10,647 328 35,778 32,557 6,218 B Shares.................... 156 -- 238 2 56 -------- ------ -------- -------- ------- Total..................... 11,067 893 36,681 32,832 7,468 ======== ====== ======== ======== ======= Net asset value Classic Shares--redemption price per share............ $ 10.29 $ 9.62 $ 10.63 $ 9.87 $ 10.22 ======== ====== ======== ======== ======= Premier Shares--offering and redemption price per share...................... $ 10.29 $ 9.62 $ 10.63 $ 9.87 $ 10.22 ======== ====== ======== ======== ======= B Shares*--offering price per share.................. $ 10.27 $ -- $ 10.60 $ 9.87 $ 10.20 ======== ====== ======== ======== ======= Maximum Sales Charge (Classic Shares)..................... 4.00% 4.00% 4.00% 4.00% 4.00% -------- ------ -------- -------- ------- Maximum Offering Price (100%/ (100%-Maximum Sales Charge) of net asset value adjusted to the nearest cent) per share (Classic Shares)..... $ 10.72 $10.02 $ 11.07 $ 10.28 $ 10.65 ======== ====== ======== ======== ======= - -------- * Redemption price per share varies by length of time shares are held. See notes to financial statements. -36- 188 AMSOUTH MUTUAL FUNDS Statements of Assets and Liabilities July 31, 1999 (Amounts in thousands, except per share amounts) Institutional U.S. Prime Prime Tax- Treasury Obligations Obligations Exempt Fund Fund Fund Fund -------- ----------- ------------- ------- ASSETS: Investments, at amortized cost..... $200,790 $582,351 $ 79,299 $96,133 Repurchase agreements, at cost..... 113,208 92,189 30,200 -- -------- -------- -------- ------- Total investments............... 313,998 674,540 109,499 96,133 Interest and dividends receivable.. 2,446 1,515 9 817 Receivable from brokers for investments sold.................. 10,000 -- -- -- Prepaid expenses and other assets.. 17 33 5 6 -------- -------- -------- ------- Total Assets.................... 326,461 676,088 109,513 96,956 -------- -------- -------- ------- LIABILITIES: Dividends payable.................. 1,081 2,540 426 202 Accrued expenses and other payables: Investment advisory fees.......... 107 233 6 16 Administration fees............... 7 15 -- 2 Distribution fees................. -- 12 11 2 Accounting fees................... 1 2 1 1 Transfer agent fees............... 7 16 3 1 Custodian fees.................... 5 7 1 1 Other............................. 16 62 32 7 -------- -------- -------- ------- Total Liabilities............... 1,224 2,887 480 232 -------- -------- -------- ------- NET ASSETS: Capital............................ 325,229 673,208 109,028 96,725 Undistributed (distributions in excess of) net investment income.. 7 -- 5 -- Undistributed net realized gains (losses) from investment transactions...................... 1 (7) -- (1) -------- -------- -------- ------- Net Assets...................... $325,237 $673,201 $109,033 $96,724 ======== ======== ======== ======= Net Assets Classic Shares (a)................ $ 4,390 $136,078 $ 69,458 $22,844 Premier Shares (b)................ 320,847 536,899 26,000 73,880 B Shares (c)...................... -- 224 13,575 -- -------- -------- -------- ------- Total........................... $325,237 $673,201 $109,033 $96,724 ======== ======== ======== ======= Outstanding units of beneficial interest (shares) Classic Shares (a)................ 4,390 136,085 69,458 22,845 Premier Shares (b)................ 320,838 536,913 26,000 73,880 B Shares (c)...................... -- 224 13,575 -- -------- -------- -------- ------- Total........................... 325,228 673,222 109,033 96,725 ======== ======== ======== ======= Net asset value--offering and redemption price per share Classic Shares (a)................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======= Premier Shares (b)................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======= B Shares (c)*..................... $ -- $ 1.00 $ 1.00 $ -- ======== ======== ======== ======= - -------- (a) Class I shares for the Institutional Prime Obligations Fund. (b) Class II shares for the Institutional Prime Obligations Fund. (c) Class III shares for the Institutional Prime Obligations Fund. * Redemption price per share varies by length of time shares are held. See notes to financial statements. -37- 189 AMSOUTH MUTUAL FUNDS Statements of Operations For the Year Ended July 31, 1999 (Amounts in thousands) Equity Enhanced Capital Income Equity Market Growth Fund Fund Fund (a) Fund ------ -------- -------- ------- Investment Income: Interest income............................. $ 274 $ 918 $ 33 $ -- Dividend income............................. 853 21,407 257 184 ------ -------- ------ ------ Total Income.............................. 1,127 22,325 290 184 ------ -------- ------ ------ Expenses: Investment advisory fees.................... 325 8,292 78 207 Administration fees......................... 81 2,073 35 52 Shareholder servicing fees (Classic Shares). 59 179 27 28 12b-1 fees (B Shares)....................... 78 102 20 52 Accounting fees............................. 54 335 59 54 Transfer agent fees......................... 47 261 31 40 Custodian fees.............................. 2 63 1 1 Trustee fees and expenses................... 1 23 -- -- Other....................................... 29 229 20 31 ------ -------- ------ ------ Total Expenses............................ 676 11,557 271 465 Expenses voluntarily reduced................ (68) (50) (107) (132) ------ -------- ------ ------ Net Expenses.............................. 608 11,507 164 333 ------ -------- ------ ------ Net Investment Income (Loss)................ 519 10,818 126 (149) ------ -------- ------ ------ Realized/Unrealized Gains (Losses) From Investments: Net realized gains (losses) from investment transactions............................... 2,385 136,676 1,583 1,650 Net change in unrealized appreciation (depreciation) from investments............ 2,356 419 2,432 2,629 ------ -------- ------ ------ Net realized/unrealized gains (losses) from investments................................ 4,741 137,095 4,015 4,279 ------ -------- ------ ------ Change in net assets resulting from operations................................. $5,260 $147,913 $4,141 $4,130 ====== ======== ====== ====== - -------- (a) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. See notes to financial statements. -38- 190 AMSOUTH MUTUAL FUNDS Statements of Operations For the Year Ended July 31, 1999 (Amounts in thousands) Select Regional Small Equity Equity Cap Balanced Fund (a) Fund Fund Fund -------- -------- ------- -------- Investment Income: Interest income.......................... $ 2 $ -- $ 37 $ 10,620 Dividend income.......................... 255 1,877 24 4,660 ------ -------- ------- -------- Total Income........................... 257 1,877 61 15,280 ------ -------- ------- -------- Expenses: Investment advisory fees................. 130 856 127 3,046 Administration fees...................... 33 214 21 762 Shareholder servicing fees (Classic Shares)................................. 28 76 3 113 12b-1 fees (B Shares).................... 8 15 9 79 Accounting fees.......................... 45 55 54 145 Transfer agent fees...................... 30 64 33 115 Custodian fees........................... 1 7 1 23 Trustee fees and expenses................ -- 3 -- 8 Other.................................... 16 58 17 92 ------ -------- ------- -------- Total Expenses......................... 291 1,348 265 4,383 Expenses voluntarily reduced or reimbursed.............................. (106) (50) (105) (50) ------ -------- ------- -------- Net Expenses........................... 185 1,298 160 4,333 ------ -------- ------- -------- Net Investment Income (Loss)............. 72 579 (99) 10,947 ------ -------- ------- -------- Realized/Unrealized Gains (Losses) From Investments: Net realized gains (losses) from investment transactions................. 612 16,745 (2,191) 43,490 Net change in unrealized appreciation (depreciation) from investments......... 1,381 (30,363) 2,703 (19,188) ------ -------- ------- -------- Net realized/unrealized gains (losses) from investments........................ 1,993 (13,618) 512 24,302 ------ -------- ------- -------- Change in net assets resulting from operations.............................. $2,065 $(13,039) $ 413 $ 35,249 ====== ======== ======= ======== - -------- (a) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. See notes to financial statements. -39- 191 AMSOUTH MUTUAL FUNDS Statements of Operations For the Year Ended July 31, 1999 (Amounts in thousands) Limited Government Municipal Florida Maturity Income Bond Bond Tax-Free Fund Fund Fund Fund Fund -------- ---------- -------- --------- -------- Investment Income: Interest income............... $ 7,037 $ 566 $ 22,088 $15,208 $ 3,208 Dividend income............... 95 11 292 193 49 ------- ----- -------- ------- ------- Total Income................ 7,132 577 22,380 15,401 3,257 ------- ----- -------- ------- ------- Expenses: Investment advisory fees...... 735 62 2,319 2,121 461 Administration fees........... 226 19 714 653 142 Shareholder servicing fees (Classic Shares)............. 8 17 18 6 25 12b-1 fees (B Shares)......... 4 -- 17 -- 1 Accounting fees............... 57 47 140 129 63 Transfer agent fees........... 48 23 99 90 38 Custodian fees................ 7 1 21 20 4 Trustee fees and expenses..... 3 -- 8 6 1 Other......................... 28 5 89 83 15 ------- ----- -------- ------- ------- Total Expenses.............. 1,116 174 3,425 3,108 750 Expenses voluntarily reduced.. (305) (110) (881) (1,121) (390) ------- ----- -------- ------- ------- Net Expenses................ 811 64 2,544 1,987 360 ------- ----- -------- ------- ------- Net Investment Income (Loss).. 6,321 513 19,836 13,414 2,897 ------- ----- -------- ------- ------- Realized/Unrealized Gains (Losses) From Investments: Net realized gains (losses) from investment transactions. 464 51 3,588 2,189 376 Net change in unrealized appreciation (depreciation) from investments............. (2,240) (283) (15,033) (7,994) (2,004) ------- ----- -------- ------- ------- Net realized/unrealized gains (losses) from investments.... (1,776) (232) (11,445) (5,805) (1,628) ------- ----- -------- ------- ------- Change in net assets resulting from operations.............. $ 4,545 $ 281 $ 8,391 $ 7,609 $ 1,269 ======= ===== ======== ======= ======= See notes to financial statements. -40- 192 AMSOUTH MUTUAL FUNDS Statements of Operations For the Year Ended July 31, 1999 (Amounts in thousands) Institutional U.S. Prime Prime Tax- Treasury Obligations Obligations Exempt Fund Fund Fund (a) Fund -------- ----------- ------------- ------ Investment Income: Interest income..................... $15,108 $35,908 $4,854 $2,906 Dividend income..................... -- -- 136 165 ------- ------- ------ ------ Total Income...................... 15,108 35,908 4,990 3,071 ------- ------- ------ ------ Expenses: Investment advisory fees............ 1,262 2,765 198 383 Administration fees................. 631 1,383 99 192 Shareholder servicing fees (Classic Shares)............................ 16 336 17 63 12b-1 fees (B Shares)............... -- 1 15 -- Accounting fees..................... 107 230 41 53 Transfer agent fees................. 90 171 39 39 Custodian fees...................... 21 41 6 6 Trustee fees and expenses........... 6 15 2 2 Registration and filing fees........ 6 31 24 6 Other............................... 76 138 38 16 ------- ------- ------ ------ Total Expenses.................... 2,215 5,111 479 760 Expenses voluntarily reduced........ (40) (252) (225) (271) ------- ------- ------ ------ Net Expenses...................... 2,175 4,859 254 489 ------- ------- ------ ------ Net Investment Income (Loss)........ 12,933 31,049 4,736 2,582 ------- ------- ------ ------ Realized/Unrealized Gains (Losses) From Investments: Net realized gains (losses) from investment transactions............ -- 2 -- 1 ------- ------- ------ ------ Net realized/unrealized gains (losses) from investments.......... -- 2 -- 1 ------- ------- ------ ------ Change in net assets resulting from operations......................... $12,933 $31,051 $4,736 $2,583 ======= ======= ====== ====== - -------- (a) For the period from September 15, 1998 (commencement of operations) through July 31, 1999. See notes to financial statements. -41- 193 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) Equity Income Equity Enhanced Market Capital Growth Fund Fund Fund Fund ------------------ ---------------------- --------------- ------------------ Year Year Year Year Period Year Period Ended Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, July 31, 1999 1998 1999 1998 1999 (b) 1999 1998 (a) -------- -------- ---------- ---------- --------------- -------- -------- From Investment Activities: Operations: Net investment income (loss)................ $ 519 $ 670 $ 10,818 $ 12,002 $ 126 $ (149) $ (39) Net realized gains (losses) from investment transactions.......... 2,385 1,649 136,676 124,775 1,583 1,650 177 Net change in unrealized appreciation (depreciation) from investments and futures............... 2,356 (405) 419 (21,447) 2,432 2,629 1,310 -------- ------- ---------- ---------- ------- ------- ------- Change in net assets resulting from operations............. 5,260 1,914 147,913 115,330 4,141 4,130 1,448 -------- ------- ---------- ---------- ------- ------- ------- Distributions to Classic Shareholders: From net investment income................ (314) (500) (565) (1,668) (79) -- -- In excess of net investment income..... -- (2) -- (1) -- -- -- From net realized gains from investment transactions.......... (525) (763) (7,000) (3,043) (30) (69) -- Distributions to Premier Shareholders: From net investment income................ (144) (132)(c) (9,737) (10,624)(c) (41)(e) -- -- In excess of net investment income..... -- -- (c) -- (13)(c) -- (e) -- -- From net realized gains from investment transactions.......... (184) (189)(c) (94,909) (47,629)(c) -- (e) (40) -- Distributions to Class B Shareholders: From net investment income................ (56) (53)(d) (24) (18)(d) (4)(f) -- -- From net realized gains from investment transactions.......... (167) (67)(d) (935) (85)(d) (2)(f) (31) -- -------- ------- ---------- ---------- ------- ------- ------- Change in net assets resulting from shareholder distributions......... (1,390) (1,706) (113,170) (63,081) (156) (140) -- -------- ------- ---------- ---------- ------- ------- ------- Capital Transactions: Proceeds from shares issued................ 9,218 25,509 199,148 190,614 40,225 27,139 15,506 Dividends reinvested... 1,155 1,376 25,287 15,125 140 100 -- Cost of shares redeemed.............. (16,396) (6,860) (244,053) (204,304) (9,580) (7,692) (933) -------- ------- ---------- ---------- ------- ------- ------- Change in net assets from capital transactions........... (6,023) 20,025 (19,618) 1,435 30,785 19,547 14,573 -------- ------- ---------- ---------- ------- ------- ------- Change in net assets.... (2,153) 20,233 15,125 53,684 34,770 23,537 16,021 Net Assets: Beginning of period.... 42,506 22,273 1,028,669 974,985 -- 16,021 -- -------- ------- ---------- ---------- ------- ------- ------- End of period.......... $ 40,353 $42,506 $1,043,794 $1,028,669 $34,770 $39,558 $16,021 ======== ======= ========== ========== ======= ======= ======= Share Transactions: Issued................. 755 2,121 8,339 8,021 3,204 2,033 1,467 Reinvested............. 98 118 1,125 664 10 8 -- Redeemed............... (1,347) (563) (10,006) (8,575) (705) (603) (87) -------- ------- ---------- ---------- ------- ------- ------- Change in shares........ (494) 1,676 (542) 110 2,509 1,438 1,380 ======== ======= ========== ========== ======= ======= ======= - -------- (a) For the period from August 3, 1997 (commencement of operations) through July 31, 1998. (b) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. (c) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (d) For the period from September 3, 1997 (commencement of operations) through July 31, 1998. (e) For the period from December 11, 1998 (commencement of operations) through July 31, 1999. (f) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. See notes to financial statements. -42- 194 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) Select Equity Regional Equity Small Cap Balanced Fund Fund Fund Fund ------------- ------------------ ------------------ ------------------- Period Year Year Year Period Year Year Ended Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, July 31, 1999 (b) 1999 1998 1999 1998 (a) 1999 1998 ------------- -------- -------- -------- -------- -------- --------- From Investment Activities: Operations: Net investment income (loss)................ $ 72 $ 579 $ 520 $ (99) $ (19) $ 10,947 $ 10,904 Net realized gains (losses) from investment transactions.......... 612 16,745 8,874 (2,191) (579) 43,490 36,908 Net change in unrealized appreciation (depreciation) from investments........... 1,381 (30,363) (9,341) 2,703 (80) (19,188) (13,602) ------- -------- -------- ------- ------ -------- --------- Change in net assets resulting from operations............. 2,065 (13,039) 53 413 (678) 35,249 34,210 ------- -------- -------- ------- ------ -------- --------- Distributions to Classic Shareholders: From net investment income................ (49) (128) (133) -- -- (1,197) (2,131) In excess of net investment income..... -- -- (8) -- -- -- -- From net realized gains from investment transactions.......... (19) (2,101) (1,577) -- -- (3,540) (3,102) Distributions to Premier Shareholders: From net investment income................ (22)(f) (436) (390)(c) -- -- (c) (9,447) (8,628)(c) In excess of net investment income..... -- (f) -- (18)(c) -- -- (c) -- (1)(c) Tax return of capital.. -- (f) -- -- (c) -- (1)(c) -- -- (c) From net realized gains from investment transactions.......... (6)(f) (4,934) (3,440)(c) -- -- (c) (25,304) (19,894)(c) Distributions to Class B Shareholders: From net investment income................ (2)(g) (1) (1)(d) -- -- (153) (43)(e) From net realized gains from investment transactions.......... -- (g) (110) (26)(d) -- -- (554) (71)(e) ------- -------- -------- ------- ------ -------- --------- Change in net assets resulting from shareholder distributions.......... (98) (7,710) (5,593) -- (1) (40,195) (33,870) ------- -------- -------- ------- ------ -------- --------- Capital Transactions: Proceeds from shares issued................ 27,874 9,981 31,703 18,277 8,135 66,769 96,873 Dividends reinvested... 94 3,734 3,015 -- -- 24,021 22,522 Cost of shares redeemed.............. (7,324) (50,312) (39,409) (2,226) (141) (95,223) (110,755) ------- -------- -------- ------- ------ -------- --------- Change in net assets from capital transactions........... 20,644 (36,597) (4,691) 16,051 7,994 (4,433) 8,640 ------- -------- -------- ------- ------ -------- --------- Change in net assets.... 22,611 (57,346) (10,231) 16,464 7,315 (9,379) 8,980 Net Assets: Beginning of period.... -- 139,607 149,838 7,315 -- 381,749 372,769 ------- -------- -------- ------- ------ -------- --------- End of period.......... $22,611 $ 82,261 $139,607 $23,779 $7,315 $372,370 $ 381,749 ======= ======== ======== ======= ====== ======== ========= Share Transactions: Issued................. 2,492 419 1,076 2,300 815 4,511 6,447 Reinvested............. 8 159 105 -- -- 1,666 1,540 Redeemed............... (597) (2,125) (1,354) (279) (15) (6,379) (7,345) ------- -------- -------- ------- ------ -------- --------- Change in shares........ 1,903 (1,547) (173) 2,021 800 (202) 642 ======= ======== ======== ======= ====== ======== ========= - -------- (a) For the period from March 2, 1998 (commencement of operations) through July 31, 1998. (b) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. (c) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (d) For the period from September 3, 1997(commencement of operations) through July 31, 1998. (e) For the period from September 2, 1997(commencement of operations) through July 31, 1998. (f) For the period from December 3, 1998 (commencement of operations) through July 31, 1999. (g) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. See notes to financial statements. -43- 195 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) Limited Maturity Government Income Fund Fund Bond Fund --------------------- ------------------ ------------------ Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- From Investment Activities: Operations: Net investment income (loss)................. $ 6,321 $ 6,785 $ 513 $ 632 $ 19,836 $ 18,122 Net realized gains (losses) from investment transactions........... 464 847 51 145 3,588 3,531 Net change in unrealized appreciation (depreciation) from investments............ (2,240) (738) (283) 2 (15,033) 1,192 -------- -------- ------- ------- -------- -------- Change in net assets resulting from operations.............. 4,545 6,894 281 779 8,391 22,845 -------- -------- ------- ------- -------- -------- Distributions to Classic Shareholders: From net investment income................. (163) (794) (360) (513) (385) (1,784) In excess of net investment income...... -- -- -- (48) -- -- From net realized gains from investment transactions........... -- -- -- -- (87) (18) Distributions to Premier Shareholders: From net investment income................. (5,930) (6,023)(a) (141) (57)(a) (18,671) (16,698)(a) In excess of net investment income...... -- -- (a) -- (15)(a) -- -- (a) From net realized gains from investment transactions........... -- -- (a) -- -- (a) (3,997) (788)(a) Distributions to Class B Shareholders: From net investment income................. (20)(c) -- -- -- (77) (9)(b) From net realized gains from investment transactions........... -- (c) -- -- -- (18) -- (b) -------- -------- ------- ------- -------- -------- Change in net assets resulting from shareholder distributions........... (6,113) (6,817) (501) (633) (23,235) (19,297) -------- -------- ------- ------- -------- -------- Capital Transactions: Proceeds from shares issued................. 31,324 20,184 2,636 3,053 122,886 99,873 Dividends reinvested.... 709 633 240 320 5,561 5,321 Cost of shares redeemed. (27,080) (49,085) (4,767) (4,444) (59,190) (85,219) -------- -------- ------- ------- -------- -------- Change in net assets from capital transactions.... 4,953 (28,268) (1,891) (1,071) 69,257 19,975 -------- -------- ------- ------- -------- -------- Change in net assets..... 3,385 (28,191) (2,111) (925) 54,413 23,523 Net Assets: Beginning of period..... 110,484 138,675 10,697 11,622 335,404 311,881 -------- -------- ------- ------- -------- -------- End of period........... $113,869 $110,484 $ 8,586 $10,697 $389,817 $335,404 ======== ======== ======= ======= ======== ======== Share Transactions: Issued.................. 2,987 1,930 266 310 11,159 9,081 Reinvested.............. 68 61 24 33 500 485 Redeemed................ (2,579) (4,702) (481) (451) (5,321) (7,771) -------- -------- ------- ------- -------- -------- Change in shares......... 476 (2,711) (191) (108) 6,338 1,795 ======== ======== ======= ======= ======== ======== - -------- (a) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 16, 1997 (commencement of operations) through July 31, 1998. (c) For the period from January 21, 1999 (commencement of operations) through July 31, 1999. See notes to financial statements. -44- 196 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) Municipal Bond Florida Tax-Free Fund Fund ------------------ --------------------- Year Year Year Year Ended Ended Ended Ended July 31, July 31, July 31, July 31, 1999 1998 1999 1998 -------- -------- -------- -------- From Investment Activities: Operations: Net investment income (loss). $ 13,414 $ 14,134 $ 2,897 $ 2,435 Net realized gains (losses) from investment transactions................ 2,189 3,647 376 418 Net change in unrealized appreciation (depreciation) from investments............ (7,994) (3,346) (2,004) (353) -------- -------- -------- -------- Change in net assets resulting from operations.............. 7,609 14,435 1,269 2,500 -------- -------- -------- -------- Distributions to Classic Shareholders: From net investment income... (88) (1,218) (388) (413) From net realized gains from investment transactions..... (21) (5) (50) (25) Distributions to Premier Shareholders: From net investment income... (12,760) (12,911)(a) (2,374) (2,016)(a) In excess of net investment income...................... -- (6)(a) -- (1)(a) From net realized gains from investment transactions..... (3,342) (816)(a) (333) (322)(a) Distributions to Class B Shareholders: From net investment income... -- -- (4)(b) -- -------- -------- -------- -------- Change in net assets resulting from shareholder distributions................ (16,211) (14,956) (3,149) (2,777) -------- -------- -------- -------- Capital Transactions: Proceeds from shares issued.. 52,433 54,703 25,737 24,956 Dividends reinvested......... 265 100 458 218 Cost of shares redeemed...... (49,246) (63,062) (12,035) (14,553) -------- -------- -------- -------- Change in net assets from capital transactions......... 3,452 (8,259) 14,160 10,621 -------- -------- -------- -------- Change in net assets.......... (5,150) (8,780) 12,280 10,344 Net Assets: Beginning of period.......... 329,153 337,933 64,032 53,688 -------- -------- -------- -------- End of period................ $324,003 $329,153 $ 76,312 $ 64,032 ======== ======== ======== ======== Share Transactions: Issued....................... 5,171 5,391 2,447 2,383 Reinvested................... 27 10 43 21 Redeemed..................... (4,836) (6,210) (1,146) (1,392) -------- -------- -------- -------- Change in shares.............. 362 (809) 1,344 1,012 ======== ======== ======== ======== - -------- (a) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from March 16, 1999 (commencement of operations) through July 31, 1999. See notes to financial statements. -45- 197 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) U.S. Treasury Fund Prime Obligations Fund -------------------- ------------------------ Year Year Year Year Ended Ended Ended Ended July 31, July 31, July 31, July 31, 1999 1998 1999 1998 --------- --------- ----------- ----------- From Investment Activities: Operations: Net investment income (loss). $ 12,933 $ 14,654 $ 31,049 $ 31,203 Net realized gains (losses) from investment transactions................ -- 7 2 -- --------- --------- ----------- ----------- Change in net assets resulting from operations.............. 12,933 14,661 31,051 31,203 --------- --------- ----------- ----------- Distributions to Classic Shareholders: From net investment income... (259) (350) (5,916) (5,957) Distributions to Premier Shareholders: From net investment income... (12,674) (14,304) (25,128) (25,246) Distributions to Class B Shareholders: From net investment income... -- -- (5) -- --------- --------- ----------- ----------- Change in net assets resulting from shareholder distributions................ (12,933) (14,654) (31,049) (31,203) --------- --------- ----------- ----------- Capital Transactions: Proceeds from shares issued.. 767,190 969,887 1,839,819 1,553,766 Dividends reinvested......... 909 737 7,705 7,810 Cost of shares redeemed...... (802,987) (929,752) (1,771,260) (1,492,634) --------- --------- ----------- ----------- Change in net assets from capital transactions......... (34,888) 40,872 76,264 68,942 --------- --------- ----------- ----------- Change in net assets.......... (34,888) 40,879 76,266 68,942 Net Assets: Beginning of period.......... 360,125 319,246 596,935 527,993 --------- --------- ----------- ----------- End of period................ $ 325,237 $ 360,125 $ 673,201 $ 596,935 ========= ========= =========== =========== Share Transactions: Issued....................... 767,190 969,887 1,839,819 1,553,766 Reinvested................... 909 737 7,705 7,810 Redeemed..................... (802,987) (929,752) (1,771,260) (1,492,634) --------- --------- ----------- ----------- Change in shares.............. (34,888) 40,872 76,264 68,942 ========= ========= =========== =========== See notes to financial statements. -46- 198 AMSOUTH MUTUAL FUNDS Statements of Changes in Net Assets (Amounts in thousands) Institutional Prime Obligations Fund Tax-Exempt Fund ------------- -------------------- Period Year Year Ended Ended Ended July 31, July 31, July 31, 1999 (a) 1999 1998 ------------- --------- --------- From Investment Activities: Operations: Net investment income (loss)........... $ 4,736 $ 2,582 $ 2,696 Net realized gains (losses) from investment transactions............... -- 1 -- --------- --------- --------- Change in net assets resulting from operations............................. 4,736 2,583 2,696 --------- --------- --------- Distributions to Classic Shareholders (b): From net investment income............. (4,300) (660) (691) Distributions to Premier Shareholders (c): From net investment income............. (306)(e) (1,922) (2,005) Distributions to Class B Shareholders (d): From net investment income............. (130)(f) -- -- --------- --------- --------- Change in net assets resulting from shareholder distributions.............. (4,736) (2,582) (2,696) --------- --------- --------- Capital Transactions: Proceeds from shares issued............ 468,518 236,615 225,711 Dividends reinvested................... -- 691 698 Cost of shares redeemed................ (359,485) (231,324) (219,023) --------- --------- --------- Change in net assets from capital transactions........................... 109,033 5,982 7,386 --------- --------- --------- Change in net assets.................... 109,033 5,983 7,386 Net Assets: Beginning of period.................... -- 90,741 83,355 --------- --------- --------- End of period.......................... $ 109,033 $ 96,724 $ 90,741 ========= ========= ========= Share Transactions: Issued................................. 468,518 236,615 225,711 Reinvested............................. -- 691 698 Redeemed............................... (359,485) (231,324) (219,023) --------- --------- --------- Change in shares........................ 109,033 5,982 7,386 ========= ========= ========= - -------- (a) For the period from September 15, 1998 (commencement of operations) through July 31, 1999. (b) Class I shares for the Institutional Prime Obligations Fund. (c) Class II shares for the Institutional Prime Obligations Fund. (d) Class III shares for the Institutional Prime Obligations Fund. (e) For the period from February 19, 1999 (commencement of operations) through July 31, 1999. (f) For the period from February 22, 1999 (commencement of operations) through July 31, 1999. See notes to financial statements. -47- 199 AMSOUTH MUTUAL FUNDS Equity Income Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks & Securities Convertible to Common Stock (99.8%): Basic Materials (3.2%): 8,600 E.I. du Pont de Nemours & Co. ............................. $ 620 10,600 Sealed Air Corp., CVT. PFD., 4/1/18........................ 652 ------- 1,272 ------- Capital Goods/Diversified (6.5%): 9,700 Emerson Electric Co. ...................................... 579 10,400 General Electric Co. ...................................... 1,134 31,000 Ingersoll-Rand Co., 6.75%, CVT. PFD., 12/31/49............. 930 ------- 2,643 ------- Consumer Cyclical (2.3%): 8,450 Ford Motor Co. ............................................ 411 8,500 Mattel, Inc. .............................................. 200 11,700 Tribune/The Learning Co., 6.25%, CVT. PFD., 8/1/01......... 304 ------- 915 ------- Energy (6.7%): 9,300 Mobil Corp. ............................................... 951 16,000 Shell Transport & Trading Co. PLC (ADR).................... 773 23,200 Williams Cos., Inc. ....................................... 976 ------- 2,700 ------- Finance (14.8%): 19,350 Citigroup Inc. ............................................ 862 8,700 Fannie Mae................................................. 600 6,775 J.P. Morgan & Co., Inc. ................................... 866 8,750 Jefferson Pilot/Bank America (ACES)........................ 980 44,400 Lincoln National Corp., 7.75%, CVT. PFD., 8/16/01.......... 1,188 10,000 Merrill Lynch & Co., Inc. ................................. 681 28,000 National Australia Bank, 7.88%, CVT. PFD., 12/31/49........ 791 ------- 5,968 ------- Healthcare (11.2%): 12,900 American Home Products Corp. .............................. 658 770,000 Athena Neurosciences Inc., 4.75%, CVT. BD., 11/15/04....... 823 11,800 Bristol-Myers Squibb Co. .................................. 785 450,000 Centocor Inc./JNJ.......................................... 576 Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks & Securities Convertible to Common Stock, continued: Healthcare, continued: 4,000 Johnson & Johnson.......................................... $ 369 16,700 Monsanto (ACES) 6.50%, CVT. PFD., 11/30/01................. 685 11,500 Pharmacia & Upjohn Inc. ................................... 619 ------- 4,515 ------- Retailing (5.9%): 1,340,000 Costco Companies........................................... 1,185 13,800 Dollar General............................................. 365 11,000 Dollar General STRYPES Trust............................... 456 390,000 Rite Aid Corp. ............................................ 379 ------- 2,385 ------- Services (5.6%): 19,900 McDonald's Corp. .......................................... 830 390,000 Omnicom Group.............................................. 888 20,300 The Walt Disney Co. ....................................... 561 ------- 2,279 ------- Staples (7.6%): 8,000 Coca Cola Co. ............................................. 483 6,200 Estee Lauder............................................... 570 8,800 Hershey Foods Corp. ....................................... 510 17,400 McCormick & Co., Inc. ..................................... 575 13,500 Quaker Oats Co. ........................................... 919 ------- 3,057 ------- Technology (24.1%): 32,700 Amdocs LTD., 6.75%, CVT. PFD., 9/11/02..................... 834 13,400 Corning Glass Works........................................ 938 180,000 EMC Corp., 3.25%, CVT. BD., 3/15/02........................ 976 6,400 IBM Corp. ................................................. 804 4,400 Intel Corp. ............................................... 304 290,000 Level One Communications/Intel............................. 674 9,300 Motorola, Inc. ............................................ 849 26,000 Nextel STRYPES Trust....................................... 1,179 12,600 Pitney Bowes, Inc. ........................................ 802 7,300 Texas Instruments, Inc. ................................... 1,050 10,800 United Technologies Corp. ................................. 720 11,900 Xerox Corp. ............................................... 580 ------- 9,710 ------- Continued -48- 200 AMSOUTH MUTUAL FUNDS Equity Income Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks & Securities Convertible to Common Stock, continued: Transportation (0.9%): 7,400 Union Pacific Corp. ....................................... 381 ------- Utilities (10.5%): 12,200 Ameritech Corp. ........................................... $ 894 24,700 BCE, Inc. ................................................. 1,227 20,300 Nisource Inc. ............................................. 974 32,100 Skytel Communications Inc./WorldCom (b).................... 1,156 ------- 4,251 ------- Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Investment Companies (0.5%): 208,614 AmSouth Prime Obligations Fund............................. 209 ------- Total Common Stocks & Securities Convertible to Common Stock 40,285 ------- Total (Cost $36,192) (a) $40,285 ======= - -------- Percentages indicated are based on net assets of $40,353. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $137. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation......... $4,918 Unrealized depreciation......... (962) ------ Net unrealized appreciation..... $3,956 ====== (b) Represents a restricted security, purchased under Rule 144A, which is exempt from registration under the Security Act of 1933, as amended. These securities have been deemed liquid under guidelines established by the Board of Trustees. ACES--Automatic Common Exchange Securities ADR--American Depository Receipt CVT. PFD.--Convertible Preferred CVT. BD.--Convertible Bond PLC--Public Limited Co. STRYPES--Structured Yield Product Exchangeable for Stock Breakdown of Sectors - -------------------- Common Stocks...................... 58.3% Convertible Preferred Stocks....... 27.5% Convertible Bonds.................. 13.7% Investment Companies............... 0.5% ------ Total............................. 100.0% ====== See notes to financial statements. -49- 201 AMSOUTH MUTUAL FUNDS Equity Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- ---------- Common Stocks (97.3%): Apparel (0.5%): 600,000 Phillips-Van Heusen Corp. .............................. $ 5,100 ---------- Automotive (1.6%): 336,000 Ford Motor Co. ......................................... 16,338 ---------- Automotive Parts (1.4%): 392,000 Arvin Industries, Inc. ................................. 14,651 ---------- Banking (5.2%): 190,000 Bank of America Corp. .................................. 12,611 60,000 Bank One Corp. ......................................... 3,274 285,000 First Union Corp. ...................................... 13,110 735,000 Washington Mutual, Inc. ................................ 25,220 ---------- 54,215 ---------- Beverages (1.6%): 400,000 Diageo PLC ADR.......................................... 16,400 ---------- Business Services (1.8%): 815,000 Reynolds & Reynolds Co., Class A........................ 19,153 ---------- Chemicals-Speciality (2.7%): 1,025,000 Engelhard Corp. ........................................ 22,870 355,000 M.A. Hanna Co. ......................................... 5,680 ---------- 28,550 ---------- Computer Hardware (2.1%): 177,000 IBM Corp. .............................................. 22,247 ---------- Computers & Peripherals (1.5%): 1,285,000 Cabletron Systems, Inc. (b)............................. 15,500 ---------- Consumer Goods (2.1%): 740,000 American Greetings Corp., Class A....................... 21,738 ---------- Electrical & Electronic (1.1%): 230,000 Avnet, Inc. ............................................ 11,270 ---------- Financial Services (2.0%): 660,000 Dun & Bradstreet Corp. ................................. 20,955 ---------- Food Processing & Packaging (2.6%): 165,000 Dole Food, Inc. ........................................ 4,352 855,000 Sara Lee Corp. ......................................... 18,810 180,000 Universal Foods Corp. .................................. 3,926 ---------- 27,088 ---------- Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- ---------- Common Stocks, continued: Forest & Paper Products (6.4%): 50,000 Champion International Corp. ........................... $ 2,588 480,000 International Paper Co. ................................ 24,540 370,000 Weyerhauser Co. ........................................ 23,934 350,000 Willamette Industries, Inc. ............................ 15,750 ---------- 66,812 ---------- Health Care (3.3%): 225,000 Aetna, Inc. ............................................ 18,450 260,000 United Healthcare Corp. ................................ 15,860 ---------- 34,310 ---------- Household Products/Wares (2.6%): 620,000 Newell Rubbermaid, Inc. ................................ 26,815 ---------- Insurance (5.1%): 25,000 Chubb Corp. ............................................ 1,495 360,000 Marsh & McLennan Cos., Inc. ............................ 27,360 790,000 St. Paul Cos., Inc. .................................... 24,589 ---------- 53,444 ---------- Manufacturing (0.3%): 123,800 Kennametal, Inc. ....................................... 2,987 ---------- Medical Supplies (3.5%): 540,000 C.R. Bard, Inc. ........................................ 26,257 365,000 DENTSPLY International, Inc. ........................... 9,878 ---------- 36,135 ---------- Metals & Mining (0.2%): 120,000 Barrick Gold Corp. ..................................... 2,228 ---------- Newspapers (3.8%): 230,000 Dow Jones & Co., Inc. .................................. 11,471 395,000 Gannett Co., Inc. ...................................... 28,539 ---------- 40,010 ---------- Oil & Gas Exploration, Production, & Services (14.5%): 240,000 Atlantic Richfield Co. ................................. 21,615 325,000 Burlington Resources, Inc. ............................. 14,361 510,000 Kerr-McGee Corp. ....................................... 26,264 190,000 Noble Affiliates........................................ 5,558 750,000 Sunoco, Inc. ........................................... 22,875 432,000 Texaco, Inc. ........................................... 26,918 Continued -50- 202 AMSOUTH MUTUAL FUNDS Equity Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- ---------- Common Stocks, continued: Oil & Gas Exploration, Production, & Services, continued: 710,000 Ultramar Diamond Shamrock Corp. ........................ $ 16,774 610,000 USX-Marathon Group...................................... 18,529 ---------- 152,894 ---------- Packaging (0.7%): 250,000 Crown Cork & Seal, Inc. ................................ 7,328 ---------- Pharmaceuticals (5.4%): 170,000 American Home Products Corp. ........................... 8,670 335,000 Baxter International, Inc. ............................. 23,010 450,000 Pharmacia & Upjohn, Inc. ............................... 24,216 ---------- 55,896 ---------- Pollution Control Services & Equipment (1.0%): 391,500 Waste Management, Inc. ................................. 10,008 ---------- Railroads (1.6%): 350,000 CSX Corp. .............................................. 16,953 ---------- Retail (10.3%): 440,000 CVS Corp. .............................................. 21,890 300,000 Dayton Hudson Corp. .................................... 19,406 540,000 Dillard's, Inc., Class A................................ 16,639 600,000 May Department Stores Co. .............................. 23,212 120,000 The Limited, Inc. ...................................... 5,483 500,000 Wal-Mart Stores, Inc. .................................. 21,125 ---------- 107,755 ---------- Temporary Services (0.6%): 700,000 Olsten Corp. ........................................... 5,906 ---------- Shares or Principal Security Market Amount Description Value ---------- ------------------------------------------------------- ---------- Common Stocks, continued: Transportation Leasing & Trucking (2.3%): 525,000 Ryder System, Inc. .................................... $ 12,370 243,000 US Freightways Corp. .................................. 11,998 ---------- 24,368 ---------- Utilities--Electric & Gas (3.5%): 615,000 Constellation Energy Group............................. 18,027 40,000 New Century Energies, Inc. ............................ 1,388 650,000 Southern Co. .......................................... 17,184 ---------- 36,599 ---------- Utilities--Telecommunications (6.0%): 435,000 AT&T Corp. ............................................ 22,593 363,216 BellAtlantic Corp. .................................... 23,155 358,000 BellSouth Corp. ....................................... 17,184 ---------- 62,932 ---------- Total Common Stocks 1,016,585 ---------- Commercial Paper--Domestic (1.0%): Automotive--Finance (1.0%): $ 10,000 General Motors Acceptance Corp., 5.11%, 8/5/99 ........ 10,000 ---------- Total Commercial Paper--Domestic 10,000 ---------- Investment Companies (1.6%): 16,400,161 AmSouth Prime Obligations Fund......................... 16,400 184,508 AmSouth U.S. Treasury Fund............................. 185 ---------- Total Investment Companies 16,585 ---------- Total (Cost $711,667) (a) $1,043,170 ========== - -------- Percentages indicated are based on net assets of $1,043,794. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $891. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation....... $353,248 Unrealized depreciation....... (22,636) -------- Net unrealized appreciation... $330,612 ======== (b) Represents non-income producing securities. ADR--American Depository Receipt PLC--Public Limited Co. See notes to financial statements. -51- 203 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks (91.1%): Aerospace/Defense (1.8%): 2,600 Alliedsignal, Inc. .......................................... $ 169 3,400 Boeing Co. .................................................. 154 300 General Dynamics Corp. ...................................... 20 2,200 Lockheed Martin Corp. ....................................... 77 100 Northrop Grumman Corp. ...................................... 7 900 Raytheon Company, Class B.................................... 63 2,100 United Technologies Corp. ................................... 140 -------- 630 -------- Agriculture (0.1%): 500 Pioneer Hi-Bred International Inc. .......................... 19 -------- Air Freight (0.2%): 1,700 FDX Corp. (b)................................................ 76 -------- Airlines (0.5%): 900 AMR Corp. (b)................................................ 58 800 Delta Air Lines, Inc. ....................................... 48 2,700 Southwest Airlines........................................... 50 400 US Airways Group, Inc. (b)................................... 14 -------- 170 -------- Apparel (0.1%): 300 Fruit of the Loom Inc. (b)................................... 2 300 Liz Claiborne, Inc. ......................................... 12 200 Reebok International Ltd. (b)................................ 2 100 Russell Corp. ............................................... 2 700 V F Corp. ................................................... 28 -------- 46 -------- Appliances (0.0%): 100 Maytag Corp. ................................................ 7 100 Whirlpool Corp. ............................................. 7 -------- 14 -------- Automotive (1.4%): 5,500 Ford Motor Co. .............................................. 268 3,400 General Motors Corp. ........................................ 207 400 Navistar International (b)................................... 18 200 PACCAR, Inc. ................................................ 11 -------- 504 -------- Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Automotive Parts (0.4%): 200 Cooper Tire & Rubber Co. .................................... $ 5 900 Dana Corp. .................................................. 38 1,737 Delphi Automotive Systems.................................... 31 300 Genuine Parts Co. ........................................... 9 300 Goodyear Tire & Rubber Co. .................................. 16 700 TRW, Inc. ................................................... 37 -------- 136 -------- Banking (5.7%): 4,800 Bank of America Corp. ....................................... 319 1,700 Bank of Boston Corp. ........................................ 80 3,500 Bank of New York Co., Inc. .................................. 129 1,748 Bank One Corp. .............................................. 95 3,800 Chase Manhattan Corp. ....................................... 292 900 Comerica, Inc. .............................................. 50 1,100 First Union Corp. ........................................... 51 3,900 Firstar Corp. ............................................... 102 660 Huntington Bancshares, Inc. ................................. 20 1,000 J.P. Morgan & Co., Inc. ..................................... 128 3,200 MBNA Corp. .................................................. 91 2,900 Mellon Bank Corp. ........................................... 98 300 Mercantile Bancorp. ......................................... 16 3,600 National City Corp. ......................................... 107 800 PNC Financial Corp. ......................................... 42 600 Regions Financial Corp. ..................................... 21 600 Republic New York Corp. ..................................... 42 400 SouthTrust Corp. ............................................ 15 300 Summit Bancorp. ............................................. 11 900 SunTrust Banks, Inc. ........................................ 58 400 Synovus Financial Corp. ..................................... 7 600 Wachovia Corp. .............................................. 47 1,700 Washington Mutual, Inc. ..................................... 58 2,500 Wells Fargo Co. ............................................. 98 -------- 1,977 -------- Beverages (2.0%): 200 Adolph Coors Co. Class B..................................... 11 1,300 Anheuser-Busch Co., Inc. .................................... 103 5,400 Coca-Cola Co. ............................................... 325 5,000 PepsiCo, Inc. ............................................... 196 1,100 Seagram Co. Ltd. ............................................ 56 -------- 691 -------- Continued -52- 204 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Biotechnology (0.5%): 2,100 Amgen, Inc. (b).............................................. $ 162 50 Pe Corp. Celera Genomics (b)................................. 1 -------- 163 -------- Broadcasting/Cable (0.2%): 2,100 Comcast Corp.--Special Class A............................... 81 -------- Brokerage Services (1.4%): 100 Bear Stearns Co., Inc. ...................................... 4 2,800 Charles Schwab Corp. ........................................ 123 500 Lehman Brothers Holdings, Inc. .............................. 27 1,300 Merrill Lynch & Co., Inc. ................................... 88 2,700 Morgan Stanley Dean Witter & Co. ............................ 244 -------- 486 -------- Business Services (0.2%): 1,700 Automatic Data Processing, Inc. ............................. 68 -------- Chemicals (1.8%): 600 Air Products and Chemicals, Inc. ............................ 20 3,900 E.I. du Pont de Nemours & Co. ............................... 280 300 Great Lakes Chemical Corp. .................................. 13 400 Hercules, Inc. .............................................. 14 2,700 Monsanto Co. ................................................ 106 400 Nalco Chemical Co. .......................................... 21 1,000 PPG Industries, Inc. ........................................ 60 900 Praxair, Inc. ............................................... 42 384 Rohm & Haas Co. ............................................. 16 900 Sherwin Williams Co. ........................................ 24 200 Sigma Aldrich Corp. ......................................... 7 400 Union Carbide Corp. ......................................... 19 100 W.R.Grace and Co. (b)........................................ 2 -------- 624 -------- Chemicals--Speciality (0.1%): 800 Engelhard Corp. ............................................. 18 -------- Commercial Services (0.4%): 4,220 Cendant Corp. (b)............................................ 84 300 Deluxe Corp. ................................................ 11 117 Gartner Group, Inc. (b)...................................... 3 900 Laidlaw, Inc. ............................................... 6 600 Paychex, Inc. ............................................... 17 1,300 Service Corp. International.................................. 21 -------- 142 -------- Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Computer Hardware (4.4%): 400 Apple Computer, Inc. (b)..................................... $ 22 6,500 Compaq Computer Corp. ....................................... 156 100 Data General Corp. (b)....................................... 1 9,400 Dell Computer Corp. (b)...................................... 384 400 Gateway, Inc. (b)............................................ 30 5,500 IBM Corp. ................................................... 692 3,400 Sun Microsystems, Inc. (b)................................... 231 -------- 1,516 -------- Computer Software (5.2%): 200 Adobe Systems, Inc. ......................................... 17 100 Autodesk, Inc. .............................................. 3 2,500 Computer Associates International, Inc. ..................... 115 600 Computer Sciences Corp. (b).................................. 39 1,000 Compuware Corp. (b).......................................... 28 15,600 Microsoft Corp. (b).......................................... 1,338 900 Novell, Inc. (b)............................................. 23 5,500 Oracle Corp. (b)............................................. 208 700 Parametric Technology Corp. (b).............................. 10 700 Peoplesoft, Inc. (b)......................................... 10 -------- 1,791 -------- Computers & Peripherals (4.0%): 1,200 3Com Corp. (b)............................................... 29 500 Cabletron Systems, Inc. (b).................................. 6 700 Ceridian Corp. (b)........................................... 20 9,500 Cisco Systems, Inc. (b)...................................... 589 2,100 Electronic Data Systems Corp. ............................... 127 2,800 EMC Corp. (b)................................................ 170 3,700 Hewlett-Packard Co. ......................................... 387 1,100 Seagate Technology, Inc. (b)................................. 30 500 Silicon Graphics, Inc. (b)................................... 9 400 Unisys Corp. (b)............................................. 16 -------- 1,383 -------- Consumer Goods (1.3%): 300 American Greetings Corp., Class A............................ 9 500 Brunswick Corp. ............................................. 14 4,100 Gillette Co. ................................................ 180 2,600 Procter & Gamble Co. ........................................ 234 -------- 437 -------- Continued -53- 205 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Cosmetics/Personal Care (0.6%): 200 Alberto Culver Co. Class B................................... $ 5 700 Avon Products, Inc. ......................................... 32 100 International Flavors & Fragrances, Inc. .................... 5 2,500 Kimberly Clark Corp. ........................................ 152 -------- 194 -------- Diversified Manufacturing (4.3%): 500 Cooper Industries............................................ 27 300 Crane Co. ................................................... 8 300 Eaton Corp. ................................................. 30 200 FMC Corp. (b)................................................ 14 10,200 General Electric Co. ........................................ 1,111 1,800 Minnesota Mining & Manufacturing Co. ........................ 158 200 Raychem Corp. ............................................... 8 900 Tenneco, Inc. ............................................... 21 400 Textron, Inc. ............................................... 33 972 Tyco International Ltd. ..................................... 95 -------- 1,505 -------- Electric Utility (0.0%): 500 Niagara Mohawk Holdings Inc. (b)............................. 8 -------- Electrical & Electronic (0.0%): 400 Ameren Corp. ................................................ 16 -------- Electronic Components (0.3%): 700 LSI Logic Corp. (b).......................................... 35 100 Millipore Corp. ............................................. 4 700 Solectron Corp. (b).......................................... 46 200 Tektronix, Inc. ............................................. 6 -------- 91 -------- Electronic Components/ Instruments (0.5%): 100 E G & G, Inc. ............................................... 3 2,200 Emerson Electric Co. ........................................ 131 300 Johnson Controls, Inc. ...................................... 21 100 Parker-Hannifin Corp. ....................................... 5 200 Pe Corp. Biosystems.......................................... 11 -------- 171 -------- Engineering & Construction (0.0%): 400 Fluor Corp. ................................................. 16 100 Foster Wheeler Corp. ........................................ 1 -------- 17 -------- Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Entertainment (0.2%): 600 Harrah's Entertainment, Inc. (b)............................. $ 13 2,600 The Walt Disney Co. ......................................... 72 -------- 85 -------- Environmental Control (0.1%): 400 Browning-Ferris Industries, Inc. ............................ 18 -------- Financial Services (4.0%): 1,700 American Express Co. ........................................ 224 2,000 Associates First Capital..................................... 77 1,000 Capital One Financial Corp. ................................. 46 10,000 Citigroup, Inc. ............................................. 445 500 Countrywide Credit Industries, Inc. ......................... 19 300 Dun & Bradstreet Corp. ...................................... 10 3,300 Fannie Mae................................................... 227 2,400 Freddie Mac.................................................. 138 200 Golden West Financial Corp. ................................. 19 2,400 Household International, Inc. ............................... 103 750 Providian Financial.......................................... 68 300 SLM Holding Corp. ........................................... 14 -------- 1,390 -------- Food Distributors & Wholesalers (0.3%): 945 Albertsons, Inc. ............................................ 47 2,400 Archer-Daniels-Midland Co. .................................. 34 100 Great Atlantic & Pacific Tea Co., Inc. ...................... 3 600 Kroger Co. (b)............................................... 16 -------- 100 -------- Food Products, Processing & Packaging (1.4%): 1,600 Bestfoods.................................................... 78 1,200 Campbell Soup Co. ........................................... 53 900 General Mills, Inc. ......................................... 75 2,000 H.J. Heinz Co. .............................................. 94 300 Hershey Foods Corp. ......................................... 17 1,800 Nabisco Group................................................ 34 600 Quaker Oats Co. ............................................. 41 1,550 Unilever NV-W/I ADR.......................................... 108 -------- 500 -------- Forest & Paper Products (0.6%): 100 Boise Cascade Corp. ......................................... 4 500 Champion International Corp. ................................ 26 1,200 Fort James Corp. ............................................ 44 Continued -54- 206 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Forest & Paper Products, continued: 500 Georgia Pacific Corp. ....................................... $ 22 45 International Paper Co. ..................................... 2 600 Louisiana Pacific Corp. ..................................... 13 600 Mead Corp. .................................................. 25 100 Potlatch Corp. .............................................. 4 600 Westvaco Corp. .............................................. 18 600 Weyerhauser Co. ............................................. 39 -------- 197 -------- Gas Distribution (0.6%): 600 Coastal Corp. ............................................... 24 200 Columbia Energy Group........................................ 12 300 Consolidated Natural Gas..................................... 19 1,000 Enron Corp. ................................................. 84 100 Nicor, Inc. ................................................. 4 100 Oneok, Inc. ................................................. 3 700 Sempra Energy................................................ 16 300 Sonat, Inc. ................................................. 11 1,200 Williams Cos., Inc. ......................................... 50 -------- 223 -------- Health Care (0.3%): 400 Aetna, Inc. ................................................. 32 400 HCR Manor Care (b)........................................... 8 2,200 HEALTHSOUTH Corp. (b)........................................ 27 900 Humana, Inc. (b)............................................. 10 600 Tenet Healthcare Corp. (b)................................... 11 -------- 88 -------- Health Care Services (0.1%): 900 IMS Health, Inc. ............................................ 25 470 Mckesson HBOC, Inc. ......................................... 15 -------- 40 -------- Home Builders (0.0%): 100 Centex Corp. ................................................ 4 100 Kaufman & Broad Home Corp. .................................. 2 100 Pulte Corp. ................................................. 2 -------- 8 -------- Hotels & Lodging (0.3%): 2,400 Carnival Corp. .............................................. 111 500 Hilton Hotels Corp. ......................................... 7 -------- 118 -------- Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Household Products/Wares (0.3%): 700 Clorox Corp. ................................................ $ 79 800 Fortune Brands, Inc. ........................................ 32 100 Jostens, Inc. ............................................... 2 72 Newell Rubbermaid, Inc. ..................................... 3 100 Tupperware Corp. ............................................ 2 -------- 118 -------- Insurance (2.9%): 503 Aegon Nv..................................................... 38 3,800 Allstate Corp. .............................................. 135 3,700 American International Group, Inc. .......................... 430 300 Chubb Corp. ................................................. 18 1,200 Cigna Corp. ................................................. 106 400 Cincinnati Financial Corp. .................................. 15 1,300 Hartford Financial Services Group............................ 70 200 Jefferson Pilot Corp. ....................................... 15 300 Lincoln National Corp. ...................................... 15 600 Loews Corp. ................................................. 42 600 MBIA, Inc. .................................................. 34 400 MGIC Investment Corp. ....................................... 20 400 Safeco Corp. ................................................ 15 300 St. Paul Cos., Inc. ......................................... 9 1,165 Unumprovident Corp. ......................................... 60 -------- 1,022 -------- Internet Software (1.1%): 3,900 America Online, Inc. (b)..................................... 371 -------- Machinery & Equipment (0.3%): 100 Briggs & Stratton Corp. ..................................... 6 900 Deere & Co. ................................................. 34 900 Ingersoll Rand Co. .......................................... 58 100 Milacron Inc. ............................................... 2 100 Snap-On, Inc. ............................................... 4 900 Thermo Electron (b).......................................... 15 -------- 119 -------- Media (1.3%): 2,900 CBS Corp. (b)................................................ 127 400 King World Productions, Inc. (b)............................. 14 1,100 McGraw Hill Cos., Inc. ...................................... 56 500 MediaOne Group, Inc. (b)..................................... 36 100 Meredith Corp. .............................................. 4 Continued -55- 207 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Media, continued: 2,000 Time Warner, Inc. ........................................... $ 144 1,900 Viacom, Inc., Class B (b).................................... 80 -------- 461 -------- Medical Supplies (0.9%): 300 Allergan, Inc. .............................................. 28 300 Bausch & Lomb, Inc. ......................................... 22 1,000 Becton Dickinson & Co. ...................................... 27 300 Biomet, Inc. ................................................ 11 1,600 Guidant Corp. ............................................... 94 400 Mallinckrodt, Inc. .......................................... 14 1,600 Medtronic, Inc. ............................................. 115 200 St Jude Medical, Inc. (b).................................... 7 -------- 318 -------- Metals & Mining (0.6%): 600 Alcan Aluminum Ltd. ......................................... 18 1,900 Alcoa, Inc. ................................................. 113 100 Asarco, Inc. ................................................ 2 1,000 Barrick Gold Corp. .......................................... 19 300 Battle Mountain Gold Co. .................................... 1 300 Cyprus Amax Minerals Co. .................................... 4 500 Freeport-McMoRan Copper & Gold, Inc. ........................ 8 600 Homestake Mining............................................. 5 500 Inco Ltd. ................................................... 9 900 Newmont Mining Corp. ........................................ 17 500 Placer Dome, Inc. ........................................... 5 400 Reynolds Metals Co. ......................................... 22 -------- 223 -------- Newspapers (0.4%): 200 Dow Jones & Co., Inc. ....................................... 10 1,600 Gannett Co., Inc. ........................................... 116 100 Knight-Ridder, Inc. ......................................... 5 500 New York Times Co. .......................................... 20 -------- 151 -------- Office Equipment & Services (0.2%): 300 Avery Dennison Corp. ........................................ 18 400 Harris Corp. ................................................ 12 100 Moore Corp. Ltd. ............................................ 1 800 Pitney Bowes, Inc. .......................................... 51 -------- 82 -------- Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Oil & Gas Exploration, Production, & Services (6.6%): 100 Amerada Hess Corp. .......................................... $ 6 100 Anadarko Petroleum........................................... 4 200 Apache Corp. ................................................ 8 400 Ashland, Inc. ............................................... 15 1,800 Atlantic Richfield Co. ...................................... 162 1,852 Baker Hughes, Inc. .......................................... 64 500 Burlington Resources, Inc. .................................. 22 1,800 Chevron Corp. ............................................... 164 7,300 Exxon Corp. ................................................. 580 1,200 Halliburton Co. ............................................. 55 200 Helmerich & Payne, Inc. ..................................... 5 510 Kerr-McGee Corp. ............................................ 26 3,500 Mobil Corp. ................................................. 358 500 Occidental Petroleum Corp. .................................. 10 1,400 Phillips Petroleum Co. ...................................... 72 200 Rowan Cos., Inc. (b)......................................... 4 6,000 Royal Dutch Petroleum Co. ................................... 367 2,400 Schlumberger Ltd. ........................................... 145 2,800 Texaco, Inc. ................................................ 174 500 Union Pacific Resources Group................................ 9 1,700 USX-Marathon Group........................................... 52 -------- 2,302 -------- Packaging (0.1%): 300 Crown Cork & Seal, Inc. ..................................... 9 200 Sealed Air Corp. (b)......................................... 13 -------- 22 -------- Pharmaceuticals (8.9%): 4,900 Abbott Laboratories.......................................... 210 4,200 American Home Products Corp. ................................ 214 1,400 Baxter International, Inc. .................................. 96 6,500 Bristol-Myers Squibb Co. .................................... 432 4,300 Eli Lilly & Co. ............................................. 282 3,800 Johnson & Johnson............................................ 350 7,600 Merck & Co., Inc. ........................................... 515 11,700 Pfizer, Inc. ................................................ 397 2,000 Pharmacia & Upjohn, Inc. .................................... 108 5,400 Schering-Plough Corp. ....................................... 265 2,800 Warner-Lambert Co. .......................................... 185 500 Watson Pharmaceuticals, Inc. (b)............................. 17 -------- 3,071 -------- Continued -56- 208 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Photography & Imaging (0.3%): 1,300 Eastman Kodak Co. ........................................... $ 90 100 Polaroid Corp. .............................................. 2 -------- 92 -------- Railroads (0.5%): 2,600 Burlington Northern Santa Fe................................. 84 600 CSX Corp. ................................................... 29 600 Kansas City Southern Industries.............................. 33 1,000 Norfolk Southern Corp. ...................................... 29 -------- 175 -------- Restaurants (0.2%): 1,600 McDonald's Corp. ............................................ 67 400 Tricon Global Restaurants (b)................................ 16 -------- 83 -------- Retail (4.4%): 800 Best Buy, Inc. (b)........................................... 60 1,000 Circuit City Stores, Inc. ................................... 47 2,300 CVS Corp. ................................................... 114 1,600 Dayton Hudson Corp. ......................................... 104 300 Dillard's, Inc., Class A..................................... 9 3,000 Gap, Inc. ................................................... 140 2,300 Home Depot, Inc. ............................................ 147 400 Ikon Office Solutions........................................ 5 900 Kohls Corp. (b).............................................. 68 100 Longs Drug Stores Corp. ..................................... 3 1,700 May Department Stores Co. ................................... 66 400 Nordstrom, Inc. ............................................. 13 100 Pep Boys Manny, Moe & Jack................................... 2 200 Rite Aid..................................................... 4 2,200 Staples, Inc. (b)............................................ 64 600 Supervalu, Inc. ............................................. 14 900 Tandy Corp. ................................................. 46 1,700 TJX Co., Inc. ............................................... 56 300 Toys 'R' Us, Inc. (b)........................................ 5 13,000 Wal-Mart Stores, Inc. ....................................... 549 -------- 1,516 -------- Semiconductors (3.4%): 400 Advanced Micro Devices, Inc. (b)............................. 7 1,500 Applied Materials, Inc. (b).................................. 108 11,100 Intel Corp. ................................................. 765 200 KLA-Tencor Corp. (b)......................................... 14 Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Semiconductors, continued: 1,000 Micron Technology, Inc. (b).................................. $ 62 900 National Semiconductor Corp. (b)............................. 22 1,400 Texas Instruments, Inc. ..................................... 202 -------- 1,180 -------- Steel (0.0%): 100 Bethlehem Steel Corp. (b).................................... 1 100 Nucor Corp. ................................................. 5 100 Timken Co. .................................................. 2 100 Worthington Industries, Inc. ................................ 1 -------- 9 -------- Telecommunications--Equipment (3.4%): 900 General Instrument Corp. .................................... 41 9,750 Lucent Technologies, Inc. ................................... 634 2,200 Motorola, Inc. .............................................. 201 1,900 Nortel Networks Corp. ....................................... 168 400 Scientific-Atlanta, Inc. .................................... 15 1,800 Tellabs, Inc. (b)............................................ 111 -------- 1,170 -------- Telecommunications--Wireless (0.4%): 200 Andrew Corp. (b)............................................. 4 1,250 Sprint Corp. PCS............................................. 76 200 Vodafone Airtouch PLC........................................ 42 -------- 122 -------- Tobacco (0.9%): 7,800 Philip Morris Companies, Inc. ............................... 290 500 UST, Inc. ................................................... 16 -------- 306 -------- Tobacco Holdings (0.0%): 533 RJ Reynolds.................................................. 15 -------- Toys/Games/Hobbies (0.1%): 550 Hasbro, Inc. ................................................ 14 300 Mattel, Inc. ................................................ 7 -------- 21 -------- Transportation & Shipping (0.0%): 200 USX U.S. Steel Group......................................... 5 -------- Transportation Leasing & Trucking (0.0%): 200 Ryder System, Inc. .......................................... 5 -------- Continued -57- 209 AMSOUTH MUTUAL FUNDS Enhanced Market Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- -------- Common Stocks, continued: Utilities--Electric & Gas (1.6%): 500 American Electric Power Co. ................................. $ 18 400 Carolina Power & Light Co. .................................. 16 600 Central & South West Corp. .................................. 13 400 Cinergy Corp. ............................................... 12 300 CMS Energy Corp. ............................................ 11 700 Consolidated Edison, Inc. ................................... 30 400 Constellation Energy Group................................... 12 500 Dominion Resources, Inc. .................................... 22 400 DTE Energy Co. .............................................. 16 1,000 Duke Energy Corp. ........................................... 52 900 Edison International......................................... 23 700 Entergy Corp. ............................................... 21 600 Firstenergy Corp. ........................................... 17 500 FPL Group, Inc. ............................................. 27 300 GPU Inc. .................................................... 12 300 New Century Energies, Inc. .................................. 10 400 Northern States Power Co. ................................... 9 450 P.P. & L. Resources, Inc. ................................... 13 800 Pacificorp................................................... 15 600 Peco Energy Co. ............................................. 25 100 Peoples Energy Corp. ........................................ 4 1,100 PG&E Corp. .................................................. 35 600 Public Service Enterprise Group, Inc. ....................... 24 800 Reliant Energy, Inc. ........................................ 22 1,900 Southern Co. ................................................ 50 800 Texas Utilities Co. ......................................... 34 600 Unicom Corp. ................................................ 24 -------- 567 -------- Shares or Principal Security Market Amount Description Value --------- ---------------------------------------------------------- -------- Common Stocks, continued: Utilities--Telecommunications (7.0%): 3,600 Ameritech Corp. .......................................... $ 264 7,432 AT&T Corp. ............................................... 385 2,500 BellAtlantic Corp. ....................................... 159 7,400 BellSouth Corp. .......................................... 355 700 Centurytel, Inc. ......................................... 30 300 Frontier Corp. ........................................... 17 3,200 GTE Corp. ................................................ 236 4,300 MCI WorldCom, Inc. (b).................................... 355 5,500 SBC Communications, Inc. ................................. 315 2,500 Sprint Corp. ............................................. 129 2,600 U.S. West, Inc. .......................................... 149 -------- 2,394 -------- Total Common Stocks 31,661 -------- Investment Companies (2.8%): 979,724 AmSouth Prime Obligations Fund............................ 980 5,326 AmSouth U.S. Treasury Fund................................ 5 -------- Total Investment Companies 985 -------- U.S. Treasury Notes (2.9%): $ 1,000 6.38%, 1/15/00 (c)........................................ 1,005 -------- Total U.S. Treasury Notes 1,005 -------- Total (Cost $31,089) (a) $ 33,651 ======== - -------- Percentages indicated are based on net assets of $34,770. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $21. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation....... $ 3,697 Unrealized depreciation....... (1,156) ------- Net unrealized appreciation... $ 2,541 ======= (b) Represents non-income producing securities. (c) All or part of this security has been pledged as collateral as of July 31, 1999. Unrealized # of Contracts Contract Value Expiration Date Gain/(Loss) -------------- -------------- --------------- ----------- S&P 500 Stock Index.. 9 $2,997 9/17/99 (130) The aggregate market value of securities pledged to cover margin requirements for open futures positions at July 31, 1999 was $169. See notes to financial statements. -58- 210 AMSOUTH MUTUAL FUNDS Capital Growth Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks (96.8%): Advertising (1.6%): 9,000 Omnicom Group, Inc. ......................................... $ 638 ------- Banking (4.4%): 12,300 Commerce Bancshares, Inc..................................... 497 15,000 SouthTrust Corp.............................................. 551 10,692 SunTrust Banks, Inc.......................................... 689 ------- 1,737 ------- Beverages (1.6%): 8,100 Anheuser-Busch Co., Inc. .................................... 639 ------- Broadcasting/Cable (1.9%): 20,400 Cox Communications Inc., Class A (b)......................... 764 ------- Brokerage Services (4.3%): 17,000 Lehman Brothers Holdings, Inc................................ 914 8,800 Morgan Stanley Dean Witter & Co.............................. 793 ------- 1,707 ------- Chemicals (1.4%): 14,500 Monsanto Co. ................................................ 567 ------- Computer Hardware (2.7%): 11,400 Apple Computer, Inc. (b)..................................... 635 6,400 Sun Microsystems, Inc. (b)................................... 434 ------- 1,069 ------- Computer Software (5.7%): 30,000 Compuware Corp. (b).......................................... 833 16,800 Microsoft Corp. (b).......................................... 1,441 ------- 2,274 ------- Diversified Manufacturing (7.0%): 12,300 General Electric Co.......................................... 1,341 14,200 Tyco International Ltd. ..................................... 1,387 ------- 2,728 ------- Electronic Components (2.5%): 20,000 LSI Logic Corp. (b).......................................... 1,006 ------- Financial Services (1.7%): 7,450 Providian Financial.......................................... 678 ------- Food Products & Services (2.0%): 19,000 Nabisco Holdings Corp........................................ 791 ------- Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks, continued: Household Products/Wares (1.7%): 6,100 Clorox Corp.................................................. $ 683 ------- Insurance (1.6%): 14,000 AFLAC, Inc................................................... 649 ------- Internet Software (4.1%): 5,000 America Online, Inc. (b)..................................... 476 13,000 Earthlink Network, Inc. (b).................................. 628 16,000 Mindspring Enterprises, Inc. (b)............................. 537 ------- 1,641 ------- Medical Supplies (1.3%): 7,100 Medtronic, Inc............................................... 512 ------- Newspapers (1.9%): 14,000 Knight-Ridder, Inc. ......................................... 751 ------- Oil & Gas Exploration, Production, & Services (6.9%): 12,000 Phillips Petroleum Co. ...................................... 616 11,400 Royal Dutch Petroleum Co..................................... 695 12,700 Texaco, Inc.................................................. 792 15,000 Unocal Corp. ................................................ 595 ------- 2,698 ------- Pharmaceuticals (9.3%): 13,100 Bristol-Myers Squibb Co. .................................... 871 9,900 Eli Lilly & Co. ............................................. 650 12,000 Pharmacia & Upjohn, Inc. .................................... 646 17,000 Schering-Plough Corp......................................... 833 9,900 Warner-Lambert Co. .......................................... 653 ------- 3,653 ------- Retail (12.9%): 18,000 Abercrombie & Fitch Co. (b).................................. 747 31,000 Bed Bath & Beyond, Inc. (b).................................. 1,053 14,000 Best Buy, Inc. (b)........................................... 1,045 15,750 Gap, Inc..................................................... 736 12,100 Home Depot, Inc.............................................. 772 17,000 Wal-Mart Stores, Inc......................................... 718 ------- 5,071 ------- Semiconductors (5.3%): 15,000 Applied Materials, Inc. (b).................................. 1,079 15,000 KLA-Tencor Corp. (b)......................................... 1,016 ------- 2,095 ------- Continued -59- 211 AMSOUTH MUTUAL FUNDS Capital Growth Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks, continued: Telecommunications--Equipment (7.5%): 14,400 Lucent Technologies, Inc..................................... $ 937 175,000 Paging Network, Inc. (b)..................................... 941 29,000 Scientific-Atlanta, Inc. .................................... 1,058 ------- 2,936 ------- Telecommunications--Wireless (3.1%): 23,000 Nextel Communications, Inc. (b).............................. 1,232 ------- - -------- Percentages indicated are based on net assets of $39,558. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $8. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............................................. $ 5,523 Unrealized depreciation............................................. (1,592) ------- Net unrealized appreciation......................................... $ 3,931 ======= (b) Represents non-income producing securities. Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks, continued: Utilities--Telecommunications (4.4%): 21,225 Centurytel, Inc.............................................. $ 907 16,400 Sprint Corp.................................................. 848 ------- 1,755 ------- Total Common Stocks 38,274 ------- Total (Cost $34,335) (a) $38,274 ======= See notes to financial statements. -60- 212 AMSOUTH MUTUAL FUNDS Select Equity Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks (97.9%): Business Services (4.8%): 27,300 Automatic Data Processing, Inc............................... $ 1,094 ------- Commercial Services (0.4%): 3,906 Gartner Group, Inc. (b)...................................... 84 ------- Consumer Goods (4.2%): 32,600 American Greetings Corp., Class A............................ 958 ------- Electrical Equipment (10.7%): 58,700 Hubbell Harvey, Inc., Class B................................ 2,421 ------- Electronic Components/ Instruments (10.3%): 38,900 Emerson Electric Co.......................................... 2,322 ------- Financial Services (11.3%): 33,700 Dun & Bradstreet Corp........................................ 1,070 27,300 H & R Block, Inc............................................. 1,492 ------- 2,562 ------- Food Distributors & Wholesalers (4.9%): 33,600 SYSCO Corp................................................... 1,098 ------- Food Processing & Packaging (6.6%): 36,900 Ralston Purina Co............................................ 1,105 15,600 Smuckers Co., Class A........................................ 377 ------- 1,482 ------- Food Products, Processing & Packaging (3.9%): 15,100 Hershey Foods Corp........................................... 876 ------- Health Care Services (3.7%): 30,000 IMS Health, Inc.............................................. 836 ------- Machinery & Equipment (4.2%): 10,100 Briggs & Stratton Corp....................................... 608 10,000 Snap-On, Inc................................................. 350 ------- 958 ------- - -------- Percentages indicated are based on net assets of $22,611. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............................................. $ 2,628 Unrealized depreciation............................................. (1,247) ------- Net unrealized appreciation......................................... $ 1,381 ======= (b) Represents non-income producing securities. Security Market Shares Description Value ------ ------------------------------------------------------------- ------- Common Stocks, continued: Media (1.8%): 12,833 Nielsen Media Research (b)................................... $ 417 ------- Newspapers (8.3%): 17,000 Gannett Co., Inc. ........................................... 1,227 8,000 Lee Enterprises.............................................. 244 700 Washington Post, Class B..................................... 396 ------- 1,867 ------- Office Equipment & Services (4.7%): 16,800 Pitney Bowes, Inc............................................ 1,069 ------- Pharmaceuticals (8.2%): 27,900 Bristol-Myers Squibb Co. .................................... 1,855 ------- Pollution Control Services & Equipment (3.6%): 31,760 Waste Management, Inc........................................ 812 ------- Restaurants (5.4%): 29,500 McDonald's Corp.............................................. 1,230 ------- Tobacco (0.9%): 5,500 Philip Morris Companies, Inc................................. 205 ------- Total Common Stocks 22,146 ------- Investment Companies (1.5%): 337,441 AmSouth Prime Obligations Fund............................... 337 ------- Total Investment Companies 337 ------- Total (Cost $21,102) (a) $22,483 ======= See notes to financial statements. -61- 213 AMSOUTH MUTUAL FUNDS Regional Equity Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ----------------------------------------------------------- ------- Common Stocks (98.0%): Apparel (2.1%): 90,000 Russell Corp............................................... $ 1,727 ------- Automotive Parts (5.6%): 100,000 Discount Auto Parts, Inc. (b).............................. 2,238 75,000 Genuine Parts Co. ......................................... 2,329 ------- 4,567 ------- Banking (9.7%): 40,000 Bank of America Corp....................................... 2,654 30,000 First American Corp.-Tenn.................................. 1,260 50,000 First Union Corp. ......................................... 2,300 40,000 Union Planters Corp........................................ 1,773 ------- 7,987 ------- Building Materials (3.0%): 275,000 Interface, Inc............................................. 2,458 ------- Commercial Services (5.5%): 60,000 Equifax, Inc............................................... 1,973 175,000 Modis Professional Services (b)............................ 2,537 ------- 4,510 ------- Construction--Manufactured Homes (2.9%): 225,000 Clayton Homes, Inc......................................... 2,363 ------- Diversified Manufacturing (0.8%): 55,000 Walter Industries, Inc. (b)................................ 694 ------- Food Processing & Packaging (3.8%): 90,000 Flowers Industries, Inc.................................... 1,502 110,000 Lance, Inc................................................. 1,616 ------- 3,118 ------- Forest & Paper Products (5.5%): 80,000 Caraustar Industries, Inc. ................................ 1,990 70,000 Fort James Corp. .......................................... 2,555 ------- 4,545 ------- Furniture (3.7%): 230,000 Heilig-Myers Co............................................ 1,668 40,000 Winsloew Furniture, Inc. (b)............................... 1,345 ------- 3,013 ------- Health Care (5.1%): 340,000 HEALTHSOUTH Corp. (b)...................................... 4,165 ------- Security Market Shares Description Value ------ ----------------------------------------------------------- ------- Common Stocks, continued: Manufacturing (2.7%): 105,000 Wolverine Tube, Inc. (b)................................... $ 2,192 ------- Medical Services (6.5%): 125,000 Coventry Health Care, Inc. (b)............................. 1,383 310,000 Health Management Assoc., Inc., Class A (b)................ 2,557 170,000 MedPartners, Inc. (b)...................................... 1,423 ------- 5,363 ------- Office Equipment & Services (1.8%): 50,000 Harris Corp................................................ 1,516 ------- Oil & Gas Exploration, Production, & Services (5.1%): 45,000 Burlington Resources, Inc.................................. 1,988 10,000 Mobil Corp................................................. 1,023 20,000 Schlumberger Ltd........................................... 1,211 ------- 4,222 ------- Printing (1.5%): 60,000 John H. Harland Co......................................... 1,208 ------- Railroads (2.7%): 75,000 Norfolk Southern Corp...................................... 2,194 ------- Restaurants (2.4%): 130,000 CRBL Group, Inc............................................ 1,966 ------- Retail (7.6%): 285,000 Hancock Fabrics, Inc....................................... 1,443 85,000 Office Depot, Inc. (b)..................................... 1,594 60,000 Saks, Inc. (b)............................................. 1,380 275,000 Stein-Mart, Inc. (b)....................................... 1,829 ------- 6,246 ------- Steel (2.9%): 50,000 Nucor Corp................................................. 2,425 ------- Telecommunications--Equipment (1.8%): 40,000 Scientific-Atlanta, Inc.................................... 1,460 ------- Transportation (5.2%): 165,000 Offshore Logistics, Inc. (b)............................... 2,001 70,000 Tidewater, Inc............................................. 2,314 ------- 4,315 ------- Transportation Leasing & Trucking (2.6%): 90,000 Ryder System, Inc.......................................... 2,121 ------- Continued -62- 214 AMSOUTH MUTUAL FUNDS Regional Equity Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Security Market Shares Description Value ------ ----------------------------------------------------------- ------- Common Stocks, continued: Utilities-Electric & Gas (4.9%): 50,000 Florida Progress Corp. .................................... $ 2,047 75,000 Southern Co................................................ 1,983 ------- 4,030 ------- Utilities-Telecommunications (2.6%): 45,000 BellSouth Corp............................................. 2,160 ------- Total Common Stocks 80,565 ------- - -------- Percentages indicated are based on net assets of $82,261. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net appreciation of securities as follows: Unrealized appreciation............................................. $20,404 Unrealized depreciation............................................. (7,851) ------- Net unrealized appreciation......................................... $12,553 ======= (b) Represents non-income producing securities. Security Market Shares Description Value ------ ----------------------------------------------------------- ------- Investment Companies (2.0%): 1,655,457 AmSouth Prime Obligations Fund............................. $ 1,655 2,829 AmSouth U.S. Treasury Fund................................. 3 ------- Total Investment Companies 1,658 ------- Total (Cost $69,670) (a) $82,223 ======= See notes to financial statements. -63- 215 AMSOUTH MUTUAL FUNDS Small Cap Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks (95.3%): Airlines (0.6%): 22,900 Airtran Holdings, Inc. (b)................................. $ 147 ------- Automotive (5.6%): 28,900 Copart, Inc. (b)........................................... 694 24,150 Monaco Coach Corp. (b)..................................... 638 ------- 1,332 ------- Commercial Services (3.1%): 23,100 Dollar Thrifty Automotive Group (b)........................ 497 7,500 Plexus Corp. (b)........................................... 240 ------- 737 ------- Computer Software (7.1%): 3,500 Computer Network Tech Co. (b).............................. 51 12,900 Credence Systems Corp. (b)................................. 535 21,900 Handleman Co. (b).......................................... 245 10,800 Mercury Interactive Corp. (b).............................. 498 12,600 Pinnacle Systems, Inc (b).................................. 367 ------- 1,696 ------- Computers & Peripherals (9.5%): 17,400 Cybex Computer Products Corp. (b).......................... 463 5,600 Kronos, Inc. (b)........................................... 271 8,000 Lam Research Corp. (b)..................................... 443 46,100 Sybase, Inc. (b)........................................... 473 11,600 Verity, Inc. (b)........................................... 575 ------- 2,225 ------- Construction (4.5%): 10,900 Dycom Industries, Inc. (b)................................. 520 25,700 Insituform Technologies, Class A (b)....................... 559 ------- 1,079 ------- Construction--Manufactured Homes (2.1%): 18,000 Ryland Group, Inc. ........................................ 502 ------- Diversified Manufacturing (3.3%): 20,550 Labor Ready, Inc. (b)...................................... 353 27,600 WMS Industries, Inc. (b)................................... 425 ------- 778 ------- Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks, continued: Electrical & Electronic (6.6%): 8,900 Advanced Digital Info Corp. (b)............................ $ 378 18,400 Aeroflex, Inc. (b)......................................... 348 3,200 Cree Research, Inc. (b).................................... 198 12,000 DII Group, Inc. (b)........................................ 445 9,400 Mentor Graphics Corp. (b).................................. 95 1,400 Optical Coating Laboratory................................. 100 ------- 1,564 ------- Entertainment (1.6%): 40,000 Aztar Corp. (b)............................................ 373 ------- Financial Services (4.8%): 18,100 Hambrecht & Quist Group (b)................................ 681 13,400 Legg Mason, Inc. .......................................... 469 ------- 1,150 ------- Food Processing & Packaging (2.1%): 18,500 Foodmaker, Inc. (b)........................................ 506 ------- Forest & Paper Products (1.3%): 19,000 Longview Fibre Co. ........................................ 310 ------- Health Care (5.4%): 17,500 Cytyc Corp. (b)............................................ 431 19,000 Hooper Holmes, Inc. ....................................... 375 8,800 Infocure Corp. (b)......................................... 472 ------- 1,278 ------- Household Products/Wares (2.8%): 12,700 Fossil, Inc. (b)........................................... 667 ------- Machinery--Construction (0.9%): 6,600 Astec Industries, Inc. (b)................................. 225 ------- Machinery--Diversified (0.4%): 1,600 Tecumseh Products, Inc. ................................... 103 ------- Media (1.8%): 11,550 Valassis Communications, Inc. (b).......................... 430 ------- Medical Services (2.4%): 13,100 Medquist, Inc. (b)......................................... 568 ------- Office Equipment & Services (1.0%): 7,000 Clarify, Inc. (b).......................................... 231 ------- Continued -64- 216 AMSOUTH MUTUAL FUNDS Small Cap Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks, continued: Oil & Gas Exploration, Production, & Services (4.1%): 15,100 Basin Exploration, Inc. (b)................................ $ 317 26,500 Forest Oil Corp. (b)....................................... 394 8,700 Syncor International Corp. (b)............................. 258 ------- 969 ------- Pharmaceuticals (6.7%): 11,000 Chirex, Inc. (b)........................................... 360 19,400 King Pharmaceuticals, Inc. (b)............................. 526 14,850 Priority Healthcare Corp. Class B (b)...................... 717 ------- 1,603 ------- Retail (1.8%): 11,300 American Eagle Outfitters (b).............................. 436 ------- Technology (2.3%): 1,600 Cohu, Inc.................................................. 66 10,900 Integrated Device Tech, Inc. (b)........................... 142 23,500 International Rectifier Corp. (b).......................... 340 ------- 548 ------- Telecommunications (2.0%): 31,700 InterVoice, Inc. (b)....................................... 479 ------- Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Common Stocks, continued: Telecommunications--Equipment (7.4%): 6,700 American Xtal Technology, Inc. (b)......................... $ 206 17,200 ANTEC Corp. (b)............................................ 721 24,100 Commscope, Inc. (b)........................................ 825 ------- 1,752 ------- Transportation Leasing & Trucking (4.1%): 29,000 American Freightways Corp. (b)............................. 696 5,600 US Freightways Corp. ...................................... 277 ------- 973 ------- Total Common Stocks 22,661 ------- U.S. Treasury Bills (2.1%): $ 500 9/16/99.................................................... 497 ------- Total U.S. Treasury Bills 497 ------- Investment Companies (3.6%): 861,416 AmSouth Prime Obligations Fund............................. 861 ------- Total Investment Companies 861 ------- Total (Cost $21,396) (a) $24,019 ======= - -------- Percentages indicated are based on net assets of $23,779. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $20. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation......... $3,149 Unrealized depreciation......... (546) ------ Net unrealized appreciation..... $2,603 ====== (b) Represents non-income producing securities. See notes to financial statements. -65- 217 AMSOUTH MUTUAL FUNDS Balanced Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Common Stocks (48.1%): Apparel (0.3%): 140,000 Phillips-Van Heusen Corp................................. $ 1,190 -------- Automotive (0.7%): 55,000 Ford Motor Co............................................ 2,674 -------- Automotive Parts (1.0%): 101,000 Arvin Industries, Inc.................................... 3,775 -------- Banking (3.1%): 50,000 Bank of America Corp..................................... 3,319 20,000 Bank One Corp............................................ 1,091 40,000 First Union Corp. ....................................... 1,840 150,000 Washington Mutual, Inc................................... 5,147 -------- 11,397 -------- Beverages (0.8%): 70,000 Diageo PLC ADR........................................... 2,870 -------- Business Services (1.0%): 160,000 Reynolds & Reynolds Co., Class A......................... 3,760 -------- Chemicals-Speciality (1.8%): 230,000 Engelhard Corp........................................... 5,132 100,000 M.A. Hanna Co. .......................................... 1,600 -------- 6,732 -------- Computer Hardware (0.5%): 15,000 IBM Corp. ............................................... 1,885 -------- Computers & Peripherals (1.3%): 410,000 Cabletron Systems, Inc. (b).............................. 4,946 -------- Consumer Goods (0.7%): 95,000 American Greetings Corp., Class A........................ 2,791 -------- Electrical & Electronic (0.4%): 32,000 Avnet, Inc............................................... 1,568 -------- Financial Services (0.9%): 110,000 Dun & Bradstreet Corp.................................... 3,493 -------- Food Processing & Packaging (1.3%): 20,000 Dole Food, Inc........................................... 528 140,000 Sara Lee Corp............................................ 3,079 56,000 Universal Foods Corp. ................................... 1,222 -------- 4,829 -------- Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Common Stocks, continued: Forest & Paper Products (3.2%): 15,000 Champion International Corp.............................. $ 776 75,000 International Paper Co................................... 3,834 50,000 Weyerhauser Co. ......................................... 3,234 90,000 Willamette Industries, Inc............................... 4,051 -------- 11,895 -------- Health Care (1.4%): 40,000 Aetna, Inc. ............................................. 3,280 33,000 United Healthcare Corp................................... 2,013 -------- 5,293 -------- Household Products/Wares (1.0%): 90,000 Newell Rubbermaid, Inc. ................................. 3,893 -------- Insurance (2.3%): 5,000 Chubb Corp. ............................................. 299 60,000 Marsh & McLennan Cos., Inc. ............................. 4,560 120,000 St. Paul Cos., Inc....................................... 3,735 -------- 8,594 -------- Manufacturing (0.2%): 31,000 Kennametal, Inc. ........................................ 748 -------- Medical Supplies (1.7%): 85,000 C.R. Bard, Inc........................................... 4,133 80,000 DENTSPLY International, Inc.............................. 2,165 -------- 6,298 -------- Metals & Mining (0.2%): 40,000 Barrick Gold Corp........................................ 743 -------- Newspapers (1.6%): 30,000 Dow Jones & Co., Inc..................................... 1,496 60,000 Gannett Co., Inc. ....................................... 4,335 -------- 5,831 -------- Oil & Gas Exploration, Production, & Services (8.1%): 40,000 Atlantic Richfield Co.................................... 3,603 75,000 Burlington Resources, Inc................................ 3,314 90,000 Kerr-McGee Corp.......................................... 4,634 50,000 Noble Affiliates......................................... 1,463 115,000 Sunoco, Inc.............................................. 3,508 80,000 Texaco, Inc.............................................. 4,984 Continued -66- 218 AMSOUTH MUTUAL FUNDS Balanced Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Common Stocks, continued: Oil & Gas Exploration, Production, & Services, continued: 190,000 Ultramar Diamond Shamrock Corp........................... $ 4,488 130,000 USX-Marathon Group....................................... 3,949 -------- 29,943 -------- Packaging (0.5%): 60,000 Crown Cork & Seal, Inc. ................................. 1,759 -------- Pharmaceuticals (2.7%): 40,000 American Home Products Corp. ............................ 2,040 60,000 Baxter International, Inc. .............................. 4,121 70,000 Pharmacia & Upjohn, Inc. ................................ 3,767 -------- 9,928 -------- Pollution Control Services & Equipment (0.5%): 70,000 Waste Management, Inc. .................................. 1,789 -------- Railroads (0.8%): 60,000 CSX Corp................................................. 2,906 -------- Retail (4.1%): 70,000 CVS Corp................................................. 3,483 18,000 Dayton Hudson Corp. ..................................... 1,164 105,000 Dillard's, Inc., Class A................................. 3,235 105,000 May Department Stores Co. ............................... 4,061 30,000 The Limited, Inc. ....................................... 1,371 46,000 Wal-Mart Stores, Inc. ................................... 1,944 -------- 15,258 -------- Temporary Services (0.2%): 100,000 Olsten Corp. ............................................ 844 -------- Transportation Leasing & Trucking (1.4%): 105,000 Ryder System, Inc. ...................................... 2,474 55,000 US Freightways Corp. .................................... 2,716 -------- 5,190 -------- Utilities-Electric & Gas (2.0%): 130,000 Constellation Energy Group............................... 3,810 10,000 New Century Energies, Inc. .............................. 347 120,000 Southern Co. ............................................ 3,173 -------- 7,330 -------- Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Common Stocks, continued: Utilities-Telecommunications (2.4%): 35,000 AT&T Corp................................................ $ 1,818 70,000 BellAtlantic Corp. ...................................... 4,462 57,000 BellSouth Corp........................................... 2,736 -------- 9,016 -------- Total Common Stocks 179,168 -------- Corporate Bonds (24.6%): Appliances (0.1%): $ 500 Whirlpool Corp., 9.50%, 6/15/00.......................... 514 -------- Automotive (0.2%): 700 General Motors Corp., 9.63%, 12/1/00..................... 729 -------- Automotive-Finance (2.0%): 2,500 Chrysler Financial Corp., 6.08%, 4/6/01.................. 2,494 2,000 General Motors Acceptance Corp., 6.00%, 2/1/02........... 1,970 3,000 Toyota Motor Credit Corp., 5.50%, 9/17/01.......................................... 2,951 -------- 7,415 -------- Banking (3.7%): 930 Bank of America Corp., 9.50%, 4/1/01..................... 975 1,000 Bankers Trust Co., 9.50%, 6/14/00........................ 1,028 2,500 Mellon Financial Co., 6.30%, 6/1/00...................... 2,507 4,185 NationsBank Corp., 5.38%, 4/15/00........................ 4,174 2,000 SunTrust Banks, Inc., 7.38%, 7/1/06...................... 2,040 1,565 Wachovia Corp., 5.40%, 2/20/01........................... 1,545 1,475 Wachovia Corp., 6.63%, 11/15/06.......................... 1,440 -------- 13,709 -------- Brokerage Services (1.9%): 3,000 Bear Stearns & Co., Inc., 6.50%, 8/1/02.................. 2,970 2,000 Merrill Lynch & Co., Inc., 6.00%, 3/1/01........................................... 1,990 2,000 Morgan Stanley Group, Inc., 8.10%, 6/24/02.......................................... 2,070 -------- 7,030 -------- Chemicals (0.8%): 3,000 Monsanto Co., 6.00%, 7/1/00.............................. 3,000 -------- Continued -67- 219 AMSOUTH MUTUAL FUNDS Balanced Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Corporate Bonds, continued: Consumer Goods (0.5%): $ 2,000 Procter & Gamble Co., 5.25%, 9/15/03..................... $ 1,913 -------- Diversified Manufacturing (0.7%): 2,500 Avnet Inc., 6.45%, 8/15/03............................... 2,444 -------- Electronic Components/ Instruments (0.5%): 2,000 Honeywell, Inc., 6.75%, 3/15/02.......................... 2,018 -------- Farm Equipment (0.8%): 3,000 John Deere Capital Corp., 5.85%, 1/15/01.......................................... 2,981 -------- Financial Services (1.6%): 4,000 Associates Corp. N. A., 6.75%, 7/15/01................... 4,020 1,000 Commercial Credit Co., 7.88%, 7/15/04.................... 1,041 1,000 Pitney Bowes Credit Corp., 6.80%, 10/1/01.......................................... 1,013 -------- 6,074 -------- Food Products & Services (0.3%): 1,000 H.J. Heinz Co., 6.75%, 10/15/99.......................... 1,003 -------- Forest & Paper Products (0.3%): 1,000 Mead Corp., 6.60%, 3/1/02................................ 994 -------- Industrial Goods & Services (2.2%): 500 Browning-Ferris Industries, Inc., 6.10%, 1/15/03.......................................... 461 2,000 Caterpillar Financial Services, 6.02%, 4/15/02.......................................... 1,974 1,000 Dresser Industries, Inc., 6.25%, 6/1/00.................. 1,003 3,000 First Data Corp., 6.75%, 7/15/05......................... 2,988 2,000 Illinois Tool Works, 5.75%, 3/1/09....................... 1,855 -------- 8,281 -------- Insurance (0.4%): 1,400 Capital Holding Corp., 9.20%, 4/17/01.................... 1,462 140 Chubb Corp., 8.75%, 11/15/99............................. 141 -------- 1,603 -------- Newspapers (0.5%): 2,000 Gannett Co., Inc., 5.85%, 5/1/00......................... 2,000 -------- Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Corporate Bonds, continued: Oil & Gas Exploration, Production, & Services (0.8%): $ 1,550 BP America, Inc., 9.38%, 11/1/00......................... $ 1,612 1,500 Conoco Inc., 6.35%, 4/15/09.............................. 1,427 -------- 3,039 -------- Pollution Control Services & Equipment (0.8%): 1,000 Waste Management, Inc., 8.25%, 11/15/99......................................... 1,008 2,000 Waste Management, Inc., 7.70%, 10/1/02.......................................... 2,050 -------- 3,058 -------- Retail (2.4%): 2,000 J.C. Penney Co., Inc., 7.25%, 4/1/02..................... 2,018 2,000 Sears, Roebuck and Co., 6.00%, 3/20/03................... 1,950 3,000 Wal-Mart Stores, Inc., 5.85%, 6/1/00..................... 3,003 2,000 Wal-Mart Stores, Inc., 6.75%, 5/15/02.................... 2,024 -------- 8,995 -------- Telecommunications--Equipment (0.5%): 1,730 Lucent Technologies, Inc., 6.90%, 7/15/01.......................................... 1,752 -------- Tools (0.6%): 2,200 Stanley Works, 7.38%, 12/15/02........................... 2,258 -------- Utilities--Electric & Gas (2.1%): 3,450 Duke Power Co., 7.00%, 6/1/00 ........................... 3,475 1,275 Georgia Power Co., 6.13%, 9/1/99......................... 1,275 2,000 Oklahoma Gas & Electric Co., 6.25%, 10/15/00......................................... 2,005 900 Pennsylvania Power & Light Co., 6.00%, 6/1/00........................................... 899 -------- 7,654 -------- Utilities--Telecommunications (0.9%): 1,000 AT&T Corp., 7.13%, 1/15/02............................... 1,016 2,200 BellSouth Telecommunications, 6.00%, 6/15/02.......................................... 2,173 -------- 3,189 -------- Total Corporate Bonds 91,653 -------- Continued -68- 220 AMSOUTH MUTUAL FUNDS Balanced Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Municipal Bonds (1.0%): Illinois (1.0%): $ 3,800 Chicago Public Building, 7.00%, 1/1/06................... $ 3,824 -------- Total Municipal Bonds 3,824 -------- U.S. Government Agencies (7.7%): Fannie Mae (2.9%): 2,400 5.50%, 2/2/01............................................ 2,386 5,000 6.21%, 11/07/07.......................................... 4,877 4,000 5.25%, 1/15/09........................................... 3,593 -------- 10,856 -------- Freddie Mac (2.4%): 7,000 5.83%, 2/9/06............................................ 6,727 2,000 7.10%, 4/10/07........................................... 2,058 -------- 8,785 -------- Government National Mortgage Assoc. (2.4%): 9,626 6.50%, 11/20/28.......................................... 9,093 -------- Total U.S. Government Agencies 28,734 -------- - -------- Percentages indicated are based on net assets of $372,370. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $297. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............................................. $62,726 Unrealized depreciation............................................. (7,819) ------- Net unrealized appreciation......................................... $54,907 ======= (b) Represents non-income producing securities. ADR--American Depository Receipt PLC--Public Limited Co. Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- U.S. Treasury Bonds (3.0%): $ 10,000 7.25%, 8/15/22........................................... $ 11,075 -------- Total U.S. Treasury Bonds 11,075 -------- U.S. Treasury Securities (13.1%): Bonds (12.6%): 9,600 5.88%, 11/15/05.......................................... 9,526 7,000 6.50%, 10/15/06.......................................... 7,160 6,000 7.50%, 11/15/16.......................................... 6,693 23,400 6.25%, 8/15/23........................................... 23,212 -------- 46,591 -------- Notes (0.5%): 2,000 6.13%, 8/15/07........................................... 2,004 -------- Total U.S. Treasury Securities 48,595 -------- Investment Companies (1.7%): 6,220,560 AmSouth Prime Obligations Fund........................... 6,220 2,512 AmSouth U.S. Treasury Fund............................... 3 -------- Total Investment Companies 6,223 -------- Total (Cost $314,068) (a) $369,272 ======== See notes to financial statements. -69- 221 AMSOUTH MUTUAL FUNDS Limited Maturity Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ---------------------------------------------------------- -------- Corporate Bonds (79.6%): Automotive--Finance (9.3%): $ 1,000 Chrysler Financial Corp., 6.08%, 4/6/01................... $ 998 4,000 Ford Motor Credit Co., 8.20%, 2/15/02..................... 4,149 3,500 General Motors Acceptance Corp., 6.75%, 2/7/02............ 3,509 2,000 Toyota Motor Credit Corp., 5.50%, 9/17/01................. 1,968 -------- 10,624 -------- Banking (8.7%): 3,000 Bank One Corp., 6.25%, 9/1/00............................. 3,003 1,500 Firstar Bank, 6.25%, 12/1/02.............................. 1,487 2,000 NationsBank Corp., 5.38%, 4/15/00......................... 1,995 2,500 NationsBank Corp., 5.70%, 9/11/00......................... 2,488 900 Wachovia Bank, 6.30%, 3/15/01............................. 899 -------- 9,872 -------- Brokerage Services (4.8%): 3,500 Bear Stearns & Co., Inc., 6.50%, 8/1/02................... 3,465 2,000 Dean Witter Discover & Co., 6.26%, 3/15/00................ 2,005 -------- 5,470 -------- Building Products (1.7%): 2,000 Vulcan Materials Co., 5.75%, 4/1/04....................... 1,940 -------- Computers & Peripherals (0.9%): 1,000 IBM Corp., 5.95%, 6/2/03.................................. 981 -------- Consumer Goods (1.7%): 2,000 Procter & Gamble Co., 5.25%, 9/15/03...................... 1,913 -------- Electronic Components/ Instruments (0.8%): 850 Honeywell, Inc., 6.75%, 3/15/02........................... 857 -------- Farm Equipment (2.6%): 3,000 John Deere Capital Corp., 5.85%, 1/15/01.................. 2,981 -------- Financial Services (16.7%): 3,000 Ameritech Capital Funding, 6.13%, 10/15/01................ 2,988 4,200 Associates Corp. of North America, 6.63%, 5/15/01......... 4,210 500 Beneficial Corp., 7.32%, 11/17/99......................... 502 2,000 CIT Group Holdings, 6.38%, 10/1/02........................ 1,983 1,000 Citigroup, Inc., 6.13%, 6/15/00........................... 1,000 Shares or Principal Security Market Amount Description Value --------- ---------------------------------------------------------- -------- Corporate Bonds, continued: Financial Services, continued: $ 1,000 Commercial Credit Co., 8.26%, 11/1/01..................... $ 1,038 2,500 General Electric Capital Corp., 6.15%, 11/5/01............ 2,491 2,500 Household Finance Co., 8.95%, 9/15/99..................... 2,508 2,500 Household Netherlands, 6.20%, 12/1/03..................... 2,438 -------- 19,158 -------- Food Products & Services (2.6%): 1,000 Campbell Soup Co., 6.15%, 12/1/02......................... 996 1,000 McDonald's Corp., 5.90%, 5/11/01.......................... 995 1,000 McDonald's Corp., 6.00%, 6/23/02.......................... 990 -------- 2,981 -------- Forest & Paper Products (0.9%): 1,000 Mead Corp., 6.60%, 3/1/02................................. 994 -------- Health Care (1.7%): 2,000 McKesson Corp., 6.88%, 3/1/02............................. 1,985 -------- Industrial Goods & Services (5.3%): 2,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02............ 2,083 1,000 Caterpillar Financial Services, 6.02%, 4/15/02............ 988 3,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02.............. 3,007 -------- 6,078 -------- Insurance (5.8%): 2,000 American General Finance, 5.75%, 11/01/03................. 1,923 1,500 AON Corp., 6.88%, 10/1/99................................. 1,502 1,000 St. Paul Cos., Inc., Series A, 6.17%, 1/15/01............. 996 2,200 USLife Corp., 6.38%, 6/15/00.............................. 2,199 -------- 6,620 -------- Leasing (1.8%): 2,000 USL Capital Corp., 8.13%, 2/15/00......................... 2,024 -------- Office Equipment & Services (1.2%): 1,274 Xerox Corp., 8.13%, 4/15/02............................... 1,331 -------- Oil & Gas Exploration, Production, & Services (1.9%): 2,200 Amoco Co., 6.25%, 10/15/04................................ 2,178 -------- Continued -70- 222 AMSOUTH MUTUAL FUNDS Limited Maturity Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ---------------------------------------------------------- -------- Corporate Bonds, continued: Retail (3.9%): $ 1,000 Sears, Roebuck and Co., 6.00%, 3/20/03.................... $ 975 3,500 Wal-Mart Stores, Inc., 5.85%, 6/1/00...................... 3,504 -------- 4,479 -------- Telecommunications (1.3%): 1,500 AT&T Corp., 5.63%, 3/15/04................................ 1,438 -------- Telecommunications--Equipment (0.9%): 1,000 Lucent Technologies, Inc., 6.90%, 7/15/01........................................... 1,013 -------- Tools (0.9%): 500 Stanley Works, 7.38%, 12/15/02............................ 514 500 Stanley Works, 5.75%, 3/1/04.............................. 484 -------- 998 -------- Utilities--Electric & Gas (2.5%): 1,250 Alabama Power Corp., 5.35%, 11/15/03...................... 1,194 600 Baltimore Gas & Electric Co., 5.50%, 7/15/00.............. 599 1,000 Florida Power Corp., 6.50%, 12/1/99....................... 1,003 -------- 2,796 -------- Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Corporate Bonds, continued: Utilities--Telecommunications (1.7%): $ 2,000 BellSouth Telecommunications, 6.00%, 6/15/02............. $ 1,975 -------- Total Corporate Bonds 90,686 -------- U.S. Treasury Notes (16.7%): 18,000 7.25%, 5/15/04........................................... 18,971 -------- Total U.S. Treasury Notes 18,971 -------- Investment Companies (2.0%): 2,248,559 AmSouth Prime Obligations Fund........................... 2,248 339 AmSouth U.S. Treasury Fund............................... --* -------- Total Investment Companies 2,248 -------- Total (Cost $112,420) (a) $111,905 ======== - -------- Percentages indicated are based on net assets of $113,869. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation....... $ 592 Unrealized depreciation....... (1,107) ------- Net unrealized depreciation... $ (515) ======= * Due to rounding, figure was below thousand dollar threshold. See notes to financial statements. -71- 223 AMSOUTH MUTUAL FUNDS Government Income Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ------------------------------------------------------------ ------ U.S. Government Agencies (84.3%): Fannie Mae (18.3%): $ 1,600 5.75%, 4/15/03.............................................. $1,568 ------ Government National Mortgage Assoc. (66.0%): 1,360 7.00%, 12/15/26-2/20/29..................................... 1,324 2,207 7.50%, 6/15/24-12/15/25..................................... 2,209 306 8.00%, 7/15/26.............................................. 312 196 8.50%, 12/15/19-2/15/23..................................... 203 874 9.00%, 6/15/18-9/15/22...................................... 921 662 9.50%, 5/15/18-8/15/21...................................... 705 ------ 5,674 ------ Total U.S. Government Agencies 7,242 ------ Shares or Principal Security Market Amount Description Value --------- ------------------------------------------------------------ ------ U.S. Treasury Securities (10.4%): Bonds (10.4%): $ 800 7.50%, 11/15/16............................................. $ 892 ------ Total U.S. Treasury Securities 892 ------ Investment Companies (4.5%): 387,763 AmSouth U.S. Treasury Fund.................................. 387 ------ Total Investment Companies 387 ------ Total (Cost $8,566) (a) $8,521 ====== - -------- Percentages indicated are based on net assets of $8,586. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net depreciation of securities as follows: Unrealized appreciation......... $ 103 Unrealized depreciation......... (148) ----- Net unrealized depreciation..... $ (45) ===== See notes to financial statements. -72- 224 AMSOUTH MUTUAL FUNDS Bond Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value ---------- --------------------------------------------------------- -------- Corporate Bonds (46.8%): Aerospace/Defense (0.8%): $ 3,000 Boeing Corp., 6.88%, 11/1/06............................. $ 3,000 -------- Appliances (0.1%): 500 Whirlpool Corp., 9.50%, 6/15/00.......................... 514 -------- Automotive (0.2%): 908 General Motors Corp., 9.63%, 12/1/00..................... 945 -------- Automotive--Finance (2.1%): 3,485 Ford Motor Credit Co., 6.25%, 12/8/05.................... 3,341 2,000 General Motors Acceptance Corp., 6.15%, 4/7/07........... 1,898 3,000 Toyota Motor Credit Corp., 5.50%, 9/17/01................ 2,951 -------- 8,190 -------- Banking (5.1%): 1,150 Bank of America Corp., 9.50%, 4/1/01..................... 1,206 3,157 Bank One Corp., 7.00%, 7/15/05........................... 3,157 4,000 Fifth Third Bank, 6.75%, 7/15/05......................... 3,965 3,856 J.P. Morgan & Co., 7.63%, 9/15/04........................ 3,952 4,306 NationsBank Corp., 5.38%, 4/15/00........................ 4,296 3,159 SunTrust Banks, Inc., 7.38%, 7/1/06...................... 3,222 -------- 19,798 -------- Beverages (0.9%): 3,500 Coca-Cola Enterprises, Inc., 6.38%, 8/1/01............... 3,509 -------- Brokerage Services (2.2%): 2,910 Bear Stearns & Co. Inc., 6.63%, 10/1/04.................. 2,826 3,500 Dean Witter Discover & Co., 6.50%, 11/1/05............... 3,387 750 Merrill Lynch & Co., Inc., 8.25%, 11/15/99............... 756 1,450 Merrill Lynch & Co., Inc., 6.00%, 2/12/03................ 1,419 -------- 8,388 -------- Building Products (0.5%): 2,000 Vulcan Materials, 6.00%, 4/1/09.......................... 1,858 -------- Electronic Components/Instruments (0.5%): 2,000 Honeywell, Inc., 7.00%, 3/15/07.......................... 1,998 -------- Shares or Principal Security Market Amount Description Value ---------- --------------------------------------------------------- -------- Corporate Bonds, continued: Entertainment (0.7%): $ 3,000 Walt Disney Company, 5.13%, 12/15/03..................... $ 2,831 -------- Financial Services (5.7%): 2,000 American Express Credit Corp., 6.50%, 8/1/00............. 2,012 3,500 Ameritech Capital, 5.65%, 1/15/01........................ 3,477 2,000 Associates Corp., 5.75%, 10/15/03........................ 1,913 3,000 Associates Corp., 5.75%, 11/01/03........................ 2,869 3,091 Avco Financial Service Corp., 5.50%, 4/1/00.............. 3,086 3,000 Commercial Credit Co., 7.38%, 3/15/02.................... 3,060 3,000 Commercial Credit Co., 6.50%, 8/1/04..................... 2,951 1,000 Margaretten Financial Corp., 6.75%, 6/15/00.............. 1,006 2,000 Norwest Financial, Inc., 6.63%, 7/15/04.................. 1,970 -------- 22,344 -------- Food Products & Services (0.7%): 2,750 Campbell Soup Co., 6.15%, 12/1/02........................ 2,740 -------- Forest & Paper Products (0.8%): 3,000 Mead Corp., 6.60%, 3/1/02................................ 2,981 -------- Industrial Goods & Services (4.4%): 3,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02........... 3,124 2,655 Browning-Ferris Industries, Inc., 6.10%, 1/15/03......... 2,446 2,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02............. 2,005 2,570 E. I. Dupont de Nemours & Co., 6.75%, 10/15/02........... 2,596 2,000 First Data Corp., 6.75%, 7/15/05......................... 1,993 1,500 Illinois Tool Works, Inc., 5.88%, 3/1/00................. 1,502 3,456 Rockwell International Corp., 6.63%, 6/1/05.............. 3,433 -------- 17,099 -------- Insurance (1.8%): 1,000 AON Corp., 6.88%, 10/1/99................................ 1,001 1,600 Capital Holding Corp., 9.20%, 4/17/01.................... 1,670 330 Chubb Corp., 8.75%, 11/15/99............................. 333 Continued -73- 225 AMSOUTH MUTUAL FUNDS Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value ---------- -------------------------------------------------------- -------- Corporate Bonds, continued: Insurance, continued: $ 1,000 Chubb Corp., 6.15%, 8/15/05............................. $ 963 3,100 Hartford Life, Inc., 6.90%, 6/15/04..................... 3,088 -------- 7,055 -------- Office Equipment & Services (0.6%): 2,200 Xerox Corp., 7.15%, 8/1/04.............................. 2,247 -------- Oil & Gas Exploration, Production, & Services (1.8%): 3,158 BP America, Inc., 9.38%, 11/1/00........................ 3,284 1,000 Conoco Inc., 6.35%, 4/15/09............................. 951 864 Exxon Capital Corp., 7.45%, 12/15/01.................... 886 2,000 Phillips Petroleum Co., 6.38%, 3/30/09.................. 1,895 -------- 7,016 -------- Pharmaceuticals (0.8%): 3,000 Warner-Lambert Co., 5.75%, 1/15/03...................... 2,936 -------- Photography (0.9%): 3,100 Eastman Kodak, 9.38%, 3/15/03........................... 3,379 -------- Pollution Control Services & Equipment (1.1%): 2,449 Waste Management, Inc., 6.38%, 12/1/03.................. 2,412 2,000 Waste Management, Inc., 7.00%, 5/15/05.................. 1,985 -------- 4,397 -------- Railroads (0.3%): 1,000 Union Pacific Corp., 7.00%, 6/15/00..................... 1,006 -------- Retail (2.5%): 2,000 JC Penny & Co., 6.13%, 11/15/03......................... 1,930 3,000 Nike, Inc., 6.38%, 12/1/03.............................. 2,959 4,000 Wal-Mart Stores, Inc., 5.85%, 6/1/00.................... 4,004 1,000 Wal-Mart Stores, Inc., 6.75%, 5/15/02................... 1,013 -------- 9,906 -------- Tools (0.5%): 2,000 Stanley Works, 5.75%, 3/1/04............................ 1,938 -------- Utilities--Electric & Gas (6.2%): 3,100 Baltimore Gas & Electric, 7.50%, 1/15/07................ 3,216 2,000 Consolidated Edison Co. of New York, Inc., 6.63%, 2/1/02................................................. 2,013 3,500 National Rural Utilities, 5.00%, 10/1/02................ 3,346 3,100 National Rural Utilities, 6.38%, 10/15/04............... 3,030 Shares or Principal Security Market Amount Description Value ---------- -------------------------------------------------------- -------- Corporate Bonds, continued: Utilities--Electric & Gas, continued: $ 2,750 Northern States Power Co., 7.88%, 10/1/01............... $ 2,839 2,250 Oklahoma Gas & Electric Co., 6.25%, 10/15/00............ 2,256 2,000 Tampa Electric Co., 6.13%, 5/1/03....................... 1,968 2,500 Virginia Electric & Power Co., 8.00%, 3/1/04............ 2,625 3,500 Wisconsin Electric Power, 6.63%, 11/15/06............... 3,425 -------- 24,718 -------- Utilities--Telecommunications (5.6%): 2,000 BellAtlantic Corp., 6.25%, 2/15/04...................... 1,960 3,500 BellSouth Telecommunications, 6.50%, 6/15/05............ 3,439 2,009 Chesapeake & Potomac Telephone, 6.00%, 5/1/03........... 1,971 2,000 GTE California, Inc., 5.63%, 2/1/01..................... 1,983 2,295 GTE Northwest, Inc., Series A, 7.38%, 5/1/01............ 2,335 1,650 GTE Southwest, Inc., Series A, 5.82%, 12/1/99........... 1,650 500 Michigan Bell Telephone, 5.88%, 9/15/99................. 500 2,000 Southern New England Telecommunications Corp., 6.50%, 2/15/02......................................... 2,003 2,000 Southwestern Bell Telephone, 6.63%, 4/1/05.............. 1,978 4,000 US West Communications Group, 6.63%, 9/15/05............ 3,854 -------- 21,673 -------- Total Corporate Bonds 182,466 -------- U.S. Government Agencies (12.8%): Fannie Mae (8.9%): 3,000 6.59%, 5/21/02.......................................... 3,036 7,500 7.05%, 11/12/02......................................... 7,706 17,600 5.13%, 2/13/04.......................................... 16,716 7,300 6.56% 11/26/07.......................................... 7,148 -------- 34,606 -------- Continued -74- 226 AMSOUTH MUTUAL FUNDS Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value ---------- --------------------------------------------------------- -------- U.S. Government Agencies, continued: Freddie Mac (0.7%): $ 700 7.14%, 3/12/07........................................... $ 704 2,000 7.10%, 4/10/07........................................... 2,058 -------- 2,762 -------- Government National Mortgage Assoc. (2.3%): 9,279 7.00%, 11/20/28.......................................... 9,014 -------- Tennessee Valley Authority (0.9%): 4,000 5.38%, 11/13/08.......................................... 3,632 -------- Total U.S. Government Agencies 50,014 -------- U.S. Treasury Securities (35.3%): Bonds (30.1%): 8,000 5.75%, 8/15/03........................................... 7,958 15,000 5.88%, 11/15/05.......................................... 14,884 21,000 6.50%, 10/15/06.......................................... 21,480 17,833 3.38%, 1/15/07........................................... 17,070 17,000 7.50%, 11/15/16.......................................... 18,963 37,360 6.25%, 8/15/23........................................... 37,060 -------- 117,415 -------- Shares or Principal Security Market Amount Description Value ---------- -------------------------------------------------------- -------- U.S. Treasury Securities, continued: Notes (4.4%): $ 17,000 6.13%, 8/15/07.......................................... $ 17,037 -------- Strips (0.8%): 4,000 2/15/04................................................. 3,067 -------- Total U.S. Treasury Securities 137,519 -------- Investment Companies (3.4%): 13,287,510 AmSouth Prime Obligations Fund.......................... 13,288 7 AmSouth U.S. Treasury Fund.............................. --* -------- Total Investment Companies 13,288 -------- Total (Cost $385,361) (a) $383,287 ======== - -------- Percentages indicated are based on net assets of $389,817. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation....... $ 5,701 Unrealized depreciation....... (7,775) ------- Net unrealized depreciation... $(2,074) ======= * Due to rounding, figure was below thousand dollar threshold. See notes to financial statements. -75- 227 AMSOUTH MUTUAL FUNDS Municipal Bond Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands) Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- -------- Municipal Bonds (98.0%): Alabama (56.5%): $ 2,245 Alabama State Agriculture & Mechanical University Revenue, 4.55%, 11/1/09, Callable 5/1/08 @ 102, MBIA .. $ 2,155 2,355 Alabama State Agriculture & Mechanical University Revenue, 4.65%, 11/1/10, Callable 5/1/08 @ 102, MBIA .. 2,248 2,035 Alabama State Agriculture & Mechanical University Revenue, 6.50%, 11/1/25, Callable 11/1/05 @ 102, MBIA . 2,287 3,060 Alabama State Corrections Institution, Series A, 4.90%, 4/1/03, MBIA .......................................... 3,118 1,520 Alabama State Industrial Access Road & Bridge Corp., Capital Improvements, Series A, 4.60%, 6/1/03 ......... 1,528 3,700 Alabama State Judicial Building Authority, Judicial Facilties Project, 4.75%, 1/1/05, AMBAC ............... 3,739 3,880 Alabama State Judicial Building Authority, Judicial Facilties Project, 4.85%, 1/1/06, AMBAC ............... 3,927 2,000 Alabama State Mental Health Finance Authority, Special Tax, 4.88%, 5/1/03, MBIA .............................. 2,039 7,350 Alabama State Public School & College Authority, 4.75%, 12/1/03, Callable 6/1/03 @ 103 ........................ 7,474 3,390 Alabama State Public School & College Authority, 5.00%, 12/1/05, Callable 6/1/03 @ 103 ........................ 3,479 10,000 Alabama State Public School & College Authority Revenue, Series A, 4.38%, 8/1/04 ............................... 9,981 5,000 Alabama State Public School & College Authority, Capital Improvement, 4.75%, 11/1/06, Callable 11/1/05 @ 101 ... 5,039 1,760 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.25%, 8/15/08, Callable 8/15/06 @ 100, AMBAC .................................. 1,805 1,350 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.38%, 8/15/10, Callable 8/15/06 @ 100, AMBAC .................................. 1,379 2,495 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.40%, 8/15/11, Callable 8/15/06 @ 100, AMBAC .................................. 2,552 5,000 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.50%, 8/15/16, Callable 8/15/06 @ 100, AMBAC .................................. 5,046 3,500 Alabama State, Series A, GO, 4.60%, 10/1/05............. 3,517 1,000 Auburn University, University Revenues, General Fee, 5.25%, 6/1/06, Callable 6/1/03 @ 102, MBIA ............ 1,032 1,040 Birmingham Capital Improvement, Series B, GO, 4.80%, 10/1/08, Callable 4/1/07 @ 102 ........................ 1,039 1,375 Birmingham Waterworks & Sewer Board, Water & Sewer Revenue, 5.90%, 1/1/03, Callable 1/1/02 @ 102 ......... 1,453 1,340 Birmingham, Capital Improvements, Series A, GO, 4.75%, 10/1/10, Callable 4/1/08 @ 102 ........................ 1,309 1,430 Birmingham, Capital Improvements, Series A, GO, 4.85%, 10/1/11, Callable 4/1/08 @ 102 ........................ 1,396 1,500 Birmingham, GO, 4.90%, 7/1/06........................... 1,525 1,300 Birmingham, Industrial Water Board, Industrial Water Supply, 5.50%, 3/1/06, Pre-refunded 3/1/05 @ 100 ...... 1,362 3,465 Birmingham, Industrial Water Board, Industrial Water Supply, 6.20%, 7/1/08, Pre-refunded 1/1/07 @ 100 ...... 3,663 1,100 Birmingham, Industrial Water Board, Industrial Water Supply, ETM, 5.30%, 3/1/04, Callable 3/1/03 @ 102 ..... 1,139 1,000 Birmingham, Industrial Water Board, Industrial Water Supply, ETM, 5.40%, 3/1/05, Callable 3/1/03 @ 102 ..... 1,042 1,045 Clark & Mobile County, Gas District, 5.60%, 12/1/17, Callable 12/1/06 @ 102, MBIA .......................... 1,064 9,500 Daphne, Special Care Facilities Financing Authority, Presbyterian Retirement Corp., 7.30%, 8/15/18, Pre- refunded 8/15/01 @ 100 ................................ 10,071 720 Decatur, Warrants, Series E, Limited GO, 5.10%, 8/1/05, Callable 8/1/02 @ 102 ................................. 738 760 Decatur, Warrants, Series E, Limited GO, 5.20%, 8/1/06, Callable 8/1/02 @ 102 ................................. 779 750 Decatur, Warrants, Series E, Limited GO, 5.25%, 8/1/08, Callable 8/1/02 @ 102 ................................. 763 780 Decatur, Warrants, Series E, Limited GO, 5.30%, 8/1/09, Callable 8/1/02 @ 102 ................................. 792 2,845 Florence, Warrants, Series A, GO, 4.65%, 9/1/03, MBIA... 2,879 390 Florence, Warrants, Series A, GO, 4.35%, 12/1/07, FSA... 380 Continued -76- 228 AMSOUTH MUTUAL FUNDS Municipal Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands) Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- -------- Municipal Bonds, continued: Alabama, continued: $ 405 Florence, Warrants, Series A, GO, 4.40%, 12/1/08........ $ 392 425 Florence, Warrants, Series A, GO, 4.50%, 12/1/09........ 410 445 Florence, Warrants, Series A, GO, 4.60%, 12/1/10, Callable 12/1/08 @ 102 ................................ 428 790 Florence, Warrants, Series B, GO, 4.35%, 12/1/07, FSA... 769 825 Florence, Warrants, Series B, GO, 4.40%, 12/1/08, FSA... 798 865 Florence, Warrants, Series B, GO, 4.50%, 12/1/09, Callable 12/1/08 @ 102, FSA ........................... 834 900 Florence, Warrants, Series B, GO, 4.60%, 12/1/10, Callable 12/1/08 @ 102, FSA ........................... 865 4,700 Gadsden, East Alabama Medical Clinic Board, Baptist Hospital of Gadsden, Inc., Series A, 7.80%, 11/1/21, Pre-refunded 11/1/01 @ 102 ............................ 5,150 5,450 Hoover, Warrants, GO, 4.50%, 3/1/13, Pre-refunded 3/1/03 @ 100 ................................................. 5,016 550 Huntsville Electric, 4.60%, 12/1/09, Callable 12/1/07 @ 102.................................................... 534 660 Huntsville Electric, 4.70%, 12/1/10, Callable 12/1/07 @ 102.................................................... 639 680 Huntsville Electric, 4.80%, 12/1/11, Callable 12/1/07 @ 102.................................................... 656 3,120 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/05...... 3,026 3,245 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/06...... 3,108 3,380 Huntsville, Warrants, Series B, GO, 4.10%, 11/1/07...... 3,218 2,000 Huntsville, Water System, Warrants, 5.00%, 5/1/02, AMBAC.................................................. 2,042 3,125 Huntsville, Water System, Warrants, 5.05%, 5/1/03, Callable 5/1/02 @ 102, AMBAC .......................... 3,202 1,000 Jefferson County Board of Education, Capital Outlay, 5.40%, 2/15/10, Callable 2/15/03 @ 102, AMBAC ......... 1,053 4,000 Jefferson County, GO, 5.30%, 4/1/09, Pre-refunded 4/1/03 @ 102 ................................................. 4,070 2,400 Jefferson County, Sewer Revenue Warrants, 5.40%, 9/1/04, Pre-refunded 3/1/03 @ 102.5, MBIA ..................... 2,539 5,000 Jefferson County, Warrants, GO, 5.00%, 4/1/04, Callable 4/1/03 @ 102 .......................................... 5,119 2,000 Mobile County Board of School Commissioners, Warrants, Capital Outlay, 4.80%, 3/1/02, AMBAC .................. 2,030 1,350 Mobile County, Series A, GO, 5.00%, 2/1/04, Callable 2/1/03 @ 102 .......................................... 1,382 1,000 Mobile County, Warrants, Series A, Limited GO, 5.00%, 2/1/04, Callable 2/1/03 @ 102 ......................... 1,024 5,000 Mobile County, Warrants, Series A, Limited GO, 5.10%, 2/1/05, Callable 2/1/03 @ 102 ......................... 5,142 1,630 Mobile, Warrants, GO, 6.50%, 2/15/05, AMBAC............. 1,782 1,685 Mobile, Warrants, GO, 6.50%, 2/15/06, AMBAC............. 1,857 2,700 Mobile, Warrants, GO, 4.85%, 2/15/09, Callable 2/15/00 @ 100 ................................................... 2,662 3,250 Mobile, Water & Sewer Commissioners, Water & Sewer Revenue, 5.00%, 1/1/05, FGIC .......................... 3,327 1,500 Montgomery County, Warrants, GO, 5.00%, 11/1/04, Callable 11/1/04 @ 102 ................................ 1,539 1,040 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/05, Callable 5/1/03 @ 102 ................................. 1,066 1,000 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/06, Callable 5/1/03 @ 102 ................................. 1,019 3,000 Montgomery, Waterworks & Sanitary Sewer Board, 5.50%, 9/1/08, Callable 9/1/06 @ 101, MBIA ................... 3,135 1,000 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 5.70%, 9/1/02 ......................................... 1,041 2,500 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 6.25%, 9/1/08, Callable 9/1/02 @ 102 .................. 2,667 3,565 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 6.30%, 9/1/10, Callable 9/1/02 @ 102 .................. 3,808 1,005 Shelby County, Warrants, Board of Education, Capital Outlay, 4.80%, 2/1/10, Callable 2/1/09 @ 101, AMBAC.... 986 1,990 Shelby County, Warrants, Series A, 5.60%, 8/1/02, AMBAC. 2,070 1,830 Shelby County, Warrants, Series A, 5.70%, 2/1/03, AMBAC. 1,912 335 Talladega County, Industrial Development Board, Cyprus 1 Project, 9.75%, 12/1/13 ............................... 336 Continued -77- 229 AMSOUTH MUTUAL FUNDS Municipal Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Municipal Bonds, continued: Alabama, continued: $ 740 Tuscaloosa County, Warrants, GO, 5.60%, 10/1/04.......... $ 780 1,200 University Alabama General Fee, 4.60%, 6/1/09, Callable 6/1/07 @ 102, MBIA ..................................... 1,171 1,300 University Alabama General Fee, 4.70%, 6/1/10, Callable 6/1/07 @ 102, MBIA ..................................... 1,265 1,500 University Alabama General Fee, 4.75%, 6/1/11, Callable 6/1/07 @ 102, MBIA ..................................... 1,450 2,185 University of South Alabama, University Revenues, Tuition, 4.70%, 11/15/08, Callable 5/15/06 @ 102, AMBAC.. 2,163 -------- 183,221 -------- California (1.5%): 4,765 San Mateo County, Transit District Sales Tax Revenue, Series A, 5.25%, 6/1/16, Callable 6/1/09 @ 101, FSA .... 4,744 -------- Florida (5.7%): 1,150 Escambia County, Utilities Authority Revenue, Series D, 5.00%, 1/1/04, FGIC .................................... 1,179 2,000 Escambia County, Utilities Authority Revenue, Series D, 5.00%, 1/1/05, FGIC .................................... 2,051 6,500 Florida State Board of Education, Capital Outlay, Series A, GO, 5.00%, 6/1/08 ................................... 6,606 8,070 Reedy Creek, Improvement District, Series 1, 5.50%, 10/1/08, Callable 10/1/07 @ 101, AMBAC ................. 8,510 -------- 18,346 -------- Michigan (2.2%): 7,000 Municipal Bond Authority Revenue, 5.00%, 12/1/05......... 7,191 -------- Minnesota (0.7%): 2,175 Centennial Independent School District, No. 12, Series A, GO, 5.60%, 2/1/07, MBIA ................................ 2,296 -------- Mississippi (0.6%): 2,000 Mississippi State, Capital Improvements, Series A, GO, 5.20%, 8/1/11, Callable 8/1/03 @ 100 ................... 2,007 -------- Missouri (2.4%): 7,535 Missouri State, Water Pollution, Series B, GO, 5.00%, 8/1/07, Callable 8/1/03 @ 102 .......................... 7,699 -------- New York (0.9%): 1,150 Hempstead Town, GO, 5.00%, 2/15/09, Callable 2/15/06 @ 102 .................................................... 1,163 1,500 Municipal Assistance Corp. for New York City, GO, 6.00%, 7/1/05 ................................................. 1,615 -------- 2,778 -------- North Carolina (2.3%): 355 Durham, Water & Sewer Revenue, 4.60%, 6/1/05............. 357 675 Durham, Water & Sewer Revenue, 4.60%, 6/1/06............. 676 555 Durham, Water & Sewer Revenue, 4.60%, 6/1/07............. 552 765 Durham, Water & Sewer Revenue, 4.60%, 6/1/08............. 754 5,000 North Carolina State, Series A, GO, 4.75%, 4/1/09, Callable 4/1/08 @ 100.5 ................................ 4,988 -------- 7,327 -------- Continued -78- 230 AMSOUTH MUTUAL FUNDS Municipal Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands) Shares or Principal Security Market Amount Description Value --------- -------------------------------------------------------- -------- Municipal Bonds, continued: Oregon (2.3%): $ 2,365 Salem, GO, 4.45%, 12/1/10, Callable 6/1/09 @ 100, FSA... $ 2,247 5,285 Washington County, Criminal Justice Facilities, GO, 5.00%, 12/1/09, Callable 12/1/07 @ 100 ................ 5,331 -------- 7,578 -------- South Carolina (2.9%): 5,525 Beaufort County, School District, GO, Series B, 4.10%, 2/1/09, Callable 2/1/07 @ 101, SCSDE .................. 5,151 4,325 Beaufort County, School District, GO, Series B, 4.90%, 3/1/09, Callable 3/1/05 @ 101 ......................... 4,325 -------- 9,476 -------- Tennessee (3.3%): 2,000 Jackson, Improvements, 5.00%, 3/1/10, Pre-refunded 3/1/05 @102 ........................................... 1,997 3,000 Metropolitan Government, Nashville & Davidson County, GO, 5.25%, 5/15/06 .................................... 3,118 5,495 Tennessee State, Series B, GO, 4.60%, 5/1/07, Callable 5/1/06 @ 100 .......................................... 5,487 -------- 10,602 -------- Texas (6.7%): 3,000 Dallas County, Series A, GO, 5.25%, 8/15/09............. 3,080 4,000 Mesquite Independent School District, Series A, GO, 4.70%, 8/15/08, Callable 8/15/07 @ 100 ................ 3,967 5,000 Texas State, Series B, GO, 5.25%, 10/1/08, Callable 10/1/03 @ 100 ......................................... 5,082 3,575 University of Texas, 4.60%, 7/1/08, Callable 7/1/06 @ 100.................................................... 3,534 5,455 University of Texas, Series B, 4.25%, 8/15/09, Callable 8/15/07 @ 100 ......................................... 5,143 1,000 Whitehouse Texas Independent School District, GO, 4.80%, 2/15/12, Callable 2/15/08 @ 100 ....................... 956 -------- 21,762 -------- Utah (4.6%): 4,805 Davis County, School District, GO, 4.38%, 6/1/08, School Board Guaranty ........................................ 4,662 3,810 Jordan School District, GO, 4.80%, 6/15/08, Callable 6/15/07 @ 100 ......................................... 3,817 6,000 Utah State, GO, Series F, 5.50%, 7/1/07................. 6,343 -------- 14,822 -------- Virginia (3.3%): 2,000 Virginia College Building Authority, Series A, 5.00%, 9/1/12, Callable 9/1/07 @ 101.......................... 1,975 5,000 Virginia State, GO, 5.00%, 6/1/08, Callable 6/1/07 @ 100,................................................... 5,110 3,500 Virginia State, Public School Authority, Series S, 5.25%, 8/1/09 ......................................... 3,613 -------- 10,698 -------- Washington (2.1%): 6,500 Washington State, GO, 5.75%, 9/1/08..................... 6,930 -------- Total Municipal Bonds 317,477 -------- Continued -79- 231 AMSOUTH MUTUAL FUNDS Municipal Bond Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- --------------------------------------------------------- -------- Investment Companies (2.0%): 33,471 Federated Tax-Free Fund.................................. $ 33 6,367,832 Goldman Sachs Tax-Free Fund.............................. 6,368 -------- Total Investment Companies 6,401 -------- Total (Cost $321,757) (a) $323,878 ======== - -------- Percentages indicated are based on net assets of $324,003. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation........ $5,063 Unrealized depreciation........ (2,942) ------ Net unrealized appreciation.... $2,121 ====== AMBAC--Insured by AMBAC Indemnity Corp. ETM--Escrowed to Maturity FGIC--Insured by Financial Guaranty Insurance Corp. FSA--Insured by Financial Security Assurance. GO--General Obligation MBIA--Insured by Municipal Bond Insurance Assoc. SCSDE--South Carolina School District Enhancement. See notes to financial statements. -80- 232 AMSOUTH MUTUAL FUNDS Florida Tax-Free Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ----------------------------------------------------------- ------- Florida Municipal Bonds (97.3%): $ 545 Altamonte Springs, Health Facilities Authority, Hospital Revenue, ETM, 5.60%, 10/1/10.............................. $ 578 1,000 Bay County, Florida Resource Recovery Revenue, 6.00%, 7/1/01, MBIA.............................................. 1,037 1,500 Broward County School District, GO, 5.60%, 2/15/07, Callable 2/15/03 @ 102.................................... 1,567 2,000 Broward County School District, GO, 6.00%, 2/15/07, Callable 2/15/02 @ 102.................................... 2,116 1,000 Dade County School District, 5.75%, 8/1/03, AMBAC.......... 1,054 1,000 Dade County School District, GO, 6.00%, 7/15/06............ 1,084 1,000 Dade County School District, GO, 5.00%, 2/15/14, Callable 2/15/07 @ 101, MBIA....................................... 979 1,000 Dade County, Aviation Authority, Series 1994 B, 6.25%, 10/1/04, AMBAC............................................ 1,087 1,115 Dade County, Public Services, Tax Revenue, 5.00%, 10/1/12, Callable 10/1/09 @ 101, FSA............................... 1,105 1,000 Dade County, Water & Sewer System Revenue, 4.70%, 10/1/04, FGIC...................................................... 1,016 1,000 Escambia County, Utility Authority, Utility System Revenue, 5.00%, 1/1/08, FGIC....................................... 1,015 755 Florida Housing Finance Agency, Homeowner Mortgages, Series 1995 A-1, 5.65%, 1/1/09, Callable 1/1/06 @ 102 ........... 776 1,000 Florida State Board of Education, GO, 5.00%, 6/1/10, Callable 6/1/05 @ 101..................................... 1,002 515 Florida State Board of Education, GO, 7.25%, 6/1/23, Callable 6/1/00 @ 102 .................................... 541 1,355 Florida State Board of Education, Lottery Revenue, Series A, 5.00%, 7/1/09, Callable 7/1/08 @ 101, FGIC............. 1,369 1,000 Florida State Board of Education, Series A, GO, 4.80%, 1/1/09, Callable 1/1/07 @ 101............................. 995 1,000 Florida State Board of Education, Series A, GO, 5.00%, 1/1/15, Callable 1/1/08 @ 101............................. 975 2,000 Florida State Board of Education, Series B, GO, 5.38%, 6/1/08, Callable 6/1/07 @ 101............................. 2,086 1,000 Florida State Board of Education, Series B, GO, 5.00%, 6/1/08.................................................... 1,016 1,000 Florida State Board of Education, Series E, GO, 5.10%, 6/1/13, Callable 6/1/03 @ 101............................. 993 3,310 Florida State Department of Transportation, Right of Way, Series B, GO, 5.50%, 7/1/08, Callable 7/1/07 @ 101........ 3,487 1,000 Florida State Division of Bond Finance, Department of General Services, Preservation 2000, Series A, 5.50%, 7/1/08, FSA.............................. 1,052 1,000 Florida State Division of Bond Finance, Department of General Services, Preservation 2000, Series A, 5.70%, 7/1/09, Callable 7/1/05 @ 101, AMBAC..... 1,048 1,000 Florida State Division of Bond Finance, Department of General Services, Preservation 2000, Series A, 5.00%, 7/1/12, Callable 7/1/07 @ 101, AMBAC..... 990 2,000 Florida State Division of Bond Finance, Department of General Services, Series B, 5.50%, 7/1/05, AMBAC.......... 2,108 1,000 Florida State Division of Bond Finance, Department of Natural Resources, Preservation 2000, Series A, 5.40%, 7/1/07, Callable 7/1/03 @ 101, FSA....... 1,027 1,000 Florida State Division of Bond Finance, Department of Natural Resources, Save Our Coast, 6.30%, 7/1/04, Callable 7/1/01 @ 101, MBIA............................... 1,052 1,000 Florida State Turnpike Authority, Turnpike Revenue, Series A, 5.50%, 7/1/11, Callable 7/1/05 @ 101, FGIC............. 1,027 1,000 Florida State Turnpike Authority, Turnpike Revenue, Series A, 5.00%, 7/1/12, Callable 7/1/09 @ 101, FSA.............. 992 890 Florida State, GO, Senior Lien, Jacksonville Transportation, 6.25%, 7/1/06............................. 978 1,000 Florida State, GO, Senior Lien, Jacksonville Transportation, 5.00%, 7/1/11, Callable 7/1/09 @ 101, FSA. 996 1,000 Florida State, GO, Senior Lien, Jacksonville Transportation, 5.25%, 7/1/15, Callable 7/1/07 @ 101...... 999 1,250 Ft. Lauderdale, Park Improvement Project, GO, 5.50%, 7/1/17, Callable 1/1/04 @ 101............................. 1,261 1,000 Hillsborough County, Capital Improvements, County Center Project, Series B, 5.00%, 7/1/13, Callable 7/1/06 @ 102, MBIA...................................................... 983 750 Hillsborough County, Environmental Land, GO, 6.00%, 7/1/03*, Callable 7/1/02 @ 102, AMBAC-TCRS................ 797 1,000 Hillsborough County, Solid Waste & Resource Recovery Revenue, 5.30%, 10/1/03, MBIA............................. 1,040 Continued -81- 233 AMSOUTH MUTUAL FUNDS Florida Tax-Free Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Market Amount Description Value --------- ---------------------------------------------------------- ------- Florida Municipal Bonds, continued: $ 1,000 Homestead, Special Insurance Assessment Revenue, 4.90%, 9/1/00, MBIA............................................. $ 1,014 1,000 Jacksonville Electric Authority, St. John's River Issue 2, Series 15, 4.75%, 10/1/07, Callable 4/1/06 @ 101......... 1,004 1,000 Jacksonville Electric Authority, St. John's River Issue 2, Series 16, 5.00%, 10/1/10, Callable 10/1/03 @ 101........ 1,001 1,000 Jacksonville, District Water & Sewer Revenue, ETM, 5.20%, 10/1/02, MBIA............................................ 1,031 1,010 Jacksonville, Excise Tax Revenue, Series A, 5.50%, 10/1/05, FGIC............................................ 1,067 1,500 Kissimmee Utility Authority, Electric System Revenue, 4.50%, 10/1/05........................................... 1,505 500 Manatee County School Board, Certificates of Participation, 7/1/09, Callable 7/1/06 @ 102, MBIA....... 543 1,000 Miami Beach, Water & Sewer Revenue, 5.38%, 9/1/08, Callable 9/1/05 @ 102, FSA............................... 1,041 1,675 Okeechobee Utility Authority, Utility System Revenue, 5.25% 10/1/14, Callable 10/1/09 @ 101, FSA............... 1,680 1,000 Orange County, Sales Tax Revenue, 4.80%, 1/1/17, Callable 1/1/07 @ 101, FGIC....................................... 930 1,000 Orlando & Orange County Expressway Authority, Expressway Revenue, Senior Lien, 4.80%, 7/1/01, AMBAC............... 1,015 1,500 Orlando Utilities Commission, Water & Electric Revenue, Series B, 5.10%, 10/1/11, Callable 10/1/06 @ 100......... 1,504 1,500 Orlando, Wastewater System Revenue, Series B, 4.90%, 10/1/06, Callable 10/1/03 @ 102, AMBAC................... 1,527 1,000 Osceola County, Capital Improvements, 5.00%, 9/1/02, MBIA. 1,026 1,000 Palm Beach County, Criminal Justice Facilities, 5.38%, 6/1/10, FGIC............................................. 1,035 1,000 Pasco County, Water & Sewer Revenue, Series A, 5.50%, 10/1/03, Callable 10/1/02 @ 102, FGIC.................... 1,048 1,000 Port of Palm Beach, 6.25%, 9/1/08, Callable 9/1/02 @ 102, MBIA..................................................... 1,072 1,000 Reedy Creek, Improvement District, Series A, GO, 5.60%, 6/1/10, Callable 6/1/05 @ 100, MBIA...................... 1,033 1,000 Reedy Creek, Improvement District, Series C, GO, 4.90%, 6/1/08, Callable 12/1/05 @ 101, AMBAC.................... 1,009 1,000 Seminole County, Local Option Gas Tax Revenue, 5.00%, 10/1/02, FGIC............................................ 1,026 1,000 St. Johns River Management District, Land Acquisition, 5.10%, 7/1/09, Callable 7/1/05 @ 100, FSA................ 1,012 1,000 St. Petersburg, Utility Tax Revenue, 5.85%, 6/1/02........ 1,043 1,000 Sunshine Skyway Revenue, 6.60%, 7/1/08 *, Callable 7/1/01 @ 101.................................................... 1,049 1,000 Tallahassee, Consolidated Utility System Revenue, 5.80%, 10/1/08, Callable 10/1/03 @ 102.......................... 1,071 1,000 Tampa Sports Authority, Local Option Sales Tax Revenue, Stadium Project, 6.00%, 1/1/06, MBIA..................... 1,080 1,000 Tampa Water Utility Systems, Series B, 4.75%, 10/1/27, Callable 10/1/08 @ 101, FGIC............................. 884 750 Tampa, Water & Sewer Revenue, 5.25%, 10/1/12, Callable 10/1/05 @ 102, FGIC...................................... 757 1,000 Tampa-Hillsborough County, Expressway, 5.00%, 7/1/10, Callable 7/1/07 @ 101.................................... 1,003 1,000 Volusia County Sales Tax Revenue, 5.00%, 10/1/13, Callable 10/1/08 @ 101, MBIA...................................... 986 1,000 Volusia County School District, GO, 5.30%, 6/1/01, FSA.... 1,023 ------- Total Florida Municipal Bonds 74,247 ------- Investment Companies (1.6%): 6,693 AmSouth Tax-Exempt Fund................................... 7 1,232,054 Dreyfus Florida Money Market Fund......................... 1,232 ------- Total Investment Companies 1,239 ------- Total (Cost $75,561) (a) $75,486 ======= Continued -82- 234 AMSOUTH MUTUAL FUNDS Florida Tax-Free Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) - -------- Percentages indicated are based on net assets of $76,312. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation....... $ 1,026 Unrealized depreciation....... (1,101) ------- Net unrealized depreciation... $ (75) ======= * Put and demand features exist allowing the Fund to require the repurchase of the instrument within variable time periods including daily, weekly, monthly, or semiannually. AMBAC--Insured by AMBAC Indemnity Corp. ETM--Escrowed to Maturity FGIC--Insured by Financial Guaranty Insurance Corp. FSA--Insured by Financial Security Assurance GO--General Obligation MBIA--Insured by Municipal Bond Insurance Assoc. TCRS--Transferrable Custodial Receipts See notes to financial statements. -83- 235 AMSOUTH MUTUAL FUNDS U.S. Treasury Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands) Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- U.S. Treasury Bills (35.4%): $11,000 8/5/99................................................... $ 10,996 5,000 8/12/99.................................................. 4,993 10,000 8/19/99.................................................. 9,977 15,000 8/26/99.................................................. 14,955 10,000 9/2/99................................................... 9,960 10,000 9/16/99.................................................. 9,944 10,000 9/23/99.................................................. 9,932 5,000 10/7/99.................................................. 4,958 10,000 10/21/99................................................. 9,900 10,000 10/28/99................................................. 9,888 10,000 11/12/99................................................. 9,864 10,000 12/16/99................................................. 9,823 -------- Total U.S. Treasury Bills 115,190 -------- U.S. Treasury Notes (26.3%): 10,000 8.00%, 8/15/99........................................... 10,012 10,000 5.88%, 8/31/99........................................... 10,009 5,000 7.13%, 9/30/99........................................... 5,020 10,000 6.00%, 10/15/99.......................................... 10,027 10,000 7.50%, 10/31/99.......................................... 10,069 15,000 7.88%, 11/15/99.......................................... 15,133 10,000 7.75%, 11/30/99.......................................... 10,085 5,000 7.75%, 1/31/00........................................... 5,064 10,000 8.50%, 2/15/00........................................... 10,181 -------- Total U.S. Treasury Notes 85,600 -------- Principal Security Amortized Amount Description Cost --------- ------------------------------------------------------- --------- Repurchase Agreements (34.8%): $56,604 C.S. First Boston Corp., 5.03%, dated 7/30/99, due 8/2/99, proceeds at maturity of $56,604, (Collateralized by $47,066 U.S. Treasury Bonds, 8.13%, 8/15/99--Market value $58,165) ....................... $ 56,604 56,604 Solomon Smith Barney, 5.03%, dated 7/30/99, due 8/2/99, proceeds at maturity of $56,604, (Collateralized by $57,736 Freddie Mac, 5.75%, 4/15/08 and Fannie Mae, 5.63%, 5/14/04--Market value $57,018) ................ 56,604 -------- Total Repurchase Agreements 113,208 -------- Total (Cost $313,998) (a) $313,998 ======== - -------- Percentages indicated are based on net assets of $325,237. (a) Cost and value for federal income tax and financial reporting purposes are the same. See notes to financial statements. -84- 236 AMSOUTH MUTUAL FUNDS Prime Obligations Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands) Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- Commercial Paper--Foreign (4.4%): Banking (1.5%): $10,000 Toronto Dominion Holdings, 5.01%, 12/7/99................ $ 9,822 -------- Financial Services (1.5%): 10,000 Island Finance Puerto Rico, 5.13%, 10/18/99.............. 9,889 -------- Food Products & Services (1.4%): 10,000 Canadian Wheat Board, 4.74%, 8/20/99..................... 9,975 -------- Total Commercial Paper--Foreign 29,686 -------- Certificates of Deposit (3.7%): Banking (3.7%): 10,000 BankAmerica, 5.24%, 9/24/99.............................. 10,001 10,000 Canadian Imperial Bank of Commerce, 5.01%, 2/7/00........ 9,998 5,000 Harris Trust, 5.05%, 2/14/00............................. 4,999 -------- Total Certificates of Deposit 24,998 -------- Corporate Bonds (3.7%): Brokerage Services (1.5%): 5,000 Bear Stearns & Co., Inc., 6.50%, 7/5/00.................. 5,037 5,000 Morgan Stanley Dean Witter, 5.89%, 3/20/00............... 5,022 -------- 10,059 -------- Electric Utility (0.7%): 5,000 Alabama Power Co., 6.00%, 3/1/00......................... 5,022 -------- Financial Services (0.8%): 5,000 American General Finance Corp., 7.25%, 4/15/00........... 5,051 -------- Food Products & Services (0.7%): 5,000 Diagio PLC, 6.50%, 9/15/99............................... 5,005 -------- Total Corporate Bonds 25,137 -------- Floating Rate Funding Agreements (5.5%): Insurance (5.5%): 12,000 General American Life Insurance Co., 5.31%*, 9/1/99**.... 12,000 12,500 Monumental Life Insurance Co., 5.33%*, 8/1/99**.......... 12,500 12,500 Monumental Life Insurance Co., 5.38%*, 8/1/99**.......... 12,500 -------- Total Floating Rate Funding Agreements 37,000 -------- Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- Commercial Paper--Domestic (69.2%): Agriculture (3.0%): $10,000 Cargill Inc., 4.77%, 8/2/99.............................. $ 9,999 10,000 Monsanto Co., 4.91%, 9/21/99............................. 9,930 -------- 19,929 -------- Aircraft Leasing (3.0%): 10,000 International Lease Finance Corp., 4.80%, 8/5/99......... 9,995 10,000 International Lease Finance Corp., 4.74%, 8/13/99........ 9,984 -------- 19,979 -------- Aluminum (3.0%): 10,000 Alcoa, 4.78%, 8/24/99.................................... 9,969 10,000 Alcoa, 4.84%, 8/31/99.................................... 9,960 -------- 19,929 -------- Automotive (2.9%): 10,000 Daimler Chrysler, 4.85%, 9/20/99......................... 9,932 10,000 Daimler Chrysler, 5.14%, 10/6/99......................... 9,906 -------- 19,838 -------- Automotive Credit (5.9%): 10,000 BMW US Capital, 5.17%, 12/10/99.......................... 9,812 10,000 Ford Motor Credit Co., 4.80%, 8/27/99.................... 9,965 10,000 Ford Motor Credit Co., 4.70%, 11/5/99.................... 9,875 10,000 General Motors Acceptance Corp., 5.28%, 1/25/00.......... 9,740 -------- 39,392 -------- Banking (6.6%): 10,000 J.P. Morgan & Co., 4.80%, 10/8/99........................ 9,909 5,000 J.P. Morgan & Co., 4.80%, 10/15/99....................... 4,950 10,000 SunTrust Banks, 5.06%, 8/11/99........................... 9,987 10,000 SunTrust Banks, 5.06%, 8/25/99........................... 9,966 10,000 Wells Fargo & Co., 4.86%, 9/10/99........................ 9,946 -------- 44,758 -------- Beverages (1.5%): 10,000 Coca Cola Co., 5.00%, 9/17/99............................ 9,935 -------- Brokerage Services (2.9%): 10,000 Goldman Sachs, 5.36%, 1/21/00............................ 9,742 10,000 Merrill Lynch, 5.13%, 9/16/99............................ 9,935 -------- 19,677 -------- Continued -85- 237 AMSOUTH MUTUAL FUNDS Prime Obligations Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands) Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- Commercial Paper--Domestic, continued: Consumer Goods (8.8%): $10,000 Clorox Co., 4.88%, 9/8/99................................ $ 9,948 10,000 Clorox Co., 5.11%, 10/21/99.............................. 9,885 10,000 Hasbro Inc., 4.94%, 10/26/99............................. 9,882 10,000 Kimberly Clark, 5.05%, 8/19/99........................... 9,975 10,000 Procter & Gamble, 4.97%, 8/9/99.......................... 9,989 10,000 Proctor & Gamble, 5.10%, 9/29/99......................... 9,916 -------- 59,595 -------- Electric Utility (3.7%): 10,000 Alabama Power Co., 5.08%, 8/24/99........................ 9,968 5,000 National Rural Utilities, 4.83%, 8/23/99................. 4,985 10,000 National Rural Utilities, 4.79%, 8/26/99................. 9,967 -------- 24,920 -------- Farm Equipment (3.0%): 10,000 John Deere Capital Corp., 4.77%, 8/17/99................. 9,979 10,000 John Deere Capital Corp., 4.78%, 9/7/99.................. 9,951 -------- 19,930 -------- Financial Services (8.7%): 10,000 American Express, 4.80%, 12/14/99........................ 9,820 10,000 American Express, 4.78%, 1/11/00......................... 9,784 10,000 American General Finance Corp., 5.14%, 10/28/99.......... 9,874 10,000 Associates First Capital, 5.30%, 4/3/00.................. 9,638 10,000 General Electric Capital Corp., 5.38%, 4/4/00............ 9,631 10,000 Transamerica Finance, 4.80%, 8/12/99..................... 9,985 -------- 58,732 -------- Oil & Gas Exploration, Production, & Services (5.9%): 10,000 Chevron USA, 5.03%, 9/3/99............................... 9,954 10,000 Equilon Enterprises, 5.00%, 8/16/99...................... 9,979 Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Commercial Paper--Domestic, continued: Oil & Gas Exploration, Production, & Services, continued: $10,000 Equilon Enterprises, 5.16%, 10/19/99.................... $ 9,887 10,000 Texaco Inc., 5.33%, 1/18/00............................. 9,748 -------- 39,568 -------- Pharmaceuticals (1.5%): 10,000 Pfizer Inc., 5.05%, 9/2/99.............................. 9,955 -------- Technology (2.2%): 5,000 IBM Credit Corp., 4.67%, 8/6/99......................... 4,997 10,000 IBM Credit Corp., 4.80%, 9/13/99........................ 9,942 -------- 14,939 -------- Telecommunications (4.4%): 10,000 BellSouth Telecommunications Inc., 5.11%, 9/28/99....... 9,918 10,000 Lucent Technologies, 4.98%, 1/27/00..................... 9,752 10,000 Lucent Technologies, 4.97%, 2/10/00..................... 9,734 -------- 29,404 -------- Telecommunications--Wireless (2.2%): 5,109 Motorola, 5.05%, 8/4/99................................. 5,107 10,000 Motorola, 5.08%, 9/10/99................................ 9,943 -------- 15,050 -------- Total Commercial Paper--Domestic 465,530 -------- Repurchase Agreements (13.7%): 92,189 Solomon Smith Barney, 5.13%, dated 7/30/99, due 8/2/99 at maturity of $92,189, (Collateralized by $94,034 Freddie Mac, 5.75%,4/15/08 and Fannie Mae, 5.63%, 5/14/04--Market value $92,864)......................... 92,189 -------- Total Repurchase Agreements 92,189 -------- Total (Cost $674,540) (a) $674,540 ======== - -------- Percentages indicated are based on net assets of $673,201. (a) Cost and value for federal income tax and financial reporting purposes are the same. * Variable rate security. Rate presented represents rate in effect at July 31, 1999. Date presented reflects next rate change date. ** Put and demand features exist allowing the Fund to require the repurchase of the instrument within variable time periods including daily, weekly, monthly, quarterly, or semianually. PLC--Public Limited Co. See notes to financial statements. -86- 238 AMSOUTH MUTUAL FUNDS Institutional Prime Obligations Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- Commercial Paper--Domestic (72.7%): Aircraft Leasing (3.6%): $4,000 International Lease Finance Corp., 4.91%, 9/8/99......... $ 3,979 -------- Aluminum (3.6%): 4,000 Alcoa, Inc., 5.08%, 9/20/99.............................. 3,972 -------- Automotive (3.6%): 4,000 Daimler Chrysler, 5.13%, 11/19/99........................ 3,937 -------- Automotive-Finance (11.0%): 4,000 BMW US Capital, 5.15%, 11/5/99........................... 3,945 4,000 Ford Motor Credit, 4.80%, 8/3/99......................... 3,999 4,000 General Motors Acceptance Corp., 5.13%, 12/10/99......... 3,925 -------- 11,869 -------- Banking (3.6%): 4,000 Wells Fargo & Co., 4.86%, 9/10/99........................ 3,978 -------- Beverages (3.6%): 4,000 Coca Cola Co., 5.09%, 10/19/99........................... 3,955 -------- Brokerage Services (3.6%): 4,000 Goldman Sachs, 5.16%, 10/28/99........................... 3,950 -------- Consumer Goods (3.6%): 4,000 Clorox Co., 5.14%, 10/29/99.............................. 3,949 -------- Electric Utility (3.6%): 4,000 National Rural Utilities, 5.10%, 10/5/99................. 3,963 -------- Farm Equipment (3.7%): 4,000 John Deere Capital Corp., 5.09%, 8/6/99.................. 3,997 -------- Financial Services (14.6%): 4,000 American Express Credit, 5.11%, 11/5/99.................. 3,945 4,000 American General Finance Corp, 5.16%, 11/9/99............ 3,943 4,000 Associates First Capital, 4.96%, 10/4/99................. 3,966 4,000 General Electric Capital Corp., 5.01%, 10/25/99.......... 3,953 -------- 15,807 -------- - -------- Percentages indicated are based on net assets of $109,033. (a) Cost and value for federal income tax and financial reporting purposes are the same. Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Commercial Paper--Domestic, continued: Oil & Gas Exploration, Production, & Services (3.6%): $4,000 Equilon Enterprises, 5.13%, 10/22/99.................... $ 3,953 -------- Pharmaceuticals (3.7%): 4,000 Pfizer, Inc., 5.05%, 9/3/99............................. 3,981 -------- Technology (3.6%): 4,000 IBM Credit Corp, 5.05%, 9/7/99.......................... 3,979 -------- Telecommunications (3.7%): 4,000 BellSouth Telecommunications Inc., 5.02%, 8/6/99........ 3,997 -------- Total Commercial Paper--Domestic 79,266 -------- Investment Companies (0.0%): 18,427 AmSouth Prime Obligations Fund.......................... 18 15,291 AmSouth U.S. Treasury Fund.............................. 15 -------- Total Investment Companies 33 -------- Repurchase Agreements (27.7%): 15,100 C.S. First Boston Corp., 5.13%, dated 7/30/99, due 8/2/99, proceeds at maturity of $15,100, (Collateralized by $15,675 Freddie Mac Discount Note, 0.00%, 8/19/99--Market value $15,631).................. 15,100 15,100 Solomon Smith Barney, 5.13%, dated 7/30/99, due 8/2/99, proceeds at maturity of $15,100, (Collateralized by $15,402 Freddie Mac, 5.75%, 4/15/08 and Fannie Mae, 5.63%, 5/14/04--Market value $15,211).................. 15,100 -------- Total Repurchase Agreements 30,200 -------- Total (Cost $109,499) (a) $109,499 ======== See notes to financial statements. -87- 239 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Tax Anticipation Notes (4.9%): Florida (1.0%): $1,000 Orange County School District, Tax Anticipation Notes, 3.10%, 9/15/99 ........................................ $ 1,000 ------- Pennsylvania (1.6%): 1,500 Philadelphia, Tax & Revenue, Anticipation Notes, 4.25%, 6/30/00 ............................................... 1,510 ------- Texas (2.3%): 2,200 Texas State Tax & Revenue Anticipation Notes, 4.50%, 8/31/99 ............................................... 2,203 ------- Total Tax Anticipation Notes 4,713 ------- Demand Notes (40.2%): Alabama (13.1%): 1,500 Alabama Housing Finance Authority, Huntsville, Series B, 3.15%*, 8/4/99**, FNMA ................................ 1,500 2,000 Alabama State Housing Finance Authority, Multi Family Housing Revenue, Rime VLG Hoover Project, Series A, 3.15%*, 8/4/99**, FNMA ................................ 2,000 1,000 Bon Air, Industrial Development Board, Avondale Mills, 3.15%*, 8/4/99**, LOC: Trust Co. Bank ................. 1,000 2,000 City of Birmingham, Series 1992A, GO, 3.20%*, 8/4/99**, LOC: Regions Bank ..................................... 2,000 350 Columbia, Industrial Development Board, PCR, Alabama Power Co. Project, Series D, 3.40%*, 8/2/99** ......... 350 1,000 Jacksonville, Industrial Development Board, Parker Hannifin Corp., 3.15%*, 8/5/99** ...................... 1,000 2,000 Mobile, Industrial Development Board, PCR, Alabama Power Co. Project, Series B, 3.20%*, 8/5/99** ............... 1,999 500 North Alabama, Environmental Improvement Authority, PCR, Reynolds Metals Co., 3.40%*, 8/2/99**, LOC: Bank of Nova Scotia ........................................... 500 1,000 Port City, Medical Clinic Board, Infirmary Health Systems, Series B, 3.15%*, 8/5/99**, AMBAC ............ 1,000 1,365 Stevenson, Industrial Development Board, Environmental Improvement Revenue, Mead Corp. Project, 3.35%*, 8/2/99**, LOC: Credit Suisse .......................... 1,365 ------- 12,714 ------- California (2.6%): 2,500 Los Angeles, Regional Airports Improvements Corp., Los Angeles International-LAX 2, 3.40%*, 8/2/99 **, LOC: Societe Generale ...................................... 2,500 ------- Florida (3.3%): 1,500 Alachua County Health, 3.00%*, 8/4/99**, MBIA........... 1,500 1,680 Laurel Club, Certificates of Participation, Series 96A, 3.25%*, 8/4/99**, LOC: Swiss Bank Corp. ............... 1,680 ------- 3,180 ------- Georgia (1.0%): 1,000 Cobb County, Post Mill Project, 3.15%*, 8/4/99**........ 1,000 ------- Michigan (2.6%): 2,500 Cornell Township Economic Development Corp., Environment Improvement Revenue, 3.35%*, 8/2/99**, LOC: Swiss Bank. 2,500 ------- Continued -88- 240 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Demand Notes, continued: Minnesota (3.5%): $1,000 Minneapolis, GO, Sewer Improvements, Series A, 3.05%*, 8/4/99**, LOC: Bayerische Vereinsbank ................. $ 1,000 2,400 Minneapolis, GO, Sewer Improvements, Series B, 3.05%*, 8/5/99** .............................................. 2,400 ------- 3,400 ------- New York (2.6%): 900 New York, GO, 3.50%*, 8/2/99**, LOC: Morgan Guaranty Trust.................................................. 900 1,600 New York, GO, Series D, 3.00%*, 8/4/99**, FGIC.......... 1,600 ------- 2,500 ------- North Carolina (0.5%): 500 North Carolina Educational Facilities, 3.00%*, 8/5/99**, LOC: Wachovia B&T ..................................... 500 ------- Pennsylvania (2.3%): 2,200 Schuylkill County, Industrial Development Authority, Resource Recovery Revenue, Gilberton Power Project, 3.05%*, 8/4/99**, LOC: Mellon Bank .................... 2,200 ------- South Carolina (1.0%): 1,000 South Carolina State Jobs & Economic Development Revenue, St. Francis Hospital, 3.40%*, 8/2/99**, LOC: Chase Manhattan Bank .................................. 1,000 ------- Tennessee (1.9%): 1,300 Metropolitan Nashville Airport Authority, Special Facilities Revenue, American Airlines Project, Series A, 3.40%*, 8/2/99**, LOC: Union Bank of Switzerland ... 1,300 500 Sullivan County, Industrial Development Board, PCR, Mead Corp. Project, 2.80%*, 8/2/99**, LOC: Union Bank of Switzerland ............................. 500 ------- 1,800 ------- Texas (3.1%): 1,000 Grapevine, Industrial Development Corp., American Airlines A4, 3.40%*, 8/2/99**, LOC: Morgan Guaranty ... 1,000 2,000 North Central Texas Series C, 3.40%*, 8/2/99**.......... 2,000 ------- 3,000 ------- Washington (0.6%): 600 Seattle Municipal Light & Power, 3.00%*, 8/4/99**....... 600 ------- Wyoming (2.1%): 2,000 Lincoln County PCR, Project D, 3.35%*, 8/2/99**......... 2,000 ------- Total Demand Notes 38,894 ------- Continued -89- 241 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Tax Free Commercial Paper (11.6%): Alabama (2.6%): $1,500 Montgomery, 3.00%, 8/6/99............................... $ 1,500 1,000 Port City Medical Clinic Board, Mobile, 3.05%, 8/4/99... 1,000 ------- 2,500 ------- Florida (4.8%): 1,000 Jacksonville, 3.25%, 10/22/99........................... 1,000 1,500 Jacksonville, PCR, 3.35%, 10/18/99...................... 1,500 1,200 Sarasota County, Public Hospital Revenue, 3.20%, 9/7/99. 1,200 1,000 St. Lucie County, PCR, 3.05%, 8/5/99.................... 1,000 ------- 4,700 ------- Mississippi (2.1%): 1,000 Mississippi Hospital Equipment & Facilities Authority, 3.10%, 9/13/99 ........................................ 1,000 1,000 Mississippi Hospital Equipment Authority Revenue, 3.25%, 10/7/99 ............................................... 1,000 ------- 2,000 ------- Nevada (1.1%): 1,000 Clark County, 5.70%, 6/1/00............................. 1,018 ------- Utah (1.0%): 1,000 Intermountain Power Agency, 3.20%, 10/13/99............. 1,000 ------- Total Tax Free Commercial Paper 11,218 ------- Municipal Bonds (36.6%): Alabama (3.3%): 1,000 Alabama State College Authority, 5.00%, 8/1/99.......... 1,000 1,000 Alabama State, Municipal Electrics Authority Power Supply Revenue, 6.10%, 9/1/99, LOC: MBIA ..................... 1,003 380 Alabama Water Pollution Control Authority, 5.00%, 8/15/99, LOC: AMBAC ................................... 380 600 University Birmingham Alabama Medical & Educational Foundation Revenue, 7.00%, 12/1/19, Prerefunded 12/1/99 @ 102 ................................................. 620 250 University of Alabama Revenue, 4.15%, 10/1/99........... 250 ------- 3,253 ------- California (1.6%): 1,500 Los Angeles County, Tax & Revenue, 4.00%, 6/30/00....... 1,509 ------- Colorado (1.0%): 1,000 El Paso County, School District, 0.00%, 12/1/99, LOC: MBIA .................................................. 989 ------- Florida (1.3%): 250 Homestead, Special Insurance Assessment Revenue, 4.75%, 9/1/99, LOC: MBIA ..................................... 250 1,000 Tampa, Water & Sewer Revenue, 6.20%, 10/1/99, LOC: Bank of America ............................................ 1,005 ------- 1,255 ------- Continued -90- 242 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Municipal Bonds, continued: Georgia (3.5%): $1,000 Clayton County, GO, 4.25%, 8/1/99....................... $ 1,000 1,500 Gwinnett County School District, 3.50%, 12/31/99........ 1,501 1,000 Muscogee County School District, 4.00%, 11/1/99......... 1,003 ------- 3,504 ------- Hawaii (1.6%): 1,500 Hawaii State, 4.75%, 11/1/99, LOC: FGIC................. 1,505 ------- Illinois (3.0%): 1,075 Chicago Wastewater Transmission Revenue, 7.20%, 11/15/19, Prerefunded 11/15/99 @ 102, LOC:MBIA ........ 1,109 750 Cook County High School District, 6.50%, 12/1/99, LOC: FSA.................................................... 758 1,000 Illinois Health Facilities Authority Revenue, 4.00% 8/15/99................................................ 1,000 ------- 2,867 ------- Kentucky (1.0%): 1,000 Kentucky Asset/Liability Revenue, 4.25%, 6/28/00........ 1,008 ------- Louisianna (0.5%): 525 Louisiana State Gas & Fuels Tax Revenue, 3.35%, 11/15/99............................................... 525 ------- Maryland (1.0%): 1,000 Montgomery County, GO, 5.80%, 10/1/99................... 1,005 ------- Massachusetts (1.4%): 500 Boston Water & Sewer Common Revenue, 7.10%, 11/01/19, Prerefunded 11/1/99 @ 102, LOC: US Government Securities .............................. 516 300 Hingham, MA, 5.50%, 10/15/99............................ 301 500 Massachusetts State Convention Center Authority, 6.00%, 9/1/99 ................................................ 501 ------- 1,318 ------- New Hampshire (2.1%): 2,000 New Hampshire State Capital Appreciation, College Savings Bond Program, 0.00%, 8/1/99 ................... 2,000 ------- New York (0.5%): 450 New York City Transitional Finance Authority Revenue, 4.00%, 8/15/99 ........................................ 450 ------- North Carolina (0.3%): 250 Stokes County, 4.80%, 6/1/00, LOC: FGIC................. 252 ------- Ohio (2.2%): 1,500 Cuyahoga County, 6.70%, 10/1/10, Prerefunded 10/1/99 @ 102, LOC: US Government Securities .................... 1,539 625 Ottawa County, 4.25%, 9/1/99, LOC: MBIA................. 625 ------- 2,164 ------- Continued -91- 243 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- -------------------------------------------------------- --------- Municipal Bonds, continued: Oklahoma (1.1%): $1,100 Oklahoma City, 4.65%, 8/1/99............................ $ 1,100 ------- Pennsylvania (2.8%): 1,000 Lehigh County Purpose Authority Revenue, 8.75%, 11/1/14, Prerefunded 11/1/99 @ 102, LOC: US Treasury Obligation ........................... 1,034 1,000 Pennsylvania State Turnpike Commission Turnpike Revenue, 7.63%, 12/1/09, Prerefunded 12/1/99 @ 102 ............. 1,035 600 Philadelphia School District, 4.00%, 6/30/00, LOC: Mellon Bank ........................................... 603 ------- 2,672 ------- Rhode Island (1.0%): 1,000 Rhode Island State Construction Capital Development Loan, Series A, 4.25% 9/1/99, LOC: FGIC ............... 1,001 ------- South Carolina (0.7%): 665 South Carolina State Capital Improvement, Series B, 5.60%, 3/1/00 ......................................... 673 ------- Tennessee (2.1%): 1,000 Metro Government Nashville & Davidson Tennessee, Public Improvement, Series A, 4.60%, 11/15/99 ................ 1,004 1,000 Sullivan County, Health Education & Housing, 7.20%, 2/15/00, LOC: MBIA .................................... 1,040 ------- 2,044 ------- Texas (1.6%): 500 Dallas Water Works & Sewer Revenue, 5.90%, 10/1/99...... 502 1,000 Irving Independent School District GO, 4.50%, 8/15/99... 1,001 ------- 1,503 ------- Virginia (0.4%): 355 James City County, 6.40%, 12/15/99, LOC: FGIC........... 359 ------- Washington (1.0%): 500 King County, GO, 4.70% 10/1/99.......................... 501 435 Richland Electric Revenue, 5.30% 11/1/99................ 437 ------- 938 ------- West Virginia (1.6%): 500 West Virginia State Hospital Finance Authority, 7.00%, 8/1/04, Prerefunded 8/1/99 @ 102, LOC: FSA ............ 510 1,000 West Virginia State, State Road, 3.50%, 6/1/00.......... 1,000 ------- 1,510 ------- Total Municipal Bonds 35,404 ======= Continued -92- 244 AMSOUTH MUTUAL FUNDS Tax-Exempt Fund Schedule of Portfolio Investments, Continued July 31, 1999 (Amounts in thousands, except shares) Shares or Principal Security Amortized Amount Description Cost --------- --------------------------------------------------------- --------- Investment Companies (6.1%): 4,012,917 Federated Tax-Free Fund.................................. $ 4,013 1,890,596 Goldman Sachs Tax-Free Fund.............................. 1,891 ------- Total Investment Companies 5,904 ------- Total (Cost $96,133) (a) $96,133 ======= - -------- Percentages indicated are based on net assets of $96,724. (a) Cost for federal income tax and financial reporting purposes are the same. * Variable rate security. Rate presented represents rate in effect at July 31, 1999. Date presented reflects next rate change date. ** Put and demand features exist allowing the fund to require the repurchase of the instrument within variable time periods including daily, weekly, monthly, and semiannually. AMBAC--Insured by AMBAC Indemnity Corp. FGIC--Insured by Financial Guaranty Insurance Corp. FNMA--Insured by Federal National Mortgage Assoc. FSA--Insured by Financial Security Assoc. GO--General Obligation LOC--Letter of Credit MBIA--Insured by Municipal Bond Insurance Assoc. PCR--Pollution Control Revenue See notes to financial statements. -93- 245 AMSOUTH MUTUAL FUNDS Notes to Financial Statements July 31, 1999 1. Organization: AmSouth Mutual Funds (the "Trust") was organized on October 1, 1987, and is registered under the Investment Company Act of 1940, as amended ("the 1940 Act"), as a diversified, open-end investment company established as a Massachusetts business trust. The Trust is authorized to issue an unlimited number of shares without par value. The Trust currently offers shares of the AmSouth Equity Income Fund ("Equity Income"), the AmSouth Equity Fund ("Equity"), the AmSouth Enhanced Market Fund ("Enhanced Market"), the AmSouth Capital Growth Fund ("Capital Growth"), the AmSouth Select Equity Fund ("Select Equity"), the AmSouth Regional Equity Fund ("Regional Equity"), the AmSouth Small Cap Fund ("Small Cap"), the AmSouth Balanced Fund ("Balanced"), the AmSouth Limited Maturity Fund ("Limited Maturity"), the AmSouth Government Income Fund ("Government Income"), the AmSouth Bond Fund ("Bond"), the AmSouth Municipal Bond Fund ("Municipal Bond"), and the AmSouth Florida Tax-Free Fund ("Florida Tax-Free") (collectively, "the variable net asset funds"), the AmSouth U.S. Treasury Fund ("U.S. Treasury") the AmSouth Prime Obligations Fund ("Prime Obligations"), the AmSouth Institutional Prime Obligations Fund ("Institutional Prime Obligations") and the AmSouth Tax-Exempt Fund ("Tax-Exempt") (collectively, "the money market funds") (collectively, "the Funds" and individually "a Fund"). The Equity Income Fund seeks above average income and capital appreciation. The Equity Fund seeks growth of capital. The Enhanced Market Fund seeks long-term growth of capital. The Capital Growth Fund seeks long-term capital appreciation and growth of income. The Select Equity Fund seeks long-term growth of capital. The Regional Equity Fund seeks growth of capital. The Small Cap Fund seeks capital appreciation. The Balanced Fund seeks to obtain long-term capital growth and to produce a reasonable amount of current income. The Limited Maturity Fund seeks current income, consistent with the preservation of capital. The Government Income Fund, Bond Fund, Municipal Bond Fund and Florida Tax-Free Fund seeks to produce as high a level of current interest income exempt from federal income taxes and Florida intangible taxes (Florida Tax-Free Fund only) as is consistent with the preservation of capital. The U.S. Treasury Fund, Prime Obligations Fund and Institutional Prime Obligations Fund seek current income with liquidity and stability of principal. The Tax-Exempt Fund seeks to produce as high a level of current interest income exempt from federal income taxes as is consistent with the preservation of capital and relative stability of principal. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. These policies are in conformity with generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. Securities Valuation: Investments of the money market funds are valued at either amortized cost, which approximates market value, or at original cost which, combined with accrued interest, approximates market value. Under the Continued -94- 246 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 amortized cost method, discount or premium is amortized on a constant basis to the maturity of the security. Investments in common stocks, corporate bonds, municipal bonds, commercial paper and U.S. Government securities of the variable net asset value funds are valued on the basis of valuations provided by dealers or an independent pricing service approved by the Board of Trustees. Investments in investment companies are valued at their net asset values as reported by such companies. The differences between cost and market values of such investments are reflected as unrealized appreciation or depreciation. Securities Transactions and Related Income: Securities transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on the accrual basis and includes, where applicable, the pro rata amortization of premium or discount. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. Financial Futures Contracts: The Enhanced Market Fund and the Select Equity Fund may invest in financial futures contracts for the purpose of hedging their existing portfolio securities, or securities that they intend to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a financial futures contract, a Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by a Fund each day, depending on the daily fluctuations in the fair value of the underlying security. A Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates, and the underlying hedged assets. Repurchase Agreements: The Funds may acquire repurchase agreements from member banks of the Federal Deposit Insurance Corporation and from registered broker/dealers which AmSouth Bank ("AmSouth"), 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 generally equals the price paid by the Funds 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, is required to maintain the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). Securities subject to repurchase agreements are held by the Funds' custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. Continued -95- 247 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Dividends to Shareholders: Dividends from net investment income are declared daily and paid monthly for the money market funds. Dividends from net investment income are declared and paid monthly for the variable net asset value funds. Distributable net realized gains, if any, are declared and distributed at least annually. The amounts of dividends from net investment income and of distributions from net realized gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions to shareholders which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized gains. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. As of July 31,1999, the following reclassifications have been made to increase (decrease) such amounts with offsetting adjustments made to capital (amounts in thousands): Undistributed Undistributed Net Realized Net Investment Gains on Income Investments -------------- ------------- Capital Growth Fund............................. $149 $(149) Select Equity Fund.............................. 1 (1) Small Cap Fund.................................. 99 -- Balanced Fund................................... 87 (87) Limited Maturity Fund........................... 212 (212) Government Income Fund.......................... (15) 24 Bond Fund....................................... 445 (445) Municipal Bond Fund............................. 33 (33) Institutional Prime Obligations Fund............ 5 -- Federal Income Taxes: It is the policy of each Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of net investment income and net realized capital gains sufficient to relieve it from all, or substantially all, federal income taxes. Other: Expenses that are directly related to one of the Funds are charged directly to that Fund. Other operating expenses for the Trust are prorated to the Funds on the basis of relative net assets. Fees paid under a Fund's shareholder servicing or distribution plans are borne by the specific class of shares to which they apply. Continued -96- 248 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Unamortized Organizational Costs: Costs incurred by the Equity Income, the Capital Growth and the Small Cap Funds in connection with their organization and registration of shares have been deferred and are amortized using the straight-line method over a period of two years from the commencement of the public offering of shares of the Fund. As of July 31, 1999 the Small Cap Fund had remaining unamortized costs of $3,744. 3. Purchases and Sales of Securities: Purchases and sales of securities (excluding short-term securities) for the year ended July 31, 1999 were as follows (amounts in thousands): Purchases Sales --------- ------- Equity Income Fund........................................ $53,416 $60,382 Equity Fund............................................... 174,713 268,994 Enhanced Market Fund (a).................................. 34,546 6,824 Capital Growth Fund....................................... 38,892 20,058 Select Equity Fund (a).................................... 21,993 1,777 Regional Equity Fund...................................... 15,892 49,539 Small Cap Fund............................................ 36,636 21,062 Balanced Fund............................................. 84,942 119,423 Limited Maturity Fund..................................... 46,173 42,786 Government Income Fund.................................... 2,491 4,521 Bond Fund................................................. 115,567 63,340 Municipal Bond Fund....................................... 72,451 65,956 Florida Tax Free Fund..................................... 24,830 23,460 -------- (a) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. 4. Capital Share Transactions: The Trust has issued three classes of Fund shares in each of the Equity Income Fund, the Equity Fund, the Enhanced Market Fund, the Capital Growth Fund, the Select Equity Fund, the Regional Equity Fund, the Small Cap Fund, the Balanced Fund, the Limited Maturity Fund, the Bond Fund, the Municipal Bond Fund, the Florida Tax Free Fund, and the Prime Obligations Fund: Classic Shares, Premier Shares, and B Shares. The Trust has issued two classes of Fund shares in each of the Government Income Fund, the U.S. Treasury Fund, and the Tax-Exempt Fund: Classic Shares and Premier Shares. The Trust has issued three classes of fund shares in the Institutional Prime Obligations Fund: Class I, Class II and Class III. Each class of shares in a Fund has identical rights and privileges except with respect to fees paid under shareholder servicing or distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters affecting a single class of shares, and the exchange privilege of each class of shares. Transactions in capital shares for the Funds for the year ended July 31, 1999 and July 31,1998, respectively, were as follows (amounts in thousands): Continued -97- 249 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Equity Enhanced Capital Income Equity Market Growth Fund Fund Fund Fund ----------------- -------------------- -------- ---------------- Year Year Year Year Period Year Period Ended Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, July 31, 1999 1998 1999 1998 1999 (b) 1999 1998 (a) -------- ------- --------- --------- -------- ------- ------- CAPITAL TRANSACTIONS: Classic Shares: Proceeds from shares issued................ $ 1,858 $12,824 $ 57,426 $ 35,457 $19,464 $ 7,168 $11,600 Dividends reinvested... 790 1,113 6,662 3,628 103 65 -- Cost of shares redeemed.............. (10,017) (5,099) (68,598) (25,227) (8,488) (4,647) (695) -------- ------- --------- --------- ------- ------- ------- Change in net assets from Classic Share transactions.......... $ (7,369) $ 8,838 $ (4,510) $ 13,858 $11,079 $ 2,586 $10,905 ======== ======= ========= ========= ======= ======= ======= Premier Shares: Proceeds from shares issued................ $ 6,156 $ 4,442 (c) $ 136,777 $ 147,122 (c) $14,504 (e) $16,038 $ 457 (c) Dividends reinvested... 135 155 (c) 17,681 11,396 (c) 32 (e) 4 -- (c) Cost of shares redeemed.............. (4,389) (1,253)(c) (173,589) (178,749)(c) (749)(e) (2,206) (25)(c) -------- ------- --------- --------- ------- ------- ------- Change in net assets from Premier Share transactions.......... $ 1,902 $ 3,344 $ (19,131) $ (20,231) $13,787 $13,836 $ 432 ======== ======= ========= ========= ======= ======= ======= Class B Shares: Proceeds from shares issued................ $ 1,204 $ 8,243 (d) $ 4,945 $ 8,035 (d) $ 6,257 (f) $ 3,933 $ 3,449 (d) Dividends reinvested... 230 108 (d) 944 101 (d) 5 (f) 31 -- (d) Cost of shares redeemed.............. (1,990) (508)(d) (1,866) (328)(d) (343)(f) (839) (213)(d) -------- ------- --------- --------- ------- ------- ------- Change in net assets from Class B Share transactions.......... $ (556) $ 7,843 $ 4,023 $ 7,808 $ 5,919 $ 3,125 $ 3,236 ======== ======= ========= ========= ======= ======= ======= SHARE TRANSACTIONS: Classic Shares: Issued................. 153 1,071 2,355 1,497 1,655 538 1,106 Reinvested............. 67 96 296 159 8 5 -- Redeemed............... (821) (418) (2,824) (1,075) (627) (380) (66) -------- ------- --------- --------- ------- ------- ------- Change in Classic Shares................ (601) 749 (173) 581 1,036 163 1,040 ======== ======= ========= ========= ======= ======= ======= Premier Shares: Issued................. 501 366 (c) 5,779 6,192 (c) 1,081 (e) 1,196 41 (c) Reinvested............. 11 13 (c) 787 501 (c) 2 (e) -- -- (c) Redeemed............... (360) (104)(c) (7,105) (7,487)(c) (53)(e) (159) (2)(c) -------- ------- --------- --------- ------- ------- ------- Change in Premier Shares................ 152 275 (539) (794) 1,030 1,037 39 ======== ======= ========= ========= ======= ======= ======= Class B Shares: Issued................. 101 684 (d) 205 332 (d) 468 (f) 299 320 (d) Reinvested............. 20 9 (d) 42 4 (d) -- (f) 3 -- (d) Redeemed............... (166) (41)(d) (77) (13)(d) (25)(f) (64) (19)(d) -------- ------- --------- --------- ------- ------- ------- Change in Class B Shares................ (45) 652 170 323 443 238 301 ======== ======= ========= ========= ======= ======= ======= - -------- (a) For the period from August 3, 1997 (commencement of operations) through July 31, 1998. (b) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. (c) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (d) For the period from September 3, 1997 (commencement of operations) through July 31, 1998. (e) For the period from December 11, 1998 (commencement of operations) through July 31, 1999. (f) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. Continued -98- 250 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Select Equity Regional Equity Small Cap Balanced Fund Fund Fund Fund ------------- ------------------ ------------------ ------------------ Period Year Year Year Period Year Year Ended Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, July 31, 1999 (b) 1999 1998 1999 1998 (a) 1999 1998 ------------- -------- -------- -------- -------- -------- -------- CAPITAL TRANSACTIONS: Classic Shares: Proceeds from shares issued................ $14,740 $ 795 $ 6,724 $ 657 $1,559 (e) $ 3,921 $ 8,568 Dividends reinvested... 67 2,115 1,663 -- -- (e) 4,523 5,169 Cost of shares redeemed.............. (6,553) (18,502) (11,554) (835) (47)(e) (11,411) (21,937) ------- -------- -------- ------- ------ -------- -------- Change in net assets from Classic Share transactions.......... $ 8,254 $(15,592) $ (3,167) $ (178) $1,512 $ (2,967) $ (8,200) ======= ======== ======== ======= ====== ======== ======== Premier Shares: Proceeds from shares issued................ $11,128 (g) $ 9,008 $ 22,574 (c) $17,146 $5,609 $ 57,092 $ 82,900 (c) Dividends reinvested... 25 (g) 1,509 1,325 (c) -- -- 18,818 17,248 (c) Cost of shares redeemed.............. (708)(g) (30,812) (27,608)(c) (1,058) (72) (82,279) (88,638)(c) ------- -------- -------- ------- ------ -------- -------- Change in net assets from Premier Share transactions.......... $10,445 $(20,295) $ (3,709) $16,088 $5,537 $ (6,369) $ 11,510 ======= ======== ======== ======= ====== ======== ======== Class B Shares: Proceeds from shares issued................ $ 2,006 (h) $ 178 $ 2,405 (d) $ 474 $ 967 $ 5,756 $ 5,405 (f) Dividends reinvested... 2 (h) 110 27 (d) -- -- 680 105 (f) Cost of shares redeemed.............. (63)(h) (998) (247)(d) (333) (22) (1,533) (180)(f) ------- -------- -------- ------- ------ -------- -------- Change in net assets from Class B Share transactions.......... $ 1,945 $ (710) $ 2,185 $ 141 $ 945 $ 4,903 $ 5,330 ======= ======== ======== ======= ====== ======== ======== SHARE TRANSACTIONS: Classic Shares: Issued................. 1,391 33 231 81 155 (e) 261 567 Reinvested............. 6 90 58 -- -- (e) 314 351 Redeemed............... (534) (781) (397) (103) (5)(e) (763) (1,453) ------- -------- -------- ------- ------ -------- -------- Change in Classic Shares................ 863 (658) (108) (22) 150 (188) (535) ======= ======== ======== ======= ====== ======== ======== Premier Shares: Issued................. 933 (g) 379 764 (c) 2,159 562 3,865 5,525 (c) Reinvested............. 2 (g) 64 46 (c) -- -- 1,305 1,182 (c) Redeemed............... (58)(g) (1,301) (949)(c) (132) (8) (5,514) (5,880)(c) ------- -------- -------- ------- ------ -------- -------- Change in Premier Shares................ 877 (858) (139) 2,027 554 (344) 827 ======= ======== ======== ======= ====== ======== ======== Class B Shares: Issued................. 168 (h) 7 81 (d) 60 98 385 355 (f) Reinvested............. -- (h) 5 1 (d) -- -- 47 7 (f) Redeemed............... (5)(h) (43) (8)(d) (44) (2) (102) (12)(f) ------- -------- -------- ------- ------ -------- -------- Change in Class B Shares................ 163 (31) 74 16 96 330 350 ======= ======== ======== ======= ====== ======== ======== - -------- (a) For the period from March 2, 1998 (commencement of operations) through July 31, 1998. (b) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. (c) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (d) For the period from September 3, 1997 (commencement of operations) through July 31, 1998. (e) For the period from March 3, 1998 (commencement of operations) through July 31, 1998. (f) For the period from September 2, 1997 (commencement of operations) through July 31, 1998. (g) For the period from December 3, 1998 (commencement of operations) through July 31, 1999. (h) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. Continued -99- 251 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Limited Maturity Government Income Bond Fund Fund Fund --------------------- ------------------ ------------------ Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended July 31, July 31, July 31, July 31, July 31, July 31, 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- CAPITAL TRANSACTIONS: Classic Shares: Proceeds from shares issued................ $ 2,211 $ 3,654 $ 1,349 $ 916 $ 3,224 $ 9,635 Dividends reinvested... 159 224 240 320 406 1,185 Cost of shares redeemed.............. (3,166) (10,734) (4,187) (4,434) (3,293) (19,183) -------- -------- ------- ------- -------- -------- Change in net assets from Classic Share transactions.......... $ (796) $ (6,856) $(2,598) $(3,198) $ 337 $ (8,363) ======== ======== ======= ======= ======== ======== Premier Shares: Proceeds from shares issued................ $ 27,407 $ 16,530 (a) $ 1,287 $ 2,137 (a) $116,935 $ 89,740 (a) Dividends reinvested... 534 409 (a) -- -- (a) 5,091 4,132 (a) Cost of shares redeemed.............. (23,812) (38,351)(a) (580) (10)(a) (55,310) (65,976)(a) -------- -------- ------- ------- -------- -------- Change in net assets from Premier Share transactions.......... $ 4,129 $(21,412) $ 707 $ 2,127 $ 66,716 $ 27,896 ======== ======== ======= ======= ======== ======== Class B Shares: Proceeds from shares issued................ $ 1,706 (c) $ -- $ -- $ -- $ 2,727 $ 498 (b) Dividends reinvested... 16 (c) -- -- -- 64 4 (b) Cost of shares redeemed.............. (102)(c) -- -- -- (587) (60)(b) -------- -------- ------- ------- -------- -------- Change in net assets from Class B Share transactions.......... $ 1,620 $ -- $ -- $ -- $ 2,204 $ 442 ======== ======== ======= ======= ======== ======== SHARE TRANSACTIONS: Classic Shares: Issued................. 211 350 135 93 289 889 Reinvested............. 15 22 24 33 36 109 Redeemed............... (300) (1,033) (423) (450) (296) (1,781) -------- -------- ------- ------- -------- -------- Change in Classic Shares................ (74) (661) (264) (324) 29 (783) ======== ======== ======= ======= ======== ======== Premier Shares: Issued................. 2,612 1,580 (a) 131 217 (a) 10,625 8,147 (a) Reinvested............. 51 39 (a) -- -- (a) 458 376 (a) Redeemed............... (2,269) (3,669)(a) (58) (1)(a) (4,972) (5,985)(a) -------- -------- ------- ------- -------- -------- Change in Premier Shares................ 394 (2,050) 73 216 6,111 2,538 ======== ======== ======= ======= ======== ======== Class B Shares: Issued................. 164 (c) -- -- -- 245 45 (b) Reinvested............. 2 (c) -- -- -- 6 -- (b) Redeemed............... (10)(c) -- -- -- (53) (5)(b) -------- -------- ------- ------- -------- -------- Change in Class B Shares................ 156 -- -- -- 198 40 ======== ======== ======= ======= ======== ======== - -------- (a) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 16, 1997 (commencement of operations) through July 31, 1998. (c) For the period from January 21, 1999 (commencement of operations) through July 31, 1999. Continued -100- 252 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Municipal Bond Fund Florida Tax-Free Fund ------------------------- -------------------------- Year Year Year Year Ended Ended Ended Ended July 31, July 31, July 31, July 31, 1999 1998 1999 1998 --------- ---------- ---------- ---------- CAPITAL TRANSACTIONS: Classic Shares: Proceeds from shares issued................ $ 1,032 $ 9,434 $ 6,120 $ 6,245 Dividends reinvested... 76 52 425 218 Cost of shares redeemed.............. (1,049) (5,477) (2,685) (5,154) --------- ---------- ---------- ---------- Change in net assets from Classic Share transactions.......... $ 59 $ 4,009 $ 3,860 $ 1,309 ========= ========== ========== ========== Premier Shares: Proceeds from shares issued................ $ 51,374 $ 45,269 (a) $ 19,040 $ 18,711 (a) Dividends reinvested... 189 48 (a) 32 -- (a) Cost of shares redeemed.............. (48,186) (57,585)(a) (9,350) (9,399)(a) --------- ---------- ---------- ---------- Change in net assets from Premier Share transactions.......... $ 3,377 $ (12,268) $ 9,722 $ 9,312 ========= ========== ========== ========== Class B Shares: Proceeds from shares issued................ $ 27 (c) $ -- $ 577 (b) $ -- Dividends reinvested... -- (c) -- 1 (b) -- Cost of shares redeemed.............. (11)(c) -- -- (b) -- --------- ---------- ---------- ---------- Change in net assets from Class B Share transactions.......... $ 16 $ -- $ 578 $ -- ========= ========== ========== ========== SHARE TRANSACTIONS: Classic Shares: Issued................. 102 934 580 596 Reinvested............. 8 5 40 21 Redeemed............... (103) (542) (255) (493) --------- ---------- ---------- ---------- Change in Classic Shares................ 7 397 365 124 ========= ========== ========== ========== Premier Shares: Issued................. 5,066 4,457 (a) 1,811 1,787 (a) Reinvested............. 19 5 (a) 3 -- (a) Redeemed............... (4,732) (5,668)(a) (891) (899)(a) --------- ---------- ---------- ---------- Change in Premier Shares................ 353 (1,206) 923 888 ========= ========== ========== ========== Class B Shares: Issued................. 3 (c) -- 56 (b) -- Reinvested............. -- (c) -- -- (b) -- Redeemed............... (1)(c) -- -- (b) -- --------- ---------- ---------- ---------- Change in Class B Shares................ 2 -- 56 -- ========= ========== ========== ========== - -------- (a) Effective September 2, 1997, the Fund's existing shares, which were previously unclassified, were designated either Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from March 16, 1999 (commencement of operations) through July 31, 1999. (c) For the period from February 3, 1999 (commencement of operations) through July 31, 1999. Continued -101- 253 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 U.S. Treasury Fund Prime Obligations Fund -------------------- ------------------------ Year Year Year Year Ended Ended Ended Ended July 31, July 31, July 31, July 31, 1999 1998 1999 1998 --------- --------- ----------- ----------- CAPITAL TRANSACTIONS: Classic Shares: Proceeds from shares issued.................... $ 13,408 $ 13,952 $ 282,648 $ 214,118 Dividends reinvested....... 270 354 5,884 5,951 Cost of shares redeemed.... (17,357) (16,122) (269,414) (214,135) --------- --------- ----------- ----------- Change in net assets from Classic Share transactions.............. $ (3,679) $ (1,816) $ 19,118 $ 5,934 ========= ========= =========== =========== Premier Shares: Proceeds from shares issued.................... $ 753,782 $ 955,935 $ 1,556,708 $ 1,339,647 Dividends reinvested....... 639 383 1,817 1,859 Cost of shares redeemed.... (785,630) (913,630) (1,501,602) (1,278,499) --------- --------- ----------- ----------- Change in net assets from Premier Share transactions.............. $ (31,209) $ 42,688 $ 56,923 $ 63,007 ========= ========= =========== =========== Class B Shares: Proceeds from shares issued.................... $ -- $ -- $ 463 $ 1 (a) Dividends reinvested....... -- -- 4 -- (a) Cost of shares redeemed.... -- -- (244) -- (a) --------- --------- ----------- ----------- Change in net assets from Class B Share transactions.............. $ -- $ -- $ 223 $ 1 ========= ========= =========== =========== SHARE TRANSACTIONS: Classic Shares: Issued..................... 13,408 13,952 282,648 214,118 Reinvested................. 270 354 5,884 5,951 Redeemed................... (17,357) (16,122) (269,414) (214,135) --------- --------- ----------- ----------- Change in Classic Shares... (3,679) (1,816) 19,118 5,934 ========= ========= =========== =========== Premier Shares: Issued..................... 753,782 955,935 1,556,708 1,339,647 Reinvested................. 639 383 1,817 1,859 Redeemed................... (785,630) (913,630) (1,501,602) (1,278,499) --------- --------- ----------- ----------- Change in Premier Shares... (31,209) 42,688 56,923 63,007 ========= ========= =========== =========== Class B Shares: Issued..................... -- -- 463 1 (a) Reinvested................. -- -- 4 -- (a) Redeemed................... -- -- (244) -- (a) --------- --------- ----------- ----------- Change in Class B Shares... -- -- 223 1 ========= ========= =========== =========== - -------- (a) For the period from June 15, 1998 (commencement of operations) through July 31, 1998. Continued -102- 254 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Institutional Prime Obligations Fund Tax-Exempt Fund ------------------- --------------------- Period Year Year Ended Ended Ended July 31, July 31, July 31, 1999 (a) 1999 1998 ------------------- -------- -------- CAPITAL TRANSACTIONS: Classic Shares (b): Proceeds from shares issued........... $ 387,727 $ 55,604 $ 56,588 Dividends reinvested.................. -- 686 691 Cost of shares redeemed............... $(318,269) (62,103) (56,548) --------- --------- --------- Change in net assets from Classic Share transactions................... $ 69,458 $ (5,813) $ 731 ========= ========= ========= Premier Shares (c): Proceeds from shares issued........... $ 56,608 (e) $ 181,011 $ 169,123 Dividends reinvested.................. -- (e) 5 7 Cost of shares redeemed............... (30,608)(e) (169,221) (162,475) --------- --------- --------- Change in net assets from Premier Share transactions................... $ 26,000 $ 11,795 $ 6,655 ========= ========= ========= Class B Shares (d): Proceeds from shares issued........... $ 24,183 (f) $ -- $ -- Dividends reinvested.................. -- (f) -- -- Cost of shares redeemed............... (10,608)(f) -- -- --------- --------- --------- Change in net assets from Class B Share transactions................... $ 13,575 $ -- $ -- ========= ========= ========= SHARE TRANSACTIONS: Classic Shares (b): Issued................................ 387,727 55,604 56,588 Reinvested............................ -- 686 691 Redeemed.............................. (318,269) (62,103) (56,548) --------- --------- --------- Change in Classic Shares.............. 69,458 (5,813) 731 ========= ========= ========= Premier Shares (c): Issued................................ 56,608 (e) 181,011 169,123 Reinvested............................ -- (e) 5 7 Redeemed.............................. (30,608)(e) (169,221) (162,475) --------- --------- --------- Change in Premier Shares.............. 26,000 11,795 6,655 ========= ========= ========= Class B Shares (d): Issued................................ 24,183 (f) -- -- Reinvested............................ -- (f) -- -- Redeemed.............................. (10,608)(f) -- -- --------- --------- --------- Change in Class B Shares.............. 13,575 -- -- ========= ========= ========= - -------- (a) For the period from September 15, 1998 (commencement of operations) through July 31, 1999. (b) Class I shares for the Institutional Prime Obligations Fund. (c) Class II shares for the Institutional Prime Obligations Fund. (d) Class III shares for the Institutional Prime Obligations Fund. (e) For the period from February 19, 1999 (commencement of operations) through July 31, 1999. (f) For the period from February 22, 1999 (commencement of operations) through July 31, 1999. Continued -103- 255 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 5. Related Party Transactions: Investment advisory services are provided to each of the Funds by AmSouth. Under the terms of the investment advisory agreement, AmSouth is entitled to receive fees based on a percentage of the average daily net assets of each of the Funds. On 8/9/99 AmSouth purchased a Guaranteed Life Insurance Contract issued by General American Life Insurance Co. at par, plus accrued interest, from the Prime Obligation Fund. AmSouth also serves as Custodian for the Trust. Pursuant to the Custodian Agreement with the Trust, AmSouth receives compensation from each Fund for such services in an amount equal to an asset-based fee plus fixed fees charged for certain portfolio transactions and out-of-pocket expenses. BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"), an Ohio Limited Partnership, BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), and BISYS Fund Services, Inc. ("BISYS Inc.") are subsidiaries of the BISYS Group, Inc. ASO Services Company ("Administrator"), a wholly owned subsidiary of the BISYS Group, Inc., serves the Funds as administrator. Under the terms of the administration agreement, The Administrator's fees are computed as 0.20% of the average daily net assets of each of the Funds. AmSouth and BISYS, with whom certain officers and trustees of the Trust are affiliated, serve as the Funds' sub-administrator. Such officers and trustees are paid no fees directly by the Funds for serving as officers and trustees of the Trust. Pursuant to its current agreement with the Administrator, 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 0.10% of each Fund's daily average net assets. Pursuant to its agreement with the Administrator, BISYS, as sub-administrator, is entitled to compensation as mutually agreed upon from time to time by it and the Administrator. BISYS also serves as the Funds' distributor and is entitled to receive commissions on sales of shares of the variable net asset value funds. For the period ended July 31, 1999, BISYS received $1,668,740 from commissions earned on sales of shares of the Funds' variable net asset value funds of which the $1,664,928 was reallowed to AmSouth Investment Services, a related investment dealer of the Funds' shares and other dealers of the Funds' shares. BISYS receives no fees from the Funds for providing distribution services to the Funds. BISYS Ohio serves the Funds as Transfer Agent. Under the terms of the Transfer Agent Agreement, BISYS Ohio receives a fee based on a percentage of each funds average daily net assets, plus out of pocket charges. BISYS Inc. serves the Funds as Mutual Fund Accountant. Under the terms of the Fund Accounting Agreement, BISYS Inc. receives a fee based on a percentage of average daily net assets, plus out of pocket charges. Classic Shares of the Trust are subject to a Shareholder Servicing Plan (the "Servicing Plan") permitting payment of compensation to financial institutions that agree to provide certain administrative support services for their customers or account holders. Each Fund has entered into a specific arrangement with BISYS for the provision of such services and reimburses BISYS for its cost of providing these services, subject to a maximum rate of 0.25% of the average daily net assets of the Classic Shares of each of the Funds. Continued -104- 256 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 Class B Shares, Class II Shares and Class III shares of the Trust are subject to a Distribution and Shareholder Servicing Plan (the "Distribution Plan") permitting payment of compensation to a participating organization as payment for its services or expenses in connection with distribution assistance of the Funds' Class B Shares, Class II Shares and Class III Shares to the participating organizations customers. Each Fund has entered into a specific arrangement with BISYS for the provision of such services and pays BISYS for its cost of providing such services, subject to a maximum rate of 1.00% of the average daily net assets of the Class B Shares of each of the Funds (0.25% for Class II Shares and 0.50% for Class III Shares), which includes a Shareholder Servicing Fee of 0.25% of the average daily net assets of the Class B Shares of each Fund. Fees may be voluntarily reduced to assist the Funds in maintaining competitive expense ratios. Information regarding these transactions is as follows for the year ended July 31, 1999 (amounts in thousands): Investment Advisory Fees --------------------------- Annual Fee as Administration Shareholder Fund Transfer Other a Percentage of Fees Fees Servicing Fees Accounting Fees Agent Fees Expenses Average Daily Voluntarily Voluntarily Voluntarily Voluntarily Voluntarily Voluntarily Net Assets Reduced Reduced Reduced Reduced Reduced Reimbursed --------------- ----------- -------------- -------------- --------------- ----------- ----------- Equity Income Fund..... 0.80% $-- $-- $-- $38 $30 $-- Equity Fund............ 0.80% -- -- -- 20 30 -- Enhanced Market Fund (a).............. 0.45% -- 35 9 38 25 -- Capital Growth Fund.... 0.80% -- 52 -- 50 30 -- Select Equity Fund (a). 0.80% -- 33 10 38 25 -- Regional Equity Fund... 0.80% -- -- -- 20 30 -- Small Cap Fund......... 1.20% -- 21 -- 50 30 4 Balanced Fund.......... 0.80% -- -- -- 20 30 -- Limited Maturity Fund.. 0.65% 170 90 5 15 25 -- Government Income Fund. 0.65% 33 10 10 37 20 -- Bond Fund.............. 0.65% 535 285 11 20 30 -- Municipal Bond Fund.... 0.65% 816 261 4 15 25 -- Florida Tax-Free Fund.. 0.65% 248 71 15 32 24 -- U.S. Treasury Fund..... 0.40% -- -- 10 10 20 -- Prime Obligations Fund. 0.40% -- -- 202 20 30 -- Institutional Prime Obl. Fund (b)......... 0.20% 129 69 -- 9 18 -- Tax-Exempt Fund........ 0.40% 192 -- 38 21 20 -- - -------- (a) For the period from September 1, 1998 (commencement of operations) through July 31, 1999. (b) For the period from September 15, 1998 (commencement of operations) through July 31, 1999. Continued -105- 257 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 6. Eligible Distributions: (Unaudited) The AmSouth Mutual Funds designate the following eligible distributions for the dividends received deductions for corporations for the year ended July 31, 1999: Percentage ---------- Equity Income Fund................................................ 62.37% Equity Fund....................................................... 100.00% Enhanced Market Fund.............................................. 13.18% Capital Growth Fund............................................... 40.40% Select Equity Fund................................................ 36.03% Regional Equity Fund.............................................. 100.00% Balanced Fund..................................................... 31.97% 7. Exempt-Interest Income Designations (Unaudited): The AmSouth Mutual Funds designate the following exempt-interest dividends for the taxable year ended July 31, 1999 (amounts in thousands): Tax-Exempt Distribution ------------ Municipal Bond Fund............................................. $13,985 Florida Tax-Free Fund........................................... 3,001 Tax-Exempt Fund................................................. 2,613 8. Federal Income Tax Information (Unaudited): The accompanying table details distributions from long-term capital gains for the following funds for the year ended July 31, 1999 (amounts in thousands): 20% Capital Gains ----------- Equity Income Fund............................................... $ 607 Equity Fund...................................................... 97,302 Enhanced Market Fund............................................. 5 Regional Equity Fund............................................. 7,145 Balanced Fund.................................................... 28,585 Bond Fund........................................................ 3,908 Municipal Bond Fund.............................................. 3,301 Florida Tax-Free Fund............................................ 366 Continued -106- 258 AMSOUTH MUTUAL FUNDS Notes to Financial Statements, Continued July 31, 1999 At July 31, 1999, the following Funds have capital loss carryforwards which are available to offset future capital gains, if any (amounts in thousands): Amount Expires ------ ------- Small Cap Fund................................................ $1,924 2007 Limited Maturity Fund......................................... 65 2002 730 2003 4 2004 304 2005 Government Income Fund........................................ 209 2004 127 2005 Prime Obligations Fund........................................ 6 2000 Tax-Exempt Fund............................................... 2 2006 Under current tax law, capital losses realized after October 31, within the Fund's fiscal year may be deferred and treated as occurring on the first day of the following fiscal year. The following deferred losses will be treated as arising on the first day of the next fiscal year (amounts in thousands): Small Cap Fund.......................................................... $827 -107- 259 AMSOUTH MUTUAL FUNDS Financial Highlights Equity Income Fund ------------------------------------------------------------------------------------ Year Ended Year Ended March 20, 1997 to July 31, 1999 July 31, 1998 July 31, 1997 (g) -------------------------- -------------------------------------- ----------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- ------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period................ $ 11.89 $ 11.89 $11.86 $ 11.72 $11.35 $11.60 $ 10.00 ------- ------- ------ ------- ------ ------ ------- Investment Activities Net investment income (loss).................. 0.17 0.19 0.07 0.24 0.25 0.15 0.07 Net realized and unrealized gains (losses) from investments............. 1.46 1.47 1.47 0.59 0.95 0.68 1.71 ------- ------- ------ ------- ------ ------ ------- Total from investment activities.............. 1.63 1.66 1.54 0.83 1.20 0.83 1.78 ------- ------- ------ ------- ------ ------ ------- Distributions Net investment income.... (0.16) (0.19) (0.09) (0.25) (0.25) (0.16) (0.06) Net realized gains from investment transactions. (0.26) (0.26) (0.26) (0.41) (0.41) (0.41) -- ------- ------- ------ ------- ------ ------ ------- Total Distributions...... (0.42) (0.45) (0.35) (0.66) (0.66) (0.57) (0.06) ------- ------- ------ ------- ------ ------ ------- Net Asset Value, End of Period................... $ 13.10 $ 13.10 $13.05 $ 11.89 $11.89 $11.86 $ 11.72 ======= ======= ====== ======= ====== ====== ======= Total Return (excludes sales charge).............. 14.17% 14.43% 13.34% 7.29% 7.54%(c) 7.26%(d) 17.81%(d) Ratios/Supplemental Data: Net Assets at end of period (000)............ $21,526 $10,908 $7,919 $26,686 $8,087 $7,733 $22,273 Ratio of expenses to average net assets...... 1.41% 1.16% 2.16% 1.42% 1.19%(e) 2.19%(e) 1.30%(e) Ratio of net investment income to average net assets.................. 1.37% 1.59% 0.61% 2.03% 2.34%(e) 1.29%(e) 2.13%(e) Ratio of expenses to average net assets*..... 1.58% 1.33% 2.33% 1.57% 1.35%(e) 2.35%(e) 1.51%(e) Portfolio turnover (f).... 133.74% 133.74% 133.74% 83.26% 83.26% 83.26% 27.38% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 3, 1997 (commencements of operations) through July 31, 1998, (c) 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%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (g) Period from commencement of operations. See notes to financial statements. -108- 260 AMSOUTH MUTUAL FUNDS Financial Highlights Equity Fund -------------------------------------------------------------------- Year Ended Year Ended July 31, 1999 July 31, 1998 --------------------------- --------------------------------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- -------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period.... $ 24.60 $ 24.57 $ 24.55 $ 23.35 $ 22.51 $23.15 ------- -------- ------- ------- -------- ------ Investment Activities Net investment income (loss)................ 0.20 0.26 0.02 0.21 0.28 0.09 Net realized and unrealized gains (losses) from investments........... 3.11 3.16 3.10 2.54 3.31 2.68 ------- -------- ------- ------- -------- ------ Total from Investment Activities............ 3.31 3.42 3.12 2.75 3.59 2.77 ------- -------- ------- ------- -------- ------ Distributions Net investment income.. (0.19) (0.25) (0.06) (0.25) (0.28) (0.12) Net realized gains from investment transactions.......... (2.47) (2.47) (2.47) (1.25) (1.25) (1.25) ------- -------- ------- ------- -------- ------ Total Distributions.... (2.66) (2.72) (2.53) (1.50) (1.53) (1.37) ------- -------- ------- ------- -------- ------ Net Asset Value, End of Period................. $ 25.25 $ 25.27 $ 25.14 $ 24.60 $ 24.57 $24.55 ======= ======== ======= ======= ======== ====== Total Return (excludes sales charge).......... 14.92% 15.43% 14.03% 12.34% 12.46%(c) 12.49%(d) Ratios/Supplemental Data: Net Assets at end of period (000).......... $70,740 $960,660 $12,394 $73,165 $947,575 $7,929 Ratio of expenses to average net assets.... 1.33% 1.08% 2.08% 1.19% 1.09%(e) 2.11%(e) Ratio of net investment income to average net assets................ 0.82% 1.07% 0.05% 0.89% 1.26%(e) 0.26%(e) Ratio of expenses to average net assets*... 1.34% 1.09% 2.09% 1.19% 1.10%(e) 2.11%(e) Portfolio turnover (f).. 17.65% 17.65% 17.65% 16.95% 16.95% 16.95% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 3, 1997 (commencement of operations) through July 31, 1998. (c) 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%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -109- 261 AMSOUTH MUTUAL FUNDS Financial Highlights Equity Fund ---------------------------- Year Ended July 31, ---------------------------- 1997 1996 1995 -------- -------- -------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -110- 262 AMSOUTH MUTUAL FUNDS Financial Highlights Enhanced Market -------------------------------------- September 1, 1998 to July 31, 1999 (a) -------------------------------------- Classic Premier (b) B Shares (c) ------- ----------- ------------ Net Asset Value, Beginning of Period.. $ 10.00 $ 12.18 $10.30 ------- ------- ------ Investment Activities Net investment income (loss)......... 0.09 0.07 0.03 Net realized and unrealized gains (losses) from investments........... 3.89 1.71 3.55 ------- ------- ------ Total from Investment Activities..... 3.98 1.78 3.58 ------- ------- ------ Distributions Net investment income................ (0.09) (0.07) (0.03) Net realized gains from investment transactions........................ (0.03) (0.03) (0.03) ------- ------- ------ Total Distributions.................. (0.12) (0.10) (0.06) ------- ------- ------ Net Asset Value, End of Period........ $ 13.86 $ 13.86 $13.82 ======= ======= ====== Total Return (excludes sales charge).. 39.93%(d) 14.71%(d) 34.85%(d) Ratios/Supplemental Data: Net Assets at end of period (000).... $14,365 $14,273 $6,132 Ratio of expenses to average net assets.............................. 0.88%(e) 0.74%(e) 1.73%(e) Ratio of net investment income to average net assets.................. 0.79%(e) 0.90%(e) (0.12)%(e) Ratio of expenses to average net assets*............................. 1.52%(e) 1.29%(e) 2.28%(e) Portfolio turnover (f)................ 36.03% 36.03% 36.03% - -------- * 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 December 11, 1998 (commencement of operations) through July 31, 1999. (c) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -111- 263 AMSOUTH MUTUAL FUNDS Financial Highlights Capital Growth Fund ----------------------------------------------------------------------- Year Ended August 3, 1997 July 31, to July 31, 1999 1998 (g) ---------------------------- ----------------------------------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- ------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period.... $ 11.62 $ 11.65 $11.54 $10.00 $ 9.55 $ 9.82 ------- ------- ------ ------ ------ ------ Investment Activities Net investment income (loss)................ (0.06) (0.02) (0.12) (0.03) -- (0.06) Net realized and unrealized gains (losses) from investments........... 2.57 2.57 2.52 1.65 2.10 1.78 ------- ------- ------ ------ ------ ------ Total from Investment Activities............ 2.51 2.55 2.40 1.62 2.10 1.72 ------- ------- ------ ------ ------ ------ 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 $ 14.11 $13.85 $11.62 $11.65 $11.54 ======= ======= ====== ====== ====== ====== Total Return (excludes sales charge).......... 21.76% 22.05% 20.96% 16.20%(d) 16.50%(c) 17.52%(d) Ratios/Supplemental Data: Net Assets at end of period (000).......... $14,040 $18,055 $7,463 $9,720 $2,824 $3,477 Ratio of expenses to average net assets.... 1.23% 0.96% 1.97% 1.40%(e) 0.99%(e) 2.05%(e) Ratio of net investment income to average net assets................ (0.50)% (0.28)% (1.26)% (0.42)%(e) 0.00%(e) (1.10)%(e) Ratio of expenses to average net assets*... 1.74% 1.47% 2.48% 2.37%(e) 2.05%(e) 3.11%(e) Portfolio turnover (f).. 79.30% 79.30% 79.30% 77.26% 77.26% 77.26% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 3, 1997 (commencement of operations) through July 31, 1998. (c) 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%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (g) Period from commencement of operations. See notes to financial statements. -112- 264 AMSOUTH MUTUAL FUNDS Financial Highlights Select Equity -------------------------------------- September 1, 1998 to July 31, 1999 (a) -------------------------------------- Classic Premier (b) B Shares (c) ------- ----------- ------------ Net Asset Value, Beginning of Period.. $ 10.00 $ 11.52 $ 9.98 ------- ------- ------ Investment Activities Net investment income (loss)......... 0.04 0.04 0.02 Net realized and unrealized gains (losses) from investments........... 1.91 0.38 1.86 ------- ------- ------ Total from Investment Activities..... 1.95 0.42 1.88 ------- ------- ------ Distributions Net investment income................ (0.05) (0.03) (0.01) 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) (0.05) (0.03) ------- ------- ------ Net Asset Value, End of Period....... $ 11.88 $ 11.89 $11.83 ======= ======= ====== Total Return (excludes sales charge).. 19.44%(d) 3.63%(d) 18.83%(d) Ratios/Supplemental Data: Net Assets at end of period (000).... $10,258 $10,420 $1,933 Ratio of expenses to average net assets.............................. 1.13%(e) 0.99%(e) 1.99%(e) Ratio of net investment income to average net assets.................. 0.43%(e) 0.65%(e) (0.49)%(e) Ratio of expenses to average net assets*............................. 1.81%(e) 1.58%(e) 2.58%(e) Portfolio turnover (f)................ 9.72% 9.72% 9.72% - -------- * 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 December 3, 1998 (commencement of operations) through July 31, 1999. (c) For the period from September 2, 1998 (commencement of operations) through July 31, 1999. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -113- 265 AMSOUTH MUTUAL FUNDS Financial Highlights Regional Equity Fund --------------------------------------------------------------------- Year Ended Year Ended July 31, July 31, 1999 1998 ---------------------------- --------------------------------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- ------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period.... $ 27.18 $ 27.20 $27.05 $ 28.23 $ 27.95 $28.49 ------- ------- ------ ------- ------- ------ Investment Activities Net investment income (loss)................ 0.09 0.15 (0.09) 0.05 0.13 (0.05) Net realized and unrealized gains (losses) from investments........... (2.74) (2.73) (2.73) (0.08) 0.17 (0.42) ------- ------- ------ ------- ------- ------ Total from Investment Activities............ (2.65) (2.58) (2.82) (0.03) 0.30 (0.47) ------- ------- ------ ------- ------- ------ Distributions Net investment income.. (0.10) (0.14) (0.02) (0.07) (0.10) (0.03) In excess of net investment income..... -- -- -- (0.01) (0.01) - Net realized gains from investment transactions.......... (1.53) (1.53) (1.53) (0.94) (0.94) (0.94) ------- ------- ------ ------- ------- ------ Total Distributions.... (1.63) (1.67) (1.55) (1.02) (1.05) (0.97) ------- ------- ------ ------- ------- ------ Net Asset Value, End of Period................. $ 22.90 $ 22.95 $22.68 $ 27.18 $ 27.20 $27.05 ======= ======= ====== ======= ======= ====== Total Return (excludes sales charge).......... (9.85)% (9.57)% (10.54)% (0.31)% (0.12)%(c) (1.86)%(d) Ratios/Supplemental Data: Net Assets at end of period (000).......... $20,911 $60,385 $ 965 $42,700 $94,909 $1,998 Ratio of expenses to average net assets.... 1.38% 1.13% 2.13% 1.30% 1.12%(e) 2.14%(e) Ratio of net investment income to average net assets................ 0.37% 0.63% (0.37)% 0.14% 0.45%(e) (0.65)%(e) Ratio of expenses to average net assets*... 1.42% 1.17% 2.17% 1.32% 1.13%(e) 2.15%(e) Portfolio turnover (f).. 15.60% 15.60% 15.60% 8.17% 8.17% 8.17% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 3, 1997 (commencement of operations) to July 31, 1998. (c) 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 0.87%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -114- 266 AMSOUTH MUTUAL FUNDS Financial Highlights Regional Equity Fund -------------------------- Year Ended July 31, -------------------------- 1997 1996 1995 -------- ------- ------- Net Asset Value, Beginning of Period............... $ 20.95 $ 18.94 $ 16.68 -------- ------- ------- Investment Activities Net investment income (loss)...................... 0.24 0.26 0.23 Net realized and unrealized gains (losses) from investments...................................... 7.77 2.20 2.26 -------- ------- ------- Total from Investment Activities.................. 8.01 2.46 2.49 -------- ------- ------- Distributions Net investment income............................. (0.24) (0.26) (0.23) Net realized gains from investment transactions... (0.49) (0.19) -- -------- ------- ------- Total Distributions............................... (0.73) (0.45) (0.23) -------- ------- ------- Net Asset Value, End of Period..................... $ 28.23 $ 20.95 $ 18.94 ======== ======= ======= Total Return (excludes sales charge)............... 39.02% 13.10% 15.10% Ratios/Supplemental Data: Net Assets at end of period (000)................. $149,838 $93,584 $68,501 Ratio of expenses to average net assets........... 1.06% 1.05% 1.07% Ratio of net investment income to average net assets........................................... 0.99% 1.30% 1.35% Ratio of expenses to average net assets*.......... 1.10% 1.13% 1.15% Portfolio turnover................................. 10.30% 8.22% 14.25% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -115- 267 AMSOUTH MUTUAL FUNDS Financial Highlights Small Cap Fund ------------------------------------------------------------------- Year Ended March 2, 1998 July 31, to July 31, 1999 1998 (a) ---------------------------- ------------------------------------ Classic Premier B Shares Classic (b) Premier B Shares ------- ------- -------- ----------- ------- -------- Net Asset Value, Beginning of Period.... $ 9.14 $ 9.15 $ 9.11 $ 9.97 $10.00 $10.00 ------- ------- ------- ------ ------ ------ Investment Activities Net investment income (loss)................ (0.10) (0.03) (0.14) (0.03) (0.02) (0.04) Net realized and unrealized gains (losses) from investments........... (0.64) (0.68) (0.66) (0.80) (0.83) (0.85) ------- ------- ------- ------ ------ ------ Total from Investment Activities............ (0.74) (0.71) (0.80) (0.83) (0.85) (0.89) ------- ------- ------- ------ ------ ------ Net Asset Value, End of Period................. $ 8.40 $ 8.44 $ 8.31 $ 9.14 $ 9.15 $ 9.11 ======= ======= ======= ====== ====== ====== Total Return (excludes sales charge).......... (8.10)% (7.76)% (8.78)% (8.31)%(c) (8.48)%(c) (8.90)%(c) Ratios/Supplemental Data: Net Assets at end of period (000).......... $ 1,073 $21,777 $ 929 $1,372 $5,072 $ 871 Ratio of expenses to average net assets.... 1.66% 1.39% 2.41% 1.78%(d) 1.50 %(d) 2.54%(d) Ratio of net investment income to average net assets................ (1.07)% (0.82)% (1.83)% (0.92)%(d) (0.52)%(d) (1.69)%(d) Ratio of expenses to average net assets*... 2.68% 2.38% 3.42% 4.23%(d) 3.94%(d) 4.98%(d) Portfolio turnover (e).. 208.13% 208.13% 208.13% 70.64% 70.64% 70.64% - -------- * 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. See notes to financial statements. -116- 268 AMSOUTH MUTUAL FUNDS Financial Highlights Balanced Fund -------------------------------------------------------------------- Year Ended Year Ended July 31, July 31, 1999 1998 --------------------------- --------------------------------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- -------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period.... $ 15.19 $ 15.18 $ 15.16 $ 15.21 $ 14.77 $14.99 ------- -------- ------- ------- -------- ------ Investment Activities Net investment income (loss)................ 0.41 0.44 0.29 0.38 0.41 0.28 Net realized and unrealized gains (losses) from investments............ 0.93 0.95 0.95 0.98 1.38 1.15 ------- -------- ------- ------- -------- ------ Total from Investment Activities............ 1.34 1.39 1.24 1.36 1.79 1.43 ------- -------- ------- ------- -------- ------ Distributions Net investment income.. (0.40) (0.44) (0.30) (0.41) (0.41) (0.29) Net realized gains from investment transactions.......... (1.20) (1.20) (1.20) (0.97) (0.97) (0.97) ------- -------- ------- ------- -------- ------ Total Distributions.... (1.60) (1.64) (1.50) (1.38) (1.38) (1.26) ------- -------- ------- ------- -------- ------ Net Asset Value, End of Period................. $ 14.93 $ 14.93 $ 14.90 $ 15.19 $ 15.18 $15.16 ======= ======== ======= ======= ======== ====== Total Return (excludes sales charge).......... 9.40% 9.74% 8.66% 9.54% 9.73%(c) 10.07%(d) Ratios/Supplemental Data: Net Assets at end of period (000)........... $43,223 $319,016 $10,131 $46,814 $329,626 $5,309 Ratio of expenses to average net assets..... 1.34% 1.09% 2.09% 1.24% 1.10%(e) 2.12%(e) Ratio of net investment income to average net assets................. 2.67% 2.93% 1.93% 2.77% 2.95%(e) 1.83%(e) Ratio of expenses to average net assets*.... 1.35% 1.10% 2.10% 1.24% 1.10%(e) 2.12%(e) Portfolio turnover (f).. 23.24% 23.24% 23.24% 25.40% 25.40% 25.40% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 2, 1997 (commencement of operations) through July 31, 1998. (c) 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%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -117- 269 AMSOUTH MUTUAL FUNDS Financial Highlights Balanced Fund ---------------------------- Year Ended July 31, ---------------------------- 1997 1996 1995 -------- -------- -------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -118- 270 AMSOUTH MUTUAL FUNDS Financial Highlights Limited Maturity Fund --------------------------------------------------------- Year Ended Year Ended July 31, July 31, 1999 1998 ------------------------------- ----------------------- Classic Premier B Shares (d) Classic (a) Premier (a) ------- -------- ------------ ----------- ----------- Net Asset Value, Beginning of Period.... $10.43 $ 10.43 $10.58 $10.42 $ 10.34 ------ -------- ------ ------ -------- Investment Activities Net investment income (loss)................ 0.57 0.59 0.27 0.85 0.55 Net realized and unrealized gains (losses) from investments........... (0.15) (0.16) (0.30) (0.25) 0.10 ------ -------- ------ ------ -------- Total from Investment Activities............ 0.42 0.43 (0.03) 0.60 0.65 ------ -------- ------ ------ -------- Distributions Net investment income.. (0.56) (0.57) (0.28) (0.59) (0.56) ------ -------- ------ ------ -------- Total Distributions.... (0.56) (0.57) (0.28) (0.59) (0.56) ------ -------- ------ ------ -------- Net Asset Value, End of Period................. $10.29 $ 10.29 $10.27 $10.43 $ 10.43 ====== ======== ====== ====== ======== Total Return (excludes sales charge).......... 4.01% 4.14% (0.33)%(c) 5.94% 6.04%(b) Ratios/Supplemental Data: Net Assets at end of period (000).......... $2,716 $109,554 $1,599 $3,531 $106,953 Ratio of expenses to average net assets.... 0.81% 0.71% 1.69%(e) 0.74% 0.73%(e) Ratio of net investment income to average net assets................ 5.49% 5.60% 4.61%(e) 5.65% 5.70%(e) Ratio of expenses to average net assets*... 1.23% 0.98% 1.96%(e) 0.96% 0.98%(e) Portfolio turnover (f).. 39.15% 39.15% 39.15% 39.31% 39.31% - -------- * 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 Classic Shares or Premier Shares. (b) Represents total return based on 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 6.37%. (c) Not annualized. (d) For the period from January 21, 1999 (commencement of operations) through July 31, 1999. (e) Annualized (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -119- 271 AMSOUTH MUTUAL FUNDS Financial Highlights Limited Maturity Fund -------------------------- Year Ended July 31, -------------------------- 1997 1996 1995 -------- ------- ------- 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) -- -------- ------- ------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -120- 272 AMSOUTH MUTUAL FUNDS Financial Highlights Government Income Fund ----------------------------------------- Year Ended Year Ended July 31, July 31, 1999 1998 ---------------- ----------------------- Classic Premier Classic (a) Premier (a) ------- ------- ----------- ----------- 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%(b) 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%(c) Ratio of net investment income to average net assets................. 5.35% 5.44% 5.95% 5.72%(c) Ratio of expenses to average net assets*............................ 1.90% 1.65% 1.77% 1.80%(c) Portfolio turnover (d)............... 26.85% 26.85% 34.89% 34.89% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) 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 8.04%. (c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -121- 273 AMSOUTH MUTUAL FUNDS Financial Highlights Government Income Fund ------------------------- Year Ended July 31, ------------------------- 1997 1996 1995 ------- ------- ------- 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) Tax return of capital.......................... -- (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.............................. 2.96% 78.31% 27.32% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -122- 274 AMSOUTH MUTUAL FUNDS Financial Highlights Bond Fund ------------------------------------------------------------------- Year Ended Year Ended July 31, July 31, 1999 1998 --------------------------- --------------------------------------- Classic Premier B Shares Classic (a) Premier (a) B Shares (b) ------- -------- -------- ----------- ----------- ------------ Net Asset Value, Beginning of Period ... $11.05 $ 11.05 $11.04 $10.92 $ 10.72 $10.88 ------ -------- ------ ------ -------- ------ Investment Activities Net investment income (loss)................ 0.61 0.61 0.50 1.41 0.57 0.46 Net realized and unrealized gains (losses) from investments........... (0.32) (0.30) (0.31) (0.62) 0.38 0.24 ------ -------- ------ ------ -------- ------ Total from Investment Activities............ 0.29 0.31 0.19 0.79 0.95 0.70 ------ -------- ------ ------ -------- ------ Distributions Net investment income.. (0.58) (0.60) (0.50) (0.63) (0.59) (0.51) Net realized gains from investment transactions.......... (0.13) (0.13) (0.13) (0.03) (0.03) (0.03) ------ -------- ------ ------ -------- ------ Total Distributions.... (0.71) (0.73) (0.63) (0.66) (0.62) (0.54) ------ -------- ------ ------ -------- ------ Net Asset Value, End of Period................ $10.63 $ 10.63 $10.60 $11.05 $ 11.05 $11.04 ====== ======== ====== ====== ======== ====== Total Return (excludes sales charge).......... 2.58% 2.68% 1.58% 7.45% 7.54%(c) 6.58%(d) Ratios/Supplemental Data: Net Assets at end of period (000).......... $7,070 $380,226 $2,521 $7,032 $327,930 $ 442 Ratio of expenses to average net assets.... 0.81% 0.71% 1.71% 0.73% 0.73%(e) 1.74%(e) Ratio of net investment income to average net assets................ 5.46% 5.57% 4.63% 5.78% 5.72%(e) 4.75%(e) Ratio of expenses to average net assets*... 1.20% 0.95% 1.95% 0.95% 0.97%(e) 1.99%(e) Portfolio turnover (f).. 18.26% 18.26% 18.26% 40.41% 40.41% 40.41% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) For the period from September 16, 1997 (commencement of operations) through July 31, 1998. (c) 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 9.03%. (d) Not annualized. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to financial statements. -123- 275 AMSOUTH MUTUAL FUNDS Financial Highlights Bond Fund --------------------------- Year Ended July 31, --------------------------- 1997 1996 1995 -------- -------- ------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -124- 276 AMSOUTH MUTUAL FUNDS Financial Highlights Municipal Bond Fund ------------------------------------------------------------------------- Year Ended Year Ended July 1, 1997 July 31, July 31, July 31, 1999 1998 1997 (a) ------------------------------ ----------------------- ------------ Classic Premier Class B (g) Classic (b) Premier (b) ------- -------- ----------- ----------- ----------- Net Asset Value, Beginning of Period.... $10.13 $ 10.14 $10.28 $10.15 $ 10.04 $ 10.00 ------ -------- ------ ------ -------- -------- Investment Activities Net investment income (loss)................ 0.41 0.42 0.14 0.86 0.39 0.04 Net realized and unrealized gains (losses) from investments........... (0.17) (0.18) (0.41) (0.43) 0.14 0.15 ------ -------- ------ ------ -------- -------- Total from Investment Activities............ 0.24 0.24 (0.27) 0.43 0.53 0.19 ------ -------- ------ ------ -------- -------- Distributions Net investment income.. (0.39) (0.40) (0.14) (0.42) (0.40) (0.04) Net realized gains from investment transactions.......... (0.11) (0.11) -- (0.03) (0.03) -- ------ -------- ------ ------ -------- -------- Total Distributions.... (0.50) (0.51) (0.14) (0.45) (0.43) (0.04) ------ -------- ------ ------ -------- -------- Net Asset Value, End of Period................. $ 9.87 $ 9.87 $ 9.87 $10.13 $ 10.14 $ 10.15 ====== ======== ====== ====== ======== ======== Total Return (excludes sales charge).......... 2.31% 2.30% (2.60)%(c) 4.30% 4.49%(d) 1.86%(c) Ratios/Supplemental Data: Net Assets at end of period (000).......... $2,694 $321,293 $ 16 $2,689 $326,464 $337,933 Ratio of expenses to average net assets.... 0.71% 0.61% 1.60%(e) 0.62% 0.64%(e) 0.71%(e) Ratio of net investment income to average net assets................ 4.01% 4.11% 3.17%(e) 4.26% 4.23%(e) 4.31%(e) Ratio of expenses to average net assets*... 1.20% 0.95% 1.87%(e) 0.92% 0.97%(e) 1.04%(e) Portfolio turnover (f).. 20.74% 20.74% 20.74% 28.75% 28.75% 1.59% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (c) Not annualized. (d) 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 Municipal Bond Fund Premier Shares for the period from September 2, 1997 (commencement of operations) through July 31, 1998 was 5.27%. (e) Annualized. (f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (g) For the period from February 3, 1999 (commencement of operations) through July 31, 1999. See notes to financial statements. -125- 277 AMSOUTH MUTUAL FUNDS Financial Highlights Florida Tax-Free Fund ---------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended July 31, September 30, 1994 July 31, July 31, --------------- to July 31, 1999 1998 1997 1996 1995 (f) ----------------------------- ----------------------- ------ ------- ------------------ Classic Premier Class B (g) Classic (a) Premier (a) ------- ------- ----------- ----------- ----------- Net Asset Value, Beginning of Period.... $ 10.45 $ 10.46 $10.52 $10.50 $ 10.39 10.30 $ 10.32 $ 10.00 ------- ------- ------ ------ ------- ------ ------- ------- Investment Activities Net investment income (loss)................ 0.41 0.43 0.12 0.45 0.41 0.45 0.45 0.34 Net realized and unrealized gains (losses) from investments........... (0.18) (0.20) (0.30) 0.01 0.14 0.24 (0.01) 0.30 ------- ------- ------ ------ ------- ------ ------- ------- Total from Investment Activities............ 0.23 0.23 (0.18) 0.46 0.55 0.69 0.44 0.64 ------- ------- ------ ------ ------- ------ ------- ------- Distributions Net investment income.. (0.40) (0.41) (0.14) (0.44) (0.41) (0.48) (0.45) (0.32) Net realized gains from investment transactions.......... (0.06) (0.06) -- (0.07) (0.07) (0.01) (0.01) -- ------- ------- ------ ------ ------- ------ ------- ------- Total Distributions.... (0.46) (0.47) (0.14) (0.51) (0.48) (0.49) (0.46) (0.32) ------- ------- ------ ------ ------- ------ ------- ------- Net Asset Value, End of Period................. $ 10.22 $ 10.22 $10.20 $10.45 $ 10.46 $10.50 $ 10.30 $ 10.32 ======= ======= ====== ====== ======= ====== ======= ======= Total Return (excludes sales charge).......... 2.06% 2.16% (1.77)%(c) 4.46% 4.66%(b) 6.89% 4.24% 6.53%(c) Ratios/Supplemental Data: Net Assets at end of period (000).......... $12,195 $63,548 $ 569 $8,883 $55,369 53,688 $48,869 $48,333 Ratio of expenses to average net assets.... 0.59% 0.49% 1.49%(d) 0.55% 0.49%(d) 0.57% 0.59% 0.70%(d) Ratio of net investment income to average net assets................ 4.00% 4.10% 3.06%(d) 4.24% 4.30%(d) 4.36% 4.33% 4.16%(d) Ratio of expenses to average net assets*... 1.26% 1.01% 2.00%(d) 1.06% 1.04%(d) 1.06% 1.04% 1.01%(d) Portfolio turnover (e).. 34.33% 34.33% 34.33% 29.55% 29.55% 24.05% 12.21% 2.33% - -------- * 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 Classic Shares or Premier Shares. For reporting purposes, past performance numbers (prior to September 2, 1997) are being reflected as Classic Shares. (b) 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 Florida Tax-Free Fund Premier Shares for the period from September 2, 1997 (commencement of operations) through July 31, 1998 was 5.40%. (c) Not annualized. (d) Annualized. (e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (f) Period from commencement of operations. (g) For the period from March 16, 1999 (commencement of operations) through July 31, 1999. See notes to financial statements. -126- 278 AMSOUTH MUTUAL FUNDS Financial Highlights U.S. Treasury Fund ------------------------------------------------------- Year Ended July 31, ------------------------------------------------------- 1999 1998 1997 ----------------- ----------------- ----------------- Classic Premier Classic Premier Classic Premier ------- -------- ------- -------- ------- -------- Net Asset Value, Beginning of Period.... $ 1.000 $ 1.000 $1.000 $ 1.000 $1.000 $ 1.000 ------- -------- ------ -------- ------ -------- Investment Activities Net investment income.. 0.040 0.041 0.046 0.047 0.045 0.046 ------- -------- ------ -------- ------ -------- Distributions Net investment income.. (0.040) (0.041) (0.046) (0.047) (0.045) (0.046) ------- -------- ------ -------- ------ -------- Net Asset Value, End of Period................. $ 1.000 $ 1.000 $1.000 $ 1.000 $1.000 $ 1.000 ======= ======== ====== ======== ====== ======== Total Return............ 4.06% 4.16% 4.67% 4.77% 4.60% 4.70% Ratios/Supplemental Data: Net Assets at end of period (000).......... $ 4,390 $320,847 $8,070 $352,055 $9,885 $309,361 Ratio of expenses to average net assets.... 0.79% 0.69% 0.80% 0.70% 0.79% 0.69% Ratio of net investment income to average net assets................ 4.03% 4.10% 4.57% 4.67% 4.50% 4.60% Ratio of expenses to average net assets*... 0.95% 0.70% 0.95% 0.70% 0.94% (a) - -------- * 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. See notes to financial statements. -127- 279 AMSOUTH MUTUAL FUNDS Financial Highlights U.S. Treasury Fund ---------------------------------- Year Ended July 31, ---------------------------------- 1996 1995 ------------------------- -------- Classic (a) Premier (a) ----------- ----------- 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) - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. (a) Effective April 1, 1996, the Fund's existing shares, which were previously unclassified, were designated as Premier Shares, and the Fund commenced offering Classic Shares. (b) Represents total return for the Premier Shares for the period from August 1, 1995 to March 31, 1996 plus the total return for the Classic Shares for the period from April 1, 1996 to July 31, 1996. Total return for the Classic 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. See notes to financial statements. -128- 280 AMSOUTH MUTUAL FUNDS Financial Highlights Prime Obligations Fund -------------------------------------------------------------- Year Ended July 31, -------------------------------------------------------------- 1999 1998 ---------------------------- -------------------------------- Classic Premier B Shares Classic Premier B Shares (a) -------- -------- -------- -------- -------- ------------ 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 0.045 0.035 0.049 0.050 0.005 -------- -------- ------- -------- -------- ------- Distributions Net investment income.. (0.044) (0.045) (0.035) (0.049) (0.050) (0.005) -------- -------- ------- -------- -------- ------- Net Asset Value, End of Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ======== ======== ======= ======== ======== ======= Total Return............ 4.48% 4.59% 3.55% 4.99% 5.09% 0.49%(b) Ratios/Supplemental Data: Net Assets at end of period (000).......... $136,078 $536,899 $ 224 $116,960 $479,974 $ 1 Ratio of expenses to average net assets.... 0.78% 0.68% 1.69% 0.79% 0.69% 1.85%(c) Ratio of net investment income to average net assets................ 4.40% 4.51% 3.39% 4.88% 4.98% 3.83%(c) Ratio of expenses to average net assets*... 0.94% 0.69% 1.70% 0.95% 0.70% 1.88%(c) - -------- * 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. See notes to financial statements. -129- 281 AMSOUTH MUTUAL FUNDS Financial Highlights Prime Obligations Fund ----------------------------------------------------------- Year Ended July 31, ----------------------------------------------------------- 1997 1996 1995 ------------------ -------------------------- -------- Classic Premier Classic (a) Premier (a) -------- -------- ----------- ----------- 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) - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. (a) Effective April 1, 1996, the Fund's existing shares, which were previously unclassified, were designated as Premier Shares, and the Fund commenced offering Classic Shares. (b) Represents total return for the Premier Shares for the period from August 1, 1995 to March 31, 1996 plus the total return for the Classic Shares for the period from April 1, 1996 to July 31, 1996. Total return for the Classic 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. See notes to financial statements. -130- 282 AMSOUTH MUTUAL FUNDS Financial Highlights Institutional Prime Obligations Fund ---------------------------------------- September 15, 1998 to July 31, 1999(a) ---------------------------------------- Class I Class II (b) Class III (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.......................... 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) - -------- * 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 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. See notes to financial statements. -131- 283 AMSOUTH MUTUAL FUNDS Financial Highlights Tax-Exempt Fund ---------------------------------------------------- Year Ended July 31, ---------------------------------------------------- 1999 1998 1997 ---------------- ---------------- ---------------- Classic Premier Classic Premier Classic Premier ------- ------- ------- ------- ------- ------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. See notes to financial statements. -132- 284 AMSOUTH MUTUAL FUNDS Financial Highlights Tax-Exempt Fund --------------------------------- Year Ended July 31, --------------------------------- 1996 1995 ------------------------- ------- Classic (a) Premier (a) ----------- ----------- 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% - -------- * During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would have been as indicated. (a) Effective April 1, 1996, the Fund's existing shares, which were previously unclassified, were designated as Premier Shares, and the Fund commenced offering Classic Shares. (b) Represents total return for the Premier Shares for the period from August 1, 1995 to March 31, 1996 plus the total return for the Classic Shares for the period from April 1, 1996 to July 31, 1996. Total return for the Classic Shares for the period April 1, 1996 (commencement of operations) through July 31, 1996 was 0.95%. (c) Annualized. See notes to financial statements. -133- 285 INVESTMENT ADVISOR [LOGO OF AMSOUTH MUTUAL AmSouth FUNDS APPEARS HERE] [LOGO OF AMSOUTH APPEARS HERE] AmSouth Bank ANNUAL REPORT 1901 Sixth Avenue North July 31, 1999 Birmingham, AL 35203 Investment Sub-Advisors (Equity Income Fund Only) Rockhaven Asset Management, LLC 100 First Avenue, Suite 1050 Pittsburgh, PA 15222 (Capital Growth Fund Only) Peachtree Asset Management A Division of Salomon Smith Barney Fund Management, LLC One Peachtree Center Atlanta, GA 30308 (Small Cap Fund Only) Sawgrass Asset Management, LLC 4337 Pablo Oaks Court Jacksonville, FL 32224 (Select Equity and Enhanced Market Funds) OakBrook Investments, LLC 701 Warrenville Road, Suite 135 Lisle, IL 60532 DISTRIBUTOR BISYS Fund Services 3435 Stelzer Road Columbus, OH 43219 LEGAL COUNSEL Ropes & Gray One Franklin Square 1301 K Street, N.W. Suite 800 East Washington, DC 20005 TRANSFER AGENT BISYS Fund Services Ohio, Inc. 3435 Stelzer Road Columbus, OH 43219 AUDITORS Pricewaterhouse Coopers LLP AmSouth 100 East Broad Street AMSOUTH BANK Columbus, OH 43219 Investment Advisor [LOGO OF AMSOUTH BANK APPEARS HERE] 286 APPENDIX D FORM OF NEW ADVISORY AGREEMENT 287 FORM OF INVESTMENT ADVISORY AGREEMENT Investment Advisory Agreement made as of October 1, 1999, between THE INFINITY MUTUAL FUNDS, INC., a Maryland corporation having its principal office and place of business at 3435 Stelzer Road, Columbus, Ohio 43219-3035 (herein called the "Fund"), and FIRST AMERICAN NATIONAL BANK, a national banking association having its principal office and place of business at First American Center, 315 Deaderick Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"). WHEREAS, the Fund is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the "Administrator") to act as the Fund's administrator; and WHEREAS, the Fund desires to retain the Adviser to provide investment advisory services and other services to the Fund's portfolios set forth on Schedule 1 attached hereto, as such may be revised from time to time (each, a "Series"; the provisions herein shall apply severally to each Series), and the Adviser is willing to furnish such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. ------------ (a) The Fund hereby appoints the Adviser to act as investment adviser to each Series for the period and on the terms set forth in this Agreement. The Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. (b) In the event that the Fund establishes one or more portfolios, other than those set forth on Schedule 1 hereto, and with respect to which the Fund desires the Adviser to act as investment adviser hereunder, the Fund shall notify the Adviser in writing. If the Adviser is willing to render such services under this Agreement it shall notify the Fund in writing whereupon such portfolio shall become a Series hereunder and shall be subject to the provisions of this Agreement to the same extent as the Series currently named in Schedule 1, except to the extent that said provisions (including those relating to the 288 compensation payable to the Adviser) are modified with respect to such Series in writing by the Fund and the Adviser. 2. Delivery of Documents. ---------------------- The Fund has furnished the Adviser with copies properly certified or authenticated of each of the following: (a) The Fund's Articles of Incorporation and any amendments and supplements thereto (as presently in effect and as from time to time amended or supplemented, herein called the "Charter"); (b) The Fund's By-laws and any amendments thereto; (c) Resolutions of the Fund's Board of Directors authorizing the appointment of the Adviser and approving this Agreement; (d) The Fund's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act most recently filed with the Securities and Exchange Commission (the "Commission"); (e) The Fund's Notification of Registration on Form N-8A under the 1940 Act as filed with the Commission; and (f) The Fund's current Prospectuses and Statements of Additional Information of the Series (as presently in effect and as from time to time amended and supplemented, herein called individually the "Prospectus" and collectively the "Prospectuses"). The Fund promptly will furnish the Adviser with copies of all amendments of or supplements to the foregoing, if any. 3. Services of Adviser. -------------------- Subject to the supervision of the Fund's Board of Directors, the Adviser will provide a continuous investment program for each Series, including investment research and day-to-day management with respect to such Series' assets. The Adviser will determine from time to time what securities and other investments will be purchased, retained or sold by the Series. The Adviser will provide the services rendered by it under this Agreement in accordance with the investment criteria and policies established from time to time for a Series by the Fund, such Series' investment objective, policies and restrictions as stated in its Prospectus and resolutions of the Fund's Board of Directors. The Fund wishes to be informed of -2- 289 important developments materially affecting a Series' portfolio and the Adviser agrees to furnish to the Fund from time to time such information as the Adviser may believe appropriate for this purpose. The Adviser shall be permitted to employ one or more sub-investment advisers (each a "Sub-Adviser") to provide the day-to-day management of the investments of the Series. 4. Other Covenants. ---------------- The Adviser agrees that it will: (a) comply with all applicable rules and regulations of the Securities and Exchange Commission in performing its duties as investment adviser for the Series and, in addition, will conduct its activities under this Agreement in accordance with other applicable federal and state law; (b) review and analyze on a periodic basis each Series' portfolio holdings and transactions; (c) provide, or cause to be provided, to the Board of Directors of the Fund such reports, statistical data and economic information as may be reasonably requested in connection with the Adviser's services hereunder; (d) use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities; (e) place orders pursuant to its investment determinations for the Series either directly with the issuer or with any broker or dealer. In executing portfolio transactions and selecting brokers or dealers, the Adviser will use its best efforts to seek on behalf of the Series the best overall terms available. In assessing the best overall terms available for any transaction, the Adviser shall consider all factors that it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to execute a particular transaction, the Adviser also may consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Series and other accounts over which the Adviser or an affiliate of the Adviser exercises investment discretion. The Adviser is authorized, subject to the prior approval of the Fund's Board of Directors, to pay to a -3- 290 broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for any of the Series which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer as viewed in terms of that particular transaction or in terms of the overall responsibilities of the Adviser to the Series. In addition, the Adviser is authorized to take into account the sale of the Fund's Shares in allocating purchase and sale orders for portfolio securities to brokers or dealers (including brokers and dealers that are affiliated with the Adviser or the Fund's principal underwriter), provided the Adviser believes that the quality of the execution and the commission are comparable to what they would be with other qualified firms. In no instance, however, will portfolio securities be purchased from or sold to the Adviser, the Fund's principal underwriter or any affiliated person of either the Fund, the Adviser, or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the Securities and Exchange Commission and other applicable federal and state laws and regulations; (f) maintain historical tax lots for each portfolio security held by the Series; (g) transmit trades to the Fund's custodian for proper settlement; and (h) prepare a quarterly broker security transaction summary and monthly security transaction listing for each Series. 5. Services Not Exclusive. ----------------------- The services furnished by the Adviser hereunder are deemed not to be exclusive, and the Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. To the extent that the purchase or sale of securities or other investments of the same issuer may be deemed by the Adviser to be suitable for two or more Series, investment companies or accounts managed by the Adviser, the available securities or investments will be allocated in a manner believed by the Adviser to be equitable to each of them. It is recognized and acknowledged by the Fund that in some cases this procedure may adversely affect the price paid or received by a Series or the size of the position obtained for or disposed of by a Series. -4- 291 6. Books and Records. ------------------ In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Adviser hereby agrees that all records which it maintains for the Series are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 7. Expenses. --------- Except as otherwise stated in this section 7, the Adviser shall pay all expenses incurred by it in performing its services and duties as investment adviser and shall pay all fees of each Sub-Adviser in connection with such Sub-Adviser's duties in respect of the Fund. All other expenses incurred in the operation of the Fund will be borne by the Fund, except to the extent specifically assumed by others. The expenses to be borne by the Fund include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, if any, fees of Directors who are not officers, directors, employees or holders of 5% or more of the outstanding voting securities of the Adviser, any Sub-Adviser or the Administrator, or any of their affiliates, Commission fees, state Blue Sky qualification fees, advisory and administration fees, charges of custodians, transfer and dividend disbursing agents' fees, certain insurance premiums, industry association fees, auditing and legal expenses, costs of maintaining corporate existence, costs of independent pricing services, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of calculating the net asset value of the Series' shares, costs of shareholders' reports and corporate meetings, costs of preparing and printing certain prospectuses and statements of additional information, and any extraordinary expenses. 8. Compensation. ------------- In consideration of services rendered pursuant to this Agreement, the Fund will pay the Adviser on the first business day of each month, subject to the terms and conditions set forth on Exhibit A attached hereto, the fee at the annual rate set forth opposite the Series' name on Schedule 1 attached hereto, based upon the value of the Series' average daily net assets for the previous month. Such fee as is attributable to a Series shall be a separate charge to such Series and shall be the several (and not joint or joint and several) obligation of the -5- 292 Series. Fees hereunder shall be payable with respect to a Series commencing on the date of the initial public sale of such Series' shares. The Adviser agrees to accept such fee from the Fund as full compensation for the services provided and expenses assumed by it pursuant to this Agreement, and acknowledges that it shall not be entitled to any further compensation from the Fund in respect of the same. Net asset value shall be computed on such days and at such time or times as described in the Prospectus. Upon the commencement or any termination of this Agreement after the first day or before the end of any month, as the case may be, the fee for such part of a month shall be pro-rated according to the proportion which such period bears to the full monthly period and, in the case of any termination, shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Adviser, the value of each Series' net assets shall be computed in the manner specified in the Charter for the computation of the value of the Series' net assets. Notwithstanding anything to the contrary herein, if in any fiscal year the aggregate expenses of a Series, exclusive of taxes, brokerage, interest on borrowings and (with the prior written consent of the necessary state securities commissions) extraordinary expenses, but including investment advisory and administration fees, exceed the expense limitation of any such state having jurisdiction over such Series, the Fund may deduct from the fees to be paid hereunder, or the Adviser will bear, to the extent required by state law, that portion of such excess which bears the same relation to the total of such excess as the Adviser's fee hereunder bears to the total fee otherwise payable for the fiscal year by the Series pursuant to this Agreement and the Fund's Administration Agreement. Such deduction or payment, if any, will be estimated daily, and reconciled and effected or paid, as the case may be, on a monthly basis. 9. Limitation of Liability. ------------------------ The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except that the Adviser shall be liable to the Fund for any loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of the Adviser's duties or from its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, director, partner, employee or agent of the Adviser, who may be or become an officer, Director, employee or agent of the Fund, shall be -6- 293 deemed, when rendering services to the Fund or to a Series, or acting on any business of the Fund or of a Series (other than services or business in connection with the Adviser's duties as investment adviser hereunder) to be rendering such services to or acting solely for the Fund or such Series and not as an officer, director, partner, employee or agent or one under the control or direction of the Adviser even though paid by the Adviser. 10. Term. ----- As to each Series, this Agreement shall continue until the date set forth opposite such Series' name on Schedule 1 attached hereto (the "Reapproval Date"), and thereafter shall continue automatically for successive annual periods ending on the day of each year set forth opposite the Series' name on Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is specifically approved as to a Series at least annually by (a) the Fund's Board of Directors or (b) vote of a majority (as defined in the 1940 Act) of such Series' outstanding voting securities, provided that in either event its continuance also is approved by a majority of the Fund's Directors who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Series, this Agreement may be terminated without penalty, on 60 days' written notice to the Adviser (which notice may be waived in writing by the Adviser), by the Fund's Board of Directors or by vote of the holders of a majority of such Series' shares or may be terminated without penalty, upon not less than 90 days' written notice to the Fund (which notice may be waived in writing by the Fund), by the Adviser. This Agreement also will terminate automatically, as to the relevant Series, in the event of its assignment (as defined in the 1940 Act). 11. Use of Name. ------------ The parties hereto agree that (i) in the event of the termination of this Agreement, the Adviser shall have the right to require the Fund, within 30 days of such termination, to delete from the Series and its name the word "ISG" and (ii) the Adviser or any affiliate of the Adviser shall have the right to grant to other investment companies that it may sponsor or advise the use of the word "ISG" in the name of such investment company. -7- 294 12. Miscellaneous. -------------- (a) Amendments. No provision of this Agreement may be changed, waived, discharged or terminated, except by an instrument in writing signed by the party against whom an enforcement of the change, waiver, discharge or termination is sought. (b) Construction. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. Subject to the provisions of Section 10 hereof, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by New York law; provided, however, that nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or regulation of the Commission thereunder. (c) Notice. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be effective upon actual receipt by the Fund, or on the fourth day after the postmark if such notice or other instrument is mailed via first class postage prepaid, at its office at the address first above written, or at such other place as the Fund may from time to time designate in writing. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Adviser shall be effective upon actual receipt by the Adviser, or on the fourth day after the postmark if such notice or other instrument is mailed via first class postage prepaid, at its office at the address first above written, or at such other place as the Adviser may from time to time designate in writing. -8- 295 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written. THE INFINITY MUTUAL FUNDS, INC. By:___________________________ Attest:____________________ FIRST AMERICAN NATIONAL BANK By:__________________________ Attest:_______________________ -9- 296 SCHEDULE 1 Annual Fee as a Percentage of Average Daily Reapproval Reapproval Name of Series Net Assets Date Day - -------------- ---------- ---------- ---------- ISG Aggressive Growth Portfolio .20 of 1% December 31, 1999 December 31 ISG Capital Growth Fund .65 of 1% December 31, 1999 December 31 ISG Income Fund .50 of 1% December 31, 1999 December 31 ISG Current Income Portfolio .20 of 1% December 31, 1999 December 31 ISG Equity Income Fund .65 of 1% December 31, 1999 December 31 ISG Equity Value Fund .75 of 1% December 31, 1999 December 31 ISG Government Income Fund .60 of 1% December 31, 1999 December 31 ISG Government Money Market Fund .25 of 1% December 31, 1999 December 31 ISG Growth Portfolio .20 of 1% December 31, 1999 December 31 ISG Growth & Income Portfolio .20 of 1% December 31, 1999 December 31 ISG International Equity Fund* 1.00% December 31, 1999 December 31 ISG Large-Cap Equity Fund .75 of 1% December 31, 1999 December 31 ISG Limited Term Income Fund .50 of 1% December 31, 1999 December 31 * The Adviser has retained Lazard Asset Management as the Series' sub-investment adviser. -10- 297 ISG Limited Term Tennessee Tax- Exempt Fund .50 of 1% December 31, 1999 December 31 ISG Limited Term U.S. Government Fund .50 of 1% December 31, 1999 December 31 ISG Mid-Cap Fund** 1.00% December 31, 1999 December 31 ISG Moderate Growth & Income Portfolio .20 of 1% December 31, 1999 December 31 ISG Municipal Income Fund .60 of 1% December 31, 1999 December 31 ISG Prime Money Market Fund .25 of 1% December 31, 1999 December 31 ISG Small-Cap Opportunity Fund*** .95 of 1% December 31, 1999 December 31 ISG Tax-Exempt Money Market Fund .35 of 1% December 31, 1999 December 31 ISG Tennessee Tax-Exempt Fund .50 of 1% December 31, 1999 December 31 ISG Treasury Money Market Fund .25 of 1% December 31, 1999 December 31 ** The Adviser has retained Bennett Lawrence Management, LLC as the Series' sub-investment adviser. *** The Adviser has retained Womack Asset Management, Inc. as the Series' sub-investment adviser. -11- 298 Exhibit A As to each Series, during the period from and including October 1, 1999 (the "Escrow Beginning Date") until the date of approval by shareholders of the Series in conformity with the provisions of the 1940 Act, including but not limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall be paid in accordance with this Exhibit A. From and including the Escrow Beginning Date to, but not including, the Escrow Termination Date, any and all Sub-Advisory Fees payable under this Agreement shall be paid into an interest bearing escrow account (the "Escrow Account") maintained by an unaffiliated financial institution (the "Escrow Agent"). Pursuant to a letter agreement with the Escrow Agent, the Sub-Advisory Fees (including interest earned on such Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser only if shareholders of the Series approve the Agreement. Further pursuant to the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid hereunder will be released by the Escrow Agent from the Escrow Account to the Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from officers of the Fund stating that this Agreement, with respect to the Series, has received the requisite shareholder vote. As to each Series, in the event that the requisite shareholder vote is not obtained and the Escrow Termination Date does not therefore occur, the officers of the Fund shall execute and deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating that the requisite shareholder vote with respect to the Series has not been obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account should be paid over to the Series. As to each Series, the provisions of this Exhibit A shall terminate and be of no further force and effect, and may be removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March 31, 2000. -12- 299 APPENDIX E FORM OF NEW SUB-ADVISORY AGREEMENT (ISG MID-CAP FUND) 300 FORM OF SUB-INVESTMENT ADVISORY AGREEMENT Sub-Investment Advisory Agreement made as of the 1st day of October, l999, between FIRST AMERICAN NATIONAL BANK, a national banking association having its principal office and place of business at First American Center, 315 Deaderick Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and BENNETT LAWRENCE MANAGEMENT, LLC, having its principal office and place of business at 757 Third Avenue, New York, New York 10017(herein called the "Sub-Adviser"). WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund employs the Adviser to provide advisory services pursuant to an Investment Advisory Agreement dated October 1, 1999 between the Fund and the Adviser (the "Investment Advisory Agreement") with respect to the Fund's portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be revised from time to time (the "Series"; if there are more than one Series to which this Agreement applies, the provisions herein shall apply severally to each such Series); and WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the "Administrator") to act as the Fund's administrator; and WHEREAS, the Adviser, in its capacity as investment adviser to the Series, desires to retain the Sub-Adviser to provide the day-to-day management of the Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser to provide such services, and the Sub-Adviser is willing to perform such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. ------------ The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser to the Series for the period and on the terms set forth in this Agreement. The Sub-Adviser 301 accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. Services of Sub-Adviser. ------------------------ Subject to the oversight and supervision of the Adviser, the Sub-Adviser will provide a continuous investment program for the Series, including investment research and day-to-day management with respect to such Series' assets. The Sub-Adviser will provide the services rendered by it under this Agreement in accordance with the investment criteria and policies established from time to time for the Series by the Adviser, the Series' investment objective, policies and restrictions as stated in the Fund's Prospectus and Statement of Additional Information for the Series, as from time to time in effect, and resolutions of the Fund's Board of Directors. The Fund and the Adviser wish to be informed of important developments materially affecting the Series' portfolio and the Sub-Adviser agrees to furnish to the Fund and the Adviser from time to time such information as may be appropriate for this purpose. 3. Other Covenants. ---------------- The Sub-Adviser agrees that it will: (a) comply with all applicable rules and regulations of the Securities and Exchange Commission in performance of its duties as sub-investment adviser for the Series and, in addition, will conduct its activities under this Agreement in accordance with other applicable federal and state law; (b) provide, or cause to be provided, to the Board of Directors of the Fund such reports, statistical data and economic information as may be reasonably requested in connection with the Sub-Adviser's services hereunder; (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, -2- 302 including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to execute a particular transaction, the Sub-Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Series and other accounts over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is authorized, subject to the prior approval of the Adviser and the Fund's Board of Directors, to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for any of the Series which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Sub-Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer as viewed in terms of that particular transaction or in terms of the overall responsibilities of the Sub-Adviser to the Series. In addition, the Sub-Adviser is authorized to take into account the sale of the Fund's shares in allocating purchase and sale orders for portfolio securities to brokers or dealers (including brokers and dealers that are affiliated with the Adviser, Sub-Adviser or the Fund's principal underwriter), provided that the Sub-Adviser believes that the quality of the execution and the commission are comparable to what they would be with other qualified firms. In no instance, however, will portfolio securities be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal underwriter or any affiliated person of any of the Fund, the Adviser, Sub-Adviser, or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the Securities and Exchange Commission and other applicable federal and state laws and regulations; (e) maintain historical tax lots for each portfolio security held by the Series; (f) transmit trades to the Fund's custodian for proper settlement; and (g) prepare a quarterly broker security transaction summary and monthly security transaction listing for each Series. -3- 303 4. Services Not Exclusive. ----------------------- The services furnished by the Sub-Adviser hereunder are deemed not to be exclusive, and the Sub-Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. To the extent that the purchase or sale of securities or other investments of the same issuer may be deemed by the Sub-Adviser to be suitable for two or more Series, investment companies or accounts managed by the Sub-Adviser, the available securities or investments will be allocated in a manner believed by the Sub-Adviser to be equitable to each of them. It is recognized and acknowledged by the Adviser that in some cases this procedure may adversely affect the price paid or received by the Series or the size of the position obtained for or disposed of by Series. 5. Books and Records. ------------------ In compliance with the requirements of Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Series are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the request of the Fund of the Adviser. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 6. Expenses. --------- Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all expenses incurred by it in performing its services and duties as sub-investment adviser. The Adviser hereby agrees that all other expenses to be incurred in the operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the Fund have agreed that such other expenses will be borne by the Fund, except to the extent specifically assumed by others. The expenses to be borne by the Fund include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, if any, fees of Directors who are not officers, directors, employees or holders of 5% or more of the outstanding voting securities of the Adviser, Sub-Adviser or the Administrator, or any of their affiliates, Securities and Exchange Commission fees, state Blue Sky qualification fees, advisory and administration fees, charges of custodians, transfer and dividend disbursing agents' fees, certain insurance -4- 304 premiums, industry association fees, auditing and legal expenses, costs of maintaining corporate existence, costs of independent pricing services, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of calculating the net asset value of the Series' shares, costs of shareholders' reports and corporate meetings, costs of preparing and printing certain prospectuses and statements of additional information, and any extraordinary expenses. 7. Compensation. ------------- In consideration of services rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser on the first business day of each month, subject to the terms and conditions set forth on Exhibit A attached hereto, the fee at the annual rate set forth opposite the Series' name on Schedule l attached hereto, based on the value of such Series' average daily net assets for the previous month. The Sub-Adviser agrees to accept such fee from the Adviser as full compensation for the services provided and expenses assumed by it pursuant to this Agreement, and acknowledges that it shall not be entitled to any further compensation from any other person in respect of the same. Net asset value shall be computed on such days and at such time or times as described in the Fund's current Prospectus for the Series. The fee for the period from the date of the commencement of the initial public sale of the Series' shares to the end of the month during which such sale shall have been commenced shall be pro-rated according to the proportion which such period bears to the full monthly period, and upon any termination of this Agreement before the end of any month, the fee for such part of a month shall be pro-rated according to the proportion which such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Sub-Adviser, the value of the Series' net assets shall be computed in the manner specified in the Fund's Charter for the computation of the value of the Series' net assets. 8. Limitation of Liability. ------------------------ The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Adviser in connection with the matters to which this Agreement relates, except that the Sub-Adviser shall be liable to the Fund for any loss resulting from -5- 305 willful misfeasance, bad faith or gross negligence on its part in the performance of the Sub-Adviser's duties or from its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, director, partner, employee or agent of the Sub-Adviser, who may be or become an officer, Director, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or to the Series, or acting on any business of the Fund or of the Series (other than services or business in connection with the Sub-Adviser's duties as sub-investment adviser hereunder) to be rendering such services to or acting solely for the Fund or the Series and not as an officer, director, partner, employee or agent or one under the control or direction of the Sub-Adviser even though paid by the Sub-Adviser. 9. Term. ----- As to each Series, this Agreement shall continue until the date set forth opposite such Series' name on Schedule 1 attached hereto (the "Reapproval Date"), and thereafter shall continue automatically for successive annual periods ending on the day of each year set forth opposite the Series' name on Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is specifically approved as to a Series at least annually by (a) the Fund's Board of Directors or (b) vote of a majority (as defined in the 1940 Act) of such Series' outstanding voting securities, provided that in either event its continuance also is approved by a majority of the Fund's Directors who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Series, this Agreement may be terminated without penalty (i) by the Fund's Board of Directors or by vote of the holders of a majority of such Series' shares, upon written notice to the Sub-Adviser, (ii) by the Adviser (but only upon the approval of the Fund's Board of Directors) upon 60 days' written notice to the Sub-Adviser (which notice may be waived in writing by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90 days' written notice to the Fund and the Adviser (which notice may be waived in writing by the Fund and the Adviser). This Agreement also will terminate automatically, as to the relevant Series, in the event of its assignment (as defined in the 1940 Act). In addition, notwithstanding anything herein to the contrary, if the Investment Advisory Agreement is terminated for any reason (whether by the Fund, by the Adviser or by operation of law), this Agreement shall -6- 306 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. -7- 307 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written. FIRST AMERICAN NATIONAL BANK By: -------------------------------- Attest: -------------------------------- BENNETT LAWRENCE MANAGEMENT, LLC By: -------------------------------- Attest: -------------------------------- -8- 308 SCHEDULE 1 Annual Fee As a Percentage of Average Name of Series Daily Net Assets Reapproval Date Reapproval Day - -------------- ---------------- --------------- -------------- ISG Mid-Cap Fund * December 31, 1999 December 31 * .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. -9- 309 EXHIBIT A As to each Series, during the period from and including October 1, 1999 (the "Escrow Beginning Date") until the date of approval by shareholders of the Series in conformity with the provisions of the 1940 Act, including but not limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall be paid in accordance with this Exhibit A. From and including the Escrow Beginning Date to, but not including, the Escrow Termination Date, any and all Sub-Advisory Fees payable under this Agreement shall be paid into an interest bearing escrow account (the "Escrow Account") maintained by an unaffiliated financial institution (the "Escrow Agent"). Pursuant to a letter agreement with the Escrow Agent, the Sub-Advisory Fees (including interest earned on such Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser only if shareholders of the Series approve the Agreement. Further pursuant to the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid hereunder will be released by the Escrow Agent from the Escrow Account to the Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from officers of the Fund stating that this Agreement, with respect to the Series, has received the requisite shareholder vote. As to each Series, in the event that the requisite shareholder vote is not obtained and the Escrow Termination Date does not therefore occur, the officers of the Fund shall execute and deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating that the requisite shareholder vote with respect to the Series has not been obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account should be paid over to the Series. As to each Series, the provisions of this Exhibit A shall terminate and be of no further force and effect, and may be removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March 31, 2000. -10- 310 APPENDIX F FORM OF NEW SUB-ADVISORY AGREEMENT (ISG INTERNATIONAL EQUITY FUND) 311 FORM OF SUB-INVESTMENT ADVISORY AGREEMENT Sub-Investment Advisory Agreement made as of the 1st day of October, l999, between FIRST AMERICAN NATIONAL BANK, a national banking association having its principal office and place of business at First American Center, 315 Deaderick Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and LAZARD ASSET MANAGEMENT, having its principal office and place of business at 30 Rockefeller Plaza, New York, New York 10020 (herein called the "Sub-Adviser"). WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund employs the Adviser to provide advisory services pursuant to an Investment Advisory Agreement dated October 1, 1999 between the Fund and the Adviser (the "Investment Advisory Agreement") with respect to the Fund's portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be revised from time to time (the "Series"; if there are more than one Series to which this Agreement applies, the provisions herein shall apply severally to each such Series); and WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the "Administrator") to act as the Fund's administrator; and WHEREAS, the Adviser, in its capacity as investment adviser to the Series, desires to retain the Sub-Adviser to provide the day-to-day management of the Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser to provide such services, and the Sub-Adviser is willing to perform such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser to the Series for the period and 312 on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. Services of Sub-Adviser. Subject to the oversight and supervision of the Adviser, the Sub-Adviser will provide a continuous investment program for the Series, including investment research and day-to-day management with respect to such Series' assets. The Sub-Adviser will provide the services rendered by it under this Agreement in accordance with the investment criteria and policies established from time to time for the Series by the Adviser, the Series' investment objective, policies and restrictions as stated in the Fund's Prospectus and Statement of Additional Information for the Series, as from time to time in effect, and resolutions of the Fund's Board of Directors. The Fund and the Adviser wish to be informed of important developments materially affecting the Series' portfolio and the Sub-Adviser agrees to furnish to the Fund and the Adviser from time to time such information as may be appropriate for this purpose. 3. Other Covenants. The Sub-Adviser agrees that it will: (a) comply with all applicable rules and regulations of the Securities and Exchange Commission in performance of its duties as sub-investment adviser for the Series and, in addition, will conduct its activities under this Agreement in accordance with other applicable federal and state law; (b) provide, or cause to be provided, to the Board of Directors of the Fund such reports, statistical data and economic information as may be reasonably requested in connection with the Sub-Adviser's services hereunder; (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- -2- 313 Adviser shall consider all factors that it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to execute a particular transaction, the Sub-Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Series and other accounts over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is authorized, subject to the prior approval of the Adviser and the Fund's Board of Directors, to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for any of the Series which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Sub-Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer as viewed in terms of that particular transaction or in terms of the overall responsibilities of the Sub-Adviser to the Series. In addition, the Sub-Adviser is authorized to take into account the sale of the Fund's shares in allocating purchase and sale orders for portfolio securities to brokers or dealers (including brokers and dealers that are affiliated with the Adviser, Sub-Adviser or the Fund's principal underwriter), provided that the Sub-Adviser believes that the quality of the execution and the commission are comparable to what they would be with other qualified firms. In no instance, however, will portfolio securities be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal underwriter or any affiliated person of any of the Fund, the Adviser, Sub-Adviser, or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the Securities and Exchange Commission and other applicable federal and state laws and regulations; (e) maintain historical tax lots for each portfolio security held by the Series; (f) transmit trades to the Fund's custodian for proper settlement; and (g) prepare a quarterly broker security transaction summary and monthly security transaction listing for each Series. -3- 314 4. Services Not Exclusive. The services furnished by the Sub-Adviser hereunder are deemed not to be exclusive, and the Sub-Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. To the extent that the purchase or sale of securities or other investments of the same issuer may be deemed by the Sub-Adviser to be suitable for two or more Series, investment companies or accounts managed by the Sub-Adviser, the available securities or investments will be allocated in a manner believed by the Sub-Adviser to be equitable to each of them. It is recognized and acknowledged by the Adviser that in some cases this procedure may adversely affect the price paid or received by the Series or the size of the position obtained for or disposed of by Series. 5. Books and Records. In compliance with the requirements of Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Series are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the request of the Fund or the Adviser. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 6. Expenses. Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all expenses incurred by it in performing its services and duties as sub-investment adviser. The Adviser hereby agrees that all other expenses to be incurred in the operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the Fund have agreed that such other expenses will be borne by the Fund, except to the extent specifically assumed by others. The expenses to be borne by the Fund include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, if any, fees of Directors who are not officers, directors, employees or holders of 5% or more of the outstanding voting securities of the Adviser, Sub-Adviser or the Administrator, or any of their affiliates, Securities and Exchange Commission fees, state Blue Sky qualification fees, advisory and administration fees, charges of custodians, transfer and -4- 315 dividend disbursing agents' fees, certain insurance premiums, industry association fees, auditing and legal expenses, costs of maintaining corporate existence, costs of independent pricing services, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of calculating the net asset value of the Series' shares, costs of shareholders' reports and corporate meetings, costs of preparing and printing certain prospectuses and statements of additional information, and any extraordinary expenses. 7. Compensation. In consideration of services rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser on the first business day of each month, subject to the terms and conditions set forth on Exhibit A attached hereto, the fee at the annual rate set forth opposite the Series' name on Schedule l attached hereto, based on the value of such Series' average daily net assets for the previous month. The Sub-Adviser agrees to accept such fee from the Adviser as full compensation for the services provided and expenses assumed by it pursuant to this Agreement, and acknowledges that it shall not be entitled to any further compensation from any other person in respect of the same. Net asset value shall be computed on such days and at such time or times as described in the Fund's current Prospectus for the Series. The fee for the period from the date of the commencement of the initial public sale of the Series' shares to the end of the month during which such sale shall have been commenced shall be pro-rated according to the proportion which such period bears to the full monthly period, and upon any termination of this Agreement before the end of any month, the fee for such part of a month shall be pro-rated according to the proportion which such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Sub-Adviser, the value of the Series' net assets shall be computed in the manner specified in the Fund's Charter for the computation of the value of the Series' net assets. 8. Limitation of Liability. The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Adviser in connection with the matters to which this Agreement relates, except that the Sub-Adviser -5- 316 shall be liable to the Fund for any loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of the Sub-Adviser's duties or from its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, director, partner, employee or agent of the Sub-Adviser, who may be or become an officer, Director, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or to the Series, or acting on any business of the Fund or of the Series (other than services or business in connection with the Sub-Adviser's duties as sub-investment adviser hereunder) to be rendering such services to or acting solely for the Fund or the Series and not as an officer, director, partner, employee or agent or one under the control or direction of the Sub-Adviser even though paid by the Sub-Adviser. 9. Term. As to each Series, this Agreement shall continue until the date set forth opposite such Series' name on Schedule 1 attached hereto (the "Reapproval Date"), and thereafter shall continue automatically for successive annual periods ending on the day of each year set forth opposite the Series' name on Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is specifically approved as to a Series at least annually by (a) the Fund's Board of Directors or (b) vote of a majority (as defined in the 1940 Act) of such Series' outstanding voting securities, provided that in either event its continuance also is approved by a majority of the Fund's Directors who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Series, this Agreement may be terminated without penalty (i) by the Fund's Board of Directors or by vote of the holders of a majority of such Series' shares, upon written notice to the Sub-Adviser, (ii) by the Adviser (but only upon the approval of the Fund's Board of Directors) upon 60 days' written notice to the Sub-Adviser (which notice may be waived in writing by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90 days' written notice to the Fund and the Adviser (which notice may be waived in writing by the Fund and the Adviser). This Agreement also will terminate automatically, as to the relevant Series, in the event of its assignment (as defined in the 1940 Act). In addition, notwithstanding anything herein to the contrary, if the Investment Advisory Agreement is terminated for any reason (whether by the Fund, by the Adviser or by operation of law), this Agreement shall -6- 317 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. -7- 318 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written. FIRST AMERICAN NATIONAL BANK By: -------------------------------- Attest: --------------------------- LAZARD ASSET MANAGEMENT By: -------------------------------- Attest: --------------------------- -8- 319 SCHEDULE 1 Annual Fee As a Percentage of Average Name of Series Daily Net Assets Reapproval Date Reapproval Day - -------------- ---------------- --------------- -------------- ISG International .50 of 1% December 31, 1999 December 31 Equity Fund 320 EXHIBIT A As to each Series, during the period from and including October 1, 1999 (the "Escrow Beginning Date") until the date of approval by shareholders of the Series in conformity with the provisions of the 1940 Act, including but not limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall be paid in accordance with this Exhibit A. From and including the Escrow Beginning Date to, but not including, the Escrow Termination Date, any and all Sub-Advisory Fees payable under this Agreement shall be paid into an interest bearing escrow account (the "Escrow Account") maintained by an unaffiliated financial institution (the "Escrow Agent"). Pursuant to a letter agreement with the Escrow Agent, the Sub-Advisory Fees (including interest earned on such Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser only if shareholders of the Series approve the Agreement. Further pursuant to the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid hereunder will be released by the Escrow Agent from the Escrow Account to the Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from officers of the Fund stating that this Agreement, with respect to the Series, has received the requisite shareholder vote. As to each Series, in the event that the requisite shareholder vote is not obtained and the Escrow Termination Date does not therefore occur, the officers of the Fund shall execute and deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating that the requisite shareholder vote with respect to the Series has not been obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account should be paid over to the Series. As to each Series, the provisions of this Exhibit A shall terminate and be of no further force and effect, and may be removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March 31, 2000. -10- 321 APPENDIX G FORM OF NEW SUB-ADVISORY AGREEMENT (ISG SMALL-CAP OPPORTUNITY FUND) 322 FORM OF SUB-INVESTMENT ADVISORY AGREEMENT Sub-Investment Advisory Agreement made as of the 1st day of October, l999, between FIRST AMERICAN NATIONAL BANK, a national banking association having its principal office and place of business at First American Center, 315 Deaderick Street, Nashville, Tennessee 37238-0035 (herein called the "Adviser"), and WOMACK ASSET MANAGEMENT, INC., having its principal office and place of business at 1667 Lelia Drive, Suite 101, Jackson, Mississippi 39216 (herein called the "Sub-Adviser"). WHEREAS, The Infinity Mutual Funds, Inc. (herein called the "Fund") is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund employs the Adviser to provide advisory services pursuant to an Investment Advisory Agreement dated October 1, 1999 between the Fund and the Adviser (the "Investment Advisory Agreement") with respect to the Fund's portfolio or portfolios set forth on Schedule 1 attached hereto, as such may be revised from time to time (the "Series"; if there are more than one Series to which this Agreement applies, the provisions herein shall apply severally to each such Series); and WHEREAS, the Fund intends to employ BISYS Fund Services Ohio, Inc. (the "Administrator") to act as the Fund's administrator; and WHEREAS, the Adviser, in its capacity as investment adviser to the Series, desires to retain the Sub-Adviser to provide the day-to-day management of the Series' investments, the Fund consents to the Adviser retaining the Sub-Adviser to provide such services, and the Sub-Adviser is willing to perform such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. The Adviser hereby retains the Sub-Adviser to act as sub-investment adviser to the Series for the period and on the terms set forth in this Agreement. The Sub-Adviser 323 accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. Services of Sub-Adviser. Subject to the oversight and supervision of the Adviser, the Sub-Adviser will provide a continuous investment program for the Series, including investment research and day-to-day management with respect to such Series' assets, other than cash and cash equivalents. The Sub-Adviser will provide the services rendered by it under this Agreement in accordance with the investment criteria and policies established from time to time for the Series by the Adviser, the Series' investment objective, policies and restrictions as stated in the Fund's Prospectus and Statement of Additional Information for the Series, as from time to time in effect, and resolutions of the Fund's Board of Directors. The Fund and the Adviser wish to be informed of important developments materially affecting the Series' portfolio and the Sub-Adviser agrees to furnish to the Fund and the Adviser from time to time such information as may be appropriate for this purpose. 3. Other Covenants. The Sub-Adviser agrees that it will: (a) comply with all applicable rules and regulations of the Securities and Exchange Commission in performance of its duties as sub-investment adviser for the Series and, in addition, will conduct its activities under this Agreement in accordance with other applicable federal and state law; (b) provide, or cause to be provided, to the Board of Directors of the Fund such reports, statistical data and economic information as may be reasonably requested in connection with the Sub-Adviser's services hereunder; (c) use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities; (d) place orders pursuant to its investment determinations for the Series either directly with the issuer or with any broker or dealer. In executing portfolio transactions and selecting brokers or dealers, the Sub-Adviser will use its best efforts to seek on behalf of the Series the best overall terms available. In assessing the best overall terms available for any transaction, the Sub- -2- 324 Adviser shall consider all factors that it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to execute a particular transaction, the Sub-Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Series and other accounts over which the Sub-Adviser or an affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is authorized, subject to the prior approval of the Adviser and the Fund's Board of Directors, to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for any of the Series which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Sub-Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer as viewed in terms of that particular transaction or in terms of the overall responsibilities of the Sub-Adviser to the Series. In addition, the Sub-Adviser is authorized to take into account the sale of the Fund's shares in allocating purchase and sale orders for portfolio securities to brokers or dealers (including brokers and dealers that are affiliated with the Adviser, Sub-Adviser or the Fund's principal underwriter), provided that the Sub-Adviser believes that the quality of the execution and the commission are comparable to what they would be with other qualified firms. In no instance, however, will portfolio securities be purchased from or sold to the Adviser, Sub-Adviser, the Fund's principal underwriter or any affiliated person of any of the Fund, the Adviser, Sub-Adviser, or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the Securities and Exchange Commission and other applicable federal and state laws and regulations; (e) maintain historical tax lots for each portfolio security held by the Series; (f) transmit trades to the Fund's custodian for proper settlement; and (g) prepare a quarterly broker security transaction summary and monthly security transaction listing for each Series. -3- 325 4. Services Not Exclusive. The services furnished by the Sub-Adviser hereunder are deemed not to be exclusive, and the Sub-Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. To the extent that the purchase or sale of securities or other investments of the same issuer may be deemed by the Sub-Adviser to be suitable for two or more Series, investment companies or accounts managed by the Sub-Adviser, the available securities or investments will be allocated in a manner believed by the Sub-Adviser to be equitable to each of them. It is recognized and acknowledged by the Adviser that in some cases this procedure may adversely affect the price paid or received by the Series or the size of the position obtained for or disposed of by Series. 5. Books and Records. In compliance with the requirements of Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Series are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the request of the Fund of the Adviser. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 6. Expenses. Except as otherwise stated in this Section 6, the Sub-Adviser shall pay all expenses incurred by it in performing its services and duties as sub-investment adviser. The Adviser hereby agrees that all other expenses to be incurred in the operation of the Fund shall not be borne by the Sub-Adviser. The Adviser and the Fund have agreed that such other expenses will be borne by the Fund, except to the extent specifically assumed by others. The expenses to be borne by the Fund include, without limitation, the following: organizational costs, taxes, interest, brokerage fees and commissions, if any, fees of Directors who are not officers, directors, employees or holders of 5% or more of the outstanding voting securities of the Adviser, Sub-Adviser or the Administrator, or any of their affiliates, Securities and Exchange Commission fees, state Blue Sky qualification fees, advisory and administration fees, charges of custodians, transfer and -4- 326 dividend disbursing agents' fees, certain insurance premiums, industry association fees, auditing and legal expenses, costs of maintaining corporate existence, costs of independent pricing services, costs attributable to investor services (including, without limitation, telephone and personnel expenses), costs of calculating the net asset value of the Series' shares, costs of shareholders' reports and corporate meetings, costs of preparing and printing certain prospectuses and statements of additional information, and any extraordinary expenses. 7. Compensation. In consideration of services rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser on the first business day of each month, subject to the terms and conditions set forth on Exhibit A attached hereto, the fee at the annual rate set forth opposite the Series' name on Schedule l attached hereto, based on the value of such Series' average daily net assets for the previous month. The Sub-Adviser agrees to accept such fee from the Adviser as full compensation for the services provided and expenses assumed by it pursuant to this Agreement, and acknowledges that it shall not be entitled to any further compensation from any other person in respect of the same. Net asset value shall be computed on such days and at such time or times as described in the Fund's current Prospectus for the Series. The fee for the period from the date of the commencement of the initial public sale of the Series' shares to the end of the month during which such sale shall have been commenced shall be pro-rated according to the proportion which such period bears to the full monthly period, and upon any termination of this Agreement before the end of any month, the fee for such part of a month shall be pro-rated according to the proportion which such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Sub-Adviser, the value of the Series' net assets shall be computed in the manner specified in the Fund's Charter for the computation of the value of the Series' net assets. 8. Limitation of Liability. The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Adviser in connection with the matters to which this Agreement relates, except that the Sub-Adviser -5- 327 shall be liable to the Fund for any loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of the Sub-Adviser's duties or from its reckless disregard of its obligations and duties under this Agreement. Any person, even though also an officer, director, partner, employee or agent of the Sub-Adviser, who may be or become an officer, Director, employee or agent of the Fund, shall be deemed, when rendering services to the Fund or to the Series, or acting on any business of the Fund or of the Series (other than services or business in connection with the Sub-Adviser's duties as sub-investment adviser hereunder) to be rendering such services to or acting solely for the Fund or the Series and not as an officer, director, partner, employee or agent or one under the control or direction of the Sub-Adviser even though paid by the Sub-Adviser. 9. Term. As to each Series, this Agreement shall continue until the date set forth opposite such Series' name on Schedule 1 attached hereto (the "Reapproval Date"), and thereafter shall continue automatically for successive annual periods ending on the day of each year set forth opposite the Series' name on Schedule 1 attached hereto (the "Reapproval Day"), provided such continuance is specifically approved as to a Series at least annually by (a) the Fund's Board of Directors or (b) vote of a majority (as defined in the 1940 Act) of such Series' outstanding voting securities, provided that in either event its continuance also is approved by a majority of the Fund's Directors who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. As to each Series, this Agreement may be terminated without penalty (i) by the Fund's Board of Directors or by vote of the holders of a majority of such Series' shares, upon written notice to the Sub-Adviser, (ii) by the Adviser (but only upon the approval of the Fund's Board of Directors) upon 60 days' written notice to the Sub-Adviser (which notice may be waived in writing by the Sub-Adviser), or (iii) by the Sub-Adviser upon not less than 90 days' written notice to the Fund and the Adviser (which notice may be waived in writing by the Fund and the Adviser). This Agreement also will terminate automatically, as to the relevant Series, in the event of its assignment (as defined in the 1940 Act). In addition, notwithstanding anything herein to the contrary, if the Investment Advisory Agreement is terminated for any reason (whether by the Fund, by the Adviser or by operation of law), this Agreement shall -6- 328 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. -7- 329 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written. FIRST AMERICAN NATIONAL BANK By: -------------------------------- Attest: ------------------------------- WOMACK ASSET MANAGEMENT, INC. By: -------------------------------- Attest: ------------------------------- -8- 330 SCHEDULE 1 Annual Fee As a Percentage of Average Name of Series Daily Net Assets Reapproval Date Reapproval Day - -------------- ---------------- --------------- -------------- ISG Small-Cap Opportunity .35 of 1% December 31, 1999 December 31 Fund -9- 331 EXHIBIT A As to each Series, during the period from and including October 1, 1999 (the "Escrow Beginning Date") until the date of approval by shareholders of the Series in conformity with the provisions of the 1940 Act, including but not limited to Section 15(c) thereof (the "Escrow Termination Date"), any and all sub-advisory fees (the "Sub-Advisory Fees") payable under this Agreement shall be paid in accordance with this Exhibit A. From and including the Escrow Beginning Date to, but not including, the Escrow Termination Date, any and all Sub-Advisory Fees payable under this Agreement shall be paid into an interest bearing escrow account (the "Escrow Account") maintained by an unaffiliated financial institution (the "Escrow Agent"). Pursuant to a letter agreement with the Escrow Agent, the Sub-Advisory Fees (including interest earned on such Sub-Advisory Fees) payable under this Agreement will be paid to the Sub-Adviser only if shareholders of the Series approve the Agreement. Further pursuant to the letter agreement, on the Escrow Termination Date the Sub-Advisory Fees paid hereunder will be released by the Escrow Agent from the Escrow Account to the Sub-Adviser, only upon receipt by the Escrow Agent of a certificate from officers of the Fund stating that this Agreement, with respect to the Series, has received the requisite shareholder vote. As to each Series, in the event that the requisite shareholder vote is not obtained and the Escrow Termination Date does not therefore occur, the officers of the Fund shall execute and deliver to the Escrow Agent, no later than March 31, 2000, a certificate stating that the requisite shareholder vote with respect to the Series has not been obtained and that the Sub-Advisory Fees (and interest) in the Escrow Account should be paid over to the Series. As to each Series, the provisions of this Exhibit A shall terminate and be of no further force and effect, and may be removed from this Agreement, upon (i) the Escrow Termination Date, or (ii) March 31, 2000. -10- 332 APPENDIX H EXECUTIVE OFFICERS AND DIRECTORS OF AMSOUTH BANK 333 APPENDIX H The principal executive officer and directors of AmSouth Bank are listed in the table below. Certain executive officers and directors of AmSouth Bank also hold or have held various positions with bank and non-bank affiliates of AmSouth Bank, including AmSouth Bancorporation. Name and Position with Other business, profession, AmSouth Bank AmSouth Bank vocation, or employment - ------------ ------------------------------------ J. Harold Chandler Chairman, President & CEO Director Provident Companies, Inc. One Fountain Square Chattanooga, Tennessee 37402 James E. Dalton, Jr. President and CEO Director Quorum Health Group, Inc. 103 Continental Place Brentwood, Tennessee 37027 Rodney C. Gilbert Chairman of the Board & CEO Director Enfinity Corporation 3700 Old Leeds Road Birmingham, Alabama 35213 Elmer B. Harris President and CEO Director Alabama Power Company 600 North 18th Street Birmingham, Alabama 35291 Victoria Jackson Gregorious President and CEO Director DSS/ProDiesel, Inc. 922 Main Street Nashville, Tennessee 37206 Ronald L. Kuehn, Jr. Chairman of the Board, President and CEO Director Sonat Inc. 1900 Fifth Avenue North Birmingham, Alabama 35203 James R. Malone Chairman and CEO Director HMI Industries, Inc./Intok Capital, Inc. 8889 Pelican Bay Boulevard Naples, Florida 34108 H-1 334 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 Candice W. Rogers Senior Executive Vice President Senior Executive Vice President E.W. Stephenson, Jr. None Senior Executive Vice President H-2 335 Alfred W. Swan, Jr. None Senior Executive Vice President Stephen A. Yoder None Executive Vice President and General Counsel H-3 336 ISG CURRENT INCOME PORTFOLIO PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Current Income Portfolio on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Current Income Portfolio ("ISG Current Income") to AmSouth Strategic Portfolios: Current Income Portfolio ("AmSouth Current Income") in exchange for Shares of AmSouth Current Income and the assumption by AmSouth Current Income of all of the liabilities of ISG Current Income, followed by the dissolution and liquidation of ISG Current Income and the distribution of Shares of AmSouth Current Income to the shareholders of ISG Current Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Current Income Portfolio. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). 337 NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 338 ISG TREASURY MONEY MARKET FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Treasury Money Market Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Treasury Money Market Fund ("ISG Treasury Money Market") to AmSouth Treasury Reserve Money Market Fund ("AmSouth Treasury Reserve Money Market") in exchange for Shares of AmSouth Treasury Reserve Money Market and the assumption by AmSouth Treasury Reserve Money Market of all of the liabilities of ISG Treasury Money Market, followed by the dissolution and liquidation of ISG Treasury Money Market and the distribution of Shares of AmSouth Treasury Reserve Money Market to the shareholders of ISG Treasury Money Market. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Treasury Money Market Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). 339 NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 340 ISG MODERATE GROWTH & INCOME PORTFOLIO PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Moderate Growth & Income Portfolio on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Moderate Growth & Income Portfolio ("ISG Moderate Growth & Income") to AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ("AmSouth Moderate Growth and Income") in exchange for Shares of AmSouth Moderate Growth and Income and the assumption by AmSouth Moderate Growth and Income of all of the liabilities of ISG Moderate Growth & Income, followed by the dissolution and liquidation of ISG Moderate Growth & Income and the distribution of Shares of AmSouth Moderate Growth and Income to the shareholders of ISG Moderate Growth & Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Moderate Growth & Income Portfolio. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). 341 NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 342 ISG GROWTH & INCOME PORTFOLIO PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Growth & Income Portfolio on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Growth & Income Portfolio ("ISG Growth & Income") to AmSouth Strategic Portfolios: Growth and Income Portfolio ("AmSouth Growth and Income") in exchange for Shares of AmSouth Growth and Income and the assumption by AmSouth Growth and Income of all of the liabilities of ISG Growth & Income, followed by the dissolution and liquidation of ISG Growth & Income and the distribution of Shares of AmSouth Growth and Income to the shareholders of ISG Growth & Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Growth & Income Portfolio. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 343 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 344 ISG GROWTH PORTFOLIO PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Growth Portfolio on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Growth Portfolio ("ISG Growth") to AmSouth Strategic Portfolios: Growth Portfolio ("AmSouth Growth") in exchange for Shares of AmSouth Growth and the assumption by AmSouth Growth of all of the liabilities of ISG Growth, followed by the dissolution and liquidation of ISG Growth and the distribution of Shares of AmSouth Growth to the shareholders of ISG Growth. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Growth Portfolio. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's 345 office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 346 ISG AGGRESSIVE GROWTH PORTFOLIO PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Aggressive Growth Portfolio on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Aggressive Growth Portfolio ("ISG Aggressive Growth") to AmSouth Strategic Portfolios: Aggressive Growth Portfolio ("AmSouth Aggressive Growth") in exchange for Shares of AmSouth Aggressive Growth and the assumption by AmSouth Aggressive Growth of all of the liabilities of ISG Aggressive Growth, followed by the dissolution and liquidation of ISG Aggressive Growth and the distribution of Shares of AmSouth Aggressive Growth to the shareholders of ISG Aggressive Growth. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Aggressive Growth Portfolio. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 347 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 348 ISG MID-CAP FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Mid-Cap Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Mid-Cap Fund ("ISG Mid-Cap") to AmSouth Mid Cap Fund ("AmSouth Mid Cap") in exchange for Shares of AmSouth Mid Cap and the assumption by AmSouth Mid Cap of all of the liabilities of ISG Mid-Cap, followed by the dissolution and liquidation of ISG Mid-Cap and the distribution of Shares of AmSouth Mid Cap to the shareholders of ISG Mid-Cap. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Mid-Cap Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 3b. Approval of a new Sub-Investment Advisory Agreement between Bennett Lawrence Management, LLC, the present sub-adviser to the ISG Mid-Cap Fund, and First American National Bank, with respect to the ISG Mid-Cap Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for ISG Mid-Cap Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] 349 THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) (3)(b) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) (3)(b) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 350 ISG LARGE-CAP EQUITY FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Large-Cap Equity Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Large-Cap Equity Fund ("ISG Large-Cap Equity") to AmSouth Large Cap Fund ("AmSouth Large Cap") in exchange for Shares of AmSouth Large Cap and the assumption by AmSouth Large Cap of all of the liabilities of ISG Large-Cap Equity, followed by the dissolution and liquidation of ISG Large-Cap Equity and the distribution of Shares of AmSouth Large Cap to the shareholders of ISG Large-Cap Equity. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Large-Cap Equity Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 351 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 352 ISG INTERNATIONAL EQUITY FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG International Equity Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG International Equity Fund ("ISG International Equity") to AmSouth International Equity Fund ("AmSouth International Equity") in exchange for Shares of AmSouth International Equity and the assumption by AmSouth International Equity of all of the liabilities of ISG International Equity, followed by the dissolution and liquidation of ISG International Equity and the distribution of Shares of AmSouth International Equity to the shareholders of ISG International Equity. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG International Equity Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 3a. Approval of a new Sub-Investment Advisory Agreement between Lazard Asset Management, the present sub-adviser to the ISG International Equity Fund, and First American National Bank, with respect to the ISG International Equity Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for ISG International Equity Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] 353 THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2), (3)(a) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2), (3)(a) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 354 ISG CAPITAL GROWTH FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Capital Growth Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Capital Growth Fund ("ISG Capital Growth") to AmSouth Capital Growth Fund ("AmSouth Capital Growth") in exchange for Shares of AmSouth Capital Growth and the assumption by AmSouth Capital Growth of all of the liabilities of ISG Capital Growth, followed by the dissolution and liquidation of ISG Capital Growth and the distribution of Shares of AmSouth Capital Growth to the shareholders of ISG Capital Growth. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Capital Growth Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 355 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 356 ISG TENNESSEE TAX-EXEMPT FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Tennessee Tax-Exempt Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Tennessee Tax-Exempt Fund ("ISG Tennessee Tax-Exempt") to AmSouth Tennessee Tax-Exempt Fund ("AmSouth Tennessee Tax- Exempt") in exchange for Shares of AmSouth Tennessee Tax-Exempt and the assumption by AmSouth Tennessee Tax-Exempt of all of the liabilities of ISG Tennessee Tax-Exempt, followed by the dissolution and liquidation of ISG Tennessee Tax-Exempt and the distribution of Shares of AmSouth Tennessee Tax-Exempt to the shareholders of ISG Tennessee Tax-Exempt. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Tennessee Tax-Exempt Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 357 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 358 ISG LIMITED TERM TENNESSEE TAX-EXEMPT FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Limited Term Tennessee Tax-Exempt Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Limited Term Tennessee Tax-Exempt Fund ("ISG Limited Term Tennessee Tax-Exempt") to AmSouth Limited Term Tennessee Tax-Exempt Fund ("AmSouth Limited Term Tennessee Tax-Exempt") in exchange for Shares of AmSouth Limited Term Tennessee Tax-Exempt and the assumption by AmSouth Limited Term Tennessee Tax-Exempt of all of the liabilities of ISG Limited Term Tennessee Tax-Exempt, followed by the dissolution and liquidation of ISG Limited Term Tennessee Tax-Exempt and the distribution of Shares of AmSouth Limited Term Tennessee Tax-Exempt to the shareholders of ISG Limited Term Tennessee Tax-Exempt. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Limited Term Tennessee Tax-Exempt Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). 359 NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 360 ISG LIMITED TERM U.S. GOVERNMENT FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Limited Term U.S. Government Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Limited Term U.S. Government Fund ("ISG Limited Term U.S. Government") to AmSouth Limited Term U.S. Government Fund ("AmSouth Limited Term U.S. Government") in exchange for Shares of AmSouth Limited Term U.S. Government and the assumption by AmSouth Limited Term U.S. Government of all of the liabilities of ISG Limited Term U.S. Government, followed by the dissolution and liquidation of ISG Limited Term U.S. Government and the distribution of Shares of AmSouth Limited Term U.S. Government to the shareholders of ISG Limited Term U.S. Government. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Limited Term U.S. Government Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When 361 signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 362 ISG GOVERNMENT INCOME FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Government Income Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Government Income Fund ("ISG Government Income") to AmSouth Government Income Fund ("AmSouth Government Income") in exchange for Shares of AmSouth Government Income and the assumption by AmSouth Government Income of all of the liabilities of ISG Government Income, followed by the dissolution and liquidation of ISG Government Income and the distribution of Shares of AmSouth Government Income to the shareholders of ISG Government Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Government Income Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 363 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 364 ISG LIMITED TERM INCOME FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Limited Term Income Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Limited Term Income Fund ("ISG Limited Term Income") to AmSouth Limited Term Bond Fund ("AmSouth Limited Term Bond") in exchange for Shares of AmSouth Limited Term Bond and the assumption by AmSouth Limited Term Bond of all of the liabilities of ISG Limited Term Income, followed by the dissolution and liquidation of ISG Limited Term Income and the distribution of Shares of AmSouth Limited Term Bond to the shareholders of ISG Limited Term Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Limited Term Income Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 365 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 366 ISG EQUITY INCOME FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Equity Income Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Equity Income Fund ("ISG Equity Income") to AmSouth Equity Income Fund ("AmSouth Equity Income") in exchange for Shares of AmSouth Equity Income and the assumption by AmSouth Equity Income of all of the liabilities of ISG Equity Income, followed by the dissolution and liquidation of ISG Equity Income and the distribution of Shares of AmSouth Equity Income to the shareholders of ISG Equity Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Equity Income Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's 367 office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 368 ISG MUNICIPAL INCOME FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Municipal Income Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Municipal Income Fund ("ISG Municipal Income") to AmSouth Municipal Bond Fund ("AmSouth Municipal Bond") in exchange for Shares of AmSouth Municipal Bond and the assumption by AmSouth Municipal Bond of all of the liabilities of ISG Municipal Income, followed by the dissolution and liquidation of ISG Municipal Income and the distribution of Shares of AmSouth Municipal Bond to the shareholders of ISG Municipal Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Municipal Income Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 369 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 370 ISG SMALL-CAP OPPORTUNITY FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Small-Cap Opportunity Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Small-Cap Opportunity Fund ("ISG Small Cap Opportunity") to AmSouth Small Cap Fund ("AmSouth Small Cap") in exchange for Shares of AmSouth Small Cap and the assumption by AmSouth Small Cap of all of the liabilities of ISG Small-Cap Opportunity, followed by the dissolution and liquidation of ISG Small-Cap Opportunity and the distribution of Shares of AmSouth Small Cap to the shareholders of ISG Small-Cap Opportunity. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Small-Cap Opportunity Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 3c. Approval of a new Sub-Investment Advisory Agreement between Womack Asset Management, Inc., the present sub-adviser to the ISG Small-Cap Opportunity Fund, and First American National Bank, with respect to the ISG Small-Cap Opportunity Fund, the terms of which are identical in all material respects to the prior sub-advisory agreement for the ISG Small-Cap Opportunity Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] 371 THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2), (3)(C) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2), (3)(C) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 372 ISG TAX-EXEMPT MONEY MARKET FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Tax-Exempt Money Market Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Tax-Exempt Money Market Fund ("ISG Tax-Exempt Money Market") to AmSouth Tax-Exempt Money Market Fund ("AmSouth Tax-Exempt Money Market") in exchange for Shares of AmSouth Tax-Exempt Money Market and the assumption by AmSouth Tax-Exempt Money Market of all of the liabilities of ISG Tax-Exempt Money Market, followed by the dissolution and liquidation of ISG Tax-Exempt Money Market and the distribution of Shares of AmSouth Tax-Exempt Money Market to the shareholders of ISG Tax-Exempt Money Market. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Tax-Exempt Money Market Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 373 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 374 ISG PRIME MONEY MARKET FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Prime Money Market Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Prime Money Market Fund ("ISG Prime Money Market") to AmSouth Prime Money Market Fund ("AmSouth Prime Money Market") in exchange for Shares of AmSouth Prime Money Market and the assumption by AmSouth Prime Money Market of all of the liabilities of ISG Prime Money Market, followed by the dissolution and liquidation of ISG Prime Money Market and the distribution of Shares of AmSouth Prime Money Market to the shareholders of ISG Prime Money Market. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Prime Money Market Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please 375 give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 376 ISG INCOME FUND PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 11, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE INFINITY MUTUAL FUNDS, INC. ON BEHALF OF ISG FUNDS ("ISG FUNDS"). The undersigned hereby appoints Rodney Ruehle and Jeffrey C. Cusick, and each of them with full power of substitution as proxy of the undersigned, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Shareholders of the ISG Income Fund on February 11, 2000 at TIME a.m., Eastern time, and at any adjournments thereof, all of the shares of the Fund which the undersigned would be entitled to vote if personally present. 1. Approval of the Agreement and Plan of Reorganization by and between ISG Funds and AmSouth Funds providing for the transfer of all of the assets of ISG Income Fund ("ISG Income") to AmSouth Bond Fund ("AmSouth Bond") in exchange for Shares of AmSouth Bond and the assumption by AmSouth Bond of all of the liabilities of ISG Income, followed by the dissolution and liquidation of ISG Income and the distribution of Shares of AmSouth Bond to the shareholders of ISG Income. FOR AGAINST ABSTAIN [ ] [ ] [ ] 2. Approval of a new Investment Advisory Agreement between ISG and First American National Bank, the terms of which are identical in all material respects to the prior investment advisory agreement for the ISG Income Fund. FOR AGAINST ABSTAIN [ ] [ ] [ ] 4. To transact any other business as may properly come before the meeting or any adjournment thereof. FOR AGAINST ABSTAIN [ ] [ ] [ ] THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (4) AND TO AUTHORIZE THE PROXIES, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE DIRECTORS RECOMMEND A VOTE FOR ITEMS (1), (2) AND (4). NOTE: Please sign exactly as the name appears on this card. EACH joint owner should sign. When signing as executor, administrator, attorney, trustee or guardian, or as custodian for a minor, please give the full title as such. If a corporation, please sign in full corporate name and indicate the signer's 377 office. If a partner, please sign in the partnership name. Please be sure to sign and date this Proxy. ________________________________________ Signature of Shareholder(s) ________________________________________ Signature of Shareholder(s) Dated:______________, 2000 PLEASE EXECUTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. OR Vote On-Line 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Go to Web Site www.proxyvote.com 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your Proxy Card* at hand. 2. Call the toll-free number found on your Proxy Card. 3. Enter the 12-digit Control Number found on your Proxy Card. 4. Cast your vote using the easy-to-follow instructions. *DO NOT MAIL THE PROXY CARD IF VOTING BY INTERNET OR TELEPHONE. 378 AMSOUTH FUNDS STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information contains information which may be of interest to investors but which is not included in the Combined Prospectus/Proxy Statement (the "Prospectus") of AmSouth Funds dated [_________, 1999] relating to the transfer of assets from the ISG Funds to the corresponding AmSouth Funds as follows: ISG Current Income Portfolio AmSouth Strategic Portfolios: Current Income Portfolio ISG Treasury Money Market Fund AmSouth Treasury Reserve Money Market Fund ISG Moderate Growth & Income Portfolio AmSouth Strategic Portfolios: Moderate Growth and Income Portfolio ISG Growth & Income Portfolio AmSouth Strategic Portfolios: Growth and Income Portfolio ISG Growth Portfolio AmSouth Strategic Portfolios: Growth Portfolio ISG Aggressive Growth Portfolio AmSouth Strategic Portfolios: Aggressive Growth Portfolio ISG Mid-Cap Fund AmSouth Mid Cap Fund ISG Large-Cap Equity Fund AmSouth Large Cap Fund ISG International Equity Fund AmSouth International Equity Fund ISG Capital Growth Fund AmSouth Capital Growth Fund ISG Tennessee Tax-Exempt Fund AmSouth Tennessee Tax-Exempt Fund ISG Limited Term Tennessee Tax-Exempt Fund AmSouth Limited Term Tennessee Tax-Exempt Fund ISG Limited Term U.S. Government Fund AmSouth Limited Term U.S. Government Fund ISG Government Income Fund AmSouth Government Income Fund ISG Limited Term Income Fund AmSouth Limited Term Bond Fund ISG Equity Income Fund AmSouth Equity Income Fund ISG Municipal Income Fund AmSouth Municipal Bond Fund ISG Small-Cap Opportunity Fund AmSouth Small Cap Fund B-1 379 ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund ISG Prime Money Market Fund AmSouth Prime Money Market Fund ISG Income Fund AmSouth Bond Fund The Statement of Additional Information for the ISG Funds dated May 1, 1999, and the Statements of Additional Information for the AmSouth Funds dated December 1, 1999 and December 14, 1999 have been filed with the Securities and Exchange Commission and are incorporated herein by reference. This Statement of Additional Information is not a prospectus and is authorized for distribution only when it accompanies or follows delivery of the Prospectus. This Statement of Additional Information should be read in conjunction with the Prospectus. A copy of the [_____________, 1999] Prospectus may be obtained, without charge, by writing ASO Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling 1-800-852-0045. The date of this Statement of Additional Information is [________, 1999]. B-2 380 TABLE OF CONTENTS Other Investment Policies and Techniques ........................... B-4 Other Risks ........................................................ B-49 Financial Statements of the combined Funds on a pro-forma basis for the year ended July 31, 1999 ...................................................... B-55 B-3 381 OTHER INVESTMENT POLICIES AND TECHNIQUES Regarding ISG Funds and AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund, AmSouth Treasury Reserve Money Market Fund Lending Portfolio Securities. (All ISG Funds and AmSouth Funds) From time to time, each Fund may lend securities from its investment portfolio to brokers, dealers and other financial institutions needing to borrow securities to complete certain transactions. Such loans may not exceed 33-1/3% of the value of the relevant Fund's total assets. In connection with such loans, each Fund will receive collateral consisting of cash or U.S. Government securities which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. Each Fund can increase its income through the investment of such collateral. Each Fund continues to be entitled to payments in amounts equal to the dividends, interest and other distributions payable on the loaned security and receives interest on the amount of the loan. Such loans will be terminable at any time upon specified notice. A Fund might experience risk of loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with such Fund. From time to time, a Fund may return to the borrower or a third party which is unaffiliated with the Fund, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned. The Securities and Exchange Commission currently requires that the following conditions must be met whenever portfolio securities are loaned: (1) the Fund must receive at least 100% cash collateral from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities rises above the level of such collateral; (3) the Fund must be able to terminate the loan at any time; (4) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions payable on the loaned securities, and any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; and (6) while voting rights on the loaned securities may pass to the borrower, the Trust's Board of Directors must terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs. Options Transactions. (ISG Large-Cap Equity, ISG Capital Growth, ISG Small Cap Opportunity, ISG Mid-Cap, ISG Equity Income, ISG Government Income and ISG International Equity and AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid Cap and AmSouth International Equity Funds) Each of these Funds may purchase call and put options in respect of specific securities in which the Fund may invest and write covered call and put option contracts. A call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security at the exercise price at any time during the option period. Conversely, a put option gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying B-4 382 security at the exercise price at any time during the option period. A covered call option sold by the Fund, which is a call option with respect to which the Fund owns the underlying security, exposes the Fund during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying security or to possible continued holding of a security which might otherwise have been sold to protect against depreciation in the market price of the security. A covered put option sold by the Fund exposes the Fund during the term of the option to a decline in price of the underlying security. A put option sold by the Fund is covered when, among other things, permissible liquid assets are placed in a segregated account to fulfill the obligation undertaken. The principal reason for the Fund writing covered call options is to realize, through the receipt of premiums, a greater return than would be realized on its portfolio securities alone. In return for a premium, the writer of a covered call option forfeits the right to any appreciation in the value of the underlying security above the strike price for the life of the option (or until a closing purchase transaction can be effected). Nevertheless, the call writer retains the risk of a decline in the price of the underlying security. Similarly, the principal reason for writing covered put options is to realize income in the form of premiums. The writer of a covered put option accepts the risk of a decline in the price of the underlying security. The size of the premiums that the Fund may receive may be adversely affected as new or existing institutions, including other investment companies, engage in or increase their option-writing activities. Options written ordinarily will have expiration dates between one and nine months from the date written. The exercise price of the options may be below, equal to or above the market values of the underlying securities at the time the options are written. In the case of call options, these exercise prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money," respectively. The Fund may write (a) in-the-money call options when the Adviser expects that the price of the underlying security will remain stable or decline moderately during the option period, (b) at-the-money call options when the Adviser expects that the price of the underlying security will remain stable or advance moderately during the option period and (c) out-of-the-money call options when the Adviser expects that the premiums received from writing the call option plus the appreciation in market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the underlying security alone. In these circumstances, if the market price of the underlying security declines and the security is sold at this lower price, the amount of any realized loss will be offset wholly or in part by the premium received. Out-of-the-money, at-the-money and in-the-money put options (the reverse of call options as to the relation of exercise price to market price) may be utilized in the same market environments that such call options are used in equivalent transactions. So long as the Fund's obligation as the writer of an option continues, it may be assigned an exercise notice by the broker-dealer through which the option was sold, requiring it to deliver, in the case of a call, or take delivery of, in the case of a put, the underlying security against payment of the exercise price. This obligation terminates when the option B-5 383 expires or the Fund effects a closing purchase transaction. The Fund can no longer effect a closing purchase transaction with respect to an option once it has been assigned an exercise notice. While it may choose to do otherwise, the Fund generally will purchase or write only those options for which the Adviser believes there is an active secondary market so as to facilitate closing transactions. There is no assurance that sufficient trading interest to create a liquid secondary market on a securities exchange will exist for any particular option or at any particular time, and for some options no such secondary market may exist. A liquid secondary market in an option may cease to exist for a variety of reasons. In the past, for example, higher than anticipated trading activity or order flow, or other unforeseen events, at times have rendered certain clearing facilities inadequate and resulted in the institution of special procedures, such as trading rotations, restrictions on certain types of orders or trading halts or suspensions in one or more options. There can be no assurance that similar events, or events that otherwise may interfere with the timely execution of customers' orders, will not recur. In such event, it might not be possible to effect closing transactions in particular options. If, as a covered call option writer, the Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or it otherwise covers its position. The Fund intends to treat options in respect of specific securities that are not traded on a national securities exchange and the securities underlying covered call options written by the Fund as illiquid securities. Stock Index Options. (ISG Large-Cap Equity, ISG Capital Growth, ISG Small Cap Opportunity, ISG Mid-Cap, ISG Equity Income and ISG International Equity, AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid Cap and AmSouth International Equity Funds) Each of these Funds may purchase and write put and call options on stock indexes listed on national securities exchanges or traded in the over-the-counter market to the extent of 15% of the value of its net assets. A stock index fluctuates with changes in the market values of the stocks included in the index. Options on stock indexes are similar to options on stock except that (a) the expiration cycles of stock index options are monthly, while those of stock options are currently quarterly, and (b) the delivery requirements are different. Instead of giving the right to take or make delivery of a stock at a specified price, an option on a stock index gives the holder the right to receive a cash "exercise settlement amount" equal to (i) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount will depend upon the closing level of the stock index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash received will be equal to such difference between the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple. The writer of the option is obligated, in return for the B-6 384 premium received, to make delivery of this amount. The writer may offset its position in stock index options prior to expiration by entering into a closing transaction on an exchange or it may let the option expire unexercised. The effectiveness of the Fund's purchasing or writing stock index options will depend upon the extent to which price movements in its portfolio correlate with price movements of the stock index selected. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular stock, whether the Fund will realize a gain or loss from the purchase or writing of options on an index depends upon movements in the level of stock prices in the stock market generally or, in the case of certain indexes, in an industry or market segment, rather than movements in the price of a particular stock. Accordingly, successful use by the Fund of options on stock indexes will be subject to the Adviser's ability to predict correctly movements in the direction of the stock market generally or of a particular industry. This requires different skills and techniques than predicting changes in the price of individual stocks. When the Fund writes an option on a stock index, it will place in a segregated account permissible liquid assets in an amount at least equal to the market value of the underlying stock index and will maintain the account while the option is open or will otherwise cover the transaction. Futures Contracts and Options on Futures Contracts. (ISG Large-Cap Equity, ISG Capital Growth, ISG Small-Cap Opportunity, ISG Mid-Cap, ISG Equity Income, ISG International Equity, ISG Tennessee Tax-Exempt and ISG Limited Term Tennessee Tax-Exempt and AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid Cap, AmSouth International Equity, AmSouth Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt Funds) None of these Funds will be a commodity pool. However, as a substitute for a comparable market position in the underlying securities or for hedging purposes, each of these Funds may engage in futures and options on futures transactions, as described below. The commodities transactions of each of these Funds must constitute bona fide hedging or other permissible transactions pursuant to regulations promulgated by the Commodity Futures Trading Commission. In addition, none of these Funds may engage in such transactions if the sum of the amount of initial margin deposits and premiums paid for unexpired commodity options, other than for bona fide hedging transactions, would exceed 5% of the liquidation value of the Fund's total assets, after taking into account unrealized profits and unrealized losses on such contracts it has entered into; provided, however, that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5%. Pursuant to regulations and/or published positions of the Securities and Exchange Commission, each of these Funds may be required to segregate permissible liquid assets in connection with its commodities transactions in an amount at least equal to the value of the underlying commodity. B-7 385 Initially, when purchasing or selling futures contracts, a Fund will be required to deposit with the Trust's custodian in the broker's name an amount of cash or cash equivalents up to approximately 10% of the contract amount. This amount is subject to change by the exchange or board of trade on which the contract is traded and members of such exchange or board of trade may impose their own higher requirements. This amount is known as "initial margin" and is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures position, assuming all contractual obligations have been satisfied. Subsequent payments, known as "variation margin," to and from the broker will be made daily as the price of the index or securities underlying the futures contract fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking-to-market." At any time prior to the expiration of a futures contract, the Fund may elect to close the position by taking an opposite position, at the then prevailing price, which will operate to terminate its existing position in the contract. Although each of these Funds intends to purchase or sell futures contracts only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting the relevant Fund to substantial losses. If it is not possible, or the Fund determines not, to close a futures position in anticipation of adverse price movements, it will be required to make daily cash payments of variation margin. In such circumstances, an increase in the value of the portion of the portfolio being hedged, if any, may offset partially or completely losses on the futures contract. However, no assurance can be given that the price of the securities being hedged will correlate with the price movements in a futures contract and thus provide an offset to losses on the futures contract. To the extent a Fund is engaging in a futures transaction as a hedging device, because of the risk of an imperfect correlation between securities in a portfolio that are the subject of a hedging transaction and the futures contract used as a hedging device, it is possible that the hedge will not be fully effective if, for example, losses on the portfolio securities exceed gains on the futures contract or losses on the futures contract exceed gains on the portfolio securities. For futures contracts based on indexes, the risk of imperfect correlation increases as the composition of a Fund's investments varies from the composition of the index. In an effort to compensate for the imperfect correlation of movements in the price of the securities being hedged and movements in the price of futures contracts, the Fund may buy or sell futures contracts in a greater or lesser dollar amount than the dollar amount of the securities being hedged if the historical volatility of the futures contract has been less or greater than that of the securities. Such "over hedging" or "under hedging" may adversely affect the B-8 386 Fund's net investment results if market movements are not as anticipated when the hedge is established. Successful use of futures by a Fund also is subject to the Adviser's ability to predict correctly movements in the direction of the market or interest rates. For example, if a Fund has hedged against the possibility of a decline in the market adversely affecting the value of securities held in its portfolio and prices increase instead, such Fund will lose part or all of the benefit of the increased value of securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Fund may have to sell such securities at a time when it may be disadvantageous to do so. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the option exercise period. The writer of the option is required upon exercise to assume an offsetting futures position (a short position if the option is a call and a long position if the option is a put). Upon exercise of the option, the assumption of offsetting futures positions by the writer and holder of the option will be accompanied by delivery of the accumulated cash balance in the writer's futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option on the futures contract. Call options sold by a Fund with respect to futures contracts will be covered by, among other things, entering into a long position in the same contract at a price no higher than the strike price of the call option, or by ownership of the instruments underlying, or instruments the prices of which are expected to move relatively consistently with, the instruments underlying the futures contract. Put options sold by a Fund with respect to futures contracts will be covered in the same manner as put options on specific securities as described above. Upon exercise of an option, the writer of the option delivers to the holder of the option the futures position and the accumulated balance in the writer's futures margin account, which represents the amount by which the market price of the futures contract exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option on the futures contract. The potential loss related to the purchase of options on futures contracts is limited to the premium paid for the option (plus transaction costs). Because the value of the option is fixed at the time of sale, there are no daily cash payments to reflect changes in the value of the underlying contract; however, the value of the option does change daily and that change would be reflected in the net asset value of the Fund. Stock Index Futures and Options on Stock Index Futures. (ISG Large-Cap Equity, ISG Capital Growth, ISG Small-Cap Opportunity, ISG Mid-Cap, ISG Equity Income and ISG B-9 387 International Equity Funds and AmSouth Large Cap, AmSouth Capital Growth, AmSouth Mid Cap and AmSouth International Equity Funds) Each of these Funds may purchase and sell stock index futures contracts and options on stock index futures contracts to the extent of 15% of the value of its net assets. A stock index future obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying stocks in the index is made. With respect to stock indexes that are permitted investments, each of these Funds intends to purchase and sell futures contracts on the stock index for which it can obtain the best price with consideration also given to liquidity. Each of these Funds may use index futures as a substitute for a comparable market position in the underlying securities. Interest Rate Futures Contracts and Options on Interest Rate Futures Contracts. (ISG and AmSouth Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt Funds) Each of these Funds may invest in interest rate futures contracts and options on interest rate futures contracts as a substitute for a comparable market position and to hedge against adverse movements in interest rates to the extent of 15% of the value of its net assets. To the extent the Fund has invested in interest rate futures contracts or options on interest rate futures contracts as a substitute for a comparable market position, the Fund will be subject to the same investment risks had it purchased the securities underlying the contract. Each of these Funds may purchase call options on interest rate futures contracts to hedge against a decline in interest rates and may purchase put options on interest rate futures contracts to hedge its portfolio securities against the risk of rising interest rates. The Fund may sell call options on interest rate futures contracts to partially hedge against declining prices of portfolio securities. The Fund may sell put options on interest rate futures contracts to hedge against increasing prices of the securities which are deliverable upon exercise of the futures contracts. Each of these Funds also may sell options on interest rate futures contracts as part of closing purchase transactions to terminate its options positions. No assurance can be given that such closing transactions can be effected or the degree of correlation between price movements in the options on interest rate futures and price movements in the Fund's investment securities which are the subject of the hedge. Future Developments. Each Fund may take advantage of opportunities in the area of options and futures contracts and options on futures contracts and any other derivative investments which are not presently contemplated for use by such Fund or which are not B-10 388 currently available but which may be developed, to the extent such opportunities are both consistent with its investment objective and legally permissible for the Fund. Before entering into such transactions or making any such investment, the Fund will provide appropriate disclosure in its Prospectus or this Statement of Additional Information. Foreign Currency Transactions. (ISG and AmSouth International Equity Fund) Foreign currency transactions may be entered into for a variety of purposes, including: to fix in U.S. dollars, between trade and settlement date, the value of a security the Fund has agreed to buy or sell; to hedge the U.S. dollar value of securities the Fund already owns, particularly if it expects a decrease in the value of the currency in which the foreign security is denominated; or to gain exposure to the foreign currency in an attempt to realize gains. Foreign currency transactions may involve, for example, the Fund's purchase of foreign currencies for U.S. dollars or the maintenance of short positions in foreign currencies, which would involve the Fund agreeing to exchange an amount of a currency it did not currently own for another currency at a future date in anticipation of a decline in the value of the currency sold relative to the currency the Fund contracted to receive in the exchange. The Fund's success in these transactions will depend principally on the ability of the Fund's Sub-Adviser to predict accurately the future exchange rates between foreign currencies and the U.S. dollar. Short-Selling. (ISG International Equity Fund and, to a limited extent, ISG Capital Growth, ISG Equity Income, ISG Income, ISG Limited Term Income, ISG Limited Term U.S. Government, ISG Tennessee Tax-Exempt and ISG Limited Term Tennessee Tax-Exempt Funds and AmSouth International Equity Fund and, to a limited extent, AmSouth Capital Growth, AmSouth Limited Term U.S. Government, AmSouth Tennessee Tax-Exempt and AmSouth Limited Term Tennessee Tax-Exempt Funds) In these transactions the Fund sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the Fund must borrow the security to make delivery to the buyer. The Fund is obligated to replace the security borrowed by purchasing it subsequently at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund, which would result in a loss or gain, respectively. Securities will not be sold short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of the Fund's net assets. Each of these Funds, other than the International Equity Fund, will limit its short sales to those that are "against the box," a transaction in which the Fund enters into a short sale of a security which it owns. The proceeds of the short sale will be held by a broker until the settlement date at which time the Fund delivers the security to close the short position. The Fund receives the net proceeds from the short sale. At no time will any of these Funds have more than 15% of the value of its net assets in deposits on short sales against the box. Borrowing Money. (All ISG Funds and AmSouth Capital Appreciation Funds, AmSouth Income Funds and AmSouth Money Market Funds) As a fundamental policy, each B-11 389 Fund is permitted to borrow money in an amount up to 33-1/3% of the value of its total assets. However, each Fund currently intends to borrow money only for temporary or emergency (not leveraging) purposes, in an amount up to 33-1/3% of the value of its total assets (including the amount borrowed) valued at the lesser of cost or market, less liabilities (not including the amount borrowed) at the time the borrowing is made. While borrowings exceed 5% of a Fund's total assets, such Fund will not make any investments. In addition, each Money Market Fund may borrow for investment purposes on a secured basis through entering into reverse repurchase agreements as described below. Reverse Repurchase Agreements. (ISG Prime Money Market, ISG Treasury Money Market Funds and AmSouth Treasury Reserve Money Market Fund) These Funds may enter into reverse repurchase agreements with banks, brokers or dealers. Reverse repurchase agreements involve the transfer by the Fund of an underlying debt instrument in return for cash proceeds based on a percentage of the value of the security. The Fund retains the right to receive interest and principal payments on the security. The Fund will use the proceeds of reverse repurchase agreements only to make investments which generally either mature or have a demand feature to resell to the issuer at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. At an agreed upon future date, the Fund repurchases the security at principal plus accrued interest. In certain types of agreements, there is no agreed upon repurchase date and interest payments are calculated daily, often based on the prevailing overnight repurchase rate. As a result of these transactions, the Fund may be exposed to greater potential fluctuations in the value of its assets and its net asset value per share. Interest costs on the money borrowed may exceed the return received on the securities purchased. The Trust's Directors have considered the risks to each of these Funds and their shareholders which may result from the entry into reverse repurchase agreements and have determined that the entry into such agreements is consistent with such Fund's investment objective and management policies. The Fund will maintain in a segregated account permissible liquid assets equal to the aggregate amount of its reverse repurchase obligations, plus accrued interest, in certain cases, in accordance with releases promulgated by the Securities and Exchange Commission. AmSouth Equity Income Fund, AmSouth Small Cap Fund, AmSouth Bond Fund, AmSouth Government Income Fund, AmSouth Limited Term Bond Fund, AmSouth Municipal Bond Fund, AmSouth Prime Money Market Fund, AmSouth Tax Exempt Money Market Fund High Quality Investments With Regard to the Money Market Funds. As noted in the Prospectuses for the Money Market Funds, each such Fund may invest only in obligations determined by AmSouth Bank, Birmingham, Alabama ("AmSouth") the investment adviser to the Trust ("Adviser") to present minimal credit risks under guidelines adopted by the Trust's Trustees. With regard to the AmSouth Prime Money Market Fund, investments will be limited to those obligations which, at the time of purchase, (i) possess the highest short-term ratings from at least two nationally recognized statistical ratings organizations ("NRSROs"); or (ii) do not B-12 390 possess a rating, (i.e., are unrated) but are determined by the Adviser to be of comparable quality to the rated instruments eligible for purchase by the Fund under guidelines adopted by the Trustees. With regard to the AmSouth Tax Exempt Money Market Fund, investments will be limited to those obligations which, at the time of purchase, (i) possess one of the two highest short-term ratings from an NRSRO; or (ii) possess, in the case of multiple-rated securities, one of the two highest short-term ratings by at least two NRSROs; or (iii) do not possess a rating, (i.e., are unrated) but are determined by the Adviser to be of comparable quality to the rated instruments eligible for purchase by the Fund under the guidelines adopted by the Trustees. For purposes of these investment limitations, a security that has not received a rating will be deemed to possess the rating assigned to an outstanding class of the issuer's short-term debt obligations if determined by the Adviser to be comparable in priority and security to the obligation selected for purchase by a Fund. (The above-described securities which may be purchased by the AmSouth Prime Money Market Fund and the AmSouth Tax Exempt Money Market Fund are hereinafter referred to as "Eligible Securities.") A security subject to a tender or demand feature will be considered an Eligible Security only if both the demand feature and the underlying security possess a high quality rating or, if such do not possess a rating, (i.e., are unrated) but are determined by the Adviser to be of comparable quality; provided, however, that where the demand feature would be readily exercisable in the event of a default in payment of principal or interest on the underlying security, the obligation may be acquired based on the rating possessed by the demand feature or, if the demand feature does not possess a rating, a determination of comparable quality by the Adviser. A security which at the time of issuance had a maturity exceeding 397 days but, at the same time of purchase, has a remaining maturity of 397 days or less, is not considered an Eligible Security if it does not possess a high quality rating and the long-term rating, if any, is not within the two highest rating categories of an NRSRO. The Prime Money Market Fund will not invest more than 5% of its total assets in the securities of any one issuer, except that the Fund may invest up to 25% of its total assets in the securities of a single issuer for a period of up to three business days. If a percentage limitation is satisfied at the time of purchase, a later increase in such percentage resulting from a change in the Fund's net asset value or a subsequent change in a security's qualification as an Eligible Security will not constitute a violation of the limitation. In addition, there is no limit on the percentage of the Fund's assets that may be invested in obligations issued or guaranteed by the U.S. government, its agencies, and instrumentalities and repurchase agreements fully collateralized by such obligations. Under the guidelines adopted by the Trust's Trustees and in accordance with Rule 2a- 7 under the Investment Company Act of 1940 (the "1940 Act"), the Adviser may be required promptly to dispose of an obligation held in a Fund's portfolio in the event of certain developments that indicate a diminishment of the instrument's credit quality, such as where an NRSRO downgrades an obligation below the second highest rating category, or in the event of a default relating to the financial condition of the issuer. B-13 391 The Appendix to this Statement of Additional Information identifies each NRSRO that may be utilized by the Adviser with regard to portfolio investments for the Funds and provides a description of relevant ratings assigned by each such NRSRO. A rating by an NRSRO may be utilized only where the NRSRO is neither controlling, controlled by, or under common control with the issuer of, or any issuer, guarantor, or provider of credit support for, the instrument. Bankers' Acceptances and Certificates of Deposit. All of the Funds may invest in bankers' acceptances, certificates of deposit, and demand and time deposits. Bankers' acceptances are negotiable drafts or bills of exchange typically drawn by an importer or exporter to pay for specific merchandise, which are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. The Prime Money Market Fund will not invest in excess of 10% of its net assets in time deposits, including ETDs and CTDs but not including certificates of deposit, with maturities in excess of seven days which are subject to penalties upon early withdrawal. Bankers' acceptances will be those guaranteed by domestic and foreign banks, if at the time of purchase, such banks have capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of their most recently published financial statements). Certificates of deposit and demand and time deposits will be those of domestic and foreign banks and savings and loan associations, if (a) at the time of purchase they have capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of their most recently published financial statements) or (b) the principal amount of the instrument is insured in full by the Federal Deposit Insurance Corporation. Commercial Paper. Each Fund may invest in commercial paper. Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have maturities of less than nine months and fixed rates of return. Each Fund except the Tax Exempt Fund and the Municipal Bond Fund may invest in (i) Canadian Commercial Paper, which is commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial paper of an issue located in Europe. High Yield Securities. The Equity Income Fund may invest in high yield convertible securities. High yield securities are securities that are rated below investment grade by an NRSRO (e.g., "BB" or lower by S&P and "Ba" or lower by Moody's). Other terms used to describe such securities include "lower rated bonds," "non-investment grade bonds" and "junk bonds." Generally, lower rated debt securities provide a higher yield than higher rated debt securities of similar maturity, but are subject to a greater degree of risk with respect to the ability of the issuer to meet its principal and interest obligations. Issuers of high yield securities may not be as strong financially as those issuing higher rated securities. The B-14 392 securities are regarded as predominantly speculative. The market value of high yield securities may fluctuate more than the market value of higher rated securities, since high yield securities tend to reflect short-term corporate and market developments to a greater extent than higher rated securities, which fluctuate primarily in response to the general level of interest rates, assuming that there has been no change in the fundamental interest rates, assuming that there has been no change in the fundamental quality of such securities. The market prices of fixed income securities generally fall when interest rates rise. Conversely, the market prices of fixed-income securities generally rise when interest rates fall. Additional risks of high yield securities include limited liquidity and secondary market support. As a result, the prices of high yield securities may decline rapidly in the event that a significant number of holders decide to sell. Changes in expectations regarding an individual issuer, an industry or high yield securities generally could reduce market liquidity for such securities and make their sale by the AmSouth Equity Income Fund more difficult, at least in the absence of price concessions. Reduced liquidity also could adversely affect the AmSouth Equity Income Fund's ability to accurately value high yield securities. Issuers of high yield securities also are more vulnerable to real or perceived economic changes (for instance, an economic downturn or prolonged period of rising interest rates), political changes or adverse developments specific to the issuer. Adverse economic, political or other developments may impair the issuer's ability to service principal and interest obligations, to meet projected business goals and to obtain additional financing, particularly if the issuer is highly leveraged. In the event of a default, the Equity Income Fund would experience a reduction of its income and could expect a decline in the market value of the defaulted securities. Insurance Company Funding Agreements. The AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Prime Money Market Fund may invest in funding agreements ("Funding Agreements"), also known as guaranteed investment contracts, issued by insurance companies. Pursuant to such agreements, the AmSouth Bond Fund, AmSouth Limited Term Bond Fund and the AmSouth Prime Money Market Fund invest an amount of cash with an insurance company and the insurance company credits such investment on a monthly basis with guaranteed interest which is based on an index. The Funding Agreements provide that this guaranteed interest will not be less than a certain minimum rate. The AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Prime Money Market Fund will only purchase a Funding Agreement (i) when the Adviser has determined, under guidelines established by the Board of Trustees, that the Funding Agreement presents minimal credit risks to the Fund and is of comparable quality to instruments that are rated high quality by a nationally recognized statistical rating organization that is not an affiliated person, as defined in the 1940 Act, of the issuer, on any insurer, guarantor, provider of credit support for the instrument and (ii) if it may receive all principal of and accrued interest on a Funding Agreement at any time upon thirty days' written notice. Because the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Prime Money Market Fund may not receive the principal amount of a Funding Agreement from the insurance company on seven days' notice or less, the Funding Agreement is considered an illiquid investment, and, together with other instruments in such Fund which are not readily marketable, will not exceed 15% of such Fund's net assets in the case of the AmSouth Bond Fund and B-15 393 AmSouth Limited Term Bond Fund, and 10% of such Funds net assets in the case of the AmSouth Prime Money Market Fund. In determining average weighted portfolio maturity, a Funding Agreement will be deemed to have a maturity equal to 30 days, representing the period of time remaining until the principal amount can be recovered through demand. Variable Amount Master Demand Notes. Variable amount master demand notes, in which the AmSouth Prime Money Market Fund, the AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund and the AmSouth Limited Term Bond Fund may invest, are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic readjustments in the interest rate according to the terms of the instrument. They are also referred to as variable rate demand notes. Because these notes are direct lending arrangements between a Fund and the issuer, they are not normally traded. Although there may be no secondary market in the notes, a Fund may demand payment of principal and accrued interest at any time or during specified periods not exceeding one year, depending upon the instrument involved, and may resell the note at any time to a third party. The absence of such an active secondary market, however, could make it difficult for the Funds to dispose of a variable amount master demand note if the issuer defaulted on its payment obligations or during periods when the Funds are not entitled to exercise their demand rights, and the Funds could, for this or other reasons, suffer a loss to the extent of the default. While the notes are not typically rated by credit rating agencies, issuers of variable amount master demand notes must satisfy the same criteria as set forth above for commercial paper. The Adviser or Sub-Adviser will consider the earning power, cash flow, and other liquidity ratios of the issuers of such notes and will continuously monitor their financial status and ability to meet payment on demand. Where necessary to ensure that a note is of "high quality," a Fund will require that the issuer's obligation to pay the principal of the note be backed by an unconditional bank letter or line of credit, guarantee or commitment to lend. In determining the dollar-weighted average portfolio maturity, a variable amount master demand note will be deemed to have a maturity equal to the period of time remaining until the principal amount can be recovered from the issuer through demand. Variable and Floating Rate Notes. The AmSouth Tax Exempt Money Market Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Municipal Bond Fund may acquire variable and floating rate notes, subject to each Fund's investment objective, policies and restrictions. A variable rate note is one whose terms provide "for the readjustment of its interest rate on set dates and which, upon such readjustment, can reasonably be expected to have a market value that approximates its par value. A floating rate note is one whose terms provide for the readjustment of its interest rate whenever a specified interest rate changes and which, at any time, can reasonably be expected to have a market value that approximates its par value. Such notes are frequently not rated by credit rating agencies; however, unrated variable and floating rate notes purchased by a Fund will be determined by the Adviser under guidelines established by the Trust's Board of Trustees to be of comparable quality at the time of purchase to rated instruments eligible for purchase under the Fund's investment policies. In making such determinations, the Adviser will consider the earning power, cash flow and other liquidity ratios of the issuers of such notes (such issuers include financial, B-16 394 merchandising, bank holding and other companies) and will continuously monitor their financial condition. Although there may be no active secondary market with respect to a particular variable or floating rate note purchased by a Fund, the Fund may resell the note at any time to a third party. The absence of an active secondary market, however, could make it difficult for the Fund to dispose of a variable or floating rate note in the event the issuer of the note defaulted on its payment obligations and the Fund could, as a result or for other reasons, suffer a loss to the extent of the default. Variable or floating rate notes may be secured by bank letters of credit or drafts. For purposes of the AmSouth Tax Exempt Money Market Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Municipal Bond Fund, the maturities of the variable and floating rate notes will be determined in accordance with Rule 2a-7 under the 1940 Act. Zero Coupon Obligations. The AmSouth Bond Fund, AmSouth Limited Term Bond Fund and AmSouth Tax Exempt Money Market Fund may acquire zero-coupon obligations evidencing ownership of future interest and principal payments on U.S. Treasury bonds. Such zero-coupon obligations pay no current interest and are typically sold at prices greatly discounted from par value, with par value to be paid to the holder at maturity. The return on a zero-coupon obligation, when held to maturity, equals the difference between the par value and the original purchase price. Zero-coupon obligations have greater price volatility than coupon obligations and such obligations will be purchased when the yield spread, in light of the obligation's duration, is considered advantageous. The AmSouth Bond Fund will only purchase zero-coupon obligations if, at the time of purchase, such investments do not exceed 15% of the value of the Bond Fund's total assets, and the AmSouth Limited Term Bond Fund will only purchase zero-coupon obligations if, at the time of purchase, such investments do not exceed 25% of the value of the AmSouth Limited Term Bond Fund's total assets. An increase in interest rates will generally reduce the value of the investments in the Income Funds and a decline in interest rates will generally increase the value of those investments. Depending upon prevailing market conditions, the Adviser may purchase debt securities at a discount from face value, which produces a yield greater than the coupon rate. Conversely, if debt securities are purchased at a premium over face value, the yield will be lower than the coupon rate. In making investment decisions, the Adviser will consider many factors other than current yield, including the preservation of capital, maturity, and yield to maturity. Foreign Investment. All of the Funds, except the AmSouth Municipal Bond Fund, may, subject to their investment objectives, restrictions and policies, invest in certain obligations or securities of foreign issuers. Permissible investments include Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar denominated certificates of deposit issued by branches of foreign and domestic banks located outside the United States, Yankee Certificates of Deposit ("Yankee CTDs") which are certificates of deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the United States, Eurodollar Time Deposits ("ETD's") which are U.S. dollar denominated deposits in a foreign branch of a B-17 395 U.S. bank or a foreign bank, Canadian Time Deposits ("CTD's") which are U.S. dollar denominated certificates of deposit issued by Canadian offices of major Canadian Banks, and American Depository Receipts ("ADRs") which are foreign shares of a company held by a U.S. bank which issues a receipt evidencing ownership. Investments in securities issued by foreign branches of U.S. banks, foreign banks, or other foreign issuers, including ADRs and securities purchased on foreign securities exchanges, may subject the Funds to investment risks that differ in some respects from those related to investment in obligations of U.S. domestic issuers or in U.S. securities markets. Such risks include future adverse political and economic developments, possible seizure, currency blockage, nationalization or expropriation of foreign investments, less stringent disclosure requirements, the possible establishment of exchange controls or taxation at the source, and the adoption of other foreign governmental restrictions. Additional risks include currency exchange risks, less publicly available information, the risk that companies may not be subject to the accounting, auditing and financial reporting standards and requirements of U.S. companies, the risk that foreign securities markets may have less volume and therefore many securities traded in these markets may be less liquid and their prices more volatile than U.S. securities, and the risk that custodian and brokerage costs may be higher. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. A Fund will acquire such securities only when the Adviser or Sub- Adviser believes the risks associated with such investments are minimal. Repurchase Agreements. Securities held by each Fund may be subject to repurchase agreements. Under the terms of a repurchase agreement, a Fund would acquire securities from member banks of the Federal Deposit Insurance Corporation with capital, surplus, and undivided profits of not less than $100,000,000 (as of the date of their most recently published financial statements) and from registered broker-dealers which the Adviser or Sub-Adviser deems creditworthy under guidelines approved by the Board of Trustees, subject to the seller's agreement to repurchase such securities at a mutually agreed-upon date and price. The repurchase price would generally equal the price paid by the Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller under a repurchase agreement will be required to maintain the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest) and the Adviser or Sub-Adviser will monitor the collateral's value to ensure that it equals or exceeds the repurchase price (including accrued interest). In addition, securities subject to repurchase agreements will be held in a segregated account. If the seller were to default on its repurchase obligation or become insolvent, the Fund holding such obligation would suffer a loss to the extent that the proceeds from a sale of the underlying portfolio securities were less than the repurchase price under the agreement, or to the extent that the disposition of such securities by the Fund were delayed B-18 396 pending court action. Additionally, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. Securities subject to repurchase agreements will be held by the Trust's custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by a Fund under the 1940 Act. Reverse Repurchase Agreements. As discussed in each Prospectus, each Fund may borrow funds for temporary purposes by entering into reverse repurchase agreements in accordance with the Fund's investment restrictions. Pursuant to such an agreement, a Fund would sell portfolio securities to financial institutions such as banks and broker-dealers, and agree to repurchase the securities at a mutually agreed-upon date and price. Each Fund intends to enter into reverse repurchase agreements only to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. At the time a Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account assets consistent with the Fund's investment restrictions having a value equal to the repurchase price (including accrued interest), and will subsequently monitor the account to ensure that such equivalent value is maintained. Such assets will include U.S. government securities or other liquid high quality debt securities in the case of the AmSouth Prime Money Market Fund, the AmSouth Tax Exempt Money Market Fund, the AmSouth Bond Fund, the AmSouth Government Income Fund, the AmSouth Limited Term Bond Fund or other liquid, high-grade debt securities, in the case of the AmSouth Equity Income Fund and the AmSouth Small Cap Fund. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the price at which a Fund is obligated to repurchase the securities. Reverse repurchase agreements are considered to be borrowings by a Fund under the 1940 Act. U.S. Government Obligations. Each of the Funds may invest in bills, notes and bonds issued by the U.S. Treasury. Such obligations are supported by the full faith and credit of the U.S. government. The Funds also may invest in other obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities. Such other obligations may include those such as GNMA and the Export-Import Bank of the United States, which are supported by the full faith and credit of the U.S. government; others, such as those of FNMA, which are supported by the right of the issuer to borrow from the Treasury; others which are supported by the discretionary authority of the U.S. government to purchase the agency's obligations; and still others, such as those of the Federal Farm Credit Banks or FHLMC, which are supported only by the credit of the instrumentality. No assurance can be given that the U.S. government would provide financial support to U.S. government-sponsored agencies or instrumentalities if it is not obligated to do so by law. A Fund will invest in the obligations of such agencies and instrumentalities only when the Adviser or Sub-Adviser believes that the credit risk with respect thereto is minimal. The principal governmental (i.e., backed by the full faith and credit of the U.S. government) guarantor of mortgage-related securities is GNMA. GNMA is a wholly-owned U.S. B-19 397 government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages. Government-related (i.e., not backed by the full faith and credit of the U.S. government) guarantors include FNMA and FHLMC. FNMA and FHLMC are government-sponsored corporations owned entirely by private stockholders. Pass-through securities issued by FNMA and FHLMC are guaranteed as to timely payment of principal and interest by FNMA and FHLMC but are not backed by the full faith and credit of the U.S. government. When-Issued Securities. As discussed in the Prospectuses, each Fund except the AmSouth Prime Money Market Fund may purchase securities on a when-issued basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). When a Fund agrees to purchase securities on a when-issued basis, the Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the commitment in a separate account. Normally, the custodian will set aside portfolio securities to satisfy the purchase commitment, and in such a case, the Fund may be required subsequently to place additional assets in the separate account in order to assure that the value of the account remains equal to the amount of the Fund's commitment. It may be expected that the Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. Securities purchased on a "when-issued" basis are recorded as an asset and are subject to changes in value based upon changes in the general level of interest rates. The AmSouth Equity Income Fund and the AmSouth Small Cap Fund expect that commitments to purchase "when-issued" securities will not exceed 25% of the value of its total assets under normal market conditions, and that a commitment to purchase "when-issued" securities will not exceed 60 days. In addition, because a Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, a Fund's liquidity and the ability of the Adviser or Sub-Adviser to manage it might be affected in the event its commitments to purchase when-issued securities ever exceeded 25% of the value of its total assets. When a Fund engages in when-issued transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Fund incurring a loss or missing the opportunity to obtain a price considered to be advantageous. No Fund intends to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective. B-20 398 Asset-Backed Securities. The Bond Fund, the Limited Term Bond Fund and the Prime Money Market Fund may invest in securities backed by automobile receivables and credit-card receivables and other securities backed by other types of receivables. Offerings of Certificates for Automobile Receivables ("CARS") are structured either as flow-through grantor trusts or as pay-through notes. CARS structured as flow-through instruments represent ownership interests in a fixed pool of receivables. CARS structured as pay-through notes are debt instruments supported by the cash flows from the underlying assets. CARS may also be structured as securities with fixed payment schedules which are generally issued in multiple-classes. Cash-flow from the underlying receivables is directed first to paying interest and then to retiring principal via paying down the two respective classes of notes sequentially. Cash-flows on fixed-payment CARS are certain, while cash-flows on other types of CARS issues depends on the prepayment rate of the underlying automobile loans. Prepayments of automobile loans are triggered mainly by automobile sales and trade-ins. Many people buy new cars every two or three years, leading to rising prepayment rates as a pool becomes more seasoned. Certificates for Amortizing Revolving Debt ("CARDS") represent participation in a fixed pool of credit card accounts. CARDS pay "interest only" for a specified period, typically 18 months. The CARD'S principal balance remains constant during this period, while any cardholder repayments or new borrowings flow to the issuer's participation. Once the principal amortization phase begins, the balance declines with paydowns on the underlying portfolio. CARDS have monthly payment schedules, weighted-average lives of 18-24 months and stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are certain during the interest-only period. After this initial interest-only period, the cash flow will depend on how fast cardholders repay their borrowings. Historically, monthly cardholder repayment rates have been relatively fast. As a consequence, CARDS amortize rapidly after the end of the interest-only period. During this amortization period, the principal payments on CARDS depend specifically on the method for allocating cardholder repayments to investors. In many cases, the investor's participation is based on the ratio of the CARDS' balance to the total credit card portfolio balance. This ratio can be adjusted monthly or can be based on the balances at the beginning of the amortization period. In some issues, investors are allocated most of the repayments, regardless of the CARDS' balance. This method results in especially fast amortization. Credit support for asset-backed securities may be based on the underlying assets or provided by a third party. Credit enhancement techniques include letters of credit, insurance bonds, limited guarantees (which are generally provided by the issuer), senior-subordinated structures and over collateralization. The Bond Fund and the Limited Term Bond Fund will only purchase an asset-backed security if it is rated at the time of purchase in one of the three highest rating categories by an NRSRO or, if unrated, found by the Adviser under guidelines established by the Trust's Board of Trustees to be of comparable quality. B-21 399 Mortgage-Related Securities. Mortgage-related securities have mortgage obligations backing such securities, including among others, conventional thirty year fixed rate mortgage obligations, graduated payment mortgage obligations, fifteen year mortgage obligations, and adjustable rate mortgage obligations. All of these mortgage obligations can be used to create pass-through securities. A pass-through security is created when mortgage obligations are pooled together and undivided interests in the pool or pools are sold. The cash flow from the mortgage obligations is passed through to the holders of the securities in the form of periodic payments of interest, principal and prepayments (net of a service fee). Prepayments occur when the holder of an individual mortgage obligation prepays the remaining principal before the mortgage obligation's scheduled maturity date. As a result of the pass-through of prepayments of principal on the underlying securities, mortgage-backed securities are often subject to more rapid prepayment of principal than their stated maturity would indicate. Because the prepayment characteristics of the underlying mortgage obligations vary, it is not possible to predict accurately the realized yield or average life of a particular issue of pass-through certificates. Prepayment rates are important because of their effect on the yield and price of the securities. Accelerated prepayments have an adverse impact on yields for pass-throughs purchased at a premium (i.e., a price in excess of principal amount) and may involve additional risk of loss of principal because the premium may not have been fully amortized at the time the obligation is repaid. The opposite is true for pass-throughs purchased at a discount. The Government Income Fund may purchase mortgage-related securities at a premium or at a discount. Mortgage-Related Securities Issued By Nongovernmental Entities. The AmSouth Government Income Fund may invest in mortgage-related securities issued by nongovernmental entities. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issues also create pass-through pools of conventional residential mortgage loans. Such issuers may also be the originators of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such nongovernmental issuers generally offer a higher rate of interest than government and government-related pools because there are not direct or indirect government guarantees of payments in the former pools. However, timely payment of interest and principal of these pools is supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance. The insurance and guarantees are issued by government entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the AmSouth Government Income Fund's investment quality standards. There can be no assurance that the private insurers can meet their obligations under the policies. The Government Income Fund may buy mortgage-related securities without insurance or guarantees if through an examination of the loan experience and practices of the poolers the Adviser determines that the securities meet the Government Income Fund's quality standards. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. The Government Income Fund will not purchase mortgage-related securities or B-22 400 any other assets which in the Adviser's opinion are illiquid, if as a result, more than 15% of the value of the Government Income Fund's net assets will be illiquid. Collateralized Mortgage Obligations. Mortgage-related securities in which the AmSouth Government Income Fund may invest may also include collateralized mortgage obligations ("CMOs"). CMOs are debt obligations issued generally by finance subsidiaries or trusts that are secured by mortgage-backed certificates, including, in many cases, certificates issued by government-related guarantors, including GNMA, FNMA and FHLMC, together with certain funds and other collateral. Although payment of the principal of and interest on the mortgage-backed certificates pledged to secure the CMOs may be guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other governmental agency, or by any other person or entity. The issuers of the CMOs typically have no significant assets other than those pledged as collateral for the obligations. The staff of the Securities and Exchange Commission has determined that certain issuers of CMOs are investment companies for purposes of the 1940 Act. CMOs may include Stripped Mortgage Securities. Such securities are derivative multiclass mortgage securities issued by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped Mortgage Securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of Stripped Mortgage Security will have one class receiving all of the interest from the mortgage assets (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the securities' yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the security is rated AAA or Aaa. The Stripped Mortgage Securities held by the Fund will be considered liquid securities only under guidelines established by the Trust's Board of Trustees, and the Fund will not purchase a Stripped Mortgage Security that is illiquid if, as a result thereof, more than 15% of the value of the Fund's net assets would be invested in such securities and other illiquid securities. In reliance on a recent staff interpretation, the Government Income Fund's investment in certain qualifying CMOs, including CMOs that have elected to be treated as Real Estate Mortgage Investment Conduits (REMICs), are not subject to the 1940 Act's limitation on acquiring interests in other investment companies. In order to be able to rely on the staff's interpretation, the CMOs and REMICs must be unmanaged, fixed-asset issuers, that B-23 401 (a) invest primarily in mortgaged-backed securities, (b) do not issue redeemable securities, (c) operate under general exemptive orders exempting them from all provisions of the 1940 Act, and (d) are not registered or regulated under the 1940 Act as investment companies. To the extent that the Government Income Fund selects CMOs or REMICs that do not meet the above requirements, the Government Income Fund's investment in such securities will be subject to the limitations on its investment in investment company securities. See "Investment Company Securities" in this Statement of Additional Information. The AmSouth Government Income Fund expects that governmental, government-related or private entities may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may be different from customary long-term fixed rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the Adviser will, consistent with the Government Income Fund's investment objective, policies and quality standards, consider making investments in such new types of securities. Convertible Securities. The AmSouth Equity Income Fund and the AmSouth Small Cap Fund may invest in convertible securities. Convertible securities are fixed-income securities which may be exchanged or converted into a predetermined number of the issuer's underlying common stock at the option of the holder during a specified time period. Convertible securities may take the form of convertible preferred stock, convertible bonds or debentures, units consisting of "usable" bonds and warrants or a combination of the features of several of these securities. The Funds may invest in convertible securities rated "BBB" or higher by an NRSRO at the time of investment, or if unrated, of comparable quality. The Equity Income Fund may invest in convertible securities rated "BB" or lower by an NRSRO at the time of investment, or if unrated, of comparable quality. If a convertible security falls below these minimum ratings after a Fund has purchased it, a Fund is not required to drop the convertible bond from its portfolio, but will consider appropriate action. The investment characteristics of each convertible security vary widely, which allows convertible securities to be employed for different investment objectives. Securities which are rated "BB" or lower by Standard & Poor's or "Ba" or lower by Moody's either have speculative characteristics or are speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligations. A description of the rating categories is contained in the Appendix to the Statement of Additional Information. There is no lower limit with respect to rating categories for convertible securities in which the Equity Income Fund may invest. Corporate debt obligations that are not determined to be investment-grade are high-yield, high-risk bonds, typically subject to greater market fluctuations and greater risk of loss of income and principal due to an issuer's default. To a greater extent than investment-grade securities, lower rated securities tend to reflect short-term corporate, economic and market B-24 402 developments, as well as investor perceptions or the issuer's credit quality. Because investments in lower rated securities involve greater investment risk, achievement of the AmSouth Equity Income Fund's investment objective may be more dependent on the Sub-Adviser's credit analysis than would be the case if the Fund were investing in higher rated securities. High yield securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. A projection of an economic downturn, for example, could cause a decline in high yield prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. In addition, the secondary trading market for high yield securities may be less liquid than the market for higher grade securities. The market prices of debt securities also generally fluctuate with changes in interest rates so that the Fund's net asset value can be expected to decrease as long-term interest rates rise and to increase as long-term rates fall. In addition, lower rated securities may be more difficult to dispose of or to value than high-rated, lower-yielding securities. The Sub-Adviser attempts to reduce the risks described above through diversification of the portfolio and by credit analysis of each issuer as well as by monitoring broad economic trends and corporate and legislative developments. Convertible bonds and convertible preferred stocks are fixed-income securities that generally retain the investment characteristics of fixed-income securities until they have been converted but also react to movements in the underlying equity securities. The holder is entitled to receive the fixed-income of a bond or the dividend preference of a preferred stock until the holder elects to exercise the conversion privilege. Usable bonds are corporate bonds that can be used in whole or in part, customarily at full face value, in lieu of cash to purchase the issuer's common stock. When owned as part of a unit along with warrants, which are options to buy the common stock, they function as convertible bonds, except that the warrants generally will expire before the bond's maturity. Convertible securities are senior to equity securities, and, therefore, have a claim to assets of the corporation prior to the holders of common stock in the case of liquidation. However, convertible securities are generally subordinated to similar non-convertible securities of the same company. The interest income and dividends from convertible bonds and preferred stocks provide a stable stream of income with generally higher yields than common stocks, but lower than non-convertible securities of similar quality. The AmSouth Equity Income Fund and the AmSouth Small Cap Fund will exchange or convert the convertible securities held in portfolio into shares of the underlying common stock in instances in which, in the opinion of the Adviser or Sub-Adviser, the investment characteristics of the underlying common shares will assist a Fund in achieving its investment objectives. Otherwise, a Fund will hold or trade the convertible securities. In selecting convertible securities for a Fund, the Adviser or Sub-Adviser evaluates the investment characteristics of the convertible security as a fixed-income instrument, and the investment potential of the underlying equity security for capital appreciation. In evaluating these matters with respect to a particular convertible security, the Adviser or Sub-Adviser considers numerous factors, including the economic and political outlook, the value of the B-25 403 security relative to other investment alternatives, trends in the determinants of the issuer's profits, and the issuer's management capability and practices. As with all debt securities, the market values of convertible securities tend to increase when interest rates decline and, conversely, tend to decline when interest rates increase. Calls. The AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund may write (sell) "covered" call options and purchase options to close out options previously written by it. Such options must be issued by the Options Clearing Corporation and may or may not be listed on a National Securities Exchange. The purpose of writing covered call options is to generate additional premium income for a Fund. This premium income will serve to enhance the Fund's total return and will reduce the effect of any price decline of the security involved in the option. Covered call options will generally be written on securities which, in the Adviser's or Sub-Adviser's opinion, are not expected to make any major price moves in the near future but which, over the long term, are deemed to be attractive investments for the Fund. A call option gives the holder (buyer) the "right to purchase" a security at a specified price (the exercise price) at any time until a certain date (the expiration date). So long as the obligation of the writer of a call option continues, he or she may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring him or her to deliver the underlying security against payment of the exercise price. This obligation terminates upon the expiration of the call option, or such earlier time at which the writer effects a closing purchase transaction by repurchasing an option identical to that previously sold. To secure his or her obligation to deliver the underlying security in the case of a call option, a writer is required to deposit in escrow the underlying security or other assets in accordance with the rules of the Options Clearing Corporation. The Capital Appreciation Funds, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund will write only covered call options. This means that a Fund will only write a call option on a security which it already owns. Fund securities on which call options may be written will be purchased solely on the basis of investment considerations consistent with a Fund's investment objectives. The writing of covered call options is a conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered options, which the AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund will not do), but capable of enhancing a Fund's total return. When writing a covered call option, a Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security above the exercise price, but retains the risk of loss should the price of the security decline. Unlike when a Fund owns securities not subject to an option, the AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund will not have any control over when they may be required to sell the underlying securities, since they may be assigned an exercise notice at any time prior to the expiration of their obligation as a B-26 404 writer. If a call option which the Fund has written expires, the Fund will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security during the option period. If the call option is exercised, the Fund will realize a gain or loss from the sale of the underlying security. The security covering the call will be maintained in a segregated account of the Fund's custodian. The AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund will consider a security covered by a call to be "pledged" as that term is used in its policy which limits the pledging or mortgaging of its assets. The premium received is the market value of an option. The premium a Fund will receive from writing a call option will reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to such market price, the historical price volatility of the underlying security, and the length of the option period. Once the decision to write a call option has been made, the Adviser or Sub-Adviser, in determining whether a particular call option should be written on a particular security, will consider the reasonableness of the anticipated premium and the likelihood that a liquid secondary market will exist for those options. The premium received by a Fund for writing covered call options will be recorded as a liability in the Fund's statement of assets and liabilities. This liability will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net asset value per share of the Fund is computed (close of the New York Stock Exchange), or, in the absence of such sale, the latest asked price. The liability will be extinguished upon expiration of the option, the purchase of an identical option in the closing transaction, or delivery of the underlying security upon the exercise of the option. Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security from being called, or to permit the sale of the underlying security. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. If a Fund desires to sell a particular security from its portfolio on which it has written a call option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security. There is, of course, no assurance that the Fund will be able to effect such closing transactions at a favorable price. If a Fund cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold, in which case it would continue to be at market risk on the security. This could result in higher transaction costs. A Fund will pay transaction costs in connection with the writing of options to close out previously written options. Such transaction costs are normally higher than those applicable to purchases and sales of portfolio securities. Call options written by the AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund and the AmSouth Government Income Fund will normally have expiration dates of less than nine months from the date written. The exercise price of the options may be below, equal to, or above the current market values of the underlying securities at the time the options are written. From time to time, a Fund may purchase an underlying B-27 405 security for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering such security from its portfolio. In such cases, additional costs will be incurred. A Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by a Fund. Puts. The AmSouth Tax-Exempt Money Market Fund and the AmSouth Municipal Bond Fund may acquire "puts" with respect to Municipal Securities held in their portfolios, and the Bond Fund and the AmSouth Limited Term Bond Fund may acquire "puts" with respect to debt securities held in their portfolios and the 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 AmSouth Tax Exempt Money Market Fund, the AmSouth Municipal Bond Fund, the AmSouth Bond Fund, the AmSouth Limited Term Bond Fund may sell, transfer, or assign a put only in conjunction with the sale, transfer, or assignment of the underlying security or securities. The amount payable to a Fund upon its exercise of a "put" is normally (i) the Fund's acquisition cost of the securities subject to the put (excluding any accrued interest which the Fund paid on the acquisition), less any amortized market premium or plus any amortized market or original issue discount during the period the Fund owned the securities, plus (ii) all interest accrued on the securities since the last interest payment date during that period. Puts may be acquired by a Fund to facilitate the liquidity of the portfolio assets. Puts may also be used to facilitate the reinvestment of assets at a rate of return more favorable than that of the underlying security. Puts may, under certain circumstances, also be used to shorten the maturity of underlying variable rate or floating rate securities for purposes of calculating the remaining maturity of those securities and the dollar-weighted average portfolio maturity of the Tax Exempt Fund's assets pursuant to Rule 2a-7 under the 1940 Act. The AmSouth Limited Term Bond Fund will acquire puts solely to shorten the maturity of the underlying debt security. The AmSouth Tax-Exempt Money Market Fund, the AmSouth Municipal Bond Fund, the AmSouth Limited Term Bond Fund will generally acquire puts only where the puts are available without the payment of any direct or indirect consideration. However, if necessary or advisable, a Fund may pay for puts either separately in cash or by paying a higher price for portfolio securities which are acquired subject to the puts (thus reducing the yield to maturity otherwise available for the same securities). B-28 406 The AmSouth Tax Exempt Money Market Fund, the AmSouth Municipal Bond Fund, the AmSouth Limited Term Bond intend to enter into puts only with dealers, banks, and broker-dealers which, in the Adviser's opinion, present minimal credit risks. Futures Contracts and Related Options. The AmSouth Small Cap Fund may invest in futures contracts and options thereon (interest rate futures contracts or index futures contracts, as applicable) to commit funds awaiting investment, to maintain cash liquidity or for other hedging purposes. The value of a Fund's contracts may equal or exceed 100% of the Fund's total assets, although a Fund will not purchase or sell a futures contract unless immediately afterwards the aggregate amount of margin deposits on its existing futures positions plus the amount of premiums paid for related futures options entered into for other than bona fide hedging purposes is 5% or less of its net assets. Futures contracts obligate a Fund, at maturity, to take or make delivery of securities, the cash value of a securities index or a stated quantity of a foreign currency. A Fund may sell a futures contract in order to offset an expected decrease in the value of its portfolio positions that might otherwise result from a market decline or currency exchange fluctuation. A Fund may do so either to hedge the value of its securities portfolio as a whole, or to protect against declines occurring prior to sales of securities in the value of the securities to be sold. In addition, a Fund may utilize futures contracts in anticipation of changes in the composition of its holdings or in currency exchange rates. Positions in futures contracts may be closed out only on an exchange which provides a secondary market for such futures. However, there can be no assurance that a liquid secondary market will exist for any particular futures contract at any specific time. Thus, it may not be possible to close a futures position. In the event of adverse price movements, the Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, a Fund may be required to make delivery of the instruments underlying the futures contracts it holds. The inability to close options and futures positions also could have an adverse impact on a Fund's ability to effectively hedge. When a Fund purchases an option on a futures contract, it has the right to assume a position as a purchaser or a seller of a futures contract at a specified exercise price during the option period. When a Fund sells an option on a futures contract, it becomes obligated to sell or buy a futures contract if the option is exercised. In connection with a Fund's position in a futures contract or related option, a Fund will create a segregated account of liquid assets or will otherwise cover its position in accordance with applicable SEC requirements. Successful use of futures by the Funds is also subject to an adviser's or sub-adviser's ability to correctly predict movements in the direction of the market. For example, if a Fund has hedged against the possibility of a decline in the market adversely affecting securities B-29 407 held by it and securities prices increase instead, a Fund will lose part or all of the benefit to the increased value of its securities which it has hedged because it will have approximately equal offsetting losses in its futures positions. In addition, in some situations, if a Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. Such sales of securities may be, but will not necessarily be, at increased prices which reflect the rising market. A Fund may have to sell securities at a time when it may be disadvantageous to do so. The risk of loss in trading futures contracts in some strategies can be substantial, due both to the low margin deposits required, and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss (as well as gain) to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit, before any deduction for the transaction costs, if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the contract. Utilization of futures transactions by a Fund involves the risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker with whom a Fund has an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement, during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses. The trading of futures contracts is also subject to the risk of trading halts, suspensions, exchange or clearing house equipment failures, government intervention, insolvency of a brokerage firm or clearing house or other disruptions of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess variation margin payments. Investment Company Securities. The AmSouth Equity Income Fund, the AmSouth Small Cap Fund, the AmSouth Bond Fund, the AmSouth Government Income Fund, the AmSouth Limited Term Bond Fund and the AmSouth Municipal Bond Fund may invest up to 5% of the value of its total assets in the securities of any one B-30 408 money market mutual fund including Shares of the AmSouth Prime Money Market Fund, the AmSouth Treasury Reserve Fund (the "AmSouth Money Market Funds"), the AmSouth Money Market and AmSouth Tax Exempt Money Market Fund may invest in the securities of other money market funds that have similar policies and objectives provided that no more than 10% of a Fund's total assets may be invested in the securities of money market mutual funds in the aggregate. In order to avoid the imposition of additional fees as a result of investments by the Funds in the AmSouth Money Market Funds or the AmSouth Institutional Money Market Funds, the Adviser and the Administrator will reduce that portion of their usual service fees from each Fund by an amount equal to their service fees from the AmSouth Money Market Funds or the AmSouth Institutional Money Market Funds that are attributable to those Fund investments. The Adviser and the Administrator will promptly forward such fees to the Funds. Each Fund will incur additional expenses due to the duplication of expenses as a result of investing in securities of other unaffiliated money market mutual funds. Securities Lending. In order to generate additional income, each Fund may, from time to time, lend its portfolio securities to broker-dealers, banks or institutional borrowers of securities which are not affiliated directly or indirectly with the Trust. While the lending of securities may subject a Fund to certain risks, such as delays or the inability to regain the securities in the event the borrower were to default on its lending agreement or enter into bankruptcy, the Fund will receive 100% collateral in the form of cash or other liquid securities. This collateral will be valued daily by the Adviser or Sub-Adviser and should the market value of the loaned securities increase, the borrower will furnish additional collateral to the Fund. During the time portfolio securities are on loan, the borrower pays the Fund any dividends or interest paid on such securities. Loans are subject to termination by the Funds or the borrower at any time. While the Funds do not have the right to vote securities on loan, the Funds intend to terminate the loan and regain the right to vote if that is considered important with respect to the investment. The Funds will only enter into loan arrangements with broker-dealers, banks or other institutions which the Adviser or Sub-Adviser has determined are creditworthy under guidelines established by the Trust's Board of Trustees. Short-Term Trading. The AmSouth Equity Income Fund, the AmSouth Small Cap Fund and the AmSouth Government Income Fund may engage in the technique of short-term trading. Such trading involves the selling of securities held for a short time, ranging from several months to less than a day. The object of such short-term trading is to increase the potential for capital appreciation and/or income of the Fund in order to take advantage of what the Adviser or Sub-Adviser believes are changes in market, industry or individual company conditions or outlook. Any such trading would increase the turnover rate of a Fund and its transaction costs. Municipal Securities. Under normal market conditions, the AmSouth Tax Exempt Fund and the AmSouth Municipal Bond Fund will be primarily invested in bonds (and in the case of the AmSouth Tax-Exempt Money Market B-31 409 Fund, notes) issued by or on behalf of states (including the District of Columbia), territories, and possessions of the United States and their respective authorities, agencies, instrumentalities, and political subdivisions, the interest on which is exempt from federal income tax ("Municipal Securities"). Under normal market conditions, the AmSouth Tax-Exempt Money Market Fund will invest at least 80% of its total assets, the Municipal Bond Fund will invest at least 80% of its net assets may invest up to 20% of its net assets in Municipal Securities, the interest on which is not treated as a preference item for purposes of the federal alternative minimum tax. Municipal Securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Private activity bonds that are issued by or on behalf of public authorities to finance various privately-operated facilities are included within the term Municipal Securities if the interest paid thereon is exempt from both federal income tax and not treated as a preference item for individuals for purposes of the federal alternative minimum tax. Interest on private activity bonds (and industrial development bonds) is fully tax-exempt only if the bonds fall within certain defined categories of qualified private activity bonds and meet the requirements specified in those respective categories. Regardless of whether they qualify for tax-exempt status, private activity bonds may subject both individual and corporate investors to tax liability under the alternative minimum tax. However, private activity bonds will only be considered Municipal Securities if they do not have this effect regarding individuals. Municipal Securities may also include General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax Exempt Commercial Paper, Construction Loan Notes and other forms of short-term tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues. Project Notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its Project Notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will lend the issuer an amount equal to the principal of and interest on the Project Notes. As described in the Prospectuses of the Tax Exempt Money Market Fund, the Municipal Bond Fund the two principal classifications of Municipal Securities consist of "general obligation" and "revenue" issues. A Fund permitted to invest in Municipal Securities may also acquire "moral obligation" issues, which are normally issued by special purpose authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality that created the issuer. There are, of B-32 410 course, variations in the quality of Municipal Securities, both within a particular classification and between classifications, and the yields on Municipal Securities depend upon a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of NRSROs represent their opinions as to the quality of Municipal Securities. It should be emphasized, however, that ratings are general and are not absolute standards of quality, and Municipal Securities with the same maturity, interest rate and rating may have different yields, while Municipal Securities of the same maturity and interest rate with different ratings may have the same yield. Subsequent to purchases by the Tax Exempt Fund, an issue of Municipal Securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase by the Tax Exempt Fund. Neither event would under all circumstances require the elimination of such an obligation from the Fund's investment portfolio. However, the obligation generally would be retained only if such retention was determined by the Board of Trustees to be in the best interests of the Fund. Municipal Securities purchased by the AmSouth Tax-Exempt Money Market Fund may include rated and unrated variable and floating rate tax-exempt notes, which may have a stated maturity in excess of one year but which will, in such event, be subject to a demand feature that will permit the AmSouth Tax Exempt Money Market Fund to demand payment of the principal of the note either (i) at any time upon not more than thirty days' notice or (ii) at specified intervals not exceeding one year and upon no more than thirty days' notice. There may be no active secondary market with respect to a particular variable or floating rate note. Nevertheless, the periodic readjustments of their interest rates tend to assure that their value to the AmSouth Tax Exempt Fund will approximate their par value. An issuer's obligations under its Municipal Securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the federal bankruptcy code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its Municipal Securities may be materially adversely affected by litigation or other conditions. Opinions relating to the validity of Eligible Municipal Securities and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Municipal Bond Fund nor the Adviser will review the proceedings relating to the issuance of Eligible Municipal Securities or the basis for such opinions. Although the AmSouth Tax-Exempt Fund and AmSouth Municipal Bond Fund do not presently intend to do so on a regular basis, each may invest more than 25% of its total assets in Municipal Securities that are related in such a way that an economic, business, or political development B-33 411 or change affecting one such security would likewise affect the other Municipal Securities. An example of such securities are obligations the repayment of which is dependent upon similar types of projects. Such investments would be made only if deemed necessary or appropriate by the Adviser. To the extent that the Fund's assets are concentrated in Municipal Securities that are so related, the Fund will be subject to the peculiar risks presented by such securities, such as negative developments in a particular industry, to a greater extent than it would be if the Fund's assets were not so concentrated. The AmSouth Municipal Bond Fund may acquire "puts" with respect to Eligible Municipal Securities held in their portfolios. Under a put, the Funds would have the right to sell a specified Eligible Municipal Security within a specified period of time at a specified price to a third party. A put would be sold, transferred, or assigned only with the underlying Eligible Municipal Security. The Funds will acquire puts solely to facilitate portfolio liquidity, shorten the maturity of the underlying Eligible Municipal Securities, or permit the investment of the Funds' at a more favorable rate of return. The Funds expect that they will generally acquire puts only where the puts are available without the payment of any direct or indirect consideration. However, if necessary or advisable, the Funds may pay for a put separately in cash. The aggregate price of a security subject to a put may be higher than the price which otherwise would be paid for the security without such an option, thereby increasing the security's cost and reducing its yield. Tax-Free Funds. The AmSouth Municipal Bond Fund may also invest in master demand notes in order to satisfy short-term needs or, if warranted, as part of its temporary defensive investment strategy. Such notes are demand obligations that permit the investment of fluctuating amounts at varying market rates of interest pursuant to arrangements between the issuer and a U.S. commercial bank acting as agent for the payees of such notes. Master demand notes are callable on demand by the Funds, but are not marketable to third parties. Master demand notes are direct lending arrangements between the Fund and the issuer of such notes. The Adviser will review the quality of master demand notes at least quarterly, and will consider the earning power, cash flow and debt-to-equity ratios indicating the borrower's ability to pay principal together with accrued interest on demand. While master demand notes are not typically rated by credit rating agencies, issuers of such notes must satisfy the same criteria for the Funds set forth above for commercial paper. The AmSouth Municipal Bond Fund may acquire rated and unrated variable and floating rate notes. Variable and floating rate notes are frequently not rated by credit rating agencies; however, unrated variable and floating rate notes purchased by the Funds will be determined by the Adviser under guidelines established by the Board of Trustees to be of comparable quality at the time of purchase to rated instruments eligible for purchase under the Funds' investment policies. There may be no active secondary market with respect to a particular variable or floating rate note. Nevertheless, the periodic readjustments of their interest rates tend to assure that their value to the Funds will approximate their par value. B-34 412 The AmSouth Municipal Bond Fund may acquire zero coupon obligations. Such zero-coupon obligations pay no current interest and are typically sold at prices greatly discounted from par value, with par value to be paid to the holder at maturity. The return on a zero-coupon obligation, when held to maturity, equals the difference between the par value and the original purchase price. Zero-coupon obligations have greater price volatility than coupon obligations and such obligations will be purchased when the yield spread, in light of the obligation's duration, is considered advantageous. The Fund will only purchase zero-coupon obligations if, at the time of purchase, such investments does not exceed 25% of the Municipal Bond Fund's total assets. An increase in interest rates will generally reduce the value of the investments in the Municipal Bond Fund and a decline in interest rates will generally increase the value of those investments. Depending upon prevailing market conditions, the Adviser may purchase debt securities at a discount from face value, which produces a yield greater than the coupon rate. Conversely, if debt securities are purchased at a premium over face value, the yield will be lower than the coupon rate. In making investment decisions, the Adviser will consider many factors besides current yield, including the preservation of capital, maturity, and yield to maturity. The AmSouth Municipal Bond Fund -- Concentration in Alabama Issuers. The AmSouth Municipal Bond Fund may invest 25% or more of its total assets in bonds, notes and warrants generally issued by or on behalf of the State of Alabama and its political subdivisions, the interest on which, in the opinion of the issuer's bond counsel at the time of issuance, is exempt form both federal income tax and Alabama personal income tax and is not treated as a preference item for purposes of the federal alternative minimum tax for individuals ("Alabama Municipal Securities"). Because of the relatively small number of issuers of Alabama Municipal Securities, the Fund is more likely to invest a higher percentage of its assets in the securities of a single issuer. This concentration involves an increased risk of loss if the issuer is unable to make interest or principal payments or if the market value of such securities were to decline. Concentration of this nature may cause greater fluctuation in the net asset value of the Fund's Shares. General Economic Characteristics of Alabama. Alabama ranks twenty-third in the nation in total population, with over four million residents in 1998. Its economy has historically been based primarily on agriculture, textiles, mineral extraction and iron and steel production, although the state has diversified into health care related industries and other service-oriented sectors. Overall job growth rate was 0.2% in 1998. Alabama's per capita income in 1998 was $21,442, 81.2% of U.S. per capita income. Currently Alabama's general obligations are rated Aa3 by Moody's and AA by Standard and Poor's. Balanced Budget and Pro-Ration Procedures. Section 213 of the Constitution of Alabama, as amended, requires that annual financial operations of Alabama must be on a balanced budget. The Constitution also prohibits the state from incurring general obligation debt unless authorized by an amendment to the Constitution. Amendments to the Constitution have generally been adopted through a procedure that requires each amendment B-35 413 to be proposed by a favorable vote of three-fifths of all the members of each house of the Legislature and thereafter approved by a majority of the voters of the state voting in a statewide election. Alabama has statutory budget provisions which create a proration procedure in the event that estimated budget resources in a fiscal year are insufficient to pay in full all appropriations for such fiscal year. The Alabama state budget is composed of two funds the General Fund and the Education Fund. Proration of either Fund is possible in any fiscal year, and proration may have a material adverse effect on entities dependent on state funding, including certain issuers of Alabama Municipal Securities held in the Alabama Fund. Court decisions have indicated that certain state expenses necessary for essential functions of government are not subject to proration under applicable law. The Supreme Court of Alabama has held that the debt prohibition contained in the constitutional amendment does not apply to obligations incurred for current operating expenses payable during the current fiscal year, debts incurred by separate public corporations, or state debt incurred to repel invasion or suppress insurrection. The state may also make temporary loans not exceeding $300,000 to cover deficits in the state treasury. Limited obligation debt may be authorized by the legislature without amendment to the Constitution. The state has followed the practice of financing certain capital improvement programs - principally for highways, education and improvements to the State Docks - through the issuance of limited obligation bonds payable solely out of certain taxes and other revenues specifically pledged for their payment and not from the general revenues of the state. General Obligation Warrants. Municipalities and counties in Alabama traditionally have issued general obligation warrants to finance various public improvements. Alabama statutes authorizing the issuance of such interest-bearing warrants do not require an election prior to issuance. On the other hand, the Constitution of Alabama (Section 222) provides that general obligation bonds may not be issued without an election. The Supreme Court of Alabama validated certain general obligation warrants issued by the City of Hoover, reaffirming that such obligations did not require an election under Section 222 of the Constitution of Alabama. In so holding, the Court found that warrants are not "bonds" within the meaning of Section 222. According to the Court, warrants are not negotiable instruments and transferees of warrants cannot be holders in due course. Therefore, a transferee of warrants is subject to all defenses that the issuer of such warrants may have against the transferor. County boards of education may borrow money by issuing interest-bearing warrants payable solely out of such board's allocated or apportioned share of specified tax. The county board's apportioned share of such tax may be diminished upon the establishment of a city school system, which could jeopardize the payment of the county board's warrants. B-36 414 Limited Taxing Authority. Political subdivisions of the state have limited taxing authority. Ad valorem taxes may be levied only as authorized by the Alabama Constitution. In order to increase the rate at which any ad valorem tax is levied above the limit otherwise provided in the Constitution, the proposed increase must be proposed by the governing body of the taxing authority after a public hearing, approved by an act of the Alabama Legislature and approved at an election within the taxing authority's jurisdiction. In addition, the Alabama Constitution limits the total amount of state, county, municipal and other ad valorem taxes that may be imposed on any class of property in any one tax year. This limitation is expressed in terms of a specified percentage of the market value of such property. Specific authorizing legislation is required for the levy of taxes by local governments. In addition, the rate at which such taxes are levied may be limited to the authorizing legislation or judicial precedent. For example, the Alabama Supreme Court has held that sales and use taxes, which usually comprise a significant portion of the revenues for local governments, may not be levied at rates that are confiscatory or unreasonable. The total sales tax (state and local) in some jurisdictions is 9%. State and local governments in Alabama are more dependent on general and special sales taxes than are state and local governments in many states. Because sales taxes are less stable sources of revenue than are property taxes, state and local governments in Alabama may be subject to shortfalls in revenue due to economic cycles. Priority for Essential Governmental Functions. Numerous decisions of the Alabama Supreme Court hold that a governmental unit may first use its taxes and other revenues to pay the expenses of providing necessary governmental services before paying debt service on its bonds, warrants or other indebtedness. Challenge to Education Funding. On January 10, 1997, the Alabama Supreme Court affirmed a lower court ruling which held that an unconstitutional disparity exists among Alabama's public school districts because, among other things, of an inequitable distribution of tax funds among the school districts. In order to comply with the ruling, the Alabama Legislature continues to restructure the public educational system in Alabama, subject to review by the state courts. Any reallocation of funds between school districts arising out of this restructuring could impair the ability of certain districts to service debt. INVESTMENT RESTRICTIONS. As noted above, each ISG Fund's investment objective and policies are similar, although not always identical, to those of the corresponding AmSouth Fund. In addition, for the most part, the types of instruments and securities in which they may invest are similar. Likewise, the fundamental investment restrictions adopted by each ISG Fund and the corresponding AmSouth Fund, which may be changed only with shareholder approval, are also similar. However, as summarized below, there are some differences between these investment restrictions. The following discussion is qualified by the disclosure on such subjects contained in the AmSouth Prospectuses and the ISG Prospectuses accompanying and incorporated by reference into this Combined B-37 415 Prospectus/Proxy Statement, as well as by the disclosure on such subjects contained in the Statements of Additional Information of AmSouth and ISG which are incorporated by reference into this Combined Prospectus/Proxy Statement. ISG Funds Each Fund's investment objective is a fundamental policy, which cannot be changed without approval by the holders of a majority (as defined in the 1940 Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted investment restrictions numbered 1 through 7 as fundamental policies, and only the Funds so indicated have adopted investment restrictions numbered 8 through 13 as additional fundamental policies. These restrictions cannot be changed, as to a Fund, without approval by the holders of a majority (as defined in the 1940 Act) of such Fund's outstanding voting securities. Each Fund, except as otherwise indicated, has adopted investment restrictions numbered 14 through 19 as non-fundamental policies which may be changed by vote of a majority of ISG's Directors at any time. No fund may: 1. Invest in commodities, except that each Fund may purchase and sell options, forward contracts, futures contracts, including those relating to indexes, and options on futures contracts or indexes. 2. Purchase, hold or deal in real estate, or oil, gas or other mineral leases or exploration or development programs, but each Fund may purchase and sell securities that are secured by real estate or issued by companies that invest or deal in real estate. 3. Borrow money , except that each fund may borrow up to 33-1/3% of the value of its total assets. For purposes of this investment restriction, a Fund's entry into options, forward contracts, futures contracts, including those relating to indexes, and options on futures contracts or indexes shall not constitute borrowing. 4. Make loans to others, except through the purchase of debt obligations and the entry into repurchase agreements. However, each Fund may lend its portfolio securities in an amount not to exceed 33-1/3% of the value of its total assets. Any loans of portfolio securities will be made according to guidelines established by the Securities and Exchange Commission and ISG's Board of Directors. 5. Act as an underwriter of securities of other issuers, except to the extent the Fund may be deemed an underwriter under the 1933 Act by virtue of disposing of portfolio securities, and except that the Municipal Income Fund, Tennessee Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt, Tax-Exempt Money Market Fund, Limited Term Income Fund and Income Fund each may bid separately or as part of a group for the purchase of Municipal Obligations directly from an issuer for its own portfolio to take advantage of the lower purchase price available. B-38 416 6. Issue any senior security (as such term is defined in Section 18(f) of the 1940 Act). A Fund's permitted borrowings and transactions in futures and options, to the extent permitted under the 1940 Act, are not considered senior securities for purposes of this investment restriction. 7. Purchase securities on margin, but each Fund may make margin deposits in connection with transactions in options, forward contracts, futures contracts, including those relating to indexes, and options on futures contracts or indexes. The following investment restrictions numbered 8 and 9 are fundamental policies which apply only the Prime Money Market Fund. The Prime Money Market Fund may not: 8. Invest more than 5% of its assets in the obligations of any one issuer, except that up to 25% of the value of the Prime Money Market Fund's total assets may be invested without regard to any such limitation, provided that not more than 10% of its assets may be invested in securities issued or guaranteed by any single guarantor of obligations held by the Prime Money Market Fund. 9. Invest less than 25% of its total assets in securities issued by banks or invest more than 25% of its assets in the securities of issuers in any other industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. Notwithstanding the foregoing, for temporary defensive purposes the Prime Money Market Fund may invest less than 25% of its assets in bank obligations. The following investment restriction number 10 is a fundamental policy which applies to each Fund, except the Strategic Portfolios and Prime Money Market Fund. None of these Funds may: 10. Invest more than 25% of its assets in the securities of issuers in any single industry, provided that, in the case of the Municipal Income Fund, Tennessee Tax-Exempt Fund, Limited Term Tennessee Tax-Exempt Fund and Tax-Exempt Money Market Fund, there shall be no such limitation on the purchase of tax-exempt municipal obligations and, in the case of each Fund, there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. The following investment restrictions numbered 11 and 12 are fundamental policies which apply only to the Large-Cap Equity Fund, Small-Cap Opportunity Fund, Mid-Cap Fund, Municipal Income Fund and Government Income Fund. None of these Funds may: 11. With respect to 75% of its total assets, invest more than 5% of its assets in the obligations of any single issuer. This investment restriction does not apply to the purchase of U.S. Government securities. B-39 417 12. Hold more than 10% of the outstanding voting securities of any single issuer. This investment restriction applies only with respect to 75% of the Fund's total assets. The following investment restriction number 13 is a fundamental policy which applies only to the Strategic Portfolios. None of the Strategic Portfolios may: 13. Invest less than 25% of the value of its total assets in securities issued by investment companies or invest more than 25% of the value of its total assets in the securities of issuers in any other industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. As non-fundamental policies, no fund may: 14. Invest in the securities of a company for the purpose of exercising management or control, but each Fund will vote (as provided in ISG's charter) the securities it owns as a shareholder in accordance with its views. 15. Pledge, mortgage or hypothecate its assets, except to the extent necessary to secure permitted borrowings and to the extent related to the purchase of securities on a when-issued or forward commitment basis and the deposit of assets in escrow in connection with writing covered put and call options and collateral and initial or variation margin arrangements with respect to options, forward contracts, futures contracts, including those relating to indexes, and options on futures contracts or indexes. 16. Enter into repurchase agreements providing for settlement in more than seven days after notice or purchase securities which are illiquid, if, in the aggregate, more than 15% (10% in the case of the Capital Growth, Equity Income, Income, Limited Term Income, Limited Term U.S. Government, Tennessee Tax-Exempt, Limited Term Tennessee Tax-Exempt and Money market Funds) of the value of the Fund's net assets would be so invested. 17. Purchase securities of other investment companies, except to the extent permitted under the 1940 Act. The following investment restrictions numbered 18 and 19 are noon-fundamental policies which apply to each Fund, except the Strategic Portfolios, Large-Cap Equity Fund, Small-Cap Opportunity Fund, Mid-Cap Fund, International Equity Fund, Municipal Income Fund, Government Income Fund, Prime Money Market fund, Government Money market fund, Treasury Money market Fund and Tax-Exempt Money Market Fund. None of these Funds may: 18. Purchase, sell or write puts, calls or combinations thereof, except as may be described in the Funds' Prospectus and Statement of Additional Information. B-40 418 19. Purchase securities of any company having less than three years' continuous operations (including operations of any predecessors) is such purchase would cause the value of the Fund's investments in all such companies to exceed 5% of the value of its total assets. For purposes of Investment Restriction No. 10, industrial development bonds, where the payment of principal and interest is the ultimate responsibility of companies within the same industry, are grouped together as an "industry." If a percentage restriction is adhered to at the time of investment, a later change in percentage resulting from a change in values or assets will not constitute a violation of such restriction. AmSouth Funds AmSouth International Equity Fund, AmSouth Mid-Cap 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 Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio, AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate Growth and Income Portfolio, AmSouth Current Income Portfolio Each Fund's investment objective is a fundamental policy, which cannot be changed without approval by the holders of a majority (as defined in the 1940 Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted investment restrictions numbered 1 through 5 as fundamental policies, and only the Funds so indicated have adopted investment restrictions numbered 6 through 9 as additional fundamental policies. These restrictions cannot be changed, as to a Fund, without approval by the holders of a majority (as defined in the 1940 Act) of such Fund's outstanding voting securities. Each Fund, except as otherwise indicated, has adopted investment restrictions numbered 10 through 13 as non-fundamental policies which may be changed by vote of a majority of the Trust's Trustees at any time. AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund, AmSouth Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio, AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate Growth and Income Portfolio, AmSouth Current Income Portfolio No Fund may: 1. Purchase or sell commodities, commodity contracts (including futures contracts with respect to each Fund other than the International Equity, Mid Cap Capital Growth, Large Cap, Limited Term U.S. Government, Tennessee Tax-Exempt, and B-41 419 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 Equity, Capital Growth, and Large Cap Funds). 2. Borrow money or issue senior securities, except that each Fund may borrow from banks or enter into reverse repurchase agreements for temporary emergency purposes in amounts up to 33 1/3% of the value of its total assets at the time of such borrowing, or mortgage, pledge, or hypothecate any assets, except in connection with any such borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 33 1/3% of the value of such Fund's total assets at the time of its borrowing. A Fund will not purchase securities while borrowings (including reverse repurchase agreements) in excess of 5% of its total assets are outstanding. 3. Make loans, except that each Fund may purchase or hold debt instruments in accordance with its investment objective and policies, may lend Fund securities in accordance with its investment objective and policies, and may enter into repurchase agreements. 4. Purchase securities on margin, sell securities short, participate on a joint or joint and several basis in any securities trading account, or underwrite the securities of other issuers, except to the extent that a Fund may be deemed to be an underwriter under certain securities laws in the disposition of "restricted securities" acquired in accordance with such Fund's investment objectives, restrictions and policies. 5. Issue any senior security (as such term is defined in Section 18(f) of the 1940 Act). A Fund's permitted borrowings and transactions in futures and options, to the extent permitted under the 1940 Act, are not considered senior securities for purposes of this investment restriction. The following investment restriction numbered 6 is a fundamental policy which applies only to the Treasury Reserve Money Market Fund. The Treasury Reserve Money Market Fund may not: 6. Invest in securities other than those issued or guaranteed by the U.S. Government or its agencies or instrumentalities or repurchase agreements related thereto. The following investment restriction numbered 7 is a fundamental policy which applies to each of the Tennessee Tax-Exempt and Tennessee Limited Term Tax-Exempt Funds. Neither of these Funds may: B-42 420 7. Purchase any securities which would cause 25% or more of the Fund's total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Securities; and provided, further, that for the purpose of this limitation only, private activity bonds that are backed only by the assets and revenues of a non-governmental user shall not be deemed to be Municipal Securities. The following investment restriction numbered 8 is fundamental for the Treasury Reserve Money Market, International Equity Fund, Mid Cap Fund, Capital Growth Fund, Large Cap Fund, Limited Term U.S. Government Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth and Income Portfolio, and Current Income Portfolio. None of these Funds may: 8. Purchase any securities which would cause more than 25% of the value of such Fund's total assets at the time of purchase to be invested in securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, and repurchase agreements secured by obligations of the U.S. government or its agencies or instrumentalities; (b) for the Aggressive Growth Portfolio, Growth Portfolio, Growth & Income Portfolio, Moderate Growth & Income Portfolio, and Current Income Portfolio, there is no limitation with respect to registered investment companies; (c) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of their parents; and (d) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry. The following investment restriction numbered 9 is fundamental for the Mid Cap Fund, Large Cap Fund, Limited Term U.S. Government Fund, Treasury Reserve Money Market Fund, Aggressive Growth Portfolio, Growth Portfolio, Growth and Income Portfolio, Moderate Growth and Income Portfolio, and Current Income Portfolio. No such fund may: 9. Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the value of such Fund's total assets would be invested in such issuer, or such Fund would hold more than 10% of any class of securities of the issuer or more than 10% of the outstanding voting securities of the issuer, except that up to 25% of the value of each Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities or securities of other investment companies. B-43 421 AmSouth International Equity Fund, AmSouth Mid Cap Fund, AmSouth Capital Growth Fund, AmSouth Large Cap Fund, AmSouth Limited Term U.S. Government Fund, AmSouth Tennessee Tax-Exempt Fund, AmSouth Limited Term Tennessee Tax-Exempt Fund, AmSouth Treasury Reserve Money Market Fund, AmSouth Aggressive Growth Portfolio, AmSouth Growth Portfolio, AmSouth Growth and Income Portfolio, AmSouth Moderate Growth and Income Portfolio, AmSouth Current Income Portfolio None of the Funds may: 10. Invest in the securities of a company for the purpose of exercising management or control. 11. Enter into repurchase agreements providing for settlement in more than seven days after notice or purchase securities which are illiquid, if, in the aggregate, more than 15% of the value of the Fund's net assets would be so invested. 12. Purchase securities of other investment companies, except to the extent permitted under the 1940 Act. None of the International Equity, Capital Growth, Tennessee Tax-Exempt, and Limited Term Tennessee Tax-Exempt Funds will: 13. Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities if, immediately after such purchase, more than 5% of the value of its total assets would be invested in such issuer (except that up to 50% of the value of the Fund's total assets may be invested without regard to such 5% limitation). For purposes of this limitation, a security is considered to be issued by the government entity (or entities) whose assets and revenues back the security; with respect to a private activity bond that is backed only by the assets and revenues of a non-government user, a security is considered to be issued by such non-governmental user. AmSouth Prime Obligations Fund, AmSouth Tax Exempt Fund, AmSouth Municipal Bond Fund, AmSouth Limited Maturity Fund, AmSouth Government Income Fund, AmSouth Bond Fund, AmSouth Small Cap Fund, AmSouth Equity Income Fund: The following investment restrictions may be changed with respect to a particular Fund only by a vote of a majority of the outstanding voting Shares of that Fund (as defined under "ADDITIONAL INFORMATION - Miscellaneous" in the Statement of Additional Information). The Prime Money Market Fund may not: 1. Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities if, immediately after such B-44 422 purchase, more than 5% of the value of the Prime Money Market Fund's total assets would be invested in such issuer, except that 25% or less of the value of the Prime Money Market Fund's total assets may be invested without regard to such 5% limitation. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. 2. Purchase any securities which would cause more than 25% of the value of the Prime Money Market Fund's total assets at the time of purchase to be invested in securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, bank certificates of deposit or bankers' acceptances issued by a domestic bank or by a U.S. branch of a foreign bank provided that such U.S. branch is subject to the same regulation as U.S. banks, and repurchase agreements secured by bank instruments or obligations of the U.S. government or its agencies or instrumentalities; (b) wholly owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of their parents; and (c) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry. The Tax Exempt Money Market Fund may not: 1. Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities if, immediately after such purchase, more than 5% of the value of its total assets would be invested in such issuer (except that up to 25% of the value of the Tax Exempt Money Market Fund's total assets may be invested without regard to such 5% limitation). For purposes of this limitation, a security is considered to be issued by the government entity (or entities) whose assets and revenues back the security; with respect to a private activity bond that is backed only by the assets and revenues of a non-government user, a security is considered to be issued by such non-governmental user. 2. Purchase any securities which would cause 25% or more of the Tax Exempt Money Market Fund's total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry; provided that this limitation shall not apply to Municipal Securities; and provided, further, that for the purpose of this limitation only, private activity bonds that are backed only by the assets and revenues of a non-governmental user shall not be deemed to be Municipal Securities. 3. Acquire a put if, immediately after such acquisition, over 5% of the total amortized cost value of the Tax Exempt Money Market Fund's assets would be subject to puts from the same institution (except that (i) up to 25% of the value of the Tax Exempt Money Market Fund's total assets may be subject to puts without regard to such 5% limitation and (ii) the 5% limitation is inapplicable to puts that, by their terms, would be readily exercisable in the event of a B-45 423 default in payment of principal or interest on the underlying securities). For the purpose of this investment restriction and investment restriction No. 4 below, a put will be considered to be from the party to whom the Tax Exempt Fund will look for payment of the exercise price. 4. Acquire a put that, by its terms would be readily exercisable in the event of a default in payment of principal and interest on the underlying security or securities if, immediately after that acquisition, the amortized cost value of the security or securities underlying that put, when aggregated with the amortized cost value of any other securities issued or guaranteed by the issuer of the put, would exceed 10% of the total amortized cost value of the Tax Exempt Fund's assets. The Bond Fund, the Limited Term Bond Fund, the Government Income Fund, the Municipal Bond Fund, the Equity Income Fund and the Small Cap Fund may not: 1. Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the value of such Fund's total assets would be invested in such issuer, or such Fund would hold more than 10% of any class of securities of the issuer or more than 10% of the outstanding voting securities of the issuer, except that up to 25% of the value of each Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Bond Fund, the Government Income Fund, the Limited Term Bond Fund, the Municipal Bond Fund, the Equity Income Fund and the Small Cap Fund may not: 1. Purchase any securities which would cause more than 25% of the value of such Income Fund's, Equity Income Fund's or Small Cap Fund's total assets at the time of purchase to be invested in securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, and repurchase agreements secured by obligations of the U.S. government or its agencies or instrumentalities; (b) for the Bond Fund, the Limited Term Bond Fund and the Municipal Bond Fund there is no limitation with respect to Municipal Securities, which, for purposes of this limitation only, do not include private activity bonds that are backed only by the assets and revenues of a non-governmental user; (c) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of their parents; and (d) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry. B-46 424 The Municipal Bond Fund may not: 1. Write or sell puts, calls, straddles, spreads, or combinations thereof except that the Funds may acquire puts with respect to Eligible Municipal Securities and sell those puts in conjunction with a sale of those Eligible Municipal Securities. The Prime Money Market Fund, the Tax Exempt Fund, the Bond Fund, the Government Income Fund, the Limited Term Bond Fund, the Municipal Bond Fund, the Equity Income Fund, and the Small Cap Fund may not: 1. Borrow money or issue senior securities, except that each Fund may borrow from banks or enter into reverse repurchase agreements for temporary emergency purposes in amounts up to 10% of the value of its total assets at the time of such borrowing; or mortgage, pledge, or hypothecate any assets, except in connection with any such borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of such Fund's total assets at the time of its borrowing. A Fund will not purchase securities while borrowings (including reverse repurchase agreements) in excess of 5% of its total assets are outstanding. 2. Make loans, except that each Fund may purchase or hold debt instruments in accordance with its investment objective and policies, may lend Fund securities in accordance with its investment objective and policies, and may enter into repurchase agreements. None of the AmSouth Prime Money Market Fund, AmSouth Tax Exempt Money Market Fund, AmSouth Municipal Bond Fund, AmSouth Limited Term Fund, AmSouth Government Income Fund, AmSouth Bond Fund, AmSouth Small Cap Fund, AmSouth Equity Income Fund may: 1. Purchase securities on margin, sell securities short, participate on a joint or joint and several basis in any securities trading account, or underwrite the securities of other issuers, except to the extent that a Fund may be deemed to be an underwriter under certain securities laws in the disposition of "restricted securities" acquired in accordance with such Fund's investment objectives, restrictions and policies; 2. Purchase or sell commodities, commodity contracts (including futures contracts with respect to each Fund other than the Small Cap Fund, which may purchase futures contracts), oil, gas or mineral exploration or development programs, or real estate (although investments by all of the Funds in marketable securities of companies engaged in such activities and in securities secured by real estate or interests therein are not hereby precluded and investment in real estate investment trusts are permitted for the Small Cap Fund and the Equity Income Fund); 3. Invest in securities of other investment companies, except as such securities may be acquired as part of a merger, consolidation, reorganization, or acquisition of assets; B-47 425 provided, however, that the Equity Income Fund, the Small Cap Fund and the Income Funds may purchase securities of a money market fund, including securities of both the Prime Money Market Fund and the AmSouth Treasury Reserve Fund (and in the case of the Tax-Free Funds, securities of the Tax Exempt Money Market Fund) and the Tax Exempt Money Market Fund and the Prime Money Market Fund may purchase securities of a money market fund which invests primarily in high quality short-term obligations exempt from federal income tax, if, with respect to each such Fund, immediately after such purchase, the acquiring Fund, does not own in the aggregate (i) more than 3% of the acquired company's outstanding voting securities, (ii) securities issued by the acquired company having an aggregate value in excess of 5% of the value of the total assets of the acquiring Fund, or (iii) securities issued by the acquired company and all other investment companies (other than Treasury stock of the acquiring Fund) having an aggregate value in excess of 10% of the value of the acquiring Fund's total assets; 4. Invest in any issuer for purposes of exercising control or management; 5. Purchase or retain securities of any issuer if the officers or Trustees of the Trust or the officers or directors of its investment adviser owning beneficially more than one-half of 1% of the securities of such issuer together own beneficially more than 5% of such securities; and 6. Invest more than 10% of total assets in the securities of issuers which together with any predecessors have a record of less than three years of continuous operation. The Prime Money Market Fund may not buy common stocks or voting securities, or state, municipal, or private activity bonds. The Prime Money Market Fund, the Tax Exempt Money Market Fund and the Municipal Bond Fund may not write or purchase call options. None of the Funds may write put options. The Prime Money Market Fund and the Equity Income Fund may not purchase put options. The Tax Exempt Money Market Fund and the Municipal Bond Fund may not invest in private activity bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than three years of continuous operation. As a non-fundamental investment restriction with respect to the Small Cap Fund only, the Small Cap Fund may not write or purchase put options. If any percentage restriction described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in asset value will not constitute a violation of such restriction. Additional Investment Restrictions The following investment restriction is non-fundamental and may be changed by a vote of the majority of the Board of Trustees: The AmSouth Prime Money Market Fund, AmSouth Tax Exempt Money Market Fund, AmSouth Municipal Bond Fund, AmSouth Limited Term Bond Fund, AmSouth Government Income Fund, AmSouth Bond Fund, AmSouth Small Cap Fund, B-48 426 AmSouth Equity Income Fund will not invest more than 15% of its net assets in securities that are restricted as to resale, or for which no readily available market exists, including repurchase agreements providing for settlement more than seven days after notice. ADDITIONAL INVESTMENT RISKS Both the ISG and AmSouth money market funds intend to comply with Rule 2a-7 under the 1940 Act. Shares of each Fund are priced pursuant to the amortized cost method whereby each Fund seeks to maintain its net asset value per share at $1.00. There can be, however, no assurance that a stable net asset value of $1.00 per share will be maintained. Investments by both the ISG Funds and the AmSouth Funds in obligations of certain agencies and instrumentalities of the U.S. Government may not be guaranteed by the full faith and credit of the U.S. Treasury, and there can be no assurance that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so by law. As in the case of mortgage-related securities, loan participations and certain asset-backed securities are subject to prepayments and there can be no assurance that an ISG Fund or an AmSouth Fund will be able to reinvest the proceeds of any prepayment at the same interest rate or on the same terms as the original investment. With regard to loan participations, although an ISG or AmSouth Fund's ability to receive payments of principal and interest in connection with a particular loan is primarily dependent on the financial condition of the underlying borrower, the lending institution or bank may provide assistance in collecting interest and principal from the borrower and in enforcing its rights against the borrower in the event of a default. In selecting loan participations on behalf of an ISG or AmSouth Fund, the Advisor evaluates the creditworthiness of both the borrower and the loan originator and will treat both as an "issuer" of the loan participation for purposes of the Fund's investment policies and restrictions. Certain risks are inherent in both ISG and AmSouth Tennessee Tax-Exempt and ISG and AmSouth Limited Term Tennessee Tax-Exempt's concentrated investment in Tennessee Municipal Securities, which may make an investment in such Funds riskier than an investment in other types of funds. The Constitution of the State of Tennessee requires a balanced budget. In 1978, the voters of the State of Tennessee approved an amendment to the State Constitution requiring that (1) the total expenditures of the State for any fiscal year may not exceed the State's revenues and reserves, including the proceeds of debt obligations issued to finance capital expenditures and (2) in no year may the rate of growth of appropriations from State tax revenues exceed the estimated rate of growth of the State's economy. In the past the Governor and the General Assembly have had to restrict expenditures to comply with the State Constitution. B-49 427 Tennessee's fiscal year 1997-98 budget completed a six year plan for funding of improvements in the Basic Education Program for public schools and of teacher salary equalization, funded certain crime legislation aimed at juvenile crime, and expanded TennCare enrollment to all children without access to health insurance. The reduction in retirement contributions sufficient to fund contingency appropriations for a compound cost-of-living retirement adjustment, a 3.6% retirement adjustment, and a 1.5% salary increase for state employees, teachers and higher education was confirmed effective January 1, 1998. The General Assembly approved $60.8 million in general obligation bonds (excluding highway bonds), of which $24.8 million was for higher education projects, to fund part of the $93.1 million capital projects program. A budget transfer of $43 million from the Tennessee Housing Development Agency dedicated tax revenues, reserves and other funds was made as of June 30, 1998, to the State's General Fund. Such transfer did not impact the ratings on the Agency's outstanding debt. The Governor's $15.4 billion budget for fiscal year 1998-99 was amended and approved April 29, 1998. The budget includes a 1,049 reduction in then existing staff positions and an increase of 406 positions necessary for recommended improvements. The base budget includes a $57.1 million reduction in expenditures from General Fund taxes ($66.2 million from all tax sources). The improvement budget of $370 million from General Fund taxes includes $66.3 million for the Basic Education Program for public schools; $20.3 million for higher education operating budgets; $67.8 million for TennCare; $21 million for new prison beds and operating requirements; and a 2% salary increase effective January 1, 1999. The Governor recommended and the General Assembly passed $265.5 million in general obligation bonds (excluding highway bonds), of which $196.2 million is for higher education projects, to fund part of the $322.7 million capital projects program. On February 8, 1999, the Funding Board reported to the Governor and the Chairmen of the Finance, Ways & Means Committees of the Tennessee General Assembly its revised consensus revenue estimates for fiscal year 1998-99 and the first estimates for fiscal year 1999-2000, which became the basis for the fiscal year 1998-99 revised estimates and the estimates for fiscal year 1999-2000. The growth estimates for fiscal year 1998-99 for the General Fund taxes range from 2.25% to 2.75% and for all tax collections range from 2.5% to 3.0%. The budget document for fiscal year 1999-2000 estimates growth of 2.43% in 1998-99 which is $69.8 million less than the budgeted estimate. The shortfall is offset by fiscal year 1997-98's surplus and available reserves in the current year. Revenue collections for the six months of August 1998 through January 1999 increased by 3.36% over the same period last year. General Fund collections are $2.6 billion which is $20.2 million less than budgeted. The undercollection was in the franchise and excise taxes. B-50 428 The estimated financial effects of the Governor's proposed "Tax Relief & Fairness Act of 1999", which repeals the sales tax on grocery food and replaces the franchise and excise taxes with the "fair business tax" -a 2.5% tax on business compensation and profits (with a $50,000 exemption on each), are included in the 1999-2000 budget. The budget contemplates a net revenue increase from the 1999 Tax Bill of $406 million in General Fund revenue consisting of $40.6 million to the Reserve for Revenue Fluctuations and $365.4 million to fund the 1999-2000 budget. The $16.568 billion budget recommended for fiscal year 1999-2000 includes no growth in positions. The base budget includes $42.3 million to fund supplemental appropriations. The improvement budget of $416 million from general fund taxes includes $68.9 million for the Basic Education Program for public schools; $25.6 million for higher education operating budgets; $142.3 million for TennCare; $13.6 million for new prison beds and local jail beds; $20 million for state employee compensation issues; and $26 million for a 1.7% salary increase effective January 1, 2000 for state employees, teachers and higher education employees. The Governor recommended $166.5 million in general obligation bonds (excluding highway bonds), of which $75.9 million is for higher education projects, to fund part of the $246.9 million capital projects program. Investment in ISG Capital Growth, AmSouth Growth Opportunities, ISG Equity Income and AmSouth Equity Income entails certain risks. These Funds are permitted to invest, to a limited extent, in securities rated as low as Ba by Moody's or BB by S&P, Fitch or Duff. Such securities, though higher yielding, are characterized by risk. Although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of these securities. The Fund will rely on the Adviser's judgment, analysis and experience in evaluating the creditworthiness of an issuer. Investors should be aware that the market values of many of these securities tend to be more sensitive to economic conditions than are higher rated securities and will fluctuate over time. These securities are considered by S&P, Moody's, Fitch and Duff generally to be predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation and generally will involve more credit risk than securities in the higher rating categories. Companies that issue certain of these securities often are highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risk associated with acquiring the securities of such issuers generally is greater than is the case with the higher rated securities. For example, during an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of these securities may not have sufficient revenues to meet their interest payment obligations. The issuer's ability to service its debt obligations also may be affected adversely by specific corporate developments, forecasts, or the unavailability of additional financing. The risk of loss because of default by the issuer is significantly greater for the holders of these securities because such securities generally are unsecured and often are subordinated to other creditors of the issuer. B-51 429 Because there is no established retail secondary market for many of these securities, the Funds anticipate that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market for these securities does exist, it generally is not as liquid as the secondary market for higher rated securities. The lack of a liquid secondary market may have an adverse impact on market price and yield and the Funds' ability to dispose of particular issues when necessary to meet its liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer. The lack of a liquid secondary market for certain securities also may make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing its securities and calculating its net asset value. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of these securities. In such cases, judgment may play a greater role in valuation because less reliable, objective data may be available. These securities may be particularly susceptible to economic downturns. It is likely that an economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities. ISG Capital Growth, AmSouth Capital Growth, ISG Equity Income and AmSouth Equity Income may acquire these securities during an initial offering. Such securities may involve special risks because they are new issues. The Funds do not have any arrangement with any persons concerning the acquisition of such securities, and the Adviser will review carefully the credit and other characteristics pertinent to such new issues. The credit risk factors pertaining to lower rated securities also apply to lower rated zero coupon securities. Such zero coupon securities carry an additional risk in that, unlike securities which pay interest throughout the period to maturity, the Funds will realize no cash until the cash payment date unless a portion of such securities are sold and, if the issuer defaults, the Funds may obtain no return at all on its investment. Regarding ISG Capital Growth, AmSouth Capital Growth, ISG Limited Term U.S. Government, AmSouth Limited Term U.S. Government, ISG Equity Income, AmSouth Equity Income, ISG Limited Term Income, AmSouth Limited Term Bond, ISG Income, AmSouth Bond, ISG Government Income and AmSouth Government Income, mortgage-related securities in which these Funds may invest are complex derivative instruments, subject to both credit and prepayment risk, and may be more volatile and less liquid than more traditional debt securities. Some mortgage-related securities have structures that make their reactions to interest rate changes and other factors difficult to predict, making their value highly volatile. No assurance can be given as to the liquidity of the market for certain mortgage-backed securities, such as collateralized mortgage obligations and stripped mortgage-backed securities. Determination as to the liquidity of interest-only and principal-only fixed mortgage-backed securities issued by the U.S. Government or its B-52 430 agencies and instrumentalities will be made in accordance with guidelines established by the Trust's Board of Directors. In accordance with such guidelines, the Adviser will monitor investments in such securities with particular regard to trading activity, availability of reliable price information and other relevant information. The Fund intends to treat other stripped mortgage-backed securities as illiquid securities. Mortgage-related securities are subject to credit risks associated with the performance of the underlying mortgage properties. Adverse changes in economic conditions and circumstances are more likely to have an adverse impact on mortgage-related securities secured by loans on certain types of commercial properties than on those secured by loans on residential properties. In addition, these securities are subject to prepayment risk, although commercial mortgages typically have shorter maturities than residential mortgages and prepayment protection features. In certain instances, the credit risk associated with mortgage-related securities can be reduced by third party guarantees or other forms of credit support. Improved credit risk does not reduce prepayment risk which is unrelated to the rating assigned to the mortgage-related security. Prepayment risk can lead to fluctuations in value of the mortgage-related security which may be pronounced. If a mortgage-related security is purchased at a premium, all or part of the premium may be lost if there is a decline in the market value of the security, whether resulting from changes in interest rates or prepayments in the underlying mortgage collateral. Certain mortgage-related securities that may be purchased by the Funds, such as inverse floating rate collateralized mortgage obligations, have coupons that move inversely to a multiple of a specific index which may result in a form of leverage. As with other interest-bearing securities, the prices of certain mortgage-related securities are inversely affected by changes in interest rates. However, though the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages underlying the security are more likely to be prepaid. For this and other reasons, a mortgage-related security's stated maturity may be shortened by unscheduled prepayments on the underlying mortgages, and, therefore, it is not possible to predict accurately the security's return to the Funds. Moreover, with respect to certain stripped mortgage-backed securities, if the underlying mortgage securities experience greater than anticipated prepayments of principal, the Funds may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating category. During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security's expected maturity which generally would cause the value of such security to fluctuate more widely in response to changes in interest rates. Were the prepayments on the Fund's mortgage-related securities to decrease significantly, the Funds' effective duration, and thus sensitivity to interest rate fluctuations, would increase. Regarding all ISG and AmSouth Funds except the Strategic Portfolios, investment decisions for each Fund are made independently from those of the other investment companies, investment advisory accounts, custodial accounts, individual trust accounts and commingled funds that may be advised by the Adviser or, if applicable, sub-investment B-53 431 adviser. However, if such other investment companies or managed accounts desire to invest in, or dispose of, the same securities as the Fund, available investments or opportunities for sales will be allocated equitably to each of them. In some cases, this procedure may adversely affect the size of the position obtained for or disposed of by a Fund or the price paid or received by a Fund. B-54 432 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- 1. BASIS OF COMBINATION: --------------------- The unaudited Pro Forma Combining Statements of Assets and Liabilities, Statements of Operations, and Schedules of Portfolio Investments reflect the accounts of eight investment portfolios offered by the AmSouth Funds (the "AmSouth Funds"): AmSouth Prime Money Market Fund, the AmSouth Tax-Exempt Money Market Fund, the AmSouth Limited Term Bond Fund, the AmSouth Government Income Fund, the AmSouth Bond Fund, the AmSouth Municipal Bond Fund, the AmSouth Equity Income Fund and the AmSouth Small Cap Fund (the "AmSouth Funds") and eight investment portfolios offered by the Infinity Mutual Funds, Inc., ISG Funds: the ISG Prime Money Market Fund, the ISG Tax-Exempt Money Market Fund, the ISG Limited Term Income Fund, the ISG Government Income Fund, the ISG Income Fund, the ISG Municipal Income Fund, the ISG Equity Income Fund, and the ISG Small-Cap Opportunity Fund (the "ISG Funds"), (collectively, the "Funds" and individually a "Fund") as if the proposed reorganization occurred as of and for the year ended July 31, 1999. These statements have been derived from books and records utilized in calculating daily net asset value at July 31, 1999. The Reorganization Agreement provides that on the Closing Date of the Reorganization, all of the assets and liabilities will be transferred as follows such that at and after the Reorganization, the assets and liabilities of the applicable ISG Funds will become the assets and liabilities of the corresponding AmSouth Fund (see table below): ISG Prime Money Market Fund AmSouth Prime Money Market Fund ISG Tax-Exempt Money Market Fund AmSouth Tax-Exempt Money Market Fund ISG Limited Term Income Fund AmSouth Limited Term Bond Fund ISG Government Income Fund AmSouth Government Income Fund ISG Income Fund AmSouth Bond Fund ISG Municipal Income Fund AmSouth Municipal Bond Fund ISG Equity Income Fund AmSouth Equity Income Fund ISG Small-Cap Opportunity AmSouth Small Cap Fund In exchange for the transfer of assets and liabilities, the Company will issue to the ISG Funds full and fractional shares of the corresponding AmSouth Funds, and the ISG Funds will make a liquidating distribution of such shares to its shareholders. The number of shares of the AmSouth Funds so issued will be equal in value to the full and fractional shares of the ISG Funds that are outstanding immediately prior to the Reorganization. At and after the Reorganization, all debts, liabilities and obligations of ISG Funds will attach to the AmSouth Funds and may thereafter be enforced against the AmSouth Funds to the same extent as if the AmSouth Funds had incurred them. The pro forma statements give effect to the proposed transfer described above. Under the purchase method of accounting for business combinations under generally (CONTINUED) B-55 433 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- accepted accounting principles, the basis on the part of the AmSouth Funds, of the assets of the ISG Funds will be the fair market value of such assets on the Closing Date of the Reorganization. The AmSouth Funds will recognize no gain or loss for federal tax purposes on its issuance of shares in the Reorganization, and the basis to the AmSouth Funds of the assets of the ISG Funds received pursuant to the Reorganization will equal the fair market value of the consideration furnished, and costs incurred, by the AmSouth Funds in the Reorganization -- i.e., the sum of the liabilities assumed, the fair market value of the AmSouth Funds shares issued, and such costs. For accounting purposes, the AmSouth Funds are the surviving portfolios of this Reorganization, except for the ISG Equity Income Fund and the AmSouth Equity Income Fund, where the ISG Fund will be the accounting survivor. The pro forma statements reflect the combined results of operations of the ISG Funds and the AmSouth Funds. However, should such Reorganization be effected, the statements of operations of the AmSouth Funds will not be restated for pre-combination period results of the corresponding ISG Funds. The Pro Forma Combining Statements of Assets and Liabilities, Statements of Operations, and Schedules of Portfolio Investments should be read in conjunction with the historical financial statements of the Funds incorporated by reference in the Statement of Additional Information. The AmSouth Funds and the ISG Funds are each separate portfolios of the AmSouth Mutual Funds and The Infinity Mutual Funds, Inc, respectively, which are registered as open-end management companies under the Investment Company Act of 1940. The investment objectives of each fund are listed below. AmSouth Prime Money Market Funds seeks current income with liquidity and stability of principal. ISG Prime Money Market Fund seeks to provide investors with as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. AmSouth Tax-Exempt Money Market Fund seeks to produce as high a level of current interest income exempt from Federal income taxes as is consistent with the preservation of capital and relative stability of principal. ISG Tax-Exempt Money Market Fund seeks to provide investors with as high a level of current income exempt from Federal income tax as is consistent with the preservation of capital and the maintenance of liquidity. AmSouth Limited Term Bond Fund seeks current income, consistent with the preservation of capital. ISG Limited Term Income Fund seeks to provide investors with current income without (CONTINUED) B-56 434 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- assuming undue risk. AmSouth Government Income Fund seeks current income consistent with the preservation of capital. ISG Government Income Fund seeks to provide investors with current income. AmSouth Bond Fund seeks current income consistent with the preservation of capital ISG Income Fund seeks to provide investor with current income without assuming undue risk. AmSouth Municipal Bond Fund seeks to provide as high a level of current interest income exempt from Federal income taxes as is consistent with the preservation of capital. ISG Municipal Income Fund seeks to provide investors with dividend income exempt from Federal income tax. AmSouth Equity Income Fund seeks above average income and capital appreciation. ISG Equity Income Fund seeks to provide investor with current income and capital appreciation. AmSouth Small Cap Fund seeks capital appreciation. ISG Small-Cap Opportunity Fund seeks to provide investors with capital appreciation. EXPENSES -------- AmSouth Bank serves as the AmSouth Funds' investment advisor and custodian. Rockhaven Asset Management, LLC, serves as sub-investment advisor to the AmSouth Equity Income Fund. Sawgrass Assets Management, LLC serves as sub-investment advisor to the AmSouth Small Cap Fund. ASO Services Company ("ASO") serves as the administrator and mutual fund accountant for the AmSouth Funds. AmSouth and BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services (BISYS) serve as sub-administrators to the AmSouth Funds. BISYS Fund Services Ohio ("BISYS Ohio") serves as the transfer and dividend disbursing agent for the AmSouth Funds. ASO, BISYS and BISYS Ohio are subsidiaries of The BISYS Group, Inc. ISG Funds: - ---------- (CONTINUED) B-57 435 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- The ISG Funds issue three classes of shares, Institutional Shares, Class A Shares and Class B Shares (except for the Tax-Exempt Money Market Fund which does not offer Class B Shares), which have rights and privileges analogous to those of the AmSouth Funds' Trust Shares, Class A Shares and Class B Shares, respectively. Under the terms of the investment advisory agreement between the ISG Funds and First American National Bank ("FANB"), FANB is entitled to receive fees computed at an annual rate based on each Fund's average daily net assets (see table below). Such fees are accrued daily and paid monthly. For the period from August 1, 1998 to December 13, 1999, ParkSouth Corporation (ParkSouth) was the investment advisor to the DG Prime Money Market Fund (now the ISG Money Market Fund), the DG Municipal Income Fund (now the ISG Municipal Income Fund) and the DG Opportunity Fund (now the ISG Small-Cap Opportunity Fund). ParkSouth received a fee for its services at an annual rate of 0.50%, 0.60% and 0.95% of each respective Fund's daily average net assets. Womack Asset Management, Inc. serves as the sub-investment advisor to the ISG Small-Cap Opportunity Fund and receives a fee from FANB paid at the annual rate of 0.35% of the Fund's average daily net assets. For the year ended July 31, 1999, total investment advisory fees incurred by the ISG Funds were as follows: Percentage Fee Total Fees Fees Waived -------------- ---------- ----------- Prime Money Market* 0.25% Tax-Exempt Money Market 0.35% Limited Term Income 0.50% Government Income 0.60% Income 0.50% Municipal Income* 0.60% Equity Income 0.65% Small-Cap Opportunity* 0.95% * Amounts include fees incurred by the funds payable to ParkSouth for the period of August 1, 1998 to December 13, 1998. AmSouth Funds: - -------------- The AmSouth Funds offer three classes of shares: Trust Shares, Class A Shares and B Shares (except for the Tax-Exempt Money Market Fund and Government Income Fund which do not offer B Shares; effective with the Closing Date of the Reorganization, the Government Income Fund will offer B Shares. For pro forma purposes, the Combining Pro Forma Statement of Assets and Liabilities and Statement of Operations include B Share operations for the period presented for the Government Income Fund). Each class of shares has identical rights and privileges except with respect to fees paid under shareholder servicing or distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters affecting a single class of shares, and the exchange (CONTINUED) B-58 436 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- privilege of each class of shares. Class A Shares are subject to an initial sales charge upon purchase. Class B Shares are subject to a contingent deferred sales change (CDSC) upon redemption. Under the terms of the investment advisory agreement, AmSouth Bank is entitled to receive fees computed at the annual rate based on each Fund's average daily net assets (see table below). Rockhaven Asset Management, LLC, serves as sub-investment advisor to the AmSouth Equity Income Fund and receives an annual fee from AmSouth Bank of 0.48% of the average daily net assets of the Fund. Sawgrass Assets Management, LLC serves as sub-investment advisor to the AmSouth Small Cap Fund and receives an annual fee from AmSouth Bank of 0.84% of the average daily net assets of the Fund. Such fees are accrued daily and paid monthly. For the year ended July 31, 1999, total investment advisory fees incurred by the AmSouth Funds were as follows: Percentage Fee Total Fees Fees Waived -------------- ---------- ----------- Prime Money Market 0.40% $2,765 - Tax-Exempt Money Market 0.40% 383 $192 Limited Term Bond 0.65% 735 170 Government Income 0.65% 62 33 Bond 0.65% 2,319 535 Municipal Bond 0.65% 2,121 816 Equity Income 0.80% 325 - Small Cap 1.20% 127 - Under the terms of the administration agreement, ASO's fees are computed at the annual rate of 0.20% of each Fund's daily average net assets. For the year ended July 31, 1999, the administration fees incurred by the AmSouth Funds were as follows: Total Fees Fees Waived ---------- ----------- Prime Money Market $1,383 - Tax-Exempt Money Market 192 - Limited Term Bond 226 $90 Government Income 19 10 Bond 714 285 Municipal Bond 653 261 Equity Income 81 - Small Cap 21 21 (CONTINUED) B-59 437 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- PRO FORMA ADJUSTMENTS AND PRO FORMA COMBINED COLUMNS ---------------------------------------------------- The pro forma adjustments and pro forma combined columns of the Statements of Operations reflect the adjustments necessary to show expenses at the rates which would have been in effect if the ISG Funds were included in the AmSouth Funds for the year ended July 31, 1999. Investment advisory, administration, 12b-1, shareholder service, accounting and custodian fees in the pro forma combined column are calculated at the rates in effect for the AmSouth Funds based upon the combined net assets of the corresponding ISG Funds and the AmSouth Funds. Certain pro forma adjustments were made to estimate the benefit of combining operations of separate funds into one survivor fund. The pro forma Schedules of Portfolio Investments give effect to the proposed transfer of such assets as if the Reorganization had occurred at July 31, 1999. 2. PORTFOLIO VALUATION, SECURITIES TRANSACTIONS AND RELATED INCOME: ---------------------------------------------------------------- Investments of the Prime Money Market and Tax-Exempt Money Market Funds are valued at either amortized cost, which approximates market value, or at original cost which, combined with accrued interest, approximates market value. Under the amortized cost method, discount or premium is amortized on a constant basis to the maturity of the security. Investments in common stocks, corporate bonds, municipal bonds, commercial paper and U.S. Government securities of the remaining Funds are valued on the basis of valuations provided by dealers or an independent pricing service approved by the Board of Trustees. Investments in investment companies are valued at their net asset values as reported by such companies. The differences between cost and market values of such investments are reflected as unrealized appreciation or depreciation. Security transactions are recorded on trade date. Realized gains and losses from sales of investments are calculated on the identified cost basis. Interest income, including accretion of discount and amortization of premium on investments, is accrued daily. Dividend income is recorded on the ex-dividend date. 3. CAPITAL SHARES: --------------- The pro forma net asset values per share assume the issuance of shares of the AmSouth Funds, which would have occurred at July 31, 1999 in connection with the proposed reorganization. The pro forma number of shares outstanding consists of the following: (CONTINUED) B-60 438 AMSOUTH FUNDS ISG FUNDS Note to Pro Forma Financial Statements (Unaudited) ------- - ----------------------------------------- -------------------- ------------------------ ----------------------- Shares Additional Shares Outstanding at Assumed in the Pro Forma Shares July 31, 1999 Reorganization at July 31, 1999 (000's) (000's) (000's) - ----------------------------------------- -------------------- ------------------------ ----------------------- Prime Money Market 673,222 - ----------------------------------------- -------------------- ------------------------ ----------------------- Tax-Exempt Money Market 96,725 - ----------------------------------------- -------------------- ------------------------ ----------------------- Limited Term Bond 11,067 - ----------------------------------------- -------------------- ------------------------ ----------------------- Government Income 893 - ----------------------------------------- -------------------- ------------------------ ----------------------- Bond 36,681 - ----------------------------------------- -------------------- ------------------------ ----------------------- Municipal Income 32,832 - ----------------------------------------- -------------------- ------------------------ ----------------------- Equity Income 3,082 - ----------------------------------------- -------------------- ------------------------ ----------------------- Small Cap 2,821 - ----------------------------------------- -------------------- ------------------------ ----------------------- (CONTINUED) B-61 439 AMSOUTH SMALL CAP FUND ISG SMALL-CAP OPPORTUNITY FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 07/31/99 (UNAUDITED) ISG PRO FORMA AMSOUTH SMALL-CAP PRO FORMA COMBINED SMALL CAP OPPORTUNITY ADJUSTMENTS (NOTE 1) ------------ ------------- -------------- -------------- ASSETS: Investment in securities, at value (cost $21,396 and $91,042, respectively) $ 24,019 $ 102,507 $ -- $ 126,526 Interest and dividends receivable 2 12 -- 14 Receivable for capital shares sold 12 -- -- 12 Receivable from investment adviser -- 22 -- 22 Receivable from brokers for investments sold 1,343 421 -- 1,764 Other assets 6 25 -- 31 ---------- ---------- ---------- ---------- TOTAL ASSETS 25,382 102,987 -- 128,369 ---------- ---------- ---------- ---------- LIABILITIES: Payable for capital shares redeemed -- 1 -- 1 Payable to brokers for investments purchased 1,584 394 -- 1,978 Accrued expenses: Advisory fees 12 88 -- 100 Administration fees -- 2 -- 2 Distribution fees 1 14 -- 15 Accounting fees -- 1 -- 1 Transfer agent fees 1 4 -- 5 Custodian fees -- 4 -- 4 Other 5 15 -- 20 ---------- ---------- ---------- ---------- TOTAL LIABILITIES 1,603 523 -- 2,126 ---------- ---------- ---------- ---------- NET ASSETS Class A Shares 1,073 9,649 -- 10,722 Class B Shares 929 311 -- 1,240 Institutional Shares 21,777 92,504 -- 114,281 ========== ========== ========== ========== $ 23,779 $ 102,464 $ -- $ 126,243 ========== ========== ========== ========== CAPITAL SHARES OUTSTANDING Class A Shares 128 723 426 (a) 1,277 Class B Shares 112 23 14 (a) 149 Institutional Shares 2,581 6,932 4,028 (a) 13,541 ========== ========== ========== ========== 2,821 7,678 4,468 (a) 14,967 ========== ========== ========== ========== NET ASSET VALUE Class A Shares - redemption price per share $ 8.40 $ 13.36 $ 8.40 ---------- ---------- ========== Class A Shares - maximum sales charge 4.50% 4.75% 4.50% ---------- ---------- ========== Class A Shares - POP $ 8.80 $ 14.03 $ 8.80 ========== ========== ========== Class B Shares - offering price per share* $ 8.31 $ 13.28 $ 8.31 ========== ========== ========== Institutional Shares - offering and redemption price per share $ 8.44 $ 13.35 $ 8.44 ========== ========== ========== COMPOSITION OF NET ASSETS Capital $ 23,927 $ 96,999 $ -- $ 120,926 Undistributed (distributions in excess of) (1) (1,225) -- (1,226) net investment income Undistributed net realized gains/(loss) (2,770) (4,775) -- (7,545) from investment transactions Net unrealized appreciation of investments 2,623 11,465 -- 14,088 ---------- ---------- ---------- ---------- NET ASSETS, JULY 31, 1999 $ 23,779 $ 102,464 $ -- $ 126,243 ========== ========== ========== ========== * Redemption price per share varies by length of time shares are held. (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-62 440 AMSOUTH SMALL CAP FUND ISG SMALL-CAP OPPORTUNITY FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 07/31/99 (UNAUDITED) ISG PRO FORMA AMSOUTH SMALL-CAP PRO FORMA COMBINED SMALL CAP OPPORTUNITY ADJUSTMENTS (NOTE 1) ------------- ------------- ------------- ------------ INVESTMENT INCOME: Interest Income $ 37 $ 584 $ -- $ 621 Dividend Income 24 144 -- 168 Income from securities lending -- 7 (7)(m) -- -------- -------- -------- -------- 61 735 (7) 789 -------- -------- -------- -------- EXPENSES: Advisory fees 127 948 250 (a) 1,325 Administration fees 21 131 69 (b) 221 Shareholder servicing fees (Class A Shares) 3 65 43 (c) 111 Shareholder servicing fees (Class B Shares) -- -- 2 (d) 2 Shareholder servicing fees (Institutional Shares) -- 85 13 (e) 98 12b-1 fees (Class A Shares) -- 19 (19)(f) -- 12b-1 fees (Class B Shares) 9 1 (3)(g) 7 Accounting fees 54 34 (65)(h) 23 Transfer agent fees 33 78 (49)(i) 62 Custodian fees 1 10 19 (j) 30 Trustee fees and expenses -- 1 -- 1 Other expenses 17 87 (29)(k) 75 -------- -------- -------- -------- TOTAL EXPENSES: 265 1,459 232 1,956 Less Waivers Advisory fees -- -- -- -- Administration fees (21) -- 21 (b) -- 12b-1 fees (Class A Shares) -- (19) 19 (f) -- Accounting Fees (50) -- 50 (h) -- Transfer agent fees (30) -- 30 (i) -- Reimbursements (4) (79) 83 (l) -- -------- -------- -------- -------- NET EXPENSES: 160 1,361 435 1,956 -------- -------- -------- -------- NET INVESTMENT INCOME (LOSS) (99) (626) (442) (1,167) -------- -------- -------- -------- REALIZED/UNREALIZED GAINS (LOSSES) FROM Investments: Net realized gains (losses) from investment transactions (2,191) (3,660) -- (5,851) Net change in unrealized appreciation (depreciation) from investments 2,703 -- -- 2,703 -------- -------- -------- -------- Net realized/unrealized gains (losses) from investments 512 (3,660) -- (3,148) Change in net assets resulting from ======== ======== ======== ======== Operations: $ 413 $ (4,286) $ (442) $ (4,315) ======== ======== ======== ======== NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (1.20% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. (m) Adjustment to reflect no securities lending income since there is not a securities lending program set up on the AmSouth Funds. B-63 441 AMSOUTH SMALL CAP FUND ISG SMALL-CAP OPPORTUNITY FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG SMALL-CAP PRO FORMA SMALL CAP OPPORTUNITY COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- ----------------------------- --------------------- ----------------------------------------- COMMON STOCKS (91.4%): Airlines (0.1%): 22,900 22,900 Airtran Holdings, Inc. (b) APPAREL (2.2%): 83,000 83,000 Jones Apparel Group, Inc. (b) AUTOMOTIVE (1.1%): 28,900 28,900 Copart, Inc. (b) 24,150 24,150 Monaco Coach Corp. (b) BUSINESS SERVICES (2.9%): 93,700 93,700 Comforce Corp. (b) 95,000 95,000 MasTec, Inc. (b) COMMERCIAL SERVICES (0.6%): 23,100 23,100 Dollar Thrifty Automotive Group (b) 7,500 7,500 Plexus Corp. (b) COMPUTER HARDWARE (1.0%): 94,000 94,000 Data General Corp. (b) COMPUTER SOFTWARE (2.9%): 3,500 3,500 Computer Network Tech Co. (b) 12,900 12,900 Credence Systems Corp. (b) 21,900 21,900 Handleman Co. (b) 10,800 10,800 Mercury Interactive Corp. (b) 12,600 12,600 Pinnacle Systems, Inc (b) 69,000 69,000 THQ, Inc. (b) COMPUTERS & PERIPHERALS (3.6%): 17,400 17,400 Cybex Computer Products Corp. (b) 171,800 171,800 Datastream Systems, Inc. 5,600 5,600 Kronos, Inc. (b) 8,000 8,000 Lam Research Corp. (b) 46,100 46,100 Sybase, Inc. (b) 11,600 11,600 Verity, Inc. (b) CONSTRUCTION (0.9%): 10,900 10,900 Dycom Industries, Inc. (b) 25,700 25,700 Insituform Technologies, Class A (b) ISG AMSOUTH AMSOUTH SMALL-CAP PRO FORMA SMALL CAP SMALL CAP OPPORTUNITY COMBINED PRINCIPAL MARKET MARKET MARKET AMOUNT/SHARES VALUE VALUE VALUE --------------------- -------------------- --------------------- ------------------- COMMON STOCKS (91.4%): Airlines (0.1%): 22,900 $ 147 $ - $ 147 -------------------- --------------------- ------------------- APPAREL (2.2%): - 2,729 2,729 -------------------- --------------------- ------------------- AUTOMOTIVE (1.1%): 28,900 694 694 24,150 638 638 -------------------- --------------------- ------------------- 1,332 - 1,332 -------------------- --------------------- ------------------- BUSINESS SERVICES (2.9%): 228 228 3,385 3,385 -------------------- --------------------- ------------------- - 3,613 3,613 -------------------- --------------------- ------------------- COMMERCIAL SERVICES (0.6%): 23,100 497 497 7,500 240 240 -------------------- --------------------- ------------------- 737 - 737 -------------------- --------------------- ------------------- COMPUTER HARDWARE (1.0%): - 1,310 1,310 -------------------- --------------------- ------------------- COMPUTER SOFTWARE (2.9%): 3,500 51 51 12,900 535 535 21,900 245 245 10,800 498 498 12,600 367 367 1,936 1,936 -------------------- --------------------- ------------------- 1,696 1,936 3,632 -------------------- --------------------- ------------------- COMPUTERS & PERIPHERALS (3.6%): 17,400 463 463 2,308 2,308 5,600 271 271 8,000 443 443 46,100 473 473 11,600 574 574 -------------------- --------------------- ------------------- 2,224 2,308 4,532 -------------------- --------------------- ------------------- CONSTRUCTION (0.9%): 10,900 520 520 25,700 559 559 -------------------- --------------------- ------------------- 1,079 - 1,079 -------------------- --------------------- ------------------- B-64 442 CONSTRUCTION-MANUFACTURED HOMES (2.1%): 207,000 207,000 Clayton Homes, Inc. 18,000 18,000 Ryland Group, Inc. DIVERSIFIED MANUFACTURING (0.6%): 20,550 20,550 Labor Ready, Inc. (b) 27,600 27,600 WMS Industries, Inc. (b) ELECTRICAL & ELECTRONIC (1.2%): 8,900 8,900 Advanced Digital Info Corp. (b) 18,400 18,400 Aeroflex, Inc. (b) 3,200 3,200 Cree Research, Inc. (b) 12,000 12,000 DII Group, Inc. (b) 9,400 9,400 Mentor Graphics Corp. (b) 1,400 1,400 Optical Coating Laboratory ENTERTAINMENT (0.3%): 40,000 40,000 Aztar Corp. (b) FINANCIAL SERVICES (5.4%): 18,100 18,100 Hambrecht & Quist Group (b) 13,400 13,400 Legg Mason, Inc. 137,000 137,000 Morgan Keegan, Inc. 95,200 95,200 T. Rowe Price Associates FOOD PROCESSING & PACKAGING (2.9%): 18,500 18,500 Foodmaker, Inc. (b) 125,000 125,000 Hain Food Group, Inc. (b) FOREST & PAPER PRODUCTS (0.2%): 19,000 19,000 Longview Fibre Co. HEALTH CARE (3.9%): 17,500 17,500 Cytyc Corp. (b) 19,000 19,000 Hooper Holmes, Inc. 8,800 4,000 12,800 Infocure Corp. (b) 114,500 114,500 Neotherapeutics, Inc. (b) 225,000 225,000 PSS World Medical, Inc. (b) HOUSEHOLD PRODUCTS/WARES (0.5%): 12,700 12,700 Fossil, Inc. (b) MACHINERY & EQUIPMENT (1.0%): 134,000 134,000 AGCO Corp. MACHINERY-CONSTRUCTION (3.3%): 6,600 6,600 Astec Industries, Inc. (b) 129,700 129,700 Terex Corp. (b) MACHINERY-DIVERSIFIED (0.1%): 1,600 1,600 Tecumseh Products, Inc. MEDIA (0.3%): 11,550 11,550 Valassis Communications, Inc. (b) CONSTRUCTION-MANUFACTURED HOMES (2.1%): 2,173 2,173 18,000 502 502 ------------------- --------------------- ------------------- 502 2,173 2,675 ------------------- --------------------- ------------------- DIVERSIFIED MANUFACTURING (0.6%): 20,550 353 353 27,600 425 425 ------------------- --------------------- ------------------- 778 - 778 ------------------- --------------------- ------------------- ELECTRICAL & ELECTRONIC (1.2%): 8,900 378 378 18,400 348 348 3,200 198 198 12,000 445 445 9,400 95 95 1,400 100 100 ------------------- --------------------- ------------------- 1,564 - 1,564 ------------------- --------------------- ------------------- ENTERTAINMENT (0.3%): 40,000 373 - 373 ------------------- --------------------- ------------------- FINANCIAL SERVICES (5.4%): 18,100 681 681 13,400 469 469 2,380 2,380 3,332 3,332 ------------------- --------------------- ------------------- 1,150 5,712 6,862 ------------------- --------------------- ------------------- FOOD PROCESSING & PACKAGING (2.9%): 18,500 506 506 3,149 3,149 ------------------- --------------------- ------------------- 506 3,149 3,655 ------------------- --------------------- ------------------- FOREST & PAPER PRODUCTS (0.2%): 19,000 310 - 310 ------------------- --------------------- ------------------- HEALTH CARE (3.9%): 17,500 431 431 19,000 375 375 8,800 472 214 686 1,159 1,159 2,321 2,321 ------------------- --------------------- ------------------- 1,278 3,694 4,972 ------------------- --------------------- ------------------- HOUSEHOLD PRODUCTS/WARES (0.5%): 12,700 667 - 667 ------------------- --------------------- ------------------- MACHINERY & EQUIPMENT (1.0%): - 1,256 1,256 ------------------- --------------------- ------------------- MACHINERY-CONSTRUCTION (3.3%): 6,600 225 225 3,891 3,891 ------------------- --------------------- ------------------- 225 3,891 4,116 ------------------- --------------------- ------------------- MACHINERY-DIVERSIFIED (0.1%): 1,600 103 - 103 ------------------- --------------------- ------------------- MEDIA (0.3%): 11,550 430 - 430 ------------------- --------------------- ------------------- B-65 443 MEDICAL EQUIPMENT & SUPPLIES (0.9%): 110,000 110,000 ATS Medical, Inc. (b) MEDICAL SERVICES (4.3%): 295,000 295,000 MedPartners, Inc. (b) 13,100 13,100 Medquist, Inc. (b) 115,000 115,000 Res-Care, Inc. (b) OFFICE EQUIPMENT & SERVICES (0.2%): 7,000 7,000 Clarify, Inc. (b) OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (8.1%): 15,100 15,100 Basin Exploration, Inc. (b) 26,500 133,000 159,500 Forest Oil Corp. (b) 148,000 148,000 Gulf Island Fabrication, Inc. (b) 200,000 200,000 Ocean Energy, Inc. (b) 80,000 80,000 Santa Fe Snyder Corp. (b) 40,000 40,000 Stone Energy Corp. (b) 8,700 8,700 Syncor International Corp. (b) 175,000 175,000 TransCoastal Marine Services, Inc. (b) OILFIELD EQUIPMENT & SERVICES (2.0%): 92,000 92,000 McDermott International, Inc. PHARMACEUTICALS (1.3%): 11,000 11,000 Chirex, Inc. (b) 19,400 19,400 King Pharmaceuticals, Inc. (b) 14,850 14,850 Priority Healthcare Corp. Class B (b) RESTAURANTS (9.3%): 120,000 120,000 CEC Entertainment, Inc. (b) 150,000 150,000 CRBL Group, Inc. 70,500 70,500 RARE Hospitality International, Inc. (b) 70,000 70,000 Ruby Tuesday, Inc. 82,000 82,000 Sonic Corp. (b) RETAIL (15.2%): 49,000 49,000 Action Performance Cos., Inc. (b) 11,300 11,300 American Eagle Outfitters (b) 250,000 250,000 Goody's Family Clothing, Inc. (b) 155,000 155,000 Horizon Pharmacies, Inc. (b) 100,000 100,000 J. Jill Group, Inc. (b) 67,000 67,000 JAKKS Pacific, Inc. (b) 110,000 110,000 Micro Warehouse, Inc. 245,000 245,000 OfficeMax, Inc. (b) 115,000 115,000 Rainbow Rentals, Inc. (b) 360,000 360,000 Stein-Mart, Inc. (b) 145,000 145,000 Trans World Entertainment Corp. (b) TECHNOLOGY (2.1%): 1,600 1,600 Cohu, Inc. 72,500 72,500 Insight Enterprises, Inc. (b) 10,900 10,900 Integrated Device Tech, Inc. (b) 23,500 23,500 International Rectifier Corp. (b) MEDICAL EQUIPMENT & SUPPLIES (0.9%): - 1,079 1,079 -------------------- --------------------- ------------------- MEDICAL SERVICES (4.3%): 2,471 2,471 13,100 568 568 2,415 2,415 -------------------- --------------------- ------------------- 568 4,886 5,454 -------------------- --------------------- ------------------- OFFICE EQUIPMENT & SERVICES (0.2%): 7,000 231 - 231 -------------------- --------------------- ------------------- OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (8.1%): 15,100 317 317 26,500 394 1,978 2,372 1,776 1,776 2,212 2,212 740 740 1,808 1,808 8,700 258 258 793 793 -------------------- --------------------- ------------------- 969 9,307 10,276 -------------------- --------------------- ------------------- OILFIELD EQUIPMENT & SERVICES (2.0%): - 2,593 2,593 -------------------- --------------------- ------------------- PHARMACEUTICALS (1.3%): 11,000 360 360 19,400 526 526 14,850 717 717 -------------------- --------------------- ------------------- 1,603 - 1,603 -------------------- --------------------- ------------------- RESTAURANTS (9.3%): 3,781 3,781 2,269 2,269 1,573 1,573 1,470 1,470 2,634 2,634 -------------------- --------------------- ------------------- - 11,727 11,727 -------------------- --------------------- ------------------- RETAIL (15.2%): 1,697 1,697 11,300 436 436 2,625 2,625 823 823 1,975 1,975 2,048 2,048 1,554 1,554 2,650 2,650 1,208 1,208 2,396 2,396 1,803 1,803 -------------------- --------------------- ------------------- 436 18,779 19,215 -------------------- --------------------- ------------------- TECHNOLOGY (2.1%): 1,600 66 66 2,102 2,102 10,900 142 142 23,500 341 341 -------------------- --------------------- ------------------- 549 2,102 2,651 -------------------- --------------------- ------------------- B-66 444 TELECOMMUNICATIONS (5.4%): 55,000 55,000 International Telecommunication Data Systems, Inc. 31,700 31,700 InterVoice, Inc. (b) 100,000 100,000 ITC DeltaCom, Inc. (b) 200,000 200,000 World Access, Inc. (b) TELECOMMUNICATIONS-EQUIPMENT (4.7%): 6,700 6,700 American Xtal Technology, Inc. (b) 17,200 17,200 ANTEC Corp. (b) 24,100 24,100 Commscope, Inc. (b) 310,000 310,000 Paging Network, Inc. (b) 68,000 68,000 Scientific-Atlanta, Inc. TRANSPORTATION LEASING & TRUCKING (0.8%): 29,000 29,000 American Freightways Corp. (b) 5,600 5,600 US Freightways Corp. U.S. TREASURY BILLS (0.4%): $ 500 $ 500 9/16/1999 TOTAL U.S. TREASURY BILLS INVESTMENT COMPANIES (0.7%): 861,416 861,416 AMSOUTH PRIME OBLIGATIONS FUND 64 64 BANK OF NEW YORK CASH RESERVE MONEY MARKET FUND TOTAL INVESTMENT COMPANIES REPURCHASE AGREEMENTS (7.7%): $ 9,774 $ 9,774 CANTOR FITZGERALD TELECOMMUNICATIONS (5.4%): 516 516 31,700 479 479 2,638 2,638 3,187 3,187 ---------- ---------- --------- 479 6,341 6,820 ---------- ---------- --------- TELECOMMUNICATIONS-EQUIPMENT (4.7%): 6,700 206 206 17,200 721 721 24,100 825 825 1,666 1,666 2,482 2,482 ---------- ---------- --------- 1,752 4,148 5,900 ---------- ---------- --------- TRANSPORTATION LEASING & TRUCKING (0.8%): 29,000 696 696 5,600 277 277 ---------- ---------- --------- 973 - 973 ---------- ---------- --------- TOTAL COMMON STOCKS $ 22,661 $ 92,733 $ 115,394 ---------- ---------- --------- U.S. TREASURY BILLS (0.4%): $ 500 497 497 ---------- ---------- --------- TOTAL U.S. TREASURY BILLS $ 497 $ - $ 497 ---------- ---------- --------- INVESTMENT COMPANIES (0.7%): 861,416 861 861 * * ---------- ---------- --------- $ $ 861 $ - $ 861 ---------- ---------- --------- REPURCHASE AGREEMENTS (7.7%): 9,774 9,774 ---------- ---------- --------- TOTAL REPURCHASE $ - $ 9,774 $ 9,774 AGREEMENTS ---------- ---------- --------- ---------- ---------- --------- TOTAL (COST $112,438) (a) $ 24,019 $ 102,507 $ 26,526 ---------- ---------- --------- ____________ Percentages indicated are based on net assets of $126,243. * Amount is less than one thousand dollars. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of $20. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation 20,655 Unrealized depreciation (6,587) ------ Net unrealized appreciation 14,068 ====== (b) Represents non-income producing securities. B-67 445 AMSOUTH EQUITY INCOME FUND ISG EQUITY INCOME FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) PRO FORMA AMSOUTH ISG PRO FORMA COMBINED EQUITY INCOME EQUITY INCOME ADJUSTMENTS (NOTE 1) ------------- ------------- ------------ ------------ ASSETS: Investment securities at value (Cost $36,192 and $86,653, respectively) $ 40,285 $ 91,498 $ -- $ 131,783 Interest and dividends receivable 75 145 -- 220 Receivable for capital shares issued 10 42 -- 52 Receivable from brokers for investments sold 1,037 1,718 -- 2,755 Other assets 5 29 -- 34 --------- --------- --------- --------- TOTAL ASSETS 41,412 93,432 -- 134,844 --------- --------- --------- --------- LIABILITIES: Dividends payable -- 70 -- 70 Payable for capital shares redeemed 19 18 -- 37 Payable to brokers for investments purchased 1,007 548 -- 1,555 Accrued expenses and other payables: Advisory fees 15 53 -- 68 Administration fees 1 2 -- 3 Distribution fees 12 15 -- 27 Transfer agent fees 2 -- -- 2 Custodian fees -- 3 -- 3 Other 3 28 -- 31 --------- --------- --------- --------- TOTAL LIABILITIES 1,059 737 -- 1,796 --------- --------- --------- --------- NET ASSETS: Class A Shares 21,526 5,821 -- 27,347 Class B Shares 7,919 7,715 -- 15,634 Institutional Shares 10,908 79,159 -- 90,067 ========= ========= ========= ========= $ 40,353 $ 92,695 $ -- $ 133,048 ========= ========= ========= ========= CAPITAL SHARES OUTSTANDING Class A Shares 1,643 559 (115)(a) 2,087 Class B Shares 607 742 (151)(a) 1,198 Institutional Shares 832 7,600 (1,557)(a) 6,875 --------- --------- --------- --------- 3,082 8,901 (1,823)(a) 10,160 ========= ========= ========= ========= NET ASSET VALUE Class A Shares - redemption price per share $ 13.10 $ 10.41 $ 13.10 ========= ========= ========= Class A Shares - maximum sales charge 4.50% 4.75% 4.50% --------- --------- --------- Class A Shares - POP $ 13.72 $ 10.93 $ 13.72 ========= ========= ========= Class B Shares - offering price per share* $ 13.05 $ 10.40 $ 13.05 ========= ========= ========= Institutional Shares - offering and redemption price per share $ 13.10 $ 10.42 $ 13.10 ========= ========= ========= COMPOSITION OF NET ASSETS Capital 33,870 77,165 -- 111,035 Undistributed (distributions in excess of) 6 (6) -- -- net investment income Undistributed net realized gains (losses) 2,384 10,691 -- 13,075 from investment transactions Net unrealized appreciation (depreciation) of investments 4,093 4,845 -- 8,938 --------- --------- --------- --------- NET ASSETS, JULY 31, 1999 $ 40,353 $ 92,695 $ -- $ 133,048 ========= ========= ========= ========= * Redemption price per share varies by length of time shares are held. (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-68 446 AMSOUTH EQUITY INCOME FUND ISG EQUITY INCOME FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 7/31/99 (AMOUNTS IN THOUSANDS) (UNAUDITED) ISG PRO FORMA AMSOUTH SMALL-CAP PRO FORMA COMBINED EQUITY INCOME EQUITY INCOME ADJUSTMENTS (NOTE 1) ------------- ------------- ----------- -------------- INVESTMENT INCOME Interest Income $ 274 $ 19 $ -- $ 293 Dividend Income 853 2,009 -- 95 Income from securities lending -- 69 (69) -- -------- -------- -------- -------- 1,127 2,097 (69) 388 -------- -------- -------- -------- EXPENSES: Advisory fees 325 549 127 (a) 1,001 Administration fees 81 127 42 (b) 250 Shareholder servicing fees (Class A Shares) 59 4 6 (c) 69 Shareholder servicing fees (Class B Shares) -- 12 20 (d) 32 Shareholder servicing fees (Institutional Shares) -- 68 59 (e) 127 12b-1 fees (Class A Shares) -- 10 (10) (f) -- 12b-1 fees (Class B Shares) 78 37 (20) (g) 95 Accounting fees 54 45 (74) (h) 25 Transfer agent fees 47 85 (71) (i) 61 Custodian fees 2 34 (2) (j) 34 Trustee fees and expenses 1 4 (1) (k) 4 Other expenses 29 88 (56) (k) 61 -------- -------- -------- -------- TOTAL EXPENSES: 676 1,063 20 1,759 Less Waivers: Accounting fees (38) -- 38 (l) -- Transfer agent fees (30) -- 30 (l) -- -------- -------- -------- -------- NET EXPENSES: 608 1,063 88 1,759 -------- -------- -------- -------- NET INVESTMENT INCOME 519 1,034 (157) (1,371) -------- -------- -------- -------- REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS Net realized gains (losses) from investment transaction 2,385 10,112 12,497 Net change in unrealized appreciation (depreciation) from investments 2,356 (1,328) 1,028 -------- -------- -------- -------- Net realized/unrealized gains (losses) from investments 4,741 8,784 -- 13,525 CHANGE IN NET ASSETS RESULTING FROM -------- -------- -------- -------- OPERATIONS: $ 5,260 $ 9,818 $ (157) $ 12,154 ======== ======== ======== ======== NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.80% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. B-69 447 AMSOUTH EQUITY INCOME FUND ISG EQUITY INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA EQUITY INCOME EQUITY INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL SHARES SHARES SHARES DESCRIPTION ------------------------------------------ --------------------- ---------------- ------------------------------------- COMMON STOCKS & SECURITIES CONVERTIBLE TO COMMON STOCK (91.4%): BANKING (4.3%): 25,500 25,500 Bank of America Corp. 19,000 19,000 First Tennessee National Corp. 19,000 19,000 KeyCorp 16,000 16,000 Wachovia Corp. 37,100 37,100 Wells Fargo Co. BASIC MATERIALS (1.7%): 8,600 13,500 22,100 E.I. du Pont de Nemours & Co. 10,600 10,600 Sealed Air Corp., CVT. PFD., 4/1/18 CAPITAL GOODS/DIVERSIFIED (3.7%): 9,700 16,900 26,600 Emerson Electric Co. 10,400 12,500 22,900 General Electric Co. 31,000 31,000 Ingersoll-Rand Co., 6.75%, CVT. PFD., 12/31/49 CHEMICALS (0.9%): 10,000 10,000 Air Products & Chemicals, Inc. 34,000 34,000 Sherwin-Williams Co. CONSUMER CYCLICAL (3.1%): 17,000 17,000 Colgate Palmolive Co. 8,450 16,000 24,450 Ford Motor Co. 8,500 8,500 Mattel, Inc. 17,500 17,500 Minnesota Mining & Manufacturing 11,700 11,700 Tribune/The Learning Co., 6.25%, CVT. PFD., 8/1/01 ENERGY (6.4%): 13,000 13,000 Enron Corp. 16,400 16,400 Exxon Corp. 22,500 22,500 Halliburton Co. 9,300 12,500 21,800 Mobil Corp. 16,000 16,000 Shell Transport & Trading Co. PLC (ADR) 18,100 18,100 Texaco, Inc. 23,200 23,200 Williams Cos., Inc. FINANCE (7.4%): 6,700 6,700 American Express Co. 19,350 25,750 45,100 Citigroup Inc. 8,700 27,900 36,600 Fannie Mae 6,775 6,775 J.P. Morgan & Co., Inc. 8,750 8,750 Jefferson Pilot/Bank America (ACES) 44,400 44,400 Lincoln National Corp., 7.75%, CVT. PFD., 8/16/01 10,000 10,000 Merrill Lynch & Co., Inc. 28,000 28,000 National Australia Bank, 7.88%, CVT. PFD., 12/31/49 AMSOUTH AMSOUTH ISG PRO FORMA EQUITY INCOME EQUITY INCOME EQUITY INCOME COMBINED PRINCIPAL MARKET MARKET MARKET SHARES VALUE VALUE VALUE ------------------------------------------ ------------------- ----------------------- ------------------- COMMON STOCKS & SECURITIES CONVERTIBLE TO COMMON STOCK (91.4%): BANKING (4.3%): $ 1,692 $ 1,692 696 696 599 599 1,249 1,249 1,447 1,447 ------------------- ----------------------- ------------------- - 5,683 5,683 ------------------- ----------------------- ------------------- BASIC MATERIALS (1.7%): 8,600 $ 620 972 1,592 10,600 652 652 ------------------- ----------------------- ------------------- 1,272 972 2,244 ------------------- ----------------------- ------------------- CAPITAL GOODS/DIVERSIFIED (3.7%): 9,700 579 1,009 1,588 10,400 1,134 1,362 2,496 31,000 930 930 ------------------- ----------------------- ------------------- 2,643 2,371 5,014 ------------------- ----------------------- ------------------- CHEMICALS (0.9%): 334 334 918 918 ------------------- ----------------------- ------------------- - 1,252 1,252 ------------------- ----------------------- ------------------- CONSUMER CYCLICAL (3.1%): 839 839 8,450 411 778 1,189 8,500 200 200 1,539 1,539 11,700 304 304 ------------------- ----------------------- ------------------- 915 3,156 4,071 ------------------- ----------------------- ------------------- ENERGY (6.4%): 1,107 1,107 1,302 1,302 1,038 1,038 9,300 951 1,278 2,229 16,000 773 773 1,128 1,128 23,200 976 976 ------------------- ----------------------- ------------------- 2,700 5,853 8,553 ------------------- ----------------------- ------------------- FINANCE (7.4%): 883 883 19,350 862 1,148 2,010 8,700 600 1,925 2,525 6,775 866 866 8,750 980 980 44,400 1,188 1,188 10,000 681 681 28,000 791 791 ------------------- ----------------------- ------------------- 5,968 3,956 9,924 ------------------- ----------------------- ------------------- B-70 448 HEALTHCARE (8.6%): 34,000 34,000 Abbott Laboratories 12,900 12,900 American Home Products Corp. 770,000 770,000 Athena Neurosciences Inc., 4.75%, CVT. BD., 11/15/04 11,800 16,800 28,600 Bristol-Myers Squibb Co. 450,000 450,000 Centocor Inc.\ JNJ 12,500 12,500 Hillenbrand Industries, Inc. 4,000 4,000 Johnson & Johnson 23,500 23,500 Merck & Co., Inc. 16,700 16,700 Monsanto (ACES) 6.50%, CVT. PFD., 11/30/01 11,500 11,500 Pharmacia & Upjohn Inc. 22,000 22,000 Schering Plough Corp. 17,500 17,500 Warner Lambert Co. INSURANCE (2.5%): 22,500 22,500 Allstate Corp. 35,000 35,000 Conseco, Inc. 32,000 32,000 Torchmark Corp. 16,000 16,000 Washington Mutual Inc. REAL ESTATE (2.4%): 21,000 21,000 Equity Residential Property 28,000 28,000 Post Properties 31,000 31,000 Spieker Properties RETAILING (4.9%): 1,340,000 1,340,000 Costco Companies 29,000 29,000 CVS Corp. 9,500 9,500 Dayton Hudson Corp. 13,800 13,800 Dollar General 11,000 31,500 42,500 Dollar General STRYPES Trust 390,000 390,000 Rite Aid Corp. 18,000 18,000 Wal Mart Stores, Inc. SERVICES (5.2%): 13,000 13,000 Gannett Co., Inc. 19,900 33,500 53,400 McDonald's Corp. 26,500 26,500 McGraw Hill Cos., Inc. 390,000 390,000 Omnicom Group 26,000 26,000 SYSCO Corp. 20,300 20,300 The Walt Disney Co. STAPLES (8.8%): 19,500 19,500 Bestfoods 5,000 5,000 Campbell Soup Co. 8,000 8,000 Coca Cola Co. 6,200 6,200 Estee Lauder 36,000 36,000 H.J. Heinz Co. 8,800 8,800 Hershey Foods Corp. 17,400 17,400 McCormick & Co., Inc. 52,000 52,000 Pepsi Bottling Group, Inc. 10,000 10,000 PepsiCo, Inc. 48,200 48,200 Philip Morris Cos., Inc. 13,000 13,000 Procter & Gamble Co. 13,500 13,500 Quaker Oats Co. 18,000 18,000 Unilever TECHNOLOGY (14.2%): 32,700 32,700 Amdocs LTD., 6.75%, CVT.PFD., 9/11/02 57,200 57,200 Automatic Data Processing, Inc. 13,400 13,400 Corning Glass Works 12,000 12,000 Electronic Data Systems Corp. 180,000 50,000 230,000 EMC Corp., 3.25%, CVT. BD., 3/15/02 9,500 9,500 Hewlett-Packard Co. 6,400 8,000 14,400 IBM. Corp. HEALTHCARE (8.6%): 1,460 1,460 658 658 823 823 785 1,116 1,901 576 576 562 562 369 369 1,590 1,590 685 685 619 619 1,078 1,078 1,155 1,155 ------------------- ----------------------- ------------------- 4,515 6,961 11,476 ------------------- ----------------------- ------------------- INSURANCE (2.5%): 799 799 1,008 1,008 1,052 1,052 549 549 ------------------- ----------------------- ------------------- - 3,408 3,408 ------------------- ----------------------- ------------------- REAL ESTATE (2.4%): 868 868 1,120 1,120 1,185 1,185 ------------------- ----------------------- ------------------- - 3,173 3,173 ------------------- ----------------------- ------------------- RETAILING (4.9%): 1,185 1,185 1,442 1,442 615 615 365 365 456 1,304 1,760 379 379 761 761 ------------------- ----------------------- ------------------- 2,385 4,122 6,507 ------------------- ----------------------- ------------------- SERVICES (5.2%): 939 939 830 1,396 2,226 1,348 1,348 888 888 850 850 561 561 ------------------- ----------------------- ------------------- 2,279 4,533 6,812 ------------------- ----------------------- ------------------- STAPLES (8.8%): 951 951 220 220 483 483 570 570 1,697 1,697 510 510 575 575 1,229 1,229 391 391 1,794 1,794 1,177 1,177 919 919 1,258 1,258 ------------------- ----------------------- ------------------- 3,057 8,717 11,774 ------------------- ----------------------- ------------------- TECHNOLOGY (14.2%): 834 834 2,291 2,291 938 938 724 724 976 271 1,247 995 995 804 1,006 1,810 B-71 449 4,400 4,400 Intel Corp. 290,000 290,000 Level One Communications\ Intel 9,300 9,300 Motorola, Inc. 26,000 26,000 Nextel STRYPES Trust 12,600 27,500 40,100 Pitney Bowes, Inc. 13,000 13,000 Raytheon Co., Class B 7,300 7,300 Texas Instruments, Inc. 10,800 18,100 28,900 United Technologies Corp. 11,900 11,900 Xerox Corp. TRANSPORTATION (1.5%): 32,500 32,500 CSX Corp. 7,400 7,400 Union Pacific Corp. (b) UTILITIES (15.8%): 43,750 43,750 A T & T Corp. 12,200 12,200 Ameritech Corp. 24,700 24,700 BCE, Inc. 35,500 35,500 Duke Energy Corp. 27,000 27,000 GTE Corp. 6,000 6,000 Honeywell, Inc. 20,300 20,300 Nisource Inc., 7.75%, CVT. PFD., 2/19/03 32,500 32,500 Nisource, Inc. 18,300 18,300 Royal Dutch Petroleum Co. ADR 33,000 33,000 SBC Communications, Inc. 53,280 53,280 Sierra Pacific Resources 32,100 32,100 Skytel Communications Inc./WorldCom (b) 25,500 25,500 Sonat, Inc. 12,400 12,400 Sprint Corp. 6,500 6,500 Telefonos De Mexico, Sponsored ADR 25,500 25,500 Texas Utilities Co., 9.25%, PRIDES 45,000 45,000 Washington Gas & Light Co. INVESTMENT COMPANIES (8.2%): 4,439,481 4,439,481 AIM Liquid Assets 2,741,037 2,741,037 AIM Stic Prime 208,614 208,614 AmSouth Prime Obligations Fund 1,077,202 1,077,202 Bank of New York Deposit Account 12,000 12,000 S & P 500 Depositary Receipt 304 304 674 674 849 849 1,179 1,179 802 1,748 2,550 914 914 1,050 1,050 720 1,207 1,927 580 580 ------------------- ----------------------- ------------------- 9,710 9,156 18,866 ------------------- ----------------------- ------------------- TRANSPORTATION (1.5%): 1,574 1,574 381 381 ------------------- ----------------------- ------------------- 381 1,574 1,955 ------------------- ----------------------- ------------------- UTILITIES (15.8%): 2,278 2,278 894 894 1,227 1,227 1,879 1,879 1,991 1,991 719 719 974 974 843 843 1,116 1,116 1,887 1,887 1,385 1,385 1,156 1,156 897 897 641 641 491 491 1,379 1,379 1,254 1,254 ------------------- ----------------------- ------------------- 4,251 16,760 21,011 ------------------- ----------------------- ------------------- ------------------- ----------------------- ------------------- TOTAL COMMON STOCKS & SECURITIES $ 40,076 $ 81,647 $ 127,723 CONVERTIBLE TO COMMON STOCK ------------------- ----------------------- ------------------- INVESTMENT COMPANIES (8.2%): 4,439 4,439 2,741 2,741 209 209 1,077 1,077 1,594 1,594 ------------------- ----------------------- ------------------- TOTAL INVESTMENT COMPANIES $ 209 $ 9,851 $ 10,060 ------------------- ----------------------- ------------------- ------------------- ----------------------- ------------------- TOTAL (COST $122,845) (a) $ 40,285 $ 91,498 $ 131,783 ------------------- ----------------------- ------------------- ------------------------------------------ Percentages indicated are based on net assets of $133,048. (a) Represents cost for financial reporting purposes and differs from cost basis for federal income tax purposes by the amount of losses recognized for financial reporting in excess of federal income tax reporting of $137. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation 12,470 Unrealized depreciation (3,669) ------- Net unrealized appreciation 8,801 ======= (b) Represents a restricted security, purchased under Rule 144A, which is exempt from registration un the Security Act of 1933, as amended. These securities have been deemed liquid under guidelines established by the Board of Trustees. ACES - Automatic Common Exchange Securities ADR - American Depository Receipt CVT. PFD. - Convertible Preferred CVT. BD. - Convertible Bond PLC - Public Limited Co. STRYPES - Structured Yield Product Exchangeable for Stock Breakdown of Sectors -------------------- Common Stocks - 58.3% Convertible Preferred Stocks - 27.5% Convertible Bonds - 13.7% Investment Companies - 0.5% B-72 450 AMSOUTH BOND FUND ISG INCOME FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) PRO FORMA AMSOUTH ISG PRO FORMA COMBINED BOND INCOME ADJUSTMENTS (NOTE 1) ------------ --------------- ---------------- ----------------- ASSETS: Investment in securities, at value (cost $385,361 and $100,292, respectively) $ 383,287 $ 97,519 $ -- $ 480,806 Interest and dividends receivable 6,731 1,431 -- 8,162 Other assets 15 22 -- 37 --------- --------- --------- --------- TOTAL ASSETS 390,033 98,972 -- 489,005 --------- --------- --------- --------- LIABILITIES: Cash overdraft -- 2 -- 2 Distributions Payable -- 439 -- 439 Payable for capital shares redeemed 83 -- -- 83 Accrued expenses and other payables: Advisory fees 86 41 -- 127 Administration fees 5 2 -- 7 Distribution fees 3 14 -- 17 Accounting fees 2 2 -- 4 Transfer agent fees 9 3 -- 12 Custodian fees 4 7 -- 11 Other 24 21 -- 45 --------- --------- --------- --------- TOTAL LIABILITIES 216 531 -- 747 --------- --------- --------- --------- NET ASSETS: Class A Shares 7,070 3,593 -- 10,663 Class B Shares 2,521 1,348 -- 3,869 Institutional Shares 380,226 93,500 -- 473,726 --------- --------- --------- --------- $ 389,817 $ 98,441 $ -- $ 488,258 ========= ========= ========= ========= CAPITAL SHARES OUTSTANDING Class A Shares 665 368 (30)(a) 1,003 Class B Shares 238 138 (11)(a) 365 Institutional Shares 35,778 9,583 (787)(a) 44,574 --------- --------- --------- --------- 36,681 10,089 (828)(a) 45,942 ========= ========= ========= ========= NET ASSET VALUE Class A Shares - redemption price per share $ 10.63 $ 9.76 $ 10.63 ========= ========= ========= Class A Shares - maximum sales charge 4.00% 3.00% 4.00% --------- --------- --------- Class A Shares - POP $ 11.07 $ 10.06 $ 11.07 ========= ========= ========= Class B Shares - offering price per share* $ 10.60 $ 9.75 $ 10.60 ========= ========= ========= Institutional Shares - offering and redemption price per share $ 10.63 $ 9.76 $ 10.63 ========= ========= ========= COMPOSITION OF NET ASSETS Capital $ 389,653 $ 101,315 $ -- $ 490,968 Undistributed (distributions in excess of) net investment income 1,421 (33) -- 1,388 Undistributed net realized gains (losses) from investment transactions 817 (68) -- 749 Net unrealized appreciation (depreciation) of investments (2,074) (2,773) -- (4,847) --------- --------- --------- --------- NET ASSETS, JULY 31, 1999 $ 389,817 $ 98,441 $ -- $ 488,258 ========= ========= ========= ========= * Redemption price per share varies by length of time shares are held. (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-73 451 AMSOUTH BOND FUND ISG INCOME FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 7/31/99 (AMOUNTS IN THOUSANDS) (UNAUDITED) PRO FORMA AMSOUTH ISG PRO FORMA COMBINED BOND INCOME ADJUSTMENTS (NOTE 1) ---------- ------------ ------------ ------------- INVESTMENT INCOME: Interest Income $ 22,088 $ 5,234 $ -- $ 27,322 Dividend Income 292 191 -- 483 Income from securities lending -- 2 (2)(l) -- -------- -------- -------- -------- 22,380 5,427 (2) 27,805 -------- -------- -------- -------- EXPENSES: Advisory fees 2,319 427 129 (a) 2,875 Administration fees 714 128 43 (b) 885 Shareholder servicing fees (Class A Shares) 18 3 5 (c) 26 Shareholder servicing fees (Class B Shares) -- 3 4 (d) 7 Shareholder servicing fees (Institutional Shares) -- 73 571 (e) 644 12b-1 fees (Class A Shares) -- 7 (7)(f) -- 12b-1 fees (Class B Shares) 17 10 (5)(g) 22 Accounting fees 140 49 (159)(h) 30 Transfer agent fees 99 60 (58)(i) 101 Custodian fees 21 26 75 (j) 122 Trustee fees and expenses 8 4 (4)(k) 8 Other expenses 89 82 (77)(k) 94 -------- -------- -------- -------- TOTAL EXPENSES: 3,425 872 517 4,814 Less Waivers Advisory fees (535) -- 535 (a) -- Administration fees (285) -- 285 (b) -- Shareholder servicing fees (Class A Shares) (11) -- 11 (c) -- Accounting fees (20) -- 20 (h) -- Transfer agent fees (30) -- 30 (i) -- -------- -------- -------- -------- NET EXPENSES: 2,544 872 1,398 4,814 -------- -------- -------- -------- NET INVESTMENT INCOME (LOSS) 19,836 4,555 (1,400) 22,991 -------- -------- -------- -------- REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS Net realized gains (losses) from investment transaction 3,588 12 -- 3,600 Net change in unrealized appreciation (depreciation) from investments (15,033) (3,881) -- (18,914) -------- -------- -------- -------- Net realized/unrealized gains (losses) from investments (11,445) (3,869) -- (15,314) CHANGE IN NET ASSETS RESULTING FROM -------- -------- -------- -------- OPERATIONS: $ 8,391 $ 686 $ (1,400) $ 7,677 ======== ======== ======== ======== Notes to Pro Forma Financial Statements (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.80% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect no securities lending income since there is not a securities lending program set up on the AmSouth Funds. B-74 452 AMSOUTH BOND FUND ISG INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ----------------------- --------------------- ------------------- ----------------------------------------------- CORPORATE BONDS (52.6%): AEROSPACE/DEFENSE (0.6%): $ 3,000 $ 3,000 Boeing Corp., 6.88%, 11/1/06 Appliances (0.1%): 500 500 Whirlpool Corp., 9.50%, 6/15/00 Automotive (0.2%): 908 908 General Motors Corp., 9.63%, 12/1/00 Automotive-Finance (2.0%): 3,485 3,485 Ford Motor Credit Co., 6.25%, 12/8/05 $ 1,500 1,500 General Motors Acceptance Corp., 5.80%, 4/9/01 2,000 2,000 General Motors Acceptance Corp., 6.15%, 4/7/07 3,000 3,000 Toyota Motor Credit Corp., 5.50%, 9/17/01 BANKING (6.3%): 1,750 1,750 ABN AMRO Bank, 6.63%, 10/31/01 2,000 2,000 AmSouth Bancorp., 6.13%, 3/1/09 1,150 1,150 Bank of America Corp., 9.50%, 4/1/01 3,157 3,157 Bank One Corp., 7.00%, 7/15/05 1,000 1,000 Bank One, Texas, 6.25%, 2/15/08 4,000 4,000 Fifth Third Bank, 6.75%, 7/15/05 1,700 1,700 First Union Corp., 6.18%, 2/15/36 3,856 3,856 J.P. Morgan & Co., 7.63%, 9/15/04 1,500 1,500 National City Corp., 6.88%, 5/15/19 4,306 4,306 NationsBank Corp., 5.38%, 4/15/00 1,100 1,100 NationsBank Corp., 7.75%, 8/15/15 3,159 3,159 SunTrust Banks, Inc., 7.38%, 7/1/06 2,100 2,100 Wachovia Corp., 6.61%, 10/1/25 BEVERAGES (1.2%): 2,250 2,250 Anheuser-Busch, 7.13%, 7/1/17 3,500 3,500 Coca-Cola Enterprises, Inc., 6.38%, 8/1/01 BROKERAGE SERVICES (1.7%): 2,910 2,910 Bear Stearns & Co., Inc., 6.63%, 10/1/04 3,500 3,500 Dean Witter Discover & Co., 6.50%, 11/1/05 750 750 Merrill Lynch & Co., Inc., 8.25%, 11/15/99 1,450 1,450 Merrill Lynch & Co., Inc., 6.00%, 2/12/03 AMSOUTH AMSOUTH ISG PRO FORMA BOND BOND INCOME COMBINED PRINCIPAL MARKET MARKET MARKET AMOUNT/SHARES VALUE VALUE VALUE ----------------------- ------------------------- --------------------------------- ---------------------- CORPORATE BONDS (52.6%): AEROSPACE/DEFENSE (0.6%): $ 3,000 $ 3,000 $ - $ 3,000 ------------------------- --------------------------------- ---------------------- APPLIANCES (0.1%): 500 514 - 514 ------------------------- --------------------------------- ---------------------- AUTOMOTIVE (0.2%): 908 945 - 945 ------------------------- --------------------------------- ---------------------- AUTOMOTIVE-FINANCE (2.0%): 3,485 3,341 3,341 1,485 1,485 2,000 1,898 1,898 3,000 2,951 2,951 ------------------------- --------------------------------- ---------------------- 8,190 1,485 9,675 ------------------------- --------------------------------- ---------------------- BANKING (6.3%): 1,757 1,757 1,843 1,843 1,150 1,206 1,206 3,157 3,157 3,157 943 943 4,000 3,965 3,965 1,628 1,628 3,856 3,952 3,952 1,391 1,391 4,306 4,296 4,296 1,132 1,132 3,159 3,222 3,222 2,062 2,062 ------------------------- --------------------------------- ---------------------- 19,798 10,756 30,554 ------------------------- --------------------------------- ---------------------- BEVERAGES (1.2%): 2,205 2,205 3,500 3,509 3,509 ------------------------- --------------------------------- ---------------------- 3,509 2,205 5,714 ------------------------- --------------------------------- ---------------------- BROKERAGE SERVICES (1.7%): 2,910 2,826 2,826 3,500 3,387 3,387 750 756 756 1,450 1,419 1,419 ------------------------- --------------------------------- ---------------------- 8,388 - 8,388 ------------------------- --------------------------------- ---------------------- B-75 453 BUILDING PRODUCTS (0.4%): 2,000 2,000 Vulcan Materials, 6.00%, 4/1/09 CHEMICALS (0.3%): 1,500 1,500 Eastman Chemical, 6.38%, 1/15/04 ELECTRONIC COMPONENTS/ INSTRUMENTS (0.9%): 2,000 2,000 Honeywell, Inc., 7.00%, 3/15/07 2,500 2,500 Motorola, Inc., 6.50%, 11/15/28 ENTERTAINMENT (0.6%): 3,000 3,000 Walt Disney Company, 5.13%, 12/15/03 FINANCIAL SERVICES (6.0%): 2,000 2,000 American Express Credit Corp., 6.50%, 8/1/00 3,500 3,500 Ameritech Capital, 5.65%, 1/15/01 800 800 Associates Corp., 7.32%, 1/13/03 2,000 2,000 Associates Corp., 5.75%, 10/15/03 3,000 3,000 Associates Corp., 5.75%, 11/01/03 3,091 3,091 Avco Financial Service Corp., 5.50%, 4/1/00 3,000 3,000 Commercial Credit Co., 7.38%, 3/15/02 3,000 3,000 Commercial Credit Co., 6.50%, 8/1/04 2,400 2,400 Countrywide Home Loan, 6.84%, 10/22/04 2,000 2,000 Ford Motor Credit, 7.35%, 11/7/11 1,500 1,500 General Electric, 7.50%, 8/21/35 1,000 1,000 Margaretten Financial Corp., 6.75%, 6/15/00 2,000 2,000 Norwest Financial, Inc., 6.63%, 7/15/04 FOOD PRODUCTS & SERVICES (1.3%): 2,500 2,500 Best Foods, 6.63%, 4/15/28 2,750 2,750 Campbell Soup Co., 6.15%, 12/1/02 1,250 1,250 Sara Lee Corp., 6.15%, 6/19/08 FOREST & PAPER PRODUCTS (0.8%): 1,000 1,000 International Paper Co., 6.88%, 7/10/00 3,000 3,000 Mead Corp., 6.60%, 3/1/02 INDUSTRIAL GOODS & SERVICES (4.8%): 3,000 3,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02 2,500 2,500 Albertson's, Inc., 6.52%, 4/10/28, MTN 2,655 2,655 Browning-Ferris Industries, Inc., 6.10%, 1/15/03 2,000 2,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02 2,570 2,570 E. I. Dupont de Nemours & Co., 6.75%, 10/15/02 2,000 2,000 First Data Corp., 6.75%, 7/15/05 2,000 2,000 H.J. Heinz Co., 6.38%, 7/15/28 1,500 1,500 Illinois Tool Works, Inc., 5.88%, 3/1/00 1,000 1,000 Lockheed Martin Corp., 7.875%, 3/15/23 1,500 1,500 Reliance Electric Co., 6.80%, 4/15/03 3,456 3,456 Rockwell International Corp., 6.63%, 6/1/05 INSURANCE (2.1%): 1,000 1,000 AON Corp., 6.88%, 10/1/99 1,600 1,600 Capital Holding Corp., 9.20%, 4/17/01 330 330 Chubb Corp., 8.75%, 11/15/99 1,000 1,000 Chubb Corp., 6.15%, 8/15/05 3,100 3,100 Hartford Life, Inc., 6.90%, 6/15/04 2,000 2,000 Travelers Property Casualty, 6.75%, 4/15/01 1,250 1,250 USLife Corp., 6.38%, 6/15/00 BUILDING PRODUCTS (0.4%): 2,000 1,858 - 1,858 ---------------------- ------------------------- ---------------------- CHEMICALS (0.3%): - 1,466 1,466 ---------------------- ------------------------- ---------------------- ELECTRONIC COMPONENTS/ INSTRUMENTS (0.9%): 2,000 1,998 1,998 2,206 2,206 ---------------------- ------------------------- ---------------------- 1,998 2,206 4,204 ---------------------- ------------------------- ---------------------- ENTERTAINMENT (0.6%): 3,000 2,831 - 2,831 ---------------------- ------------------------- ---------------------- FINANCIAL SERVICES (6.0%): 2,000 2,012 2,012 3,500 3,477 3,477 813 813 2,000 1,913 1,913 3,000 2,869 2,869 3,091 3,086 3,086 3,000 3,060 3,060 3,000 2,951 2,951 2,382 2,382 1,990 1,990 1,560 1,000 1,006 2,566 2,000 1,970 1,970 ---------------------- ------------------------- ---------------------- 22,344 6,745 29,089 ---------------------- ------------------------- ---------------------- FOOD PRODUCTS & SERVICES (1.3%): 2,266 2,266 2,750 2,740 2,740 1,194 1,194 ---------------------- ------------------------- ---------------------- 2,740 3,460 6,200 ---------------------- ------------------------- ---------------------- FOREST & PAPER PRODUCTS (0.8%): 1,004 1,004 3,000 2,981 2,981 ---------------------- ------------------------- ---------------------- 2,981 1,004 3,985 ---------------------- ------------------------- ---------------------- INDUSTRIAL GOODS & SERVICES (4.8%): 3,000 3,124 3,124 2,194 2,194 2,655 2,446 2,446 2,000 2,005 2,005 2,570 2,596 2,596 2,000 1,993 1,993 1,813 1,813 1,500 1,502 1,502 981 981 1,513 1,513 3,456 3,433 3,433 ---------------------- ------------------------- ---------------------- 17,099 6,501 23,600 ---------------------- ------------------------- ---------------------- INSURANCE (2.1%): 1,000 1,001 1,001 1,600 1,670 1,670 330 333 333 1,000 963 963 3,100 3,088 3,088 2,008 2,008 1,250 1,250 ---------------------- ------------------------- ---------------------- 7,055 3,258 10,313 ---------------------- ------------------------- ---------------------- B-76 454 OFFICE EQUIPMENT & SERVICES (0.5%): 2,200 2,200 Xerox Corp., 7.15%, 8/1/04 OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.4%): 3,158 3,158 BP America, Inc., 9.38%, 11/1/00 1,000 1,000 Conoco Inc., 6.35%, 4/15/09 864 864 Exxon Capital Corp., 7.45%, 12/15/01 2,000 2,000 Phillips Petroleum Co., 6.38%, 3/30/09 PHARMACEUTICALS (0.6%): 3,000 3,000 Warner-Lambert Co., 5.75%, 1/15/03 PHOTOGRAPHY (0.7%): 3,100 3,100 Eastman Kodak, 9.38%, 3/15/03 POLLUTION CONTROL SERVICES & EQUIPMENT (0.9%): 2,449 2,449 Waste Management, Inc., 6.38%, 12/1/03 2,000 2,000 Waste Management, Inc., 7.00%, 5/15/05 RAILROADS (0.2%): 1,000 1,000 Union Pacific Corp., 7.00%, 6/15/00 RETAIL (3.2%): 2,000 2,000 Autozone, 6.50%, 7/15/08 1,500 1,500 Dayton Hudson Co., 6.80%, 10/1/01 1,500 1,500 JCPenney & Co., 6.50%, 6/15/02 2,000 2,000 JCPenney & Co., 6.13%, 11/15/03 1,000 1,000 May Department Stores Co., 7.15%, 8/15/04 3,000 3,000 Nike, Inc., 6.38%, 12/1/03 4,000 4,000 Wal-Mart Stores, Inc., 5.85%, 6/1/00 1,000 1,000 Wal-Mart Stores, Inc., 6.75%, 5/15/02 TELECOMMUNICATIONS (0.8%): 2,000 2,000 IBM Corp., 6.50%, 1/15/28 1,000 1,000 IBM Corp., 6.25%, 2/24/00 1,250 1,250 Worldcom, Inc., 6.13%, 8/15/01 TOOLS (0.4%): 2,000 2,000 Stanley Works, 5.75%, 3/1/04 UTILITIES-ELECTRIC & GAS (9.5%): 3,100 3,100 Baltimore Gas & Electric, 7.50%, 1/15/07 1,500 1,500 Cincinnati Gas & Electric, 6.45%, 2/15/04 2,000 2,000 Consolidated Edison Co. of New York, Inc., 6.63%, 2/1/02 1,600 1,600 Consolidated Natural Gas, 6.80%, 12/15/27 1,500 1,500 Florida Power Corp., 6.54%, 7/1/02 1,725 1,725 Houston Light & Power, 6.10%, 3/1/00 1,600 1,600 National Rural Utilities, 6.49%, 7/10/02 3,500 3,500 National Rural Utilities, 5.00%, 10/1/02 3,100 3,100 National Rural Utilities, 6.38%, 10/15/04 2,750 2,750 Northern States Power Co., 7.88%, 10/1/01 2,250 2,250 Oklahoma Gas & Electric Co., 6.25%, 10/15/00 2,500 2,500 Potomac Electric Power, 6.00%, 4/1/04 2,400 2,400 Public Service Electric & Gas, 6.25%, 1/1/07 1,500 1,500 Puget Sound Power & Light, 6.61%, 2/9/00 2,500 2,500 SCANA Corp., Series B, 6.25%, 7/8/03, MTN 2,050 2,050 Smith Enron, 5.97%, 12/15/06 2,000 2,000 Tampa Electric Co., 6.13%, 5/1/03 1,750 1,750 Virginia Electric & Power Co., 6.63%, 4/1/03 2,500 2,500 Virginia Electric & Power Co., 8.00%, 3/1/04 1,500 1,500 Washington Gas Light, 6.85%, 3/9/28 3,500 3,500 Wisconsin Electric Power, 6.63%, 11/15/06 OFFICE EQUIPMENT & SERVICES (0.5%): 2,200 2,247 - 2,247 ------------------- ------------------ -------------------- OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.4%): 3,158 3,284 3,284 1,000 951 951 864 886 886 2,000 1,895 1,895 ------------------- ------------------ -------------------- 7,016 - 7,016 ------------------- ------------------ -------------------- PHARMACEUTICALS (0.6%): 3,000 2,936 - 2,936 ------------------- ------------------ -------------------- PHOTOGRAPHY (0.7%): 3,100 3,379 - 3,379 ------------------- ------------------ -------------------- POLLUTION CONTROL SERVICES & EQUIPMENT (0.9%): 2,449 2,412 2,412 2,000 1,985 1,985 ------------------- ------------------ -------------------- 4,397 - 4,397 ------------------- ------------------ -------------------- RAILROADS (0.2%): 1,000 1,006 - 1,006 ------------------- ------------------ -------------------- RETAIL (3.2%): 1,885 1,885 1,515 1,515 1,487 1,487 2,000 1,930 1,930 1,015 1,015 3,000 2,959 2,959 4,000 4,004 4,004 1,000 1,013 1,013 ------------------- ------------------ -------------------- 9,906 5,902 15,808 ------------------- ------------------ -------------------- TELECOMMUNICATIONS (0.8%): 1,830 1,830 1,000 1,000 1,241 1,241 ------------------- ------------------ -------------------- - 4,071 4,071 ------------------- ------------------ -------------------- TOOLS (0.4%): 2,000 1,938 - 1,938 ------------------- ------------------ -------------------- UTILITIES-ELECTRIC & GAS (9.5%): 3,100 3,216 3,216 1,491 1,491 2,000 2,013 2,013 1,454 1,454 1,500 1,500 1,725 1,725 1,602 1,602 3,500 3,346 3,346 3,100 3,030 3,030 2,750 2,839 2,839 2,250 2,256 2,256 2,433 2,433 2,301 2,301 1,506 1,506 2,455 2,455 2,019 2,019 2,000 1,968 1,968 1,750 1,750 2,500 2,625 2,625 1,395 1,395 3,500 3,425 3,425 ------------------- ------------------ -------------------- 24,718 21,631 46,349 ------------------- ------------------ -------------------- B-77 455 UTILITIES-TELECOMMUNICATIONS (5.1%): 1,500 1,500 AT&T Corp., 6.50%, 3/15/29 2,000 2,000 BellAtlantic Corp., 6.25%, 2/15/04 3,500 3,500 BellSouth Telecommunications, 6.50%, 6/15/05 475 475 BellSouth Telecommunications, 8.25%, 7/1/32 2,009 2,009 Chesapeake & Potomac Telephone, 6.00%, 5/1/03 2,000 2,000 GTE California, Inc., 5.63%, 2/1/01 1,450 1,450 GTE Corp., 7.90%, 2/1/27 2,295 2,295 GTE Northwest, Inc., Series A, 7.38%, 5/1/01 1,650 1,650 GTE Southwest, Inc., Series A, 5.82%, 12/1/99 500 500 Michigan Bell Telephone, 5.88%, 9/15/99 2,000 2,000 Southern New England Telecommunications Corp., 6.50%, 2/15/02 2,000 2,000 Southwestern Bell Telephone, 6.63%, 4/1/05 4,000 4,000 US West Communications Group, 6.63%, 9/15/05 MUNICIPAL BONDS (0.2%): GEORGIA (0.2%): 800 800 Atlanta Downtown Development Lease Revenue Bond, 6.88%, 2/1/21 U.S. GOVERNMENT AGENCIES (12.2%): FANNIE MAE (7.3%): 1,000 1,000 6.35%, 11/23/01 3,000 3,000 6.59%, 5/21/02 7,500 7,500 7.05%, 11/12/02 17,600 17,600 5.13%, 2/13/04 7,300 7,300 6.56% 11/26/07 FREDDIE MAC (0.6%): 700 700 7.14%, 3/12/07 2,000 2,000 7.10%, 4/10/07 GOVERNMENT NATIONAL MORTGAGE ASSOC. (3.6%): 364 364 8.00%, 5/15/10 762 762 6.50%, 8/15/11 584 584 7.50%, 8/15/11 1,023 1,023 7.00%, 9/15/11 9,279 9,279 7.00%, 11/20/28 1,449 1,449 6.50%, 1/15/29 1,988 1,988 6.50%, 3/15/29 2,886 2,886 6.50%, 4/20/29 TENNESSEE VALLEY AUTHORITY (0.7%): 4,000 4,000 5.38%, 11/13/08 U.S. TREASURY SECURITIES (28.6%): U.S. TREASURY BILLS (0.2%): 950 950 4.47%, 8/5/99 BONDS (24.3%): 8,000 8,000 5.75%, 8/15/03 15,000 15,000 5.88%, 11/15/05 21,000 21,000 6.50%, 10/15/06 17,833 17,833 3.38%, 1/15/07 17,000 17,000 7.50%, 11/15/16 1,000 1,000 8.13%, 8/15/21 37,360 37,360 6.25%, 8/15/23 UTILITIES-TELECOMMUNICATIONS (5.1%): 1,344 1,344 2,000 1,960 1,960 3,500 3,439 3,439 484 484 2,009 1,971 1,971 2,000 1,983 1,983 1,461 1,461 2,295 2,335 2,335 1,650 1,650 1,650 500 500 500 2,000 2,003 2,003 2,000 1,978 1,978 4,000 3,854 3,854 ------------------------- ------------------------ ---------------------- 21,673 3,289 24,962 ------------------------- ------------------------ ---------------------- TOTAL CORPORATE BONDS $ 182,466 $ 73,979 $ 256,445 ------------------------- ------------------------ ---------------------- MUNICIPAL BONDS (0.2%): GEORGIA (0.2%): - 752 752 ------------------------- ------------------------ ---------------------- TOTAL MUNICIPAL BONDS $ - $ 752 $ 752 ------------------------- ------------------------ ---------------------- U.S. GOVERNMENT AGENCIES (12.2%): FANNIE MAE (7.3%): 1,000 1,000 3,000 3,036 3,036 7,500 7,706 7,706 17,600 16,716 16,716 7,300 7,148 7,148 ------------------------- ------------------------ ---------------------- 34,606 1,000 35,606 ------------------------- ------------------------ ---------------------- FREDDIE MAC (0.6%): 700 704 704 2,000 2,058 2,058 ------------------------- ------------------------ ---------------------- 2,762 - 2,762 ------------------------- ------------------------ ---------------------- GOVERNMENT NATIONAL MORTGAGE ASSOC. (3.6%) 378 378 745 745 596 596 1,022 1,022 9,279 9,014 9,013 1,376 1,376 1,888 1,888 2,727 2,728 ------------------------- ------------------------ ---------------------- 9,014 8,732 17,746 ------------------------- ------------------------ ---------------------- TENNESSEE VALLEY AUTHORITY (0.7%): 4,000 3,632 - 3,632 ------------------------- ------------------------ ---------------------- TOTAL U.S. GOVERNMENT AGENCIES $ 50,014 $ 9,732 $ 59,746 ------------------------- ------------------------ ---------------------- U.S. TREASURY SECURITIES (28.6%): U.S. TREASURY BILLS (0.2%): - 949 949 ------------------------- ------------------------ ---------------------- Bonds (24.3%): 8,000 7,958 7,958 15,000 14,884 14,884 21,000 21,480 21,480 17,833 17,070 17,070 17,000 18,963 18,963 1,206 1,206 37,360 37,060 37,060 ------------------------- ------------------------ ---------------------- 117,415 1,206 118,621 ------------------------- ------------------------ ---------------------- B-78 456 Notes (3.5%): 17,000 17,000 6.13%, 8/15/07 Strips (0.6%): 4,000 4,000 2/15/04 Commercial Paper (0.4%): Financial Services (0.4%): 2,000,000 2,000,000 General Electric Capital Corp., 4.99%, 7/6/99 Investment Companies (4.5%): 4,611,751 4,611,751 Aim Liquid Assets Money Market Fund 4,291,754 4,291,754 AIM Prime Money Market Fund 13,287,510 13,287,510 AmSouth Prime Obligations Fund 7 7 AmSouth U.S. Treasury Fund 1,000 1,000 Bank of New York Cash Reserve Money Market Fund Notes (3.5%): 17,000 17,037 - 17,037 ------------------------- --------------------------------- ---------------------- Strips (0.6%): 4,000 3,067 - 3,067 ------------------------- --------------------------------- ---------------------- TOTAL U.S. TREASURY SECURITIES $ 137,519 $ 2,155 $ 139,674 ------------------------- --------------------------------- ---------------------- Commercial Paper (0.4%): Financial Services (0.4%): - 1,997 1,997 ------------------------- --------------------------------- ---------------------- TOTAL COMMERCIAL PAPER $ - $ 1,997 $ 1,997 ------------------------- --------------------------------- ---------------------- Investment Companies (4.5%): 4,612 4,612 4,291 4,291 13,287,510 13,288 13,288 7 * * 1 1 ------------------------- --------------------------------- ---------------------- TOTAL INVESTMENT COMPANIES $ 13,288 $ 8,904 $ 22,192 ------------------------- --------------------------------- ---------------------- ------------------------- --------------------------------- ---------------------- TOTAL (COST $485,653) (a) $ 383,287 $ 97,519 $ 480,806 ------------------------- --------------------------------- ---------------------- Percentages indicated are based on net assets of $488,258. (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation $ 5,802 Unrealized depreciation (10,649) ------------------- Net unrealized depreciation $ (4,847) =================== * Amount is less than one thousand dollars. MTN - Medium Term Note B-79 457 AMSOUTH GOVERNMENT INCOME FUND ISG GOVERNMENT INCOME FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 07/31/99 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) AMSOUTH ISG PRO FORMA GOVERNMENT GOVERNMENT PRO FORMA COMBINED INCOME INCOME ADJUSTMENTS (NOTE 1) ------------- ------------- ------------ ------------- ASSETS: Investment in securities, at value (Cost $8,566 and $351,112, respectively) $ 8,521 $348,749 $ -- $357,270 Interest and dividends receivable 78 6,406 -- 6,484 Receivable for capital shares issued 1 1 -- 2 Receivable from investment adviser -- 32 32 Other assets 1 26 -- 27 -------- -------- -------- -------- TOTAL ASSETS 8,601 355,214 -- 363,815 -------- -------- -------- -------- LIABILITIES: Dividends Payable -- 1,513 -- 1,513 Payable for capital shares redeemed 8 5 -- 13 Accrued expenses and other payables: Investment advisory fees 1 180 -- 181 Administration fees -- 6 -- 6 Distribution fees -- 46 -- 46 Accounting fees 1 2 -- 3 Transfer agent fees -- 3 -- 3 Custodian fees -- 12 -- 12 Other 5 43 -- 48 -------- -------- -------- -------- TOTAL LIABILITIES 15 1,810 -- 1,825 -------- -------- -------- -------- NET ASSETS: Class A Shares 5,436 1,973 -- 7,409 Class B Shares -- 606 -- 606 Institutional Shares 3,150 350,825 -- 353,975 ======== ======== ======== ======== $ 8,586 $353,404 $ -- $361,990 ======== ======== ======== ======== CAPITAL SHARES OUTSTANDING Class A Shares 565 201 4 (a) 770 Class B Shares -- 62 1 (a) 63 Institutional Shares 328 35,777 691 (a) 36,796 ======== ======== ======== ======== 893 36,040 696 (a) 37,566 ======== ======== ======== ======== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE Class A Shares - redemption price per share $ 9.62 $ 9.82 $ 9.62 -------- -------- -------- Class A Shares - maximum sales charge 4.50% 4.75% 4.50% -------- -------- ======== Class A Shares - POP $ 10.02 $ 10.31 $ 10.07 ======== ======== ======== Class B Shares - offering price per share* $ -- $ 9.79 $ 9.62 ======== ======== ======== Institutional Shares - offering and redemption price per share $ 9.62 $ 9.81 $ 9.62 ======== ======== ======== COMPOSITION OF NET ASSETS Capital 8,967 357,534 -- 366,501 Undistributed (distributions in excess of) net investment income -- 242 -- 242 Undistributed net realized gains/(loss) from investment transactions (336) (2,009) -- (2,345) Net unrealized appreciation (depreciation) of investments (45) (2,363) -- (2,408) -------- -------- -------- -------- NET ASSETS, JULY 31, 1999 $ 8,586 $353,404 $ -- $361,990 ======== ======== ======== ======== * Redemption price per share varies by length of time shares are held (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-80 458 AMSOUTH GOVERNMENT INCOME FUND ISG GOVERNMENT INCOME FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 07/31/99 (AMOUNTS IN THOUSANDS) (UNAUDITED) AMSOUTH ISG PRO FORMA GOVERNMENT GOVERNMENT PRO FORMA COMBINED INCOME INCOME ADJUSTMENTS (NOTE 1) ------------- ------------ ------------- --------------- INVESTMENT INCOME: Interest Income $ 566 $ 18,290 $ -- $ 18,856 Dividend Income 11 640 -- 651 Income from securities lending -- 35 (35)(m) -- -------- -------- -------- -------- 577 18,965 (35) 19,507 -------- -------- -------- -------- EXPENSES: Advisory fees 62 1,878 158 (a) 2,098 Administration fees 19 414 213 (b) 646 Shareholder servicing fees (Class A Shares) 17 154 105 (c) 276 Shareholder servicing fees (Class B Shares) -- -- 0 (d) 0 Shareholder servicing fees (Institutional Shares) -- 313 5 (e) 318 12b-1 fees (Class A Shares) -- 4 (4)(f) -- 12b-1 fees (Class B Shares) -- 1 0 (g) 1 Accounting fees 47 38 (55)(h) 30 Transfer agent fees 23 50 7 (i) 80 Custodian fees 1 50 38 (j) 89 Trustee fees and expenses -- 5 -- 5 Other expenses 5 123 (49)(k) 79 -------- -------- -------- -------- TOTAL EXPENSES: 174 3,030 418 3,622 Less Waivers Advisory fees (33) -- 33 (a) -- Administration fees (10) -- 10 (b) -- Shareholder servicing fees (Class A Shares) (10) -- 10 (c) -- 12b-1 fees (Class A Shares) -- (4) 4 (f) -- Accounting Fees (37) -- 37 (h) -- Transfer agent fees (20) -- 20 (i) -- Reimbursements -- (177) 177 (l) -- -------- -------- -------- -------- NET EXPENSES: 64 2,849 709 3,622 -------- -------- -------- -------- NET INVESTMENT INCOME (LOSS) 513 16,116 (744) 15,885 -------- -------- -------- -------- REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions 51 (24) -- 27 Net change in unrealized appreciation (depreciation) from investments (283) -- -- (283) -------- -------- -------- -------- Net realized/unrealized gains (losses) from investments (232) (24) -- (256) CHANGE IN NET ASSETS RESULTING FROM -------- -------- -------- -------- OPERATIONS: $ 281 $ 16,092 $ (744) $ 15,629 ======== ======== ======== ======== NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.65% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. (m) Adjustment to reflect no securities lending income since there is not a securities lending program set up on the AmSouth Funds. B-81 459 AMSOUTH GOVERNMENT INCOME FUND ISG GOVERNMENT INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA GOVERNMENT GOVERNMENT COMBINED INCOME INCOME PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------------- --------------------------------------------------------------------------------------------- CORPORATE BONDS (12.9%): AIRCRAFT LEASING (0.7%): 2,500 2,500 International Lease Finance Corp., 6.00%, 6/15/03 AUTOMOTIVE-FINANCE (1.6%): 3,000 3,000 Ford Motor Credit Co., 5.75%, 2/23/04 2,000 2,000 General Motors, 6.25%, 5/1/05 1,000 1,000 General Motors Acceptance Corp., 5.75%, 11/10/03 BANKING (0.3%): 1,000 1,000 NationsBank Corp., 5.38%, 4/15/00 BEVERAGES (0.7%): 2,000 2,000 Anheuser Busch Cos., 5.75%, 1/15/11, Callable 1/15/06 @ 100 889 889 Anheuser Busch Cos., 6.90%, 10/1/02, Callable 10/1/99 @ 100 BROKERAGE SERVICES (0.7%): 2,500 2,500 Merrill Lynch & Co., 6.00%, 7/15/05 DIVERSIFIED MANUFACTURING (1.6%): 1,400 1,400 American Home Products, 7.70%, 2/15/00 3,000 3,000 Kellogg Co., 4.875%, 10/15/05 1,000 1,000 Pharmacia & Upjohn Inc., 5.88%, 4/15/00 437 437 Texas Instruments, 9.25%, 6/15/03 ENTERTAINMENT (0.8%): 3,000 3,000 Walt Disney Co., 5.62%, 12/1/08, Callable 12/1/05 @ 100 FINANCIAL SERVICES (0.5%): 2,000 2,000 Associates Corp., 5.75%, 11/01/03 FOOD PRODUCTS & SERVICES (0.9%): 2,500 2,500 Campbell Soup Co., 4.75%, 10/1/03 1,000 1,000 H.J. Heinz Co., 6.75%, 10/15/99 INDUSTRIAL GOODS & SERVICES (0.4%): 889 889 E.I. Du Pont de Nemours & Co., 6.75%, 10/15/02 437 437 E.I. Du Pont de Nemours & Co., 9.15%, 4/15/00 INSURANCE (1.1%): 2,250 2,250 Chubb Corp., 6.15%, 8/15/05 2,000 2,000 General Electric Capital Corp., 5.92%, 4/3/01 OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.0%): 3,500 3,500 Atlantic Richfield, 5.55%, 4/15/03 TELECOMMUNICATIONS (0.5%): 2,000 2,000 GTE, Inc., 6.13%, 6/15/07 AMSOUTH ISG AMSOUTH GOVERNMENT GOVERNMENT PRO FORMA GOVERNMENT INCOME INCOME COMBINED INCOME MARKET MARKET MARKET AMOUNT/SHARES VALUE VALUE VALUE --------------------------- --------------------- ------------------------ -------------------- CORPORATE BONDS (12.9%): AIRCRAFT LEASING (0.7%): - $ 2,444 $ 2,444 -------------------- ------------------------ -------------------- AUTOMOTIVE-FINANCE (1.6%): 2,865 2,865 1,940 1,940 956 956 -------------------- ------------------------ -------------------- - 5,761 5,761 -------------------- ------------------------ -------------------- BANKING (0.3%): - 998 998 -------------------- ------------------------ -------------------- BEVERAGES (0.7%): 1,800 1,800 896 896 -------------------- ------------------------ -------------------- - 2,696 2,696 -------------------- ------------------------ -------------------- BROKERAGE SERVICES (0.7%): - 2,391 2,391 -------------------- ------------------------ -------------------- DIVERSIFIED MANUFACTURING (1.6%): 1,416 1,416 2,752 2,752 1,000 1,000 481 481 -------------------- ------------------------ -------------------- - 5,649 5,649 -------------------- ------------------------ -------------------- ENTERTAINMENT (0.8%): - 2,760 2,760 -------------------- ------------------------ -------------------- FINANCIAL SERVICES (0.5%): - 1,918 1,918 -------------------- ------------------------ -------------------- FOOD PRODUCTS & SERVICES (0.9%): 2,356 2,356 1,003 1,003 -------------------- ------------------------ -------------------- - 3,359 3,359 -------------------- ------------------------ -------------------- INDUSTRIAL GOODS & SERVICES (0.4%): 899 899 447 447 -------------------- ------------------------ -------------------- - 1,346 1,346 -------------------- ------------------------ -------------------- INSURANCE (1.1%): 2,171 2,171 1,990 1,990 -------------------- ------------------------ -------------------- - 4,161 4,161 -------------------- ------------------------ -------------------- OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.0%): - 3,404 3,404 -------------------- ------------------------ -------------------- TELECOMMUNICATIONS (0.5%): - 1,900 1,900 -------------------- ------------------------ -------------------- B-82 460 AMSOUTH GOVERNMENT INCOME FUND ISG GOVERNMENT INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/93 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA GOVERNMENT GOVERNMENT COMBINED INCOME INCOME PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------------- --------------------------------------------------------------------------------------------- UTILITIES-ELECTRIC & GAS (2.1%): 3,000 3,000 Emerson Electric, 5.85%, 3/15/09 3,500 3,500 National Rural Utilities, 5.75%, 12/1/08 1,000 1,000 Pacific Gas & Electric, 6.25%, 3/1/04 1,000 1,000 Southern California Edison, 5.63%, 10/1/02 U.S. Government Agencies (36.0%): FANNIE MAE (8.6%): 15,000 15,000 5.28%*, 9/15/99 1,600 1,600 5.75%, 4/15/03 7,000 7,000 6.00%, 5/15/08 5,000 5,000 6.46%, 5/9/05, Callable 5/9/01 @ 100 1,000 1,000 6.82%, 12/13/06 2,000 2,000 6.94%, 9/5/07, Callable 9/5/02 @ 100 FEDERAL FARM CREDIT BANK (8.5%): 15,000 15,000 5.07%, 12/15/03 7,000 7,000 5.70%, 9/3/08 10,000 10,000 6.20%, 7/1/02 FEDERAL HOME LOAN BANK (5.9%): 5,000 5,000 5.26%, 2/18/04 3,000 3,000 5.35%, 12/1/03 10,000 10,000 5.80%, 9/2/08 2,000 2,000 6.275%, 8/13/01, Callable 8/13/99 @ 100 2,250 2,250 6.34%, 6/29/04 FREDDIE MAC (9.1%): 5,000 5,000 5.00%, 1/15/04 10,000 10,000 5.75%, 3/15/09 10,000 10,000 6.75%, 5/4/09, Callable 8/4/99 @ 100 5,000 5,000 7.00%, 3/23/09, Callable 6/23/99 @ 100 4,000 4,000 7.40%, 6/9/14, Callable 6/9/00 @ 100 GOVERNMENT NATIONAL MORTGAGE ASSOC. (1.6%): 1360 1360 7.00%, 12/15/26-2/20/29 2207 2207 7.50%, 6/15/24-12/15/25 306 306 8.00%, 7/15/26 196 196 8.50%, 12/15/19-2/15/23 874 874 9.00%, 6/15/18-9/15/22 662 662 9.50%, 5/15/18-8/15/21 PRIVATE EXPORT FUNDING (1.9%): 2,000 2,000 Series B, 6.49%, 7/15/07 2,000 2,000 Series C, 6.31%, 9/30/04 3,000 3,000 Series D, 5.87%, 7/31/08 AMSOUTH ISG AMSOUTH GOVERNMENT GOVERNMENT PRO FORMA GOVERNMENT INCOME INCOME COMBINED INCOME MARKET MARKET MARKET AMOUNT/SHARES VALUE VALUE VALUE --------------------------- --------------------- ------------------------ -------------------- UTILITIES-ELECTRIC & GAS (2.1%): 2,800 2,800 3,215 3,215 985 985 978 978 ------------------------ -------------------------- -------------------- - 7,978 7,978 ------------------------ -------------------------- -------------------- TOTAL CORPORATE BONDS $ - $ 46,765 $ 46,765 ------------------------ -------------------------- -------------------- U.S. Government Agencies (36.0%): FANNIE MAE (8.6%): 14,908 14,908 1,600 1,568 1,568 6,673 6,673 4,952 4,952 1,001 1,001 1,989 1,989 ------------------------ -------------------------- -------------------- 1,568 29,523 31,091 ------------------------ -------------------------- -------------------- FEDERAL FARM CREDIT BANK (8.5%): 14,298 14,298 6,574 6,574 9,993 9,993 ------------------------ -------------------------- -------------------- - 30,865 30,865 ------------------------ -------------------------- -------------------- FEDERAL HOME LOAN BANK (5.9%): 4,785 4,785 2,879 2,879 9,401 9,401 2,000 2,000 2,244 2,244 ------------------------ -------------------------- -------------------- - 21,309 21,309 ------------------------ -------------------------- -------------------- FREDDIE MAC (9.1%): 4,729 4,729 9,312 9,312 9,999 9,999 5,000 5,000 3,943 3,943 ------------------------ -------------------------- -------------------- - 32,983 32,983 ------------------------ -------------------------- -------------------- GOVERNMENT NATIONAL MORTGAGE ASSOC. (1.6%): 1360 1,324 1,324 2207 2,208 2,208 306 312 312 196 203 203 874 921 921 662 705 705 ------------------------ -------------------------- -------------------- 5,673 - 5,673 ------------------------ -------------------------- -------------------- PRIVATE EXPORT FUNDING (1.9%): 2,013 2,013 2,008 2,008 2,894 2,894 ------------------------ -------------------------- -------------------- - 6,915 6,915 ------------------------ -------------------------- -------------------- B-83 461 AMSOUTH LIMITED TERM BOND FUND ISG LIMITED TERM INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA Limited Term Bond Limited Term COMBINED Principal Income Principal Principal Amount/Shares Amount/Shares Amount/Shares Description - ------------------------------- ------------------- --------------- --------------------------------------------------- AUTOMOTIVE-FINANCE (7.1%): 1,000 1,000 Chrysler Financial Corp., 6.08%, 4/6/01 4,000 4,000 Ford Motor Credit Co., 8.20%, 2/15/02 2,500 2,500 Ford Motor Credit Co., 6.50%, 2/28/02 2,000 2,000 General Motors Acceptance Corp., 5.80%, 4/9/01 3,500 3,500 General Motors Acceptance Corp., 6.75%, 2/7/02 2,000 2,000 Toyota Motor Credit Corp., 5.50%, 9/17/01 BANKING (7.5%): 2,500 2,500 ABN AMRO Bank, 6.63%, 10/31/01 3,000 3,000 Bank One Corp., 6.25%, 9/1/00 1,500 1,500 Bankers Trust, 6.75%, 10/3/01 1,500 1,500 Firstar Bank, 6.25%, 12/1/02 2,000 2,000 NationsBank Corp., 5.38%, 4/15/00 2,500 2,500 NationsBank Corp., 5.70%, 9/11/00 2,000 2,000 Nationsbank Corp., 7.00%, 9/15/01 900 900 Wachovia Bank, 6.30%, 3/15/01 BEVERAGES (0.6%): 1,250 1,250 Anheuser-Busch, 7.13%, 7/1/17 BROKERAGE SERVICES (3.4%): 3,500 3,500 Bear Stearns & Co., Inc., 6.50%, 8/1/02 2,000 2,000 Dean Witter Discover & Co., 6.26%, 3/15/00 1,750 1,750 Merrill Lynch & Co., 6.00%, 1/15/01 BUILDING PRODUCTS (0.9%): 2,000 2,000 Vulcan Materials Co., 5.75%, 4/1/04 CHEMICALS (0.7%): 1,500 1,500 Eastman Chemical, 6.38%, 1/15/04 COMPUTERS & PERIPHERALS (0.9%): 1,000 1,000 IBM Corp., 6.04%, 8/7/00 1,000 1,000 IBM Corp., 5.95%, 6/2/03 CONSUMER GOODS (0.9%): 2,000 2,000 Procter & Gamble Co., 5.25%, 9/15/03 ELECTRONIC COMPONENTS/ INSTRUMENTS (0.4%): 850 850 Honeywell, Inc., 6.75%, 3/15/02 ENTERTAINMENT (0.7%): 1,500 1,500 Walt Disney Co., 6.375%, 3/30/01 FARM EQUIPMENT (2.3%): 3,000 3,000 John Deere Capital Corp., 5.85%, 1/15/01 2,000 2,000 John Deere Capital Corp., 5.90%, 4/8/03 FINANCIAL SERVICES (9.7%): 3,000 3,000 Ameritech Capital Funding, 6.13%, 10/15/01 1,500 1,500 Associates Corp., 7.68%, 3/3/00 4,200 4,200 Associates Corp. of North America, 6.63%, 5/15/01 500 500 Beneficial Corp., 7.32%, 11/17/99 2,000 2,000 CIT Group Holdings, 6.38%, 10/1/02 1,000 1,000 Citigroup, Inc., 6.13%, 6/15/00 1,000 1,000 Commercial Credit Co., 8.26%, 11/1/01 AMSOUTH ISG PRO FORMA LIMITED TERM BOND LIMITED TERM COMBINED MARKET INCOME MARKET MARKET Description Value Value Value --------------------------------------------------- ----------------------------------------------------- Chrysler Financial Corp., 6.08%, 4/6/01 $ 998 $ - $ 998 Ford Motor Credit Co., 8.20%, 2/15/02 4,149 4,149 Ford Motor Credit Co., 6.50%, 2/28/02 2,497 2,497 General Motors Acceptance Corp., 5.80%, 4/9/01 1,980 1,980 General Motors Acceptance Corp., 6.75%, 2/7/02 3,509 3,509 Toyota Motor Credit Corp., 5.50%, 9/17/01 1,968 1,968 ------------- ------------ ------------- 10,624 4,477 15,101 ------------- ------------ ------------- ABN AMRO Bank, 6.63%, 10/31/01 2,509 2,509 Bank One Corp., 6.25%, 9/1/00 3,003 3,003 Bankers Trust, 6.75%, 10/3/01 1,508 1,508 Firstar Bank, 6.25%, 12/1/02 1,487 1,487 NationsBank Corp., 5.38%, 4/15/00 1,995 1,995 NationsBank Corp., 5.70%, 9/11/00 2,488 2,488 Nationsbank Corp., 7.00%, 9/15/01 2,025 2,025 Wachovia Bank, 6.30%, 3/15/01 899 899 ------------- ------------ ------------- 9,872 6,042 15,914 ------------- ------------ ------------- Anheuser-Busch, 7.13%, 7/1/17 - 1,225 1,225 ------------- ------------ ------------- Bear Stearns & Co., Inc., 6.50%, 8/1/02 3,465 3,465 Dean Witter Discover & Co., 6.26%, 3/15/00 2,005 2,005 Merrill Lynch & Co., 6.00%, 1/15/01 1,746 1,746 ------------- ------------ ------------- 5,470 1,746 7,216 ------------- ------------ ------------- Vulcan Materials Co., 5.75%, 4/1/04 1,940 - 1,940 ------------- ------------ ------------- Eastman Chemical, 6.38%, 1/15/04 - 1,466 1,466 ------------- ------------ ------------- IBM Corp., 6.04%, 8/7/00 1,002 1,002 IBM Corp., 5.95%, 6/2/03 981 981 ------------- ------------ ------------- ------------- ------------ 981 1,002 1,983 ------------- ------------ ------------- Procter & Gamble Co., 5.25%, 9/15/03 1,913 - 1,913 ------------- ------------ ------------- Honeywell, Inc., 6.75%, 3/15/02 857 - 857 ------------- ------------ ------------- Walt Disney Co., 6.375%, 3/30/01 - 1,508 1,508 ------------- ------------ ------------- John Deere Capital Corp., 5.85%, 1/15/01 2,981 2,981 John Deere Capital Corp., 5.90%, 4/8/03 1,948 1,948 ------------- ------------ ------------- ------------- 2,981 1,948 4,929 ------------- ------------ ------------- Ameritech Capital Funding, 6.13%, 10/15/01 2,988 2,988 Associates Corp., 7.68%, 3/3/00 1,519 1,519 Associates Corp. of North America, 6.63%, 5/15/01 4,210 4,210 Beneficial Corp., 7.32%, 11/17/99 502 502 CIT Group Holdings, 6.38%, 10/1/02 1,983 1,983 Citigroup, Inc., 6.13%, 6/15/00 1,000 1,000 Commercial Credit Co., 8.26%, 11/1/01 1,038 1,038 B-84 462 AMSOUTH ISG PRO FORMA Limited Term Bond Limited Term COMBINED Principal Income Principal Principal Amount/Shares Amount/Shares Amount/Shares Description - ------------------------------- ------------------- --------------- --------------------------------------------------- 2,500 2,500 General Electric Capital Corp., 6.15%, 11/5/01 2,500 2,500 Household Finance Co., 8.95%, 9/15/99 2,500 2,500 Household Netherlands, 6.20%, 12/1/03 FOOD PRODUCTS & SERVICES (1.4%): 1,000 1,000 Campbell Soup Co., 6.15%, 12/1/02 1,000 1,000 McDonald's Corp., 5.90%, 5/11/01 1,000 1,000 McDonald's Corp., 6.00%, 6/23/02 FOREST & PAPER PRODUCTS (1.4%): 2,000 2,000 International Paper Co., 6.88%, 7/10/00 1,000 1,000 Mead Corp., 6.60%, 3/1/02 HEALTH CARE (0.9%): 2,000 2,000 McKesson Corp., 6.88%, 3/1/02 INDUSTRIAL GOODS & SERVICES (6.2%): 2,000 2,000 Air Products & Chemicals, Inc., 8.35%, 1/15/02 1,500 1,500 Archer Daniels, 6.25%, 5/15/03 1,000 1,000 Caterpillar Financial Services, 6.02%, 4/15/02 3,000 3,000 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02 3,000 3,000 Imperial Oil Ltd., 8.75%, 10/15/19 2,500 2,500 Martin Marietta, 6.50%, 4/15/03 INSURANCE (4.1%): 2,000 2,000 American General Finance, 5.75%, 11/01/03 1,500 1,500 AON Corp., 6.88%, 10/1/99 1,000 1,000 St. Paul Cos., Inc., Series A, 6.17%, 1/15/01 2,000 2,000 Travelers Property Casualty, 6.75%, 4/15/01 2,200 2,200 USLife Corp., 6.38%, 6/15/00 LEASING (1.0%): 2,000 2,000 USL Capital Corp., 8.13%, 2/15/00 OFFICE EQUIPMENT & SERVICES (0.6%): 1,274 1,274 Xerox Corp., 8.13%, 4/15/02 OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (1.0%): 2,200 2,200 Amoco Co., 6.25%, 10/15/04 RETAIL (5.5%): 2,500 2,500 Dayton Hudson Co., 6.40%, 2/15/03 2,000 2,000 J.C. Penney Co., Inc., 7.25%, 4/1/02 1,000 1,000 Sears, Roebuck and Co., 6.00%, 3/20/03 3,500 3,500 Wal-Mart Stores, Inc., 5.85%, 6/1/00 2,500 2,500 Wal-Mart Stores, Inc., 5.85%, 6/1/00 TELECOMMUNICATIONS (2.6%): 1,500 1,500 AT&T Corp., 5.63%, 3/15/04 1,036 1,036 IBM Corp., 6.25%, 2/24/00 1,500 1,500 MCI Communication Corp., 7.13%, 1/20/00 1,500 1,500 Worldcom, Inc., 6.13%, 8/15/01 TELECOMMUNICATIONS-EQUIPMENT (0.5%): 1,000 1,000 Lucent Technologies, Inc., 6.90%, 7/15/01 TOOLS (0.5%): 500 500 Stanley Works, 7.38%, 12/15/02 500 500 Stanley Works, 5.75%, 3/1/04 UTILITIES-ELECTRIC & GAS (12.1%): 1,250 2,000 3,250 Alabama Power Corp., 5.35%, 11/15/03 2,500 2,500 Baltimore Gas & Electric Co., 6.50%, 2/15/03 600 600 Baltimore Gas & Electric Co., 5.50%, 7/15/00 2,000 2,000 Central Power & Light, 6.00%, 4/1/00 1,300 1,300 Cincinnati Gas & Electric, 6.45%, 2/15/04 1,000 1,000 ENSERCH, 7.00%, 8/15/99 1,000 1,000 Florida Power Corp., 6.50%, 12/1/99 2,000 2,000 Florida Power Corp., 6.54%, 7/1/02 2,500 2,500 Midamerican Energy, 6.50%, 12/15/01 2,000 2,000 National Rural Utilities, 6.49%, 7/10/02 AMSOUTH ISG PRO FORMA LIMITED TERM BOND LIMITED TERM COMBINED MARKET INCOME MARKET MARKET Description Value Value Value - --------------------------------------------------- ----------------------------------------------------- General Electric Capital Corp., 6.15%, 11/5/01 2,491 2,491 Household Finance Co., 8.95%, 9/15/99 2,508 2,508 Household Netherlands, 6.20%, 12/1/03 2,438 2,438 ------------- ------------ ------------- 19,158 1,519 20,677 ------------- ------------ ------------- Campbell Soup Co., 6.15%, 12/1/02 996 996 McDonald's Corp., 5.90%, 5/11/01 995 995 McDonald's Corp., 6.00%, 6/23/02 990 990 ------------- ------------ ------------- 2,981 - 2,981 ------------- ------------ ------------- International Paper Co., 6.88%, 7/10/00 2,007 2,007 Mead Corp., 6.60%, 3/1/02 994 994 ------------- ------------ ------------- ------------ ------------- 994 2,007 3,001 ------------- ------------ ------------- McKesson Corp., 6.88%, 3/1/02 1,985 - 1,985 ------------- ------------ ------------- Air Products & Chemicals, Inc., 8.35%, 1/15/02 2,083 2,083 Archer Daniels, 6.25%, 5/15/03 1,489 1,489 Caterpillar Financial Services, 6.02%, 4/15/02 988 988 E. I. Dupont de Nemours & Co., 6.50%, 9/1/02 3,007 3,007 Imperial Oil Ltd., 8.75%, 10/15/19 3,127 3,127 Martin Marietta, 6.50%, 4/15/03 2,487 2,487 ------------- ------------ ------------- 6,078 7,103 13,181 ------------- ------------ ------------- American General Finance, 5.75%, 11/01/03 1,923 1,923 AON Corp., 6.88%, 10/1/99 1,502 1,502 St. Paul Cos., Inc., Series A, 6.17%, 1/15/01 996 996 Travelers Property Casualty, 6.75%, 4/15/01 2,007 2,007 USLife Corp., 6.38%, 6/15/00 2,199 2,199 ------------- ------------ ------------- 6,620 2,007 8,627 ------------- ------------ ------------- USL Capital Corp., 8.13%, 2/15/00 2,024 - 2,024 ------------- ------------ ------------- Xerox Corp., 8.13%, 4/15/02 1,331 - 1,331 ------------- ------------ ------------- Amoco Co., 6.25%, 10/15/04 2,178 - 2,178 ------------- ------------ ------------- Dayton Hudson Co., 6.40%, 2/15/03 2,497 2,497 J.C. Penney Co., Inc., 7.25%, 4/1/02 2,020 2,020 Sears, Roebuck and Co., 6.00%, 3/20/03 975 975 Wal-Mart Stores, Inc., 5.85%, 6/1/00 3,504 3,504 Wal-Mart Stores, Inc., 5.85%, 6/1/00 2,503 2,503 ------------- ------------ ------------- 4,479 7,020 11,499 ------------- ------------ ------------- AT&T Corp., 5.63%, 3/15/04 1,438 1,438 IBM Corp., 6.25%, 2/24/00 1,036 1,036 MCI Communication Corp., 7.13%, 1/20/00 1,510 1,510 Worldcom, Inc., 6.13%, 8/15/01 1,489 1,489 ------------- ------------ ------------- 1,438 4,035 5,473 ------------- ------------ ------------- Lucent Technologies, Inc., 6.90%, 7/15/01 1,013 - 1,013 ------------- ------------ ------------- Stanley Works, 7.38%, 12/15/02 514 514 Stanley Works, 5.75%, 3/1/04 484 484 ------------- ------------ ------------- 998 - 998 ------------- ------------ ------------- Alabama Power Corp., 5.35%, 11/15/03 1,194 1,918 3,112 Baltimore Gas & Electric Co., 6.50%, 2/15/03 2,493 2,493 Baltimore Gas & Electric Co., 5.50%, 7/15/00 599 599 Central Power & Light, 6.00%, 4/1/00 2,000 2,000 Cincinnati Gas & Electric, 6.45%, 2/15/04 1,292 1,292 ENSERCH, 7.00%, 8/15/99 1,001 1,001 Florida Power Corp., 6.50%, 12/1/99 1,003 1,003 Florida Power Corp., 6.54%, 7/1/02 2,000 2,000 Midamerican Energy, 6.50%, 12/15/01 2,493 2,493 National Rural Utilities, 6.49%, 7/10/02 2,003 2,003 B-85 463 AMSOUTH ISG PRO FORMA Limited Term Bond Limited Term COMBINED Principal Income Principal Principal Amount/Shares Amount/Shares Amount/Shares Description - ------------------------------- ------------------- --------------- --------------------------------------------------- 2,500 2,500 Potomac Electric Power, 6.00%, 4/1/04 2,000 2,000 Puget Sound Power & Light, 6.61%, 2/9/00 2,000 2,000 SCANA Corp., Series B, 6.25%, 7/8/03 1,321 1,321 Smith Enron, 5.97%, 12/15/06 UTILITIES-TELECOMMUNICATIONS (0.9%): 2,000 2,000 BellSouth Telecommunications, 6.00%, 6/15/02 FANNIE MAE (0.7%): 1,500 1,500 6.35%, 11/23/01 FREDDIE MAC (0.9%): 2,000 2,000 6.75%, 4/1/08 GOVERNMENT NATIONAL MORTGAGE ASSOC. (9.2%): 450 450 8.00%, 12/15/07 823 823 8.00%, 8/15/08 521 521 7.50%, 4/15/09 373 373 7.50%, 4/15/09 467 467 7.50%, 6/15/09 492 492 8.50%, 9/15/09 921 921 8.00%, 11/15/09 373 373 8.50%, 12/15/09 451 451 8.50%, 12/15/09 855 855 8.00%, 4/15/10 1,119 1,119 8.00%, 4/15/10 1,199 1,199 7.50%, 8/15/11 1,928 1,928 6.00%, 1/15/14 1,930 1,930 6.00%, 1/15/14 1,932 1,932 6.50%, 1/15/29 1,942 1,942 6.50%, 1/20/29 1,988 1,988 6.50%, 3/15/29 1,990 1,990 6.50%, 4/20/29 1,500 1,500 7.75%, 1/31/00 1,000 1,000 6.25%, 6/30/02 18,000 18,000 7.25%, 5/15/04 3,835,297 3,835,297 AIM Liquid Assets Money Market Fund 2,024,579 2,024,579 AIM Prime Money Market Fund 2,248,559 2,248,559 AmSouth Prime Obligations Fund 339 339 AmSouth U.S. Treasury Fund 1,000 1,000 Bank of New York Cash Reserve Money Market Fund Unrealized appreciation $ 929 Unrealized depreciation (2,354) -------- Net unrealized depreciation $ (1,425) ======== AMSOUTH ISG PRO FORMA LIMITED TERM BOND LIMITED TERM COMBINED MARKET INCOME MARKET MARKET Description Value Value Value - --------------------------------------------------- ----------------------------------------------------- Potomac Electric Power, 6.00%, 4/1/04 2,432 2,432 Puget Sound Power & Light, 6.61%, 2/9/00 2,007 2,007 SCANA Corp., Series B, 6.25%, 7/8/03 1,965 1,965 Smith Enron, 5.97%, 12/15/06 1,301 1,301 ------------- ------------ ------------- 2,796 22,905 25,701 ------------- ------------ ------------- BellSouth Telecommunications, 6.00%, 6/15/02 1,975 - 1,975 ------------- ------------ ------------- TOTAL CORPORATE BONDS $ 90,686 $ 66,010 $ 156,696 --------- ------------ ------------- 6.35%, 11/23/01 - 1,501 1,501 --------- ------------ ------------- 6.75%, 4/1/08 - 2,000 2,000 --------- ------------ ------------- 8.00%, 12/15/07 466 466 8.00%, 8/15/08 854 854 7.50%, 4/15/09 531 531 7.50%, 4/15/09 380 380 7.50%, 6/15/09 477 477 8.50%, 9/15/09 514 514 8.00%, 11/15/09 955 955 8.50%, 12/15/09 389 389 8.50%, 12/15/09 471 471 8.00%, 4/15/10 886 886 8.00%, 4/15/10 1,160 1,160 7.50%, 8/15/11 1,223 1,223 6.00%, 1/15/14 1,846 1,846 6.00%, 1/15/14 1,849 1,849 6.50%, 1/15/29 1,835 1,835 6.50%, 1/20/29 1,836 1,836 6.50%, 3/15/29 1,889 1,889 6.50%, 4/20/29 1,882 1,882 --------- ------------ ------------- - 19,443 19,443 --------- ------------ ------------- TOTAL U.S. GOVERNMENT AGENCIES $ - $ 22,944 $ 22,944 --------- ------------ ------------- 7.75%, 1/31/00 1,519 1,519 6.25%, 6/30/02 1,013 1,013 7.25%, 5/15/04 18,971 18,971 --------- ------------ ------------- TOTAL U.S. TREASURY NOTES $ 18,971 $ 2,532 $ 21,503 --------- ------------ ------------- AIM Liquid Assets Money Market Fund 3,835 3,835 AIM Prime Money Market Fund 2,025 2,025 AmSouth Prime Obligations Fund 2,248 2,248 AmSouth U.S. Treasury Fund - - Bank of New York Cash Reserve Money Market Fund 1 1 --------- ------------ ------------- TOTAL INVESTMENT COMPANIES $ 2,248 $ 5,861 $ 8,109 --------- ------------ ------------- TOTAL (COST $210,677) (A) $ 111,905 $ 97,347 $ 209,252 --------- ------------ ------------- B-86 464 AmSouth Limited Term Bond Fund ISG Limited Term Income Fund ISG Pro Forma Combining Statement of Operations ANA # Days 7/31/99 A 7,358,647 (Amounts in thousands) B 602,460 (Unaudited) I 88,566,034 ISG Pro Forma AmSouth Limited Term Pro Forma Combined Limited Term Bond Income Adjustments (Note 1) ----------------- ---------------- ------------- ------------- INVESTMENT INCOME: Interest Income $ 7,037 $ 5,884 $ - $12,921 Dividend Income 95 191 - 95 Income from securities lending - 8 (8)(m) - --------- ------------ ---------- ------------ 7,132 6,083 (8) 13,207 --------- ------------ ---------- ------------ EXPENSES: Advisory fees 735 483 144 (a) 1,362 Administration fees 226 145 48 (b) 419 Shareholder servicing fees (Class A Shares) 8 6 12 (c) 26 Shareholder servicing fees (Class B Shares) - 2 1 (d) 3 Shareholder servicing fees (Institutional Shares) - 80 217 (e) 297 12b-1 fees (Class A Shares) - 18 (18) (f) - 12b-1 fees (Class B Shares) 4 5 (1) (g) 8 Accounting fees 57 49 (73) (h) 33 Transfer agent fees 48 57 (42) (i) 63 Custodian fees 7 25 26 (j) 58 Trustee fees and expenses 3 5 (3) (k) 5 Other expenses 28 93 (58) (k) 63 --------- ------------ ---------- ------------ Total Expenses: 1,116 968 253 2,337 Less Waivers: Advisory fees (170) - 170 (a) - Administration fees (90) - 90 (b) - Shareholder servicing fees (Class A Shares) (5) - 5 (c) - Accounting fees (15) - 15 (h) - Transfer agent fees (25) - 25 (i) - --------- ------------ ---------- ------------ Net Expenses: 811 968 558 2,337 --------- ------------ ---------- ------------ Net Investment Income 6,321 5,115 (566) 10,870 --------- ------------ ---------- ------------ Realized/Unrealized Gains (Losses) from Investments Net realized gains (losses) from investment transaction 464 130 - 594 Net change in unrealized appreciation (depreciation) from investments (2,240) (1,948) - (4,188) --------- ------------ ---------- ------------ Net realized/unrealized gains (losses) from investments (1,776) (1,818) - (3,594) Change in net assets resulting from ========= ============ ========== ============ Operations: $ 4,545 $ 3,297 $ (566) $ 7,276 Notes to Pro Forma Financial Statements (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.65% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class A net assets) (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Class B net assets) (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder servicing fees (0.25% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. (m) Adjustment to reflect no securities lending income since there is not a securities lending program set up on the AmSouth Funds. B-87 465 AMSOUTH LIMITED TERM BOND FUND ISG Limited Term Income Fund Pro Forma Combining Statement of Assets and Liabilities 7/31/99 (Amounts in thousands, except per share amounts) (Unaudited) ISG PRO FORMA AmSouth Limited Term Pro Forma Combined Limited Term Bond Income Adjustments (Note 1) ----------------- ------------- ------------ ------------- ASSETS: Investment in securities, at value (cost $112,420 and $98,257, respectively) $ 111,905 $ 97,347 $ - $ 209,252 Interest and dividends receivable 1,999 1,384 - 3,383 Other assets 5 22 - 27 --------------- ------------- ------------ ------------- TOTAL ASSETS 113,909 98,753 - 212,662 --------------- ------------- ------------ ------------- LIABILITIES: Dividends payable - 444 - 444 Payable for capital shares redeemed 2 - - 2 Accrued expenses and other payables: - Advisory fees 25 42 - 67 Administration fees 1 2 - 3 Distribution fees 2 15 - 17 Accounting fees 1 2 - 3 Transfer agent fees 3 3 - 6 Custodian fees 1 7 - 8 Other 5 22 - 27 --------------- ------------- ------------ ------------- TOTAL LIABILITIES 40 537 - 577 --------------- ------------- ------------ ------------- NET ASSETS: Class A Shares 2,716 6,850 - 9,566 Class B Shares 1,599 696 - 2,295 Institutional Shares 109,554 90,670 - 200,224 --------------- ------------- ------------ ------------- $ 113,869 $ 98,216 $ - $212,085 =============== ============= ============ ============= CAPITAL SHARES OUTSTANDING Class A Shares 264 702 (36)(a) 930 Class B Shares 156 71 (3)(a) 224 Institutional Shares 10,647 9,287 (476)(a) 19,458 --------------- ------------- ------------ ------------- 11,067 10,060 (515)(a) 20,612 =============== ============= ============ ============= Net Asset Value Class A Shares - redemption price per share $ 10.29 $ 9.76 $ 10.29 =============== ============= ============= Class A Shares - maximum sales charge 4.00% 3.00% 4.00% --------------- ------------- ------------- Class A Shares - POP $ 10.72 $ 10.06 $ 10.72 =============== ============= ============= Class B Shares - offering price per share* $ 10.27 $ 9.75 $ 10.27 =============== ============= ============= Institutional Shares - offering and redemption price per share $ 10.29 $ 9.76 $ 10.29 =============== ============= ============= COMPOSITION OF NET ASSETS Capital $ 115,003 $ 99,310 $ - $ 214,313 Undistributed (distributions in excess of) net investment income 483 (1) - 482 Undistributed net realized gains (losses) from investment transactions (1,102) (183) - (1,285) Net unrealized appreciation (depreciation) of investments (515) (910) - (1,425) --------------- ------------- ------------ ------------- NET ASSETS, JULY 31, 1999 $ 113,869 $ 98,216 $ - $212,085 =============== ============= ============ ============= * Redemption price per share varies by length of time shares are held. (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-88 466 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL MUNICIPAL PRO FORMA COMBINED BOND INCOME ADJUSTMENTS (NOTE 1) -------- -------- -------- -------- ASSETS: Investment in securities, at value (cost $321,757 and $66,213, respectively) $323,878 $ 64,489 $ -- $388,367 Interest and dividends receivable 4,967 916 -- 5,883 Other assets 13 18 -- 31 -------- -------- -------- -------- TOTAL ASSETS 328,858 65,423 -- 394,281 -------- -------- -------- -------- LIABILITIES: Cash overdraft -- 26 -- 26 Payable for capital shares redeemed -- 226 -- 226 Payable to brokers for investments purchased 4,754 991 -- 5,745 Accrued expenses: Advisory fees 57 17 -- 74 Administration fees 4 1 -- 5 Distribution fees -- 8 -- 8 Accounting fees 2 1 -- 3 Transfer agent fees 8 4 -- 12 Custodian fees 3 2 -- 5 Other 27 15 -- 42 -------- -------- -------- -------- TOTAL LIABILITIES 4,855 1,291 -- 6,146 -------- -------- -------- -------- NET ASSETS Class A Shares 2,694 3,270 -- 5,964 Class B Shares 16 347 -- 363 Institutional Shares 321,293 60,515 -- 381,808 -------- -------- -------- -------- $324,003 $ 64,132 $ -- $388,135 ======== ======== ======== ======== CAPITAL SHARES OUTSTANDING Class A Shares 273 312 19 (a) 604 Class B Shares 2 33 2 (a) 37 Institutional Shares 32,557 5,782 349 (a) 38,688 -------- -------- -------- -------- 32,832 6,127 370 (a) 39,329 ======== ======== ======== ======== NET ASSET VALUE Class A Shares - redemption price per share $ 9.87 $ 10.47 $ 9.87 -------- -------- ======== Class A Shares - maximum sales charge 4.00% 3.00% 4.00% ======== ======== ======== Class A Shares - POP $ 10.28 $ 10.79 $ 10.28 ======== ======== ======== Class B Shares - offering price per share* $ 9.87 $ 10.44 $ 9.87 ======== ======== ======== Institutional Shares - offering and redemption price per share $ 9.87 $ 10.47 $ 9.87 ======== ======== ======== COMPOSITION OF NET ASSETS Capital $319,649 $ 63,867 $ -- $383,516 Undistributed (distributions in excess of) net investment income 599 (148) -- 451 Undistributed net realized gains/(loss) from investment transactions 1,634 2,137 -- 3,771 Net unrealized appreciation (depreciation) of investments 2,121 (1,724) -- 397 -------- -------- -------- -------- NET ASSETS, JULY 31, 1999 $324,003 $ 64,132 $ -- $388,135 ======== ======== ======== ======== <FN> * Redemption price per share varies by length of time shares are held. (a) Adjustment to convert ISG Shares Outstanding to AmSouth Shares Outstanding based on AmSouth's NAV's. B-89 467 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL MUNICIPAL PRO FORMA COMBINED BOND INCOME ADJUSTMENTS (NOTE 1) -------- -------- --------- -------- INVESTMENT INCOME: Interest Income $ 15,208 $ 2,787 $ -- $ 17,995 Dividend Income 193 26 -- 219 -------- -------- --------- -------- 15,401 2,813 -- 18,214 -------- -------- --------- -------- EXPENSES: Advisory fees 2,121 356 29 (a) 2,506 Administration fees 653 95 23 (b) 771 Shareholder servicing fees (Class A Shares) 6 33 23 (c) 62 Shareholder servicing fees (Class B Shares) -- -- 0 (d) 0 Shareholder servicing fees (Institutional Shares) -- 55 486 (e) 541 12b-1 fees (Class A Shares) -- 4 (4) (f) -- 12b-1 fees (Class B Shares) -- 1 0 (g) 1 Accounting fees 129 49 (146) (h) 32 Transfer agent fees 90 38 (30) (i) 98 Custodian fees 20 13 73 (j) 106 Trustee fees and expenses 6 2 (2) (k) 6 Other expenses 83 69 (62) (k) 90 -------- -------- --------- -------- TOTAL EXPENSES: 3,108 715 391 4,214 Less Waivers Advisory fees (816) (178) 994 (a) -- Administration fees (261) -- 261 (b) -- Shareholder servicing fees (Class A Shares) (4) -- 4 (c) -- 12b-1 fees (Class A Shares) -- (4) 4 (f) -- Accounting Fees (15) -- 15 (h) -- Transfer agent fees (25) -- 25 (i) -- Reimbursements -- (1) 1 (l) -- -------- -------- --------- -------- NET EXPENSES: 1,987 532 1,695 4,214 -------- -------- --------- -------- NET INVESTMENT INCOME (LOSS) 13,414 2,281 (1,695) 14,000 -------- -------- --------- -------- REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions 2,189 2,081 -- 4,270 Net change in unrealized appreciation (depreciation) from investments (7,994) -- -- (7,994) -------- -------- --------- -------- Net realized/unrealized gains (losses) from investments (5,805) 2,081 -- (3,724) CHANGE IN NET ASSETS RESULTING FROM -------- -------- --------- -------- OPERATIONS: $ 7,609 $ 4,362 $ (1,695) $ 10,276 ======== ======== ========= ======== <FN> NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.65% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.00% of Class A net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (h) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (j) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. B-90 468 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ ------------- --------------- ----------------------------------------------------------------- MUNICIPAL BONDS (97.7%): ALABAMA (47.4%): $ 2,245 $ 2,245 Alabama State Agriculture & Mechanical University Revenue, 4.55%, 11/1/09, Callable 5/1/08 @ 102, MBIA 2,355 2,355 Alabama State Agriculture & Mechanical University Revenue, 4.65%, 11/1/10, Callable 5/1/08 @ 102, MBIA 2,035 2,035 Alabama State Agriculture & Mechanical University Revenue, 6.50%, 11/1/25, Callable 11/1/05 @ 102, MBIA 3,060 3,060 Alabama State Corrections Institution, Series A, 4.90%, 4/1/03, MBIA 1,520 1,520 Alabama State Industrial Access Road & Bridge Corp., Capital Improvements, Series A, 4.60%, 6/1/03 3,700 3,700 Alabama State Judicial Building Authority, Judicial Facilities Project, 4.75%, 1/1/05, AMBAC 3,880 3,880 Alabama State Judicial Building Authority, Judicial Facilities Project, 4.85%, 1/1/06, AMBAC 2,000 2,000 Alabama State Mental Health Finance Authority, Special Tax, 4.88%, 5/1/03, MBIA 7,350 7,350 Alabama State Public School & College Authority, 4.75%, 12/1/03, Callable 6/1/03 @ 103 3,390 3,390 Alabama State Public School & College Authority, 5.00%, 12/1/05, Callable 6/1/03 @ 103 10,000 10,000 Alabama State Public School & College Authority Revenue, Series A, 4.38%, 8/1/04 5,000 5,000 Alabama State Public School & College Authority, Capital Improvement, 4.75%, 11/1/06, Callable 11/1/05 @ 101 1,760 1,760 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.25%, 8/15/08, Callable 8/15/06 @ 100, AMBAC 1,350 1,350 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.38%, 8/15/10, Callable 8/15/06 @ 100, AMBAC 2,495 2,495 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.40%, 8/15/11, Callable 8/15/06 @ 100, AMBAC 5,000 5,000 Alabama State Water Pollution Control Authority, Revolving Fund, Series B, 5.50%, 8/15/16, Callable 8/15/06 @ 100, AMBAC 3,500 3,500 Alabama State, Series A, GO, 4.60%, 10/1/05 1,000 1,000 Auburn University, University Revenues, General Fee, 5.25%, 6/1/06, Callable 6/1/03 @ 102, MBIA 1,040 1,040 Birmingham Capital Improvement, Series B, GO, 4.80%, 10/1/08, Callable 4/1/07 @ 102 1,375 1,375 Birmingham Waterworks & Sewer Board, Water & Sewer Revenue, 5.90%, 1/1/03, Callable 1/1/02 @ 102 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE ------------------------------------------------------------------------------------------- ---------------- ---------------- Alabama State Agriculture & Mechanical University $ 2,155 $ 2,155 Revenue, 4.55%, 11/1/09, Callable 5/1/08 @ 102, MBIA Alabama State Agriculture & Mechanical University 2,248 2,248 Revenue, 4.65%, 11/1/10, Callable 5/1/08 @ 102, MBIA Alabama State Agriculture & Mechanical University 2,287 2,287 Revenue, 6.50%, 11/1/25, Callable 11/1/05 @ 102, MBIA Alabama State Corrections Institution, Series A, 4.90%, 3,118 3,118 4/1/03, MBIA Alabama State Industrial Access Road & Bridge Corp., 1,528 1,528 Capital Improvements, Series A, 4.60%, 6/1/03 Alabama State Judicial Building Authority, Judicial Facilities 3,739 3,739 Project, 4.75%, 1/1/05, AMBAC Alabama State Judicial Building Authority, Judicial Facilities 3,927 3,927 Project, 4.85%, 1/1/06, AMBAC Alabama State Mental Health Finance Authority, Special 2,039 2,039 Tax, 4.88%, 5/1/03, MBIA Alabama State Public School & College Authority, 4.75%, 7,474 7,474 12/1/03, Callable 6/1/03 @ 103 Alabama State Public School & College Authority, 5.00%, 3,479 3,479 12/1/05, Callable 6/1/03 @ 103 Alabama State Public School & College Authority Revenue, 9,981 9,981 Series A, 4.38%, 8/1/04 Alabama State Public School & College Authority, Capital 5,039 5,039 Improvement, 4.75%, 11/1/06, Callable 11/1/05 @ 101 Alabama State Water Pollution Control Authority, Revolving 1,805 1,805 Fund, Series B, 5.25%, 8/15/08, Callable 8/15/06 @ 100, AMBAC Alabama State Water Pollution Control Authority, Revolving 1,379 1,379 Fund, Series B, 5.38%, 8/15/10, Callable 8/15/06 @ 100, AMBAC Alabama State Water Pollution Control Authority, Revolving 2,552 2,552 Fund, Series B, 5.40%, 8/15/11, Callable 8/15/06 @ 100, AMBAC Alabama State Water Pollution Control Authority, Revolving 5,046 5,046 Fund, Series B, 5.50%, 8/15/16, Callable 8/15/06 @ 100, AMBAC Alabama State, Series A, GO, 4.60%, 10/1/05 3,517 3,517 Auburn University, University Revenues, General Fee, 5.25%, 1,032 1,032 6/1/06, Callable 6/1/03 @ 102, MBIA Birmingham Capital Improvement, Series B, GO, 4.80%, 1,039 1,039 10/1/08, Callable 4/1/07 @ 102 Birmingham Waterworks & Sewer Board, Water & Sewer 1,453 1,453 Revenue, 5.90%, 1/1/03, Callable 1/1/02 @ 102 B-91 469 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ ------------- -------------- ---------------------------------------------------------------- 1,340 1,340 Birmingham, Capital Improvements, Series A, GO, 4.75%, 10/1/10, Callable 4/1/08 @ 102 1,430 1,430 Birmingham, Capital Improvements, Series A, GO, 4.85%, 10/1/11, Callable 4/1/08 @ 102 1,500 1,500 Birmingham, GO, 4.90%, 7/1/06 1,300 1,300 Birmingham, Industrial Water Board, Industrial Water Supply, 5.50%, 3/1/06, Pre-refunded 3/1/05 @ 100 3,465 3,465 Birmingham, Industrial Water Board, Industrial Water Supply, 6.20%, 7/1/08, Pre-refunded 1/1/07 @ 100 1,100 1,100 Birmingham, Industrial Water Board, Industrial Water Supply, ETM, 5.30%, 3/1/04, Callable 3/1/03 @ 102 1,000 1,000 Birmingham, Industrial Water Board, Industrial Water Supply, ETM, 5.40%, 3/1/05, Callable 3/1/03 @ 102 1,045 1,045 Clark & Mobile County, Gas District, 5.60%, 12/1/17, Callable 12/1/06 @ 102, MBIA 9,500 9,500 Daphne, Special Care Facilities Financing Authority, Presbyterian Retirement Corp., 7.30%, 8/15/18, Pre-refunded 8/15/01 @ 100 720 720 Decatur, Warrants, Series E, Limited GO, 5.10%, 8/1/05, Callable 8/1/02 @ 102 760 760 Decatur, Warrants, Series E, Limited GO, 5.20%, 8/1/06, Callable 8/1/02 @ 102 750 750 Decatur, Warrants, Series E, Limited GO, 5.25%, 8/1/08, Callable 8/1/02 @ 102 780 780 Decatur, Warrants, Series E, Limited GO, 5.30%, 8/1/09, Callable 8/1/02 @ 102 2,845 2,845 Florence, Warrants, Series A, GO, 4.65%, 9/1/03, MBIA 390 390 Florence, Warrants, Series A, GO, 4.35%, 12/1/07, FSA 405 405 Florence, Warrants, Series A, GO, 4.40%, 12/1/08 425 425 Florence, Warrants, Series A, GO, 4.50%, 12/1/09 445 445 Florence, Warrants, Series A, GO, 4.60%, 12/1/10, Callable 12/1/08 @ 102 790 790 Florence, Warrants, Series B, GO, 4.35%, 12/1/07, FSA 825 825 Florence, Warrants, Series B, GO, 4.40%, 12/1/08, FSA 865 865 Florence, Warrants, Series B, GO, 4.50%, 12/1/09, Callable 12/1/08 @ 102, FSA 900 900 Florence, Warrants, Series B, GO, 4.60%, 12/1/10, Callable 12/1/08 @ 102, FSA 4,700 4,700 Gadsden, East Alabama Medical Clinic Board, Baptist Hospital of Gadsden, Inc., Series A, 7.80%, 11/1/21, Pre-refunded 11/1/01 @ 102 5,450 5,450 Hoover, Warrants, GO, 4.50%, 3/1/13, Pre-refunded 3/1/03 @ 100 550 550 Huntsville Electric, 4.60%, 12/1/09, Callable 12/1/07 @ 102 660 660 Huntsville Electric, 4.70%, 12/1/10, Callable 12/1/07 @ 102 680 680 Huntsville Electric, 4.80%, 12/1/11, Callable 12/1/07 @ 102 3,120 3,120 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/05 3,245 3,245 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/06 3,380 3,380 Huntsville, Warrants, Series B, GO, 4.10%, 11/1/07 2,000 2,000 Huntsville, Water System, Warrants, 5.00%, 5/1/02, AMBAC AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE - -------------------------------------------------------------------- --------------------- ------------------ -------------- Birmingham, Capital Improvements, Series A, GO, 4.75%, 1,309 1,309 10/1/10, Callable 4/1/08 @ 102 Birmingham, Capital Improvements, Series A, GO, 4.85%, 1,396 1,396 10/1/11, Callable 4/1/08 @ 102 Birmingham, GO, 4.90%, 7/1/06 1,525 1,525 Birmingham, Industrial Water Board, Industrial Water 1,362 1,362 Supply, 5.50%, 3/1/06, Pre-refunded 3/1/05 @ 100 Birmingham, Industrial Water Board, Industrial Water 3,663 3,663 Supply, 6.20%, 7/1/08, Pre-refunded 1/1/07 @ 100 Birmingham, Industrial Water Board, Industrial Water 1,139 1,139 Supply, ETM, 5.30%, 3/1/04, Callable 3/1/03 @ 102 Birmingham, Industrial Water Board, Industrial Water 1,042 1,042 Supply, ETM, 5.40%, 3/1/05, Callable 3/1/03 @ 102 Clark & Mobile County, Gas District, 5.60%, 12/1/17, Callable 1,064 1,064 12/1/06 @ 102, MBIA Daphne, Special Care Facilities Financing Authority, 10,071 10,071 Presbyterian Retirement Corp., 7.30%, 8/15/18, Pre-refunded 8/15/01 @ 100 Decatur, Warrants, Series E, Limited GO, 5.10%, 8/1/05, 738 738 Callable 8/1/02 @ 102 Decatur, Warrants, Series E, Limited GO, 5.20%, 8/1/06, 779 779 Callable 8/1/02 @ 102 Decatur, Warrants, Series E, Limited GO, 5.25%, 8/1/08, 763 763 Callable 8/1/02 @ 102 Decatur, Warrants, Series E, Limited GO, 5.30%, 8/1/09, 792 792 Callable 8/1/02 @ 102 Florence, Warrants, Series A, GO, 4.65%, 9/1/03, MBIA 2,879 2,879 Florence, Warrants, Series A, GO, 4.35%, 12/1/07, FSA 380 380 Florence, Warrants, Series A, GO, 4.40%, 12/1/08 392 392 Florence, Warrants, Series A, GO, 4.50%, 12/1/09 410 410 Florence, Warrants, Series A, GO, 4.60%, 12/1/10, Callable 428 428 12/1/08 @ 102 Florence, Warrants, Series B, GO, 4.35%, 12/1/07, FSA 769 769 Florence, Warrants, Series B, GO, 4.40%, 12/1/08, FSA 798 798 Florence, Warrants, Series B, GO, 4.50%, 12/1/09, Callable 834 834 12/1/08 @ 102, FSA Florence, Warrants, Series B, GO, 4.60%, 12/1/10, Callable 865 865 12/1/08 @ 102, FSA Gadsden, East Alabama Medical Clinic Board, Baptist 5,150 5,150 Hospital of Gadsden, Inc., Series A, 7.80%, 11/1/21, Pre-refunded 11/1/01 @ 102 Hoover, Warrants, GO, 4.50%, 3/1/13, Pre-refunded 3/1/03 @ 100 5,016 5,016 Huntsville Electric, 4.60%, 12/1/09, Callable 12/1/07 @ 102 534 534 Huntsville Electric, 4.70%, 12/1/10, Callable 12/1/07 @ 102 639 639 Huntsville Electric, 4.80%, 12/1/11, Callable 12/1/07 @ 102 656 656 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/05 3,026 3,026 Huntsville, Warrants, Series B, GO, 4.00%, 11/1/06 3,108 3,108 Huntsville, Warrants, Series B, GO, 4.10%, 11/1/07 3,218 3,218 Huntsville, Water System, Warrants, 5.00%, 5/1/02, AMBAC 2,042 2,042 B-92 470 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ ---------------- ---------------- --------------------------------------------------------------- 3,125 3,125 Huntsville, Water System, Warrants, 5.05%, 5/1/03, Callable 5/1/02 @ 102, AMBAC 1,000 1,000 Jefferson County Board of Education, Capital Outlay, 5.40%, 2/15/10, Callable 2/15/03 @ 102, AMBAC 4,000 4,000 Jefferson County, GO, 5.30%, 4/1/09, Pre-refunded 4/1/03 @ 102 2,400 2,400 Jefferson County, Sewer Revenue Warrants, 5.40%, 9/1/04, Pre-refunded 3/1/03 @ 102.5, MBIA 5,000 5,000 Jefferson County, Warrants, GO, 5.00%, 4/1/04, Callable 4/1/03 @ 102 1,000 1,000 Jefferson Sewer, 6.00%, 9/1/13, Callable 9/1/02 @ 102 2,000 2,000 Mobile County Board of School Commissioners, Warrants, Capital Outlay, 4.80%, 3/1/02, AMBAC 1,350 1,350 Mobile County, Series A, GO, 5.00%, 2/1/04, Callable 2/1/03 @ 102 1,000 1,000 Mobile County, Warrants, Series A, Limited GO, 5.00%, 2/1/04, Callable 2/1/03 @ 102 5,000 5,000 Mobile County, Warrants, Series A, Limited GO, 5.10%, 2/1/05, Callable 2/1/03 @ 102 1,630 1,630 Mobile, Warrants, GO, 6.50%, 2/15/05, AMBAC 1,685 1,685 Mobile, Warrants, GO, 6.50%, 2/15/06, AMBAC 2,700 2,700 Mobile, Warrants, GO, 4.85%, 2/15/09, Callable 2/15/00 @ 100 3,250 3,250 Mobile, Water & Sewer Commissioners, Water & Sewer Revenue, 5.00%, 1/1/05, FGIC 1,500 1,500 Montgomery County, Warrants, GO, 5.00%, 11/1/04, Callable 11/1/04 @ 102 1,040 1,040 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/05, Callable 5/1/03 @ 102 1,000 1,000 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/06, Callable 5/1/03 @ 102 3,000 3,000 Montgomery, Waterworks & Sanitary Sewer Board, 5.50%, 9/1/08, Callable 9/1/06 @ 101, MBIA 1,000 1,000 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 5.70%, 9/1/02 2,500 2,500 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 6.25%, 9/1/08, Callable 9/1/02 @ 102 3,565 3,565 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 6.30%, 9/1/10, Callable 9/1/02 @ 102 1,005 1,005 Shelby County, Warrants, Board of Education, Capital Outlay, 4.80%, 2/1/10, Callable 2/1/09 @ 101, AMBAC 1,990 1,990 Shelby County, Warrants, Series A, 5.60%, 8/1/02, AMBAC 1,830 1,830 Shelby County, Warrants, Series A, 5.70%, 2/1/03, AMBAC 335 335 Talladega County, Industrial Development Board, Cyprus 1 Project, 9.75%, 12/1/13 740 740 Tuscaloosa County, Warrants, GO, 5.60%, 10/1/04 1,200 1,200 University Alabama General Fee, 4.60%, 6/1/09, Callable 6/1/07 @ 102, MBIA 1,300 1,300 University Alabama General Fee, 4.70%, 6/1/10, Callable 6/1/07 @ 102, MBIA 1,500 1,500 University Alabama General Fee, 4.75%, 6/1/11, Callable 6/1/07 @ 102, MBIA 2,185 2,185 University of South Alabama, University Revenues, Tuition, 4.70%, 11/15/08, Callable 5/15/06 @ 102, AMBAC AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE ------------------------------------------------------------------- ----------------- ---------------- -------------- Huntsville, Water System, Warrants, 5.05%, 5/1/03, Callable 3,202 3,202 5/1/02 @ 102, AMBAC Jefferson County Board of Education, Capital Outlay, 5.40%, 1,053 1,053 2/15/10, Callable 2/15/03 @ 102, AMBAC Jefferson County, GO, 5.30%, 4/1/09, Pre-refunded 4/1/03 @ 102 4,070 4,070 Jefferson County, Sewer Revenue Warrants, 5.40%, 9/1/04, 2,539 2,539 Pre-refunded 3/1/03 @ 102.5, MBIA Jefferson County, Warrants, GO, 5.00%, 4/1/04, Callable 5,119 5,119 4/1/03 @ 102 Jefferson Sewer, 6.00%, 9/1/13, Callable 9/1/02 @ 102 1,069 1,069 Mobile County Board of School Commissioners, Warrants, 2,030 2,030 Capital Outlay, 4.80%, 3/1/02, AMBAC Mobile County, Series A, GO, 5.00%, 2/1/04, Callable 2/1/03 1,382 1,382 @ 102 Mobile County, Warrants, Series A, Limited GO, 5.00%, 1,024 1,024 2/1/04, Callable 2/1/03 @ 102 Mobile County, Warrants, Series A, Limited GO, 5.10%, 5,142 5,142 2/1/05, Callable 2/1/03 @ 102 Mobile, Warrants, GO, 6.50%, 2/15/05, AMBAC 1,782 1,782 Mobile, Warrants, GO, 6.50%, 2/15/06, AMBAC 1,857 1,857 Mobile, Warrants, GO, 4.85%, 2/15/09, Callable 2/15/00 @ 100 2,662 2,662 Mobile, Water & Sewer Commissioners, Water & Sewer 3,327 3,327 Revenue, 5.00%, 1/1/05, FGIC Montgomery County, Warrants, GO, 5.00%, 11/1/04, Callable 1,539 1,539 11/1/04 @ 102 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/05, 1,066 1,066 Callable 5/1/03 @ 102 Montgomery, Warrants, Series A, GO, 5.00%, 5/1/06, 1,019 1,019 Callable 5/1/03 @ 102 Montgomery, Waterworks & Sanitary Sewer Board, 5.50%, 3,135 3,135 9/1/08, Callable 9/1/06 @ 101, MBIA Montgomery, Waterworks & Sanitary Sewer Board, Series B, 1,041 1,041 5.70%, 9/1/02 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 2,667 2,667 6.25%, 9/1/08, Callable 9/1/02 @ 102 Montgomery, Waterworks & Sanitary Sewer Board, Series B, 3,808 3,808 6.30%, 9/1/10, Callable 9/1/02 @ 102 Shelby County, Warrants, Board of Education, Capital 986 986 Outlay, 4.80%, 2/1/10, Callable 2/1/09 @ 101, AMBAC Shelby County, Warrants, Series A, 5.60%, 8/1/02, AMBAC 2,070 2,070 Shelby County, Warrants, Series A, 5.70%, 2/1/03, AMBAC 1,912 1,912 Talladega County, Industrial Development Board, Cyprus 1 336 336 Project, 9.75%, 12/1/13 Tuscaloosa County, Warrants, GO, 5.60%, 10/1/04 780 780 University Alabama General Fee, 4.60%, 6/1/09, Callable 1,171 1,171 6/1/07 @ 102, MBIA University Alabama General Fee, 4.70%, 6/1/10, Callable 1,265 1,265 6/1/07 @ 102, MBIA University Alabama General Fee, 4.75%, 6/1/11, Callable 1,450 1,450 6/1/07 @ 102, MBIA University of South Alabama, University Revenues, Tuition, 2,163 2,163 4.70%, 11/15/08, Callable 5/15/06 @ 102, AMBAC ----------------- ---------------- -------------- 183,221 1,069 184,290 ----------------- ---------------- -------------- B-93 471 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ----------------- ---------------- ---------------------- --------------------------------------------------------------- ARKANSAS (0.2%): 1,400 1,400 Arkansas State Capital Appreciation, College Savings, Series C, GO, 0.00%, 6/1/11 CALIFORNIA (2.4%): 1,285 1,285 California State, 7.00%, 10/1/09, GO 2,655 2,655 Los Angeles County Metro Transit Authority Sales Tax Revenues, Series A, 6.00%, 7/1/09 4,765 4,765 San Mateo County, Transit District Sales Tax Revenue, Series A, 5.25%, 6/1/16, Callable 6/1/09 @ 101, FSA FLORIDA (5.6%): 1,760 1,760 Dade County, Series DD, 7.70%, 10/1/08, AMBAC 1,000 1,000 Dade County, Series DD, 7.70%, 10/1/12, AMBAC 1,150 1,150 Escambia County, Utilities Authority Revenue, Series D, 5.00%, 1/1/04, FGIC 2,000 2,000 Escambia County, Utilities Authority Revenue, Series D, 5.00%, 1/1/05, FGIC 6,500 6,500 Florida State Board of Education, Capital Outlay, Series A, GO, 5.00%, 6/1/08 8,070 8,070 Reedy Creek, Improvement District, Series 1, 5.50%, 10/1/08, Callable 10/1/07 @ 101, AMBAC GEORGIA (2.1%): 1,000 1,000 Georgia Municipal Gas Authority, 4.50%, 9/1/06, Gas Revenue Gas Portfolio Ii PJ - Series B 2,350 2,350 Georgia State, Series A, GO, 6.25%, 4/1/08 2,500 2,500 Georgia State, Series B, 7.20%, 3/1/06 1,500 1,500 Savannah Hospital Authority Revenue, St. Josephs Hospital Project, 6.20%, 7/1/23, Callable 7/1/03 @ 102 HAWAII (0.3%): 270 270 Honolulu City & County Prerefunded, Series B, 5.50%, 10/1/11, GO 730 730 Honolulu City & County Unrefunded Balance, Series B, 5.50%, 10/1/11, GO ILLINOIS (1.6%): 1,830 1,830 Chicago Metropolitan Water Reclamation District, Greater Chicago Capital Improvements, 6.90%, 1/1/07 2,830 2,830 Illinois Educational Facilities Authority Revenue, Loyola University, Series A, 6.10%, 7/1/15, Pre-Refunded 7/1/03 @ 102 3,000 3,000 Will County Forest Preservation District,, Series B, 0.00%, 12/1/18, GO, FGIC KENTUCKY (0.5%): 2,000 2,000 Carrollton & Henderson, 5.00%, 1/1/09, Public Energy Authority Gas Revenue MICHIGAN (2.5%): 1,000 1,000 Battle Creek Downtown Development Authority, 7.30%, 5/1/10, Prerefunded 5/1/07 @ 102 7,000 7,000 Municipal Bond Authority Revenue, 5.00%, 12/1/05 1,500 1,500 Rochester Community School District, 5.00%, 5/1/19, GO, MBIA, Q-SBLF AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE - ------------------------------------------------------------------------------------ -------------------- ---------------- Arkansas State Capital Appreciation, College Savings, - 774 774 Series C, GO, 0.00%, 6/1/11 -------------------- -------------------- ---------------- California State, 7.00%, 10/1/09, GO 1,513 1,513 Los Angeles County Metro Transit Authority Sales Tax 2,907 2,907 Revenues, Series A, 6.00%, 7/1/09 San Mateo County, Transit District Sales Tax Revenue, 4,744 4,744 Series A, 5.25%, 6/1/16, Callable 6/1/09 @ 101, FSA -------------------- -------------------- ---------------- 4,744 4,420 9,164 -------------------- -------------------- ---------------- Dade County, Series DD, 7.70%, 10/1/08, AMBAC 2,125 2,125 Dade County, Series DD, 7.70%, 10/1/12, AMBAC 1,256 1,256 Escambia County, Utilities Authority Revenue, Series D, 1,179 1,179 5.00%, 1/1/04, FGIC Escambia County, Utilities Authority Revenue, Series D, 2,051 2,051 5.00%, 1/1/05, FGIC Florida State Board of Education, Capital Outlay, Series A, 6,606 6,606 GO, 5.00%, 6/1/08 Reedy Creek, Improvement District, Series 1, 5.50%, 10/1/08, 8,510 8,510 Callable 10/1/07 @ 101, AMBAC -------------------- -------------------- ---------------- 18,346 3,381 21,727 -------------------- -------------------- ---------------- Georgia Municipal Gas Authority, 4.50%, 9/1/06, Gas 993 993 Revenue Gas Portfolio Ii PJ - Series B Georgia State, Series A, GO, 6.25%, 4/1/08 2,606 2,606 Georgia State, Series B, 7.20%, 3/1/06 2,865 2,865 Savannah Hospital Authority Revenue, St. Josephs Hospital 1,624 1,624 Project, 6.20%, 7/1/23, Callable 7/1/03 @ 102 -------------------- -------------------- ---------------- - 8,088 8,088 -------------------- -------------------- ---------------- Honolulu City & County Prerefunded, Series B, 5.50%, 283 283 10/1/11, GO Honolulu City & County Unrefunded Balance, Series B, 754 754 5.50%, 10/1/11, GO -------------------- -------------------- ---------------- - 1,037 1,037 -------------------- -------------------- ---------------- Chicago Metropolitan Water Reclamation District, Greater 2,070 2,070 Chicago Capital Improvements, 6.90%, 1/1/07 Illinois Educational Facilities Authority Revenue, Loyola 3,051 3,051 University, Series A, 6.10%, 7/1/15, Pre-Refunded 7/1/03 @ 102 Will County Forest Preservation District,, Series B, 0.00%, 1,024 1,024 12/1/18, GO, FGIC -------------------- -------------------- ---------------- - 6,145 6,145 -------------------- -------------------- ---------------- Carrollton & Henderson, 5.00%, 1/1/09, Public Energy - 2,018 2,018 -------------------- -------------------- ---------------- Authority Gas Revenue Battle Creek Downtown Development Authority, 7.30%, 1,136 1,136 5/1/10, Prerefunded 5/1/07 @ 102 Municipal Bond Authority Revenue, 5.00%, 12/1/05 7,191 7,191 Rochester Community School District, 5.00%, 5/1/19, GO, 1,438 1,438 MBIA, Q-SBLF -------------------- -------------------- ---------------- 7,191 2,574 9,765 -------------------- -------------------- ---------------- B-94 472 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ -------------- --------------- ----------------------------------------------------------- MINNESOTA (0.6%): 2,175 2,175 Centennial Independent School District, No. 12, Series A, GO, 5.60%, 2/1/07, MBIA MISSISSIPPI (1.2%): 1,000 1,000 Hinds County Refunding Bonds, 5.50%, 3/1/08, GO, MBIA 1,430 1,430 Jackson Mississippi Water & Sewer Revenue, 5.13%, 9/1/14, Callable @ 100 9/1/09 2,000 2,000 Mississippi State, Capital Improvements, Series A, GO, 5.20%, 8/1/11, Callable 8/1/03 @ 100 MISSOURI (2.0%): 7,535 7,535 Missouri State, Water Pollution, Series B, GO, 5.00%, 8/1/07, Callable 8/1/03 @ 102 NEW JERSEY (0.4%): 1,605 1,605 New Jersey Health Care, Cathedral Health Services, 5.50%, 2/1/11, MBIA NEW YORK (1.8%): 1,150 1,150 Hempstead Town, GO, 5.00%, 2/15/09, Callable 2/15/06 @ 102 1,500 1,500 Municipal Assistance Corp. for New York City, GO, 6.00%, 7/1/05 1,225 1,225 New York State Dorm Authority, New York University, Series A, 5.75%, 7/1/13, MBIA 2,500 2,500 New York State Environmental Facilities Corp., Pollution Control Revenue, Series E, 6.00%, 6/15/12 NORTH CAROLINA (1.9%): 355 355 Durham, Water & Sewer Revenue, 4.60%, 6/1/05 675 675 Durham, Water & Sewer Revenue, 4.60%, 6/1/06 555 555 Durham, Water & Sewer Revenue, 4.60%, 6/1/07 765 765 Durham, Water & Sewer Revenue, 4.60%, 6/1/08 5,000 5,000 North Carolina State, Series A, GO, 4.75%, 4/1/09, Callable 4/1/08 @ 100.5 OKLAHOMA (0.4%): 1,530 1,530 Moore Oklahoma Refunding, 5.75%, 4/1/12, GO, MBIA OREGON (2.0%): 2,365 2,365 Salem, GO, 4.45%, 12/1/10, Callable 6/1/09 @ 100, FSA 5,285 5,285 Washington County, Criminal Justice Facilities, GO, 5.00%, 12/1/09, Callable 12/1/07 @ 100 PENNSYLVANIA (1.3%): 1,500 1,500 Bethlehem Area School District, 6.00%, 3/1/16, Prerefunded 3/1/06 @100, MBIA 3,075 3,075 Pennsylvania Convention Center Authority Revenue, Series A, 6.70%, 9/1/16, FGIC RHODE ISLAND (0.3%): 1,000 1,000 Rhode Island Port Authority & Economic Development Corp., Shepard Building Project, Series B, 6.75%, 6/1/25, Prerefunded 6/1/04 @ 102, AMBAC SOUTH CAROLINA (2.4%): 5,525 5,525 Beaufort County School District, Series B, GO, 4.10%, 2/1/09, Callable 2/1/07 @ 101, SCSDE 4,325 4,325 Beaufort County School District, Series B, GO, 4.90%, 3/1/09, Callable 3/1/05 @ 101 AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE ---------------------------------------------------------------------------------------- ------------------ -------------- Centennial Independent School District, No. 12, Series A, 2,296 - 2,296 ------------------ ------------------ -------------- GO, 5.60%, 2/1/07, MBIA Hinds County Refunding Bonds, 5.50%, 3/1/08, GO, MBIA 1,048 1,048 Jackson Mississippi Water & Sewer Revenue, 5.13%, 1,412 1,412 9/1/14, Callable @ 100 9/1/09 Mississippi State, Capital Improvements, Series A, GO, 2,007 2,007 5.20%, 8/1/11, Callable 8/1/03 @ 100 ------------------ ------------------ -------------- 2,007 2,460 4,467 ------------------ ------------------ -------------- Missouri State, Water Pollution, Series B, GO, 5.00%, 7,699 - 7,699 ------------------ ------------------ -------------- 8/1/07, Callable 8/1/03 @ 102 New Jersey Health Care, Cathedral Health Services, 5.50%, - 1,663 1,663 ------------------ ------------------ -------------- 2/1/11, MBIA Hempstead Town, GO, 5.00%, 2/15/09, Callable 2/15/06 @ 1,163 1,163 102 Municipal Assistance Corp. for New York City, GO, 6.00%, 1,615 1,615 7/1/05 New York State Dorm Authority, New York University, Series 1,306 1,306 A, 5.75%, 7/1/13, MBIA New York State Environmental Facilities Corp., Pollution 2,731 2,731 Control Revenue, Series E, 6.00%, 6/15/12 ------------------ ------------------ -------------- 2,778 4,037 6,815 ------------------ ------------------ -------------- Durham, Water & Sewer Revenue, 4.60%, 6/1/05 357 357 Durham, Water & Sewer Revenue, 4.60%, 6/1/06 676 676 Durham, Water & Sewer Revenue, 4.60%, 6/1/07 552 552 Durham, Water & Sewer Revenue, 4.60%, 6/1/08 754 754 North Carolina State, Series A, GO, 4.75%, 4/1/09, Callable 4,988 4,988 4/1/08 @ 100.5 ------------------ ------------------ -------------- 7,327 - 7,327 ------------------ ------------------ -------------- Moore Oklahoma Refunding, 5.75%, 4/1/12, GO, MBIA - 1,635 1,635 ------------------ ------------------ -------------- Salem, GO, 4.45%, 12/1/10, Callable 6/1/09 @ 100, FSA 2,247 2,247 Washington County, Criminal Justice Facilities, GO, 5.00%, 5,331 5,331 12/1/09, Callable 12/1/07 @ 100 ------------------ ------------------ -------------- 7,578 - 7,578 ------------------ ------------------ -------------- Bethlehem Area School District, 6.00%, 3/1/16, Prerefunded 1,618 1,618 3/1/06 @100, MBIA Pennsylvania Convention Center Authority Revenue, Series 3,540 3,540 A, 6.70%, 9/1/16, FGIC ------------------ ------------------ -------------- - 5,158 5,158 ------------------ ------------------ -------------- - 1,115 1,115 ------------------ ------------------ -------------- Rhode Island Port Authority & Economic Development Corp., Shepard Building Project, Series B, 6.75%, 6/1/25, Prerefunded 6/1/04 @ 102, AMBAC Beaufort County School District, Series B, GO, 4.10%, 5,151 5,151 2/1/09, Callable 2/1/07 @ 101, SCSDE Beaufort County School District, Series B, GO, 4.90%, 4,325 4,325 3/1/09, Callable 3/1/05 @ 101 ------------------ ------------------ -------------- 9,476 - 9,476 ------------------ ------------------ -------------- B-95 473 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ ------------ --------------- ------------------------------------------------------------- TENNESSEE (4.3%): 2,000 2,000 Jackson, Improvements, 5.00%, 3/1/10, Pre-refunded 3/1/05 @102 2,500 2,500 Metropolitan Government Nashville & Davidson, 5.50%, 5/15/08, County, Tn Electric Revenue Refunded, Series B 1,000 1,000 Metropolitan Government Nashville & Davidson, Industrial Development Board Revenue, 7.50%, 11/15/10, Prerefunded 5/15/10 @ 100 3,000 3,000 Metropolitan Government, Nashville & Davidson County, GO, 5.25%, 5/15/06 1,000 1,000 Metropolitan Nashville & Davidson County, Industrial Development Board Revenue, Multi-family Housing, Arbor, Series C, 7.50%, 11/15/12, Callable 5/15/12 @ 100 1,000 1,000 Montgomery County, GO, 5.25%, 5/1/08, FSA 5,495 5,495 Tennessee State, Series B, GO, 4.60%, 5/1/07, Callable 5/1/06 @ 100 TEXAS (7.0%): 1,000 1,000 Austin Utility Systems Revenue Combined, Series A, 9.50%, 5/15/15, Prerefunded 5/15/00 @ 100 3,000 3,000 Dallas County, Series A, GO, 5.25%, 8/15/09 1,000 1,000 Harris County Housing Financial Corp., Multi-Family Housing Revenue, Breton Mill Partners, 7.00%, 3/1/07, Prerefunded 2/15/07 @ 100 1,000 1,000 Lubbock Health Facilities Development Hospital Revenue, Methodist Hospital, Series B, 6.75%, 12/1/10 4,000 4,000 Mesquite Independent School District, Series A, GO, 4.70%, 8/15/08, Callable 8/15/07 @ 100 1,600 1,600 North Central Health Facilities Development Corp., Baylor Health Care System, 6.25%, 5/15/10 1,000 1,000 Richardson Independent School District, Series C, 4.75%, 2/15/22, Callable 2/15/08 @ 100 5,000 5,000 Texas State, Series B, GO, 5.25%, 10/1/08, Callable 10/1/03 @ 100 3,575 3,575 University of Texas, 4.60%, 7/1/08, Callable 7/1/06 @ 100 5,455 5,455 University of Texas, Series B, 4.25%, 8/15/09, Callable 8/15/07 @ 100 1,000 1,000 Whitehouse Texas Independent School District, GO, 4.80%, 2/15/12, Callable 2/15/08 @ 100 UTAH (3.8%): 4,805 4,805 Davis County, School District, GO, 4.38%, 6/1/08, School Board Guaranty 3,810 3,810 Jordan School District, GO, 4.80%, 6/15/08, Callable 6/15/07 @ 100 6,000 6,000 Utah State, GO, Series F, 5.50%, 7/1/07 VIRGINIA (2.8%): 2,000 2,000 Virginia College Building Authority, Series A, 5.00%, 9/1/12, Callable 9/1/07 @ 101 5,000 5,000 Virginia State, GO, 5.00%, 6/1/08, Callable 6/1/07 @ 100 3,500 3,500 Virginia State, Public School Authority, Series S, 5.25%, 8/1/09 WASHINGTON (2.2%): 1,675 1,675 Seattle, Series A GO, 5.50%, 3/1/09 6,500 6,500 Washington State, GO, 5.75%, 9/1/08 AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE ------------------------------------------------------------------------------------------ ----------------- --------------- Jackson, Improvements, 5.00%, 3/1/10, Pre-refunded 3/1/05 1,997 1,997 @102 Metropolitan Government Nashville & Davidson, 5.50%, 2,625 2,625 5/15/08, County, Tn Electric Revenue Refunded, Series B Metropolitan Government Nashville & Davidson, Industrial 1,211 1,211 Development Board Revenue, 7.50%, 11/15/10, Prerefunded 5/15/10 @ 100 Metropolitan Government, Nashville & Davidson County, GO, 3,118 3,118 5.25%, 5/15/06 Metropolitan Nashville & Davidson County, Industrial 1,229 1,229 Development Board Revenue, Multi-family Housing, Arbor, Series C, 7.50%, 11/15/12, Callable 5/15/12 @ 100 Montgomery County, GO, 5.25%, 5/1/08, FSA 1,035 1,035 Tennessee State, Series B, GO, 4.60%, 5/1/07, Callable 5,487 5,487 5/1/06 @ 100 ----------------- ----------------- --------------- 10,602 6,100 16,702 ----------------- ----------------- --------------- Austin Utility Systems Revenue Combined, Series A, 9.50%, 1,045 1,045 5/15/15, Prerefunded 5/15/00 @ 100 Dallas County, Series A, GO, 5.25%, 8/15/09 3,080 3,080 Harris County Housing Financial Corp., Multi-Family Housing 1,145 1,145 Revenue, Breton Mill Partners, 7.00%, 3/1/07, Prerefunded 2/15/07 @ 100 Lubbock Health Facilities Development Hospital Revenue, 1,151 1,151 Methodist Hospital, Series B, 6.75%, 12/1/10 Mesquite Independent School District, Series A, GO, 4.70%, 3,967 3,967 8/15/08, Callable 8/15/07 @ 100 North Central Health Facilities Development Corp., Baylor 1,734 1,734 Health Care System, 6.25%, 5/15/10 Richardson Independent School District, Series C, 4.75%, 894 894 2/15/22, Callable 2/15/08 @ 100 Texas State, Series B, GO, 5.25%, 10/1/08, Callable 10/1/03 5,082 5,082 @ 100 University of Texas, 4.60%, 7/1/08, Callable 7/1/06 @ 100 3,534 3,534 University of Texas, Series B, 4.25%, 8/15/09, Callable 5,143 5,143 8/15/07 @ 100 Whitehouse Texas Independent School District, GO, 4.80%, 956 956 2/15/12, Callable 2/15/08 @ 100 ----------------- ----------------- --------------- 21,762 5,969 27,731 ----------------- ----------------- --------------- Davis County, School District, GO, 4.38%, 6/1/08, School 4,662 4,662 Board Guaranty Jordan School District, GO, 4.80%, 6/15/08, Callable 6/15/07 3,817 3,817 @ 100 Utah State, GO, Series F, 5.50%, 7/1/07 6,343 6,343 ----------------- ----------------- --------------- 14,822 - 14,822 ----------------- ----------------- --------------- Virginia College Building Authority, Series A, 5.00%, 9/1/12, 1,975 1,975 Callable 9/1/07 @ 101 Virginia State, GO, 5.00%, 6/1/08, Callable 6/1/07 @ 100 5,110 5,110 Virginia State, Public School Authority, Series S, 5.25%, 3,613 3,613 8/1/09 ----------------- ----------------- --------------- 10,698 - 10,698 ----------------- ----------------- --------------- Seattle, Series A GO, 5.50%, 3/1/09 1,750 1,750 Washington State, GO, 5.75%, 9/1/08 6,930 6,930 ----------------- ----------------- --------------- 6,930 1,750 8,680 ----------------- ----------------- --------------- B-96 474 AMSOUTH MUNICIPAL BOND FUND ISG MUNICIPAL INCOME FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 07/31/99 (UNAUDITED) AMSOUTH ISG MUNICIPAL MUNICIPAL PRO FORMA BOND INCOME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION ------------------ ---------------- ---------------------- ----------------------------------------------------------- WISCONSIN (0.7%): 2,420 2,420 Wisconsin State Health & Educational Facilities Authority Revenue, Wheaton Franciscan Services, Inc., 6.10%, 8/15/09, MBIA INVESTMENT COMPANIES (2.3%): 2,375,454 2,375,454 Aim Tax Free Money Market 67,559 67,559 Dreyfus Tax Free Money Market 33,471 33,471 Federated Tax-Free Fund 6,367,832 6,367,832 Goldman Sachs Tax-Free Fund AMSOUTH ISG PRO FORMA MUNICIPAL BOND MUNICIPAL INCOME COMBINED MARKET MARKET MARKET DESCRIPTION VALUE VALUE VALUE --------------------------------------------------------------------------------------- ---------------- -------------- Wisconsin State Health & Educational - 2,653 2,653 Facilities Authority Revenue, Wheaton ---------------- ---------------- -------------- Franciscan Services, Inc., 6.10%, 8/15/09, MBIA ---------------- ---------------- -------------- TOTAL MUNICIPAL BONDS $317,477 $ 62,046 $379,523 ---------------- ---------------- -------------- Aim Tax Free Money Market 2,375 2,375 Dreyfus Tax Free Money Market 68 68 Federated Tax-Free Fund 33 33 Goldman Sachs Tax-Free Fund 6,368 6,368 ---------------- ---------------- -------------- TOTAL INVESTMENT COMPANIES $ 6,401 $ 2,443 $ 8,844 ---------------- ---------------- -------------- ---------------- ---------------- -------------- TOTAL (COST $387,970) (a) $323,878 $ 64,489 $388,367 ---------------- ---------------- -------------- <FN> ------------ PERCENTAGES INDICATED ARE BASED ON NET ASSETS OF $388,135 (a) Represents cost for federal income tax and financial reporting purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation 5,258 Unrealized depreciation (4,861) ---------------- Net unrealized appreciation 397 ================ AMBAC - Insured by AMBAC Indemnity Corp. ETM - Escrowed to Maturity FGIC - Insured by Financial Guaranty Insurance Corp. FSA - Insured by Financial Security Assurance GO - General Obligation MBIA - Insured by Municipal Bond Insurance Assoc. SCSDE - South Carolina School District Enhancement Q-SBLF - Qualified School Bond Loan Fund B-97 475 AMSOUTH PRIME MONEY MARKET FUND ISG PRIME MONEY MARKET FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) AMSOUTH ISG PRO FORMA PRIME PRIME PRO FORMA COMBINED MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1) ------------ ------------ ------------ ------------ ASSETS: Investment securities, at amortized cost $ 582,351 $ 574,097 $ -- $ 1,156,448 Repurchase agreements 92,189 30,778 -- 122,967 ------------ ------------ ------------ ------------ Total Investments 674,540 604,875 -- 1,279,415 Interest and dividends receivable 1,515 1,356 -- 2,871 Receivable for capital shares issued -- 423 -- 423 Receivable from investment advisor -- 21 -- 21 Other assets 33 65 -- 98 ============ ============ ============ ============ TOTAL ASSETS 676,088 606,740 -- 1,282,828 ============ ============ ============ ============ LIABILITIES: Distributions payable 2,540 1,912 -- 4,452 Accrued expenses and other payables: Advisory fees 233 108 -- 341 Administration fees 15 7 -- 22 Distribution fees 12 96 -- 108 Accounting fees 2 -- -- 2 Transfer agent fees 16 -- -- 16 Custodian fees 7 16 -- 23 Other 62 47 -- 109 ------------ ------------ ------------ ------------ TOTAL LIABILITIES 2,887 2,186 -- 5,073 ============ ============ ============ ============ NET ASSETS: Class A Shares 136,078 466,274 -- 602,352 Class B Shares 224 196 -- 420 Institutional Shares 536,899 138,084 -- 674,983 ------------ ------------ ------------ ------------ $ 673,201 $ 604,554 -- $ 1,277,755 ============ ============ ============ ============ CAPITAL SHARES OUTSTANDING Class A Shares 136,085 466,314 -- 602,399 Class B Shares 224 196 -- 420 Institutional Shares 536,913 138,101 -- 675,014 ------------ ------------ ------------ ------------ $ 673,222 $ 604,611 -- $ 1,277,833 ============ ============ ============ ============ Net Asset Value - offering price and redemption price per share Class A Shares $ 1.00 $ 1.00 $ 1.00 ============ ============ ============ Class B Shares* $ 1.00 $ 1.00 $ 1.00 ============ ============ ============ Institutional Shares $ 1.00 $ 1.00 $ 1.00 ============ ============ ============ COMPOSITION OF NET ASSETS Capital 673,208 604,611 -- 1,277,819 Undistributed net realized gains (losses) from investments (7) (57) -- (64) ------------ ------------ ------------ ------------ NET ASSETS, JULY 31, 1999 $ 673,201 $ 604,554 -- $ 1,277,755 ============ ============ ============ ============ * Redemption price per share varies by length of time shares are held. B-98 476 AMSOUTH PRIME MONEY MARKET FUND ISG PRIME MONEY MARKET FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 7/31/99 (AMOUNTS IN THOUSANDS) (UNAUDITED) AMSOUTH ISG PRO FORMA PRIME PRIME MONEY PRO FORMA COMBINED MONEY MARKET MARKET ADJUSTMENTS (NOTE 1) ------------ ------------ ------------ ------------ INVESTMENT INCOME: Interest Income $ 35,908 $ 16,703 $ -- $ 52,611 ------------ ------------ ------------ ------------ 35,908 16,703 -- 52,611 ------------ ------------ ------------ ------------ EXPENSES: Advisory fees 2,765 820 492 (a) 4,077 Administration fees 1,383 328 328 (b) 2,039 Shareholder servicing fees (Class A Shares) 336 583 1 (c) 920 Shareholder servicing fees (Class B Shares) -- 1 - (d) 1 Shareholder servicing fees (Institutional Shares) -- 98 879 (e) 977 12b-1 fees (B Shares) 1 2 - (f) 3 Accounting fees 230 46 (248)(g) 28 Transfer agent fees 171 53 (39)(h) 185 Custodian fees 41 74 165 (i) 280 Trustee fees and expenses 15 10 (10)(j) 15 Registration and filing fees 31 70 (24)(k) 77 Other expenses 138 143 (131)(k) 150 ------------ ------------ ------------ ------------ TOTAL EXPENSES: 5,111 2,228 1,413 8,752 Less Waivers Advisory fees -- -- -- -- Administration fees -- -- -- -- 12b-1 fees (Class A Shares) -- -- -- -- Shareholder servicing fees (Class A Shares) (202) -- 202 (c) -- Accounting fees (20) -- 20 (g) -- Transfer agent fees (30) -- 30 (h) -- Reimbursement -- (74) 74 (l) -- ------------ ------------ ------------ ------------ NET EXPENSES: 4,859 2,154 1,739 8,752 ------------ ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 31,049 14,549 (1,739) 43,859 ------------ ------------ ------------ ------------ REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions 2 (53) -- (51) ------------ ------------ ------------ ------------ Net realized/unrealized gains (losses) from investments 2 (53) -- (51) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: $ 31,051 $ 14,496 $ (1,739) $ 43,808 ============ ============ ============ ============ NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.40% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class B net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional net assets). (f) Adjustment to reflect the AmSouth contractual fee structure for 12b-1 fees (0.75% of Class B net assets). (g) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (h) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (i) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (j) Adjustment to reflect the AmSouth contractual fee structure. (k) Reduction reflects expected savings when the two funds merge. (l) Adjustment to reflect the AmSouth contractual fee structure. B-99 477 AMSOUTH PRIME MONEY MARKET FUND ISG PRIME MONEY MARKET FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG PRO FORMA PRIME MONEY MARKET PRIME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION - -------------------- ------------- ------------- ---------------------------------------------------------- COMMERCIAL PAPER-FOREIGN (b) (10.1%): BANKING (8.5%): 20,000 20,000 Bank Austria, 5.08%, 10/01/99 19,000 19,000 Banque Generale du Luxembourg, S.A., 5.01%, 8/13/99 22,000 22,000 Bayer Hypo Vereinsbank, 5.05%, 09/24/99 19,000 19,000 Bayerische Landesbank NY, 4.98%, 9/13/99 20,000 20,000 Rabobank Nederland NV, 5.10%, 9/28/99 10,000 10,000 Toronto Dominion Holdings, 5.01%, 12/7/99 FINANCIAL SERVICES (0.8%): 10,000 10,000 Island Finance Puerto Rico, 5.13%, 10/18/99 FOOD PRODUCTS & SERVICES (0.8%): 10,000 10,000 Canadian Wheat Board, 4.74%, 8/20/99 TOTAL COMMERCIAL PAPER-FOREIGN CERTIFICATES OF DEPOSIT (2.0%): BANKING (2.0%): 10,000 10,000 BankAmerica, 5.24%, 9/24/99 10,000 10,000 Canadian Imperial Bank of Commerce, 5.01%, 2/7/00 5,000 5,000 Harris Trust, 5.05%, 2/14/00 TOTAL CERTIFICATES OF DEPOSIT CORPORATE BONDS (2.0%): BROKERAGE SERVICES (0.8%): 5,000 5,000 Bear Stearns & Co., Inc., 6.50%, 7/5/00 5,000 5,000 Morgan Stanley Dean Witter, 5.89%, 3/20/00 ELECTRIC UTILITY (0.4%): 5,000 5,000 Alabama Power Co., 6.00%, 3/1/00 FINANCIAL SERVICES (0.4%): 5,000 5,000 American General Finance Corp., 7.25%, 4/15/00 FOOD PRODUCTS & SERVICES (0.4%): 5,000 5,000 Diagio PLC, 6.50%, 9/15/99 TOTAL CORPORATE BONDS FLOATING RATE FUNDING AGREEMENTS (2.9%): INSURANCE (2.9%): 12,000 12,000 General American Life Insurance Co., 5.31%*, 9/1/99** 12,500 12,500 Monumental Life Insurance Co., 5.40%*, 9/1/99** 12,500 12,500 Monumental Life Insurance Co., 5.45%*, 9/1/99** TOTAL FLOATING RATE FUNDING AGREEMENTS AMSOUTH PRIME ISG PRO FORMA OBLIGATIONS PRIME COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - ----------------------------------------------------------------------- ----------- ---------- Bank Austria, 5.08%, 10/01/99 $ 19,828 $ 19,828 Banque Generale du Luxembourg, S.A., 5.01%, 8/13/99 18,968 18,968 Bayer Hypo Vereinsbank, 5.05%, 09/24/99 21,833 21,833 Bayerische Landesbank NY, 4.98%, 9/13/99 18,887 18,887 Rabobank Nederland NV, 5.10%, 9/28/99 19,836 19,836 Toronto Dominion Holdings, 5.01%, 12/7/99 $ 9,822 9,822 ---------- ---------- ---------- 9,822 99,352 109,174 ---------- ---------- ---------- Island Finance Puerto Rico, 5.13%, 10/18/99 9,889 -- 9,889 ---------- ---------- ---------- Canadian Wheat Board, 4.74%, 8/20/99 9,975 9,975 ---------- ---------- ---------- TOTAL COMMERCIAL PAPER-FOREIGN $ 29,686 $ 99,352 $ 129,038 ---------- ---------- ---------- BankAmerica, 5.24%, 9/24/99 10,001 10,001 Canadian Imperial Bank of Commerce, 5.01%, 2/7/00 9,998 9,998 Harris Trust, 5.05%, 2/14/00 4,999 4,999 ---------- ---------- ---------- TOTAL CERTIFICATES OF DEPOSIT $ 24,998 $ -- $ 24,998 ---------- ---------- ---------- Bear Stearns & Co., Inc., 6.50%, 7/5/00 5,037 5,037 Morgan Stanley Dean Witter, 5.89%, 3/20/00 5,022 5,022 ---------- ---------- ---------- 10,059 -- 10,059 ---------- ---------- ---------- Alabama Power Co., 6.00%, 3/1/00 5,022 -- 5,022 ---------- ---------- ---------- American General Finance Corp., 7.25%, 4/15/00 5,051 -- 5,051 ---------- ---------- ---------- Diagio PLC, 6.50%, 9/15/99 5,005 5,005 ---------- ---------- ---------- TOTAL CORPORATE BONDS $ 25,137 $ -- $ 25,137 ---------- ---------- ---------- General American Life Insurance Co., 5.31%*, 9/1/99** 12,000 12,000 Monumental Life Insurance Co., 5.40%*, 9/1/99** 12,500 12,500 Monumental Life Insurance Co., 5.45%*, 9/1/99** 12,500 12,500 ---------- ---------- ---------- 37,000 -- 37,000 ---------- ---------- ---------- TOTAL FLOATING RATE FUNDING AGREEMENTS $ 37,000 $ -- $ 37,000 ---------- ---------- ---------- B-100 478 AMSOUTH ISG PRO FORMA PRIME MONEY MARKET PRIME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES --------------------------- ------------------------- ------------------- U.S. GOVERNMENT AGENCIES (5.2%): FANNIE MAE (2.8%): 15,000 15,000 15,000 15,000 6,500 6,500 FEDERAL FARM CREDIT BANK (1.2%): 15,000 15,000 STUDENT LOAN MARKETING ASSOC. (1.2%): 15,000 15,000 COMMERCIAL PAPER-DOMESTIC (b) (68.3%): AGRICULTURE (1.6%): 10,000 10,000 10,000 10,000 AIRCRAFT LEASING (3.1%): 10,000 10,000 10,000 10,000 20,000 20,000 ALUMINUM (1.6%): 10,000 10,000 10,000 10,000 AUTOMOTIVE (1.6%): 10,000 10,000 10,000 10,000 AUTOMOTIVE CREDIT (5.8%): 10,000 10,000 18,000 18,000 10,000 10,000 10,000 10,000 17,000 17,000 10,000 10,000 BANKING (7.2%): 10,000 10,000 10,000 10,000 5,000 5,000 18,000 18,000 10,000 10,000 10,000 10,000 10,000 10,000 19,000 19,000 BEVERAGES (2.2%): 10,000 10,000 19,000 19,000 AMSOUTH OBLIGATIONS ISG PRO FORMA PRIME PRIME COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - -------------------------------------------------------------------------------- -------------- --------------- 5.00%, 2/24/00 15,000 15,000 5.10%, 3/8/00, Callable 6/8/99 @ 100 15,000 15,000 5.07%, 4/19/00 6,500 6,500 ------------ -------------- --------------- - 36,500 36,500 ------------ -------------- --------------- Federal Farm Credit Bank, 5.26%, 3/17/00 - 15,000 15,000 ------------ -------------- --------------- Student Loan Marketing Assoc., 5.16%, 3/8/00, Callable 6/8/99 @ 100 - 15,000 15,000 ------------ -------------- --------------- TOTAL U.S. GOVERNMENT AGENCIES $ - $ 66,500 $ 66,500 ------------ -------------- --------------- Cargill Inc., 4.77%, 8/2/99 9,999 9,999 Monsanto Co., 4.91%, 9/21/99 9,930 9,930 ------------ -------------- --------------- 19,929 - 19,929 ------------ -------------- --------------- International Lease Finance Corp., 4.80%, 8/5/99 9,995 9,995 International Lease Finance Corp., 4.74%, 8/13/99 9,984 9,984 International Lease Finance Corp., 5.06%, 9/21/99 19,857 19,857 ------------ -------------- --------------- 19,979 19,857 39,836 ------------ -------------- --------------- Alcoa, 4.78%, 8/24/99 9,969 9,969 Alcoa, 4.84%, 8/31/99 9,960 9,960 ------------ -------------- --------------- 19,929 - 19,929 ------------ -------------- --------------- Daimler Chrysler, 4.85%, 9/20/99 9,932 9,932 Daimler Chrysler, 5.14%, 10/6/99 9,906 9,906 ------------ -------------- --------------- 19,838 - 19,838 ------------ -------------- --------------- BMW US Capital, 5.17%, 12/10/99 9,812 9,812 Ford Motor Credit, 5.16%, 10/21/99 17,791 17,791 Ford Motor Credit Co., 4.80%, 8/27/99 9,965 9,965 Ford Motor Credit Co., 4.70%, 11/5/99 9,875 9,875 General Motors Accept Corp., 5.15%, 10/5/99 16,842 16,842 General Motors Acceptance Corp., 5.28%, 1/25/00 9,740 9,740 ------------ -------------- --------------- 39,392 34,633 74,025 ------------ -------------- --------------- Banca Credit Financial Corp., 4.80%, 8/9/99 9,989 9,989 J.P. Morgan & Co., 4.80%, 10/8/99 9,909 9,909 J.P. Morgan & Co., 4.80%, 10/15/99 4,950 4,950 Lloyds Bank PLC, 4.94%, 8/23/99 17,946 17,946 SunTrust Banks, 5.06%, 8/11/99 9,986 9,986 SunTrust Banks, 5.06%, 8/25/99 9,966 9,966 Wells Fargo & Co., 4.86%, 9/10/99 9,946 9,946 Wells Fargo Co., 5.01%, 8/20/99 18,950 18,950 ------------ -------------- --------------- 44,757 46,885 91,642 ------------ -------------- --------------- Coca Cola Co., 5.00%, 9/17/99 9,935 9,935 Coca Cola Co., 5.10%, 10/7/99 18,819 18,819 ------------ -------------- --------------- 9,935 18,819 28,754 ------------ -------------- --------------- B-101 479 AMSOUTH ISG PRO FORMA PRIME MONEY MARKET PRIME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES --------------------------- ----------------- ------------- BROKERAGE SERVICES (1.5%): 10,000 10,000 10,000 10,000 CONSUMER GOODS (6.1%): 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 19,000 19,000 10,000 10,000 ELECTRIC UTILITY (3.6%): 10,000 10,000 5,000 5,000 10,000 10,000 22,000 22,000 FARM EQUIPMENT (3.1%): 20,000 20,000 10,000 10,000 10,000 10,000 FINANCIAL SERVICES (16.3%): 18,000 18,000 19,000 19,000 10,000 10,000 10,000 10,000 18,000 18,000 10,000 10,000 18,000 18,000 10,000 10,000 19,000 19,000 19,000 19,000 10,000 10,000 19,000 19,000 10,000 10,000 9,000 9,000 12,654 12,654 INDUSTRIALS (1.4%): 18,000 18,000 OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (4.5%): 10,000 10,000 10,000 10,000 10,000 10,000 18,000 18,000 10,000 10,000 PHARMACEUTICALS (2.3%): 19,000 19,000 10,000 10,000 AMSOUTH PRIME ISG PRO FORMA OBLIGATIONS PRIME COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - --------------------------------------------------------------------------- -------------- ----------- Goldman Sachs, 5.36%, 1/21/00 9,742 9,742 Merrill Lynch, 5.13%, 9/16/99 9,935 9,935 ---------------- -------------- ----------- 19,677 - 19,677 ---------------- -------------- ----------- Clorox Co., 4.88%, 9/8/99 9,948 9,948 Clorox Co., 5.11%, 10/21/99 9,885 9,885 Hasbro Inc., 4.94%, 10/26/99 9,882 9,882 Kimberly Clark, 5.05%, 8/19/99 9,975 9,975 Procter & Gamble, 4.97%, 8/9/99 9,989 9,989 Proctor & Gamble, 4.88%, 8/2/99 18,998 18,998 Proctor & Gamble, 5.10%, 9/29/99 9,916 9,916 ---------------- -------------- ----------- 59,595 18,998 78,593 ---------------- -------------- ----------- Alabama Power Co., 5.08%, 8/24/99 9,968 9,968 National Rural Utilities, 4.83%, 8/23/99 4,985 4,985 National Rural Utilities, 4.79%, 8/26/99 9,967 9,967 National Rural Utilities, 5.15%, 10/27/99 21,726 21,726 ---------------- -------------- ----------- 24,920 21,726 46,646 ---------------- -------------- ----------- John Deere & Co., 5.07%, 9/1/99 19,912 19,912 John Deere Capital Corp., 4.77%, 8/17/99 9,979 9,979 John Deere Capital Corp., 4.78%, 9/7/99 9,951 9,951 ---------------- -------------- ----------- 19,930 19,912 39,842 ---------------- -------------- ----------- Abbey National North America, 5.01%, 9/15/99 17,887 17,887 American Express, 4.94%, 8/25/99 18,937 18,937 American Express, 4.80%, 12/14/99 9,820 9,820 American Express, 4.78%, 1/11/00 9,784 9,784 American General, 5.09%, 9/9/99 17,901 17,901 American General Finance Corp., 5.14%, 10/28/99 9,874 9,874 Associates Corp., 5.10%, 9/7/99 17,906 17,906 Associates First Capital, 5.30%, 4/3/00 9,638 9,638 Commercial Credit Co., 5.06%, 8/30/99 18,923 18,923 General Electric, 4.93%, 8/16/99 18,961 18,961 General Electric Capital Corp., 5.38%, 4/4/00 9,631 9,631 Household Financial, 4.90%, 8/11/99 18,973 18,973 Transamerica Finance, 4.80%, 8/12/99 9,985 9,985 USAA Capital Corp., 5.13%, 10/18/99 8,900 8,900 USAA Capital Corp., 5.15%, 10/19/99 12,511 12,511 ---------------- -------------- ----------- 58,732 150,899 209,631 ---------------- -------------- ----------- Emerson Electric, 5.08%, 8/5/99 17,990 17,990 ---------------- -------------- ----------- Chevron USA, 5.03%, 9/3/99 9,954 9,954 Equilon Enterprises, 5.00%, 8/16/99 9,979 9,979 Equilon Enterprises, 5.16%, 10/19/99 9,887 9,887 Shell Oil Co., 5.05%, 9/3/99 17,917 17,917 Texaco Inc., 5.33%, 1/18/00 9,748 9,748 ---------------- -------------- ----------- 39,568 17,917 57,485 ---------------- -------------- ----------- Glaxo Wellcome PLC, 5.06%, 9/17/99 18,875 18,875 Pfizer Inc., 5.05%, 9/2/99 9,955 9,955 ---------------- -------------- ----------- 9,955 18,875 28,830 ---------------- -------------- ----------- B-102 480 AMSOUTH ISG PRO FORMA PRIME MONEY MARKET PRIME COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES --------------------------- ------------------------- ------------------- TECHNOLOGY (2.9%): 5,000 5,000 10,000 10,000 22,000 22,000 TELECOMMUNICATIONS (2.3%): 10,000 10,000 10,000 10,000 10,000 10,000 TELECOMMUNICATIONS-WIRELESS (1.2%): 5,109 5,109 10,000 10,000 INVESTMENT COMPANIES (0.0%): 568 568 REPURCHASE AGREEMENTS (9.6%): 30,778 30,778 92,189 92,189 AMSOUTH PRIME ISG PRO FORMA OBLIGATIONS PRIME COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - --------------------------------------------------------------------------------------------- ------------- ------------ IBM Credit Corp., 4.67%, 8/6/99 4,997 4,997 IBM Credit Corp., 4.80%, 9/13/99 9,943 9,943 IBM Credit Corp., 5.12%, 10/25/99 21,733 21,733 ---------------- -------------- ------------ 14,940 21,733 36,673 ---------------- -------------- ------------ BellSouth Telecommunications Inc., 5.11%, 9/28/99 9,918 9,918 Lucent Technologies, 4.98%, 1/27/00 9,752 9,752 Lucent Technologies, 4.97%, 2/10/00 9,734 9,734 ---------------- -------------- ------------ 29,404 - 29,404 ---------------- -------------- ------------ Motorola, 5.05%, 8/4/99 5,107 5,107 Motorola, 5.08%, 9/10/99 9,943 9,943 ---------------- -------------- ------------ 15,050 - 15,050 ---------------- -------------- ------------ TOTAL COMMERCIAL PAPER-DOMESTIC $ 465,530 $ 408,244 $ 873,774 ---------------- -------------- ------------ Bank Of New York Cash Reserve 1 1 ---------------- -------------- ------------ TOTAL INVESTMENT COMPANIES $ - $ 1 $ 1 ---------------- -------------- ------------ Cantor Fizgerald, 5.08%, 8/02/99 30,778 30,778 Solomon Smith Barney, 5.13%, 7/30/99 92,189 92,189 ---------------- -------------- ------------ TOTAL REPURCHASE AGREEMENTS $ 92,189 $ 30,778 $ 122,967 ---------------- -------------- ------------ ---------------- -------------- ------------ TOTAL (COST $1,279,415) (a) $ 674,540 $ 604,875 $ 1,279,415 ---------------- -------------- ------------ --------------------------- Percentages are based on net assets of $1,277,755. (a) Cost and value for federal income tax and financial reporting purposes are the same. (b) Yield effective at purchase. * Variable rate security. Rate presented represents the rate in effect at July 31, 1999. Date presented reflects next rate change date ** Put and demand features exist allowing the Fund to require the repurchase of the instrument within variable time periods including daily, weekly, monthly, quarterly, or semiannually. PLC - Public Limited Co. B-103 481 AMSOUTH TAX-EXEMPT MONEY MARKET FUND ISG TAX-EXEMPT MONEY MARKET FUND PRO FORMA COMBINING STATEMENT OF OPERATIONS 7/31/99 (AMOUNTS IN THOUSANDS) (UNAUDITED) AMSOUTH ISG PRO FORMA TAX-EXEMPT TAX-EXEMPT PRO FORMA COMBINED MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1) ------------ ------------ ------------ ------------ INVESTMENT INCOME: Interest Income $ 2,906 $ 792 $ -- $ 3,698 Dividend Income 165 38 -- 203 ------------ ------------ ------------ ------------ 3,071 830 -- 3,901 ------------ ------------ ------------ ------------ EXPENSES: Advisory fees 383 88 13 (a) 484 Administration fees 192 25 25 (b) 242 Shareholder servicing fees (Class A Shares) 63 2 (1)(c) 64 Shareholder servicing fees (Institutional Shares) -- 37 106 (d) 143 Accounting fees 53 4 (27)(e) 30 Transfer agent fees 39 7 22 (f) 68 Custodian fees 6 9 18 (g) 33 Trustee fees and expenses 2 -- -- 2 Registration and filing fees 6 14 (5)(h) 15 Other expenses 16 16 (11)(h) 21 ------------ ------------ ------------ ------------ TOTAL EXPENSES: 760 202 141 1,103 Less Waivers Advisory fees (192) -- 192 (a) -- Administration fees -- -- -- -- Shareholder servicing fees (Class A Shares) (38) -- 38 (c) -- 12b-1 fees (Class A Shares) -- -- -- -- Accounting fees (21) -- 21 (e) -- Transfer agent fees (20) -- 20 (i) -- Reimbursements -- -- -- -- ------------ ------------ ------------ ------------ NET EXPENSES: 489 202 412 1,103 ------------ ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 2,582 628 (412) 2,798 ------------ ------------ ------------ ------------ REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions 1 (40) -- (39) ------------ ------------ ------------ ------------ Net realized/unrealized gains (losses) from investments 1 (40) -- (39) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: $ 2,583 $ 588 $ (412) $ 2,759 ============ ============ ============ ============ NOTES TO PRO FORMA FINANCIAL STATEMENTS (a) Adjustment to reflect the AmSouth contractual fee structure for Advisory fees (0.40% of net assets). (b) Adjustment to reflect the AmSouth contractual fee structure for Administration fees (0.20% of net assets). (c) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.25% of Class A net assets). (d) Adjustment to reflect the AmSouth contractual fee structure for Shareholder Servicing fees (0.15% of Institutional net assets). (e) Adjustment to reflect the AmSouth contractual fee structure for Accounting fees ($10,000 a year per additional class + OOP). (f) Adjustment to reflect the AmSouth contractual fee structure for Transfer agent fees (0.015% of net assets + $10,000 a year per class + OOP). (g) Adjustment to reflect the AmSouth contractual fee structure for Custodian fees (0.0275% of net assets). (h) Reduction reflects expected savings when the two funds merge. (i) Adjustment to reflect the AmSouth contractual fee structure. B-104 482 AMSOUTH TAX-EXEMPT MONEY MARKET FUND ISG TAX-EXEMPT MONEY MARKET FUND PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) AMSOUTH ISG PRO FORMA TAX-EXEMPT TAX-EXEMPT PRO FORMA COMBINED MONEY MARKET MONEY MARKET ADJUSTMENTS (NOTE 1) ------------ ------------ ------------ ------------ ASSETS: Investment securities, at amortized cost $ 96,133 $ 110,571 $ -- $ 206,704 Interest and dividends receivable 817 735 -- 1,552 Other assets 6 2 -- 8 ------------ ------------ ------------ ------------ TOTAL ASSETS 96,956 111,308 -- 208,264 ------------ ------------ ------------ ------------ LIABILITIES: Distributions payable 202 212 -- 414 Securities purchased payable -- 2,904 -- 2,904 Accrued expenses and other payables: Investment advisory fees 16 31 -- 47 Administration fees 2 1 -- 3 Distribution fees 2 13 -- 15 Accounting fees 1 -- -- 1 Transfer agent fees 1 7 -- 8 Custodian fees 1 6 -- 7 Other 7 29 -- 36 ------------ ------------ ------------ ------------ TOTAL LIABILITIES 232 3,203 -- 3,435 ------------ ------------ ------------ ------------ NET ASSETS: Class A Shares 22,844 10,046 -- 32,890 Institutional Shares 73,880 98,059 -- 171,939 ------------ ------------ ------------ ------------ $ 96,724 $ 108,105 $ -- $ 204,829 ============ ============ ============ ============ CAPITAL SHARES OUTSTANDING Class A Shares 22,845 10,047 -- 32,892 Institutional Shares 73,880 98,099 -- 171,979 ------------ ------------ ------------ ------------ 96,725 108,146 -- 204,871 ============ ============ ============ ============ NET ASSET VALUE - OFFERING AND REDEMPTION PRICE PER SHARE Class A Shares $ 1.00 $ 1.00 -- $ 1.00 ------------ ------------ ------------ Institutional Shares $ 1.00 $ 1.00 -- $ 1.00 ------------ ------------ ------------ COMPOSITION OF NET ASSETS Capital $ 96,725 $ 108,146 $ -- $ 204,871 Undistributed (distributions in excess of) net investment income -- (41) -- (41) Undistributed net realized gains (losses) from investment transactions (1) -- -- (1) ------------ ------------ ------------ ------------ NET ASSETS, JULY 31, 1999 $ 96,724 $ 108,105 $ -- $ 204,829 ============ ============ ============ ============ B-105 483 AMSOUTH TAX-EXEMPT MONEY MARKET FUND ISG TAX-EXEMPT MONEY MARKET FUND PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS 7/31/99 (AMOUNTS IN THOUSANDS, EXCEPT SHARES) (UNAUDITED) AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- ------------------ ----------------------------------------------------------------------------- TAX ANTICIPATION NOTES (4.7%): FLORIDA (0.5%): $ 1,000 $ 1,000 Orange County School District Tax Anticipation Notes, 3.10%, 9/15/99 PENNSYLVANIA (0.7%): 1,500 1,500 Philadelphia Tax & Revenue Anticipation Notes, 4.25%, 6/30/00 TEXAS (3.5%): 2,200 5,000 7,200 Texas State Tax & Revenue Anticipation Notes, 4.50%, 8/31/99 DEMAND NOTES (19.0%): ALABAMA (6.2%): 1,500 1,500 Alabama Housing Finance Authority, Huntsville, Series B, 3.15%*, 8/4/99**, FNMA 2,000 2,000 Alabama State Housing Finance Authority, Multi Family Housing Revenue, Rime VLG Hoover Project, Series A, 3.15%*,8/4/99**, FNMA 1,000 1,000 Bon Air, Industrial Development Board, Avondale Mills, 3.15%*, 8/4/99** 2,000 2,000 City of Birmingham, Series 1992A, GO, 3.20%*, 8/4/99** 350 350 Columbia, Industrial Development Board, PCR, Alabama Power Co. Project , Series D, 3.40%*, 8/2/99** 1,000 1,000 Jacksonville, Industrial Development Board, Parker Hannifin Corp., 3.15%*, 8/5/99** 2,000 2,000 Mobile, Industrial Development Board, PCR, Alabama Power Co. Project, Series B, 3.20%*, 8/5/99** 500 500 North Alabama, Environmental Improvement Authority, PCR, Reynolds Metals Co., 3.40%*, 8/2/99** 1,000 1,000 Port City Medical Clinic Board, Infirmary Health Systems, Series B, 3.15%*, 8/5/99**, AMBAC 1,365 1,365 Stevenson, Industrial Development Board, Environmental Improvement Revenue, Mead Corp. Project, 3.35%*, 8/2/99** AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST ------------------------------------------------------------------------------------ ---------------- -------------------- Orange County School District Tax Anticipation Notes, $ 1,000 - $ 1,000 3.10%, 9/15/99 ------------------- ---------------- ---------------- Philadelphia Tax & Revenue Anticipation Notes, 4.25%, 1,510 - 1,510 6/30/00 ------------------- ---------------- ---------------- Texas State Tax & Revenue Anticipation Notes, 4.50%, 2,203 5,005 7,208 8/31/99 ------------------- ---------------- ---------------- TOTAL TAX ANTICIPATION NOTES $ 4,713 $ 5,005 $ 9,718 ------------------- ---------------- ---------------- Alabama Housing Finance Authority, Huntsville, Series B, 1,500 1,500 3.15%*, 8/4/99**, FNMA Alabama State Housing Finance Authority, Multi Family 2,000 2,000 Housing Revenue, Rime VLG Hoover Project, Series A, 3.15%*,8/4/99**, FNMA Bon Air, Industrial Development Board, Avondale Mills, 1,000 1,000 3.15%*, 8/4/99** City of Birmingham, Series 1992A, GO, 3.20%*, 8/4/99** 2,000 2,000 Columbia, Industrial Development Board, PCR, Alabama 350 350 Power Co. Project , Series D, 3.40%*, 8/2/99** Jacksonville, Industrial Development Board, Parker Hannifin 1,000 1,000 Corp., 3.15%*, 8/5/99** Mobile, Industrial Development Board, PCR, Alabama Power 1,999 1,999 Co. Project, Series B, 3.20%*, 8/5/99** North Alabama, Environmental Improvement Authority, PCR, 500 500 Reynolds Metals Co., 3.40%*, 8/2/99** Port City Medical Clinic Board, Infirmary Health Systems, 1,000 1,000 Series B, 3.15%*, 8/5/99**, AMBAC Stevenson, Industrial Development Board, Environmental 1,365 1,365 Improvement Revenue, Mead Corp. Project, 3.35%*, 8/2/99** ------------------- --------------------- ----------------- 12,714 12.714 ------------------- --------------------- ----------------- B-106 484 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- ---------------- ------------------- --------------------------------------------------------- CALIFORNIA (1.2%): 2,500 2,500 Los Angeles, Regional Airports Improvements Corp., Los Angeles International-LAX 2, 3.40%*, 8/2/99 ** FLORIDA (1.5%): 1,500 1,500 Alachua County Florida Health, 3.00%*, 8/4/99**, MBIA 1,680 1,680 Laurel Club, Certificates of Participation, Series 96A, 3.25%*, 8/4/99** GEORGIA (0.5%): 1,000 1,000 Cobb County, Post Mill Project, 3.15%*, 8/4/99** MICHIGAN (1.2%): 2,500 2,500 Cornell Township Economic Development Corporation, Environment Improvement Revenue, 3.35%*, 8/2/99** MINNESOTA (1.7%): 1,000 1,000 Minneapolis, GO, Sewer Improvements, Series A, 3.05%*, 8/4/99** 2,400 2,400 Minneapolis, GO, Sewer Improvements, Series B, 3.05%*, 8/5/99** NEW YORK (1.2%): 900 900 New York, GO, 3.50%*, 8/2/99**, LOC: Morgan Guaranty Trust 1,600 1,600 New York, GO, Series D, 3.00%*, 8/4/99**, FGIC NORTH CAROLINA (0.2%): 500 500 North Carolina Educational Facilities, 3.00%*, 8/5/99** PENNSYLVANIA (1.1%): 2,200 2,200 Schuylkill County, Industrial Development Authority, Resource Recovery Revenue, Gilberton Power Project, 3.05%*, 8/4/99** SOUTH CAROLINA (0.5%): 1,000 1,000 South Carolina State Jobs & Economic Development Revenue, St. Francis Hospital, 3.40%*, 8/2/99** TENNESSEE (0.9%): 1,300 1,300 Metropolitan Nashville Airport Authority, Special Facilitie Revenue, American Airlines Project, Series A, 3.40%*, 8/2/99** 500 500 Sullivan County, Industrial Development Board , PCR, Mead Corp. Project, 2.80%*, 8/2/99** TEXAS (1.5%): 1,000 1,000 Grapevine, Industrial Development Corp., American Airlines A4, 3.40%*, 8/2/99** 2,000 2,000 North Central Texas Series C, 3.40%*, 8/2/99** WASHINGTON (0.3%): 600 600 Seattle Municipal Light & Power, 3.00%*, 8/4/99** WYOMING (1.0%): 2,000 2,000 Lincoln County PCR, Project D, 3.35%*, 8/2/99** TOTAL DEMAND NOTES AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST -------------------------------------------------------------------------------------- --------------------- ------------------ Los Angeles, Regional Airports Improvements Corp., Los 2,500 - 2,500 Angeles International-LAX 2, 3.40%*, 8/2/99 ** ------------------- ---------------- ----------------- Alachua County Florida Health, 3.00%*, 8/4/99**, MBIA 1,500 1,500 Laurel Club, Certificates of Participation, Series 96A, 1,680 1,680 3.25%*, 8/4/99** ------------------- ---------------- ----------------- 3,180 - 3,180 ------------------- ---------------- ----------------- Cobb County, Post Mill Project, 3.15%*, 8/4/99** 1,000 - 1,000 ------------------- ---------------- ----------------- Cornell Township Economic Development Corporation, 2,500 - 2,500 ------------------- ---------------- ----------------- Environment Improvement Revenue, 3.35%*, 8/2/99** Minneapolis, GO, Sewer Improvements, Series A, 3.05%*, 1,000 1,000 8/4/99** Minneapolis, GO, Sewer Improvements, Series B, 3.05%*, 2,400 2,400 8/5/99** ------------------- ---------------- ----------------- 3,400 - 3,400 ------------------- ---------------- ----------------- New York, GO, 3.50%*, 8/2/99**, LOC: Morgan Guaranty Trust 900 900 New York, GO, Series D, 3.00%*, 8/4/99**, FGIC 1,600 1,600 ------------------- ---------------- ----------------- 2,500 - 2,500 ------------------- ---------------- ----------------- North Carolina Educational Facilities, 3.00%*, 8/5/99** 500 - 500 ------------------- ---------------- ----------------- Schuylkill County, Industrial Development Authority, 2,200 - 2,200 Resource Recovery Revenue, Gilberton Power Project, ------------------- ---------------- ----------------- 3.05%*, 8/4/99** South Carolina State Jobs & Economic Development 1,000 - 1,000 Revenue, St. Francis Hospital, 3.40%*, 8/2/99** ------------------- ---------------- ----------------- Metropolitan Nashville Airport Authority, Special Facilities 1,300 1,300 Revenue, American Airlines Project, Series A, 3.40%*, 8/2/99** Sullivan County, Industrial Development Board , PCR, Mead 500 500 Corp. Project, 2.80%*, 8/2/99** ------------------- ---------------- ----------------- 1,800 - 1,800 ------------------- ---------------- ----------------- Grapevine, Industrial Development Corp., American Airlines 1,000 1,000 A4, 3.40%*, 8/2/99** North Central Texas Series C, 3.40%*, 8/2/99** 2,000 - 2,000 ------------------- ---------------- ----------------- 3,000 - 3,000 ------------------- ---------------- ----------------- Seattle Municipal Light & Power, 3.00%*, 8/4/99** 600 - 600 ------------------- ---------------- ----------------- Lincoln County PCR, Project D, 3.35%*, 8/2/99** 2,000 - 2,000 ------------------ ---------------- ----------------- TOTAL DEMAND NOTES $ 38,894 - $ 38,894 ------------------- ---------------- ----------------- B-107 485 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- --------------------- --------------- --------------------------------------------------------- TAX FREE COMMERCIAL PAPER (5.5%): ALABAMA (1.2%): 1,500 1,500 Montgomery, 3.00%, 8/6/99 1,000 1,000 Port City Medical Clinic Board, Mobile, 3.05%, 8/4/99 FLORIDA (2.3%): 1,000 1,000 Jacksonville, 3.25%, 10/22/99 1,500 1,500 Jacksonville, PCR, 3.35%, 10/18/99 1,200 1,200 Sarasota County, Public Hospital Revenue, 3.20%,9/7/99 1,000 1,000 St. Lucie County, PCR, 3.05%, 8/5/99 MISSISSIPPI (1.0%): 1,000 1,000 Mississippi Hospital Equiment & Facilities Authority, 3.10% 5/15/27 1,000 1,000 Mississippi Hospital Equipment Authority Revenue, 3.25%, 10/7/99 NEVADA (0.5%): 1,000 1,000 Clark County, 5.70%, 6/1/00 UTAH (0.5%): 1,000 1,000 Intermountain Power Agency, 3.20%, 10/13/99 TOTAL TAX FREE COMMERCIAL PAPER MUNICIPAL BONDS (66.4%): ALABAMA (1.6%): 1,000 1,000 Alabama State College Authority, 5.00%, 8/1/99 1,000 1,000 Alabama State, Municipal Electric Authority Power Supply Revenue, 6.10%, 9/1/99 380 380 Alabama Water Pollution Control Authority, 5.00%, 8/15/99 600 600 University Birmingham Alabama Medical & Educational Foundation Revenue, 7.00%, 12/1/19, Prerefunded 12/1/99 @ 102 250 250 University of Alabama Revenue, 4.15%, 10/1/99 ARIZONA (0.5%): 1,000 1,000 Salt River Agriculture Improvement, Series B, Salt River Project, 4.45%, 1/1/00 CALIFORNIA (0.7%): 1,500 1,500 Los Angeles County, Tax & Revenue, 4.00%, 6/30/00 COLORADO (0.5%): 1,000 1,000 El Paso County School District, 0.00%, 12/1/99, LOC: MBIA CONNECTICUT (2.4%): 5,000 5,000 Connecticut State Health & Educational Facilities Authority Series T-1, Yale University, 3.60%*, 7/1/29 DIST OF COLUMBIA (0.0%): 25 25 District Of Columbia, 1998 Series A, 6.75%, 6/1/08, Prerefunded 6/1/00 @ 102, MBIA, GO 30 30 District Of Columbia, Series B, 7.40%, 6/1/05, Prerefunded 6/1/00 @ 102, FSA, GO AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - ------------------------------------------------------------------------------------- --------------------- ------------------- Montgomery, 3.00%, 8/6/99 1,500 1,500 Port City Medical Clinic Board, Mobile, 3.05%, 8/4/99 1,000 1,000 ------------------- --------------------- ----------------- 2,500 - 2,500 ------------------- --------------------- ----------------- Jacksonville, 3.25%, 10/22/99 1,000 1,000 Jacksonville, PCR, 3.35%, 10/18/99 1,500 1,500 Sarasota County, Public Hospital Revenue, 3.20%,9/7/99 1,200 1,200 St. Lucie County, PCR, 3.05%, 8/5/99 1,000 1,000 ------------------- --------------------- ----------------- 4,700 - 4,700 ------------------- --------------------- ----------------- Mississippi Hospital Equiment & Facilities Authority, 3.10%, 1,000 1,000 5/15/27 Mississippi Hospital Equipment Authority Revenue, 3.25%, 1,000 1,000 10/7/99 ------------------- --------------------- ----------------- 2,000 - 2,000 ------------------- --------------------- ----------------- Clark County, 5.70%, 6/1/00 1,018 - 1,018 ------------------- --------------------- ----------------- Intermountain Power Agency, 3.20%, 10/13/99 1,000 - 1,000 ------------------- --------------------- ----------------- TOTAL TAX FREE COMMERCIAL PAPER $ 11,218 - $ 11,218 ------------------- --------------------- ----------------- Alabama State College Authority, 5.00%, 8/1/99 1,000 1,000 Alabama State, Municipal Electric Authority Power Supply 1,003 1,003 Revenue, 6.10%, 9/1/99 Alabama Water Pollution Control Authority, 5.00%, 8/15/99 380 380 University Birmingham Alabama Medical & Educational 620 620 Foundation Revenue, 7.00%, 12/1/19, Prerefunded 12/1/99 @ 102 University of Alabama Revenue, 4.15%, 10/1/99 250 250 ------------------- --------------------- ----------------- 3,253 - 3,253 ------------------- --------------------- ----------------- Salt River Agriculture Improvement, Series B, Salt River - 1,004 1,004 Project, 4.45%, 1/1/00 ------------------- --------------------- ----------------- Los Angeles County, Tax & Revenue, 4.00%, 6/30/00 1,509 - 1,509 ------------------- --------------------- ----------------- El Paso County School District, 0.00%, 12/1/99, LOC: MBIA 989 - 989 ------------------- --------------------- ----------------- Connecticut State Health & Educational Facilities Authority, - 5,000 5,000 Series T-1, Yale University, 3.60%*, 7/1/29 ---------------- --------------------- ----------------- District Of Columbia, 1998 Series A, 6.75%, 6/1/08, 26 26 Prerefunded 6/1/00 @ 102, MBIA, GO District Of Columbia, Series B, 7.40%, 6/1/05, Prerefunded 31 31 6/1/00 @ 102, FSA, GO ------------------- --------------------- ----------------- - 57 57 ------------------- --------------------- ----------------- B-108 486 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- -------------------- ---------------- ----------------------------------------------------------- FLORIDA (0.7%): 250 250 Homestead, Special Insurance Assessment Revenue, 4.75%, 9/1/99, LOC: MBIA 30 30 Martin County, 6.50%, 2/1/10, Prerefunded 2/1/00 @ 102, AMBAC, GO 40 40 Orlando & Orange County Expressway Revenue, Jr. Lien, 6.50%, 7/1/20, Prerefunded 7/1/00 @ 102, FGIC 30 30 Pinellas County Health Facilities Authority, Morton Plant Health System Project, 4.50%, 11/15/99, MBIA 1,000 1,000 Tampa, Water & Sewer Revenue, 6.20%, 10/1/99, LOC: Bank of America GEORGIA (3.7%): 50 50 Albany Sewer Systems, 5.35%, 7/1/00, FGIC 30 30 Atlanta Airport Extension & Improvement, 7.00%, 1/1/00 1,000 1,000 Clayton County, GO, 4.25%, 8/1/99 1,000 1,000 Douglas County Water & Sewer Authority, 6.70%, 6/1/05, Prerefunded 6/1/00 @ 102, MBIA 2,900 2,900 Georgia Municipal Gas Authority Gas Revenue, Series A 4.25%, 11/1/99 1,500 1,500 Gwinnett County School District, 3.50, 12/31/99 30 30 Jackson County School District, 4.90%, 7/1/00, MBIA 1,000 1,000 Muscogee County School District, 4.00%, 11/1/99 HAWAII (1.4%): 1,300 1,300 Hawaii County, Series A, 4.80%, 5/1/00, FGIC, GO 1,500 1,500 Hawaii State, 4.75%, 11/1/99, LOC: FGIC ILLINOIS (8.9%): 1,075 1,075 Chicago Wastewater Transmission Revenue, 7.20%, 11/15/19, Prerefunded 11/15/99 @ 102, LOC:MBIA 3,000 3,000 Chicago, O'Hare International Airport,, Series A, General Airport Second Lien, 3.40%*, 1/1/18 750 750 Cook County High School District, 6.50%, 12/1/99, LOC: FSA 50 50 Du Page County Forest Preservation, 4.00%, 10/1/99 4,895 4,895 Elmhurst Revenue Bond, Joint Common Accreditation, 3.65%*, 7/1/18 5,000 5,000 Illinois Developmental Finance Authority, Series C, Provena Health, 3.45%*, 5/1/28 1,000 1,000 Illinois Health Facilities Authority Revenue, 4.00% 8/15/99 90 90 Illinois Health Facilities Authority Revenue, 7.00%, 1/1/19 Prerefunded 1/1/00 @ 102, MBIA 1,190 1,190 Kane County Public Building Revenue Bond, 4.20%, 12/1/99 1,000 1,000 Peoria Public Building & School Facilities, 6.50%, 12/1/05, Prerefunded 12/1/99 @ 100, AMBAC INDIANA (0.1%): 235 235 Hamilton Southeastern, School Building Corp., 4.25%, AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST ------------------------------------------------------------------------------- --------------------- -------------------- Homestead, Special Insurance Assessment Revenue, 250 250 4.75%, 9/1/99, LOC: MBIA Martin County, 6.50%, 2/1/10, Prerefunded 2/1/00 @ 102, 31 31 AMBAC, GO Orlando & Orange County Expressway Revenue, Jr. Lien, 42 42 6.50%, 7/1/20, Prerefunded 7/1/00 @ 102, FGIC Pinellas County Health Facilities Authority, Morton Plant 30 30 Health System Project, 4.50%, 11/15/99, MBIA Tampa, Water & Sewer Revenue, 6.20%, 10/1/99, LOC: Bank 1,005 1,005 of America ------------------- --------------------- -------------------- 1,255 103 1,358 ------------------- --------------------- -------------------- Albany Sewer Systems, 5.35%, 7/1/00, FGIC 51 51 Atlanta Airport Extension & Improvement, 7.00%, 1/1/00 30 30 Clayton County, GO, 4.25%, 8/1/99 1,000 1,000 Douglas County Water & Sewer Authority, 6.70%, 6/1/05, 1,048 1,048 Prerefunded 6/1/00 @ 102, MBIA Georgia Municipal Gas Authority Gas Revenue, Series A 2,904 2,904 4.25%, 11/1/99 Gwinnett County School District, 3.50, 12/31/99 1,501 1,501 Jackson County School District, 4.90%, 7/1/00, MBIA 30 30 Muscogee County School District, 4.00%, 11/1/99 1,003 1,003 ------------------- --------------------- -------------------- 3,504 4,063 7,567 ------------------- --------------------- -------------------- Hawaii County, Series A, 4.80%, 5/1/00, FGIC, GO 1,316 1,316 Hawaii State, 4.75%, 11/1/99, LOC: FGIC 1,505 1,505 ------------------- --------------------- -------------------- 1,505 1,316 2,821 ------------------- --------------------- -------------------- Chicago Wastewater Transmission Revenue, 7.20%, 1,109 1,109 11/15/19, Prerefunded 11/15/99 @ 102, LOC:MBIA Chicago, O'Hare International Airport,, Series A, General 3,000 3,000 Airport Second Lien, 3.40%*, 1/1/18 Cook County High School District, 6.50%, 12/1/99, LOC: FSA 758 758 Du Page County Forest Preservation, 4.00%, 10/1/99 50 50 Elmhurst Revenue Bond, Joint Common Accreditation, 4,895 4,895 3.65%*, 7/1/18 Illinois Developmental Finance Authority, Series C, Provena 5,000 5,000 Health, 3.45%*, 5/1/28 Illinois Health Facilities Authority Revenue, 4.00% 8/15/99 1,000 1,000 Illinois Health Facilities Authority Revenue, 7.00%, 1/1/19, 93 93 Prerefunded 1/1/00 @ 102, MBIA Kane County Public Building Revenue Bond, 4.20%, 12/1/99 1,194 1,194 Peoria Public Building & School Facilities, 6.50%, 12/1/05, 1,011 1,011 Prerefunded 12/1/99 @ 100, AMBAC ------------------- --------------------- -------------------- 2,867 15,243 18,110 ------------------- --------------------- -------------------- Hamilton Southeastern, School Building Corp., 4.25%, - 236 236 B-109 487 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- -------------------- --------------------- ----------------------------------------------------- IOWA (2.4%): 5,000 5,000 Iowa Finance Authority Revenue, Series B, Wheaton Franciscan, 3.30%*, 8/15/24, MBIA KANSAS (0.0%): 100 100 Shawnee County, Series A, 7.00%, 9/1/99, GO KENTUCKY (0.5%): 1,000 1,000 Kentucky Asset/Liability Revenue, 4.25%, 6/28/00 LOUISIANA (0.3%): 525 525 Louisiana State Gas & Fuels Tax Revenue, 3.35%, 11/15/99 MARYLAND (0.5%): 1,000 1,000 Montgomery County, GO, 5.80%, 10/1/99 50 50 Prince Georges County, Series A, Construction Public Improvement, 4.90%, 9/1/99, MBIA, GO MASSACHUSETTS (4.3%): 500 500 Boston Water & Sewer Common Revenue, 7.10%, 11/01/19, Prerefunded 11/1/99 @ 102, LOC: US Government Securities 2,278 2,278 Dedham, 3.75%, 10/8/99 5,300 5,300 Greenfield, 3.50%, 1/14/00 300 300 Hingham, 5.50, 10/15/99 500 500 Massachusetts State Convention Center Authority, 6.00%, 9/1/99 MICHIGAN (0.1%): 125 125 Macomb County Transportation Funding Notes, 6.50%, 25 25 Marquette Electric Utility Revenue, 4.80%, 7/1/00, AMBAC MISSISSIPPI (0.1%): 250 250 Mississippi Higher Education, Series B, 6.00%, 1/1/00 NEBRASKA (0.6%): 250 250 American Public Energy Agency, Series A, Nebraska Gas Supply, 3.35%, 6/1/00, AMBAC 990 990 Nebraska Public Power Revenue, 4.50%, 1/1/00 NEVADA (0.0%): 25 25 Washoe County, Reno Sparks Convention/Visitor, 7.10%, 7/1/07, Prerefunded 7/1/00 @ 102, AMBAC NEW HAMPSHIRE (5.1%): 130 130 Hudson School District, Lot C, 7.25%, 12/15/99 2,000 2,000 Nashua, 3.50%, 12/10/99 2,000 2,000 New Hampshire State Capital Appreciation, College Savings Bond Program, 0.00%, 8/1/99 2,150 2,150 Salem, 3.75%, 12/16/99, GO 4,200 4,200 Strafford, 3.60%, 12/31/99, GO NEW YORK (4.1%): 2,500 2,500 Arlington Central School District, 3.88%, 11/9/99, GO 450 450 New York City Transitional Finance Authority Revenue, 4.00%, 8/15/99 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST -------------------------------------------------------------------------------- --------------------- -------------------- Iowa Finance Authority Revenue, Series B, Wheaton - 5,000 5,000 Franciscan, 3.30%*, 8/15/24, MBIA ------------------- --------------------- -------------------- Shawnee County, Series A, 7.00%, 9/1/99, GO - 100 100 ------------------- --------------------- -------------------- Kentucky Asset/Liability Revenue, 4.25%, 6/28/00 1,008 - 1,008 ------------------- --------------------- -------------------- Louisiana State Gas & Fuels Tax Revenue, 3.35%, 11/15/99 525 - 525 ------------------- --------------------- -------------------- Montgomery County, GO, 5.80%, 10/1/99 1,005 1,005 Prince Georges County, Series A, Construction Public 50 50 Improvement, 4.90%, 9/1/99, MBIA, GO ------------------- --------------------- -------------------- 1,005 50 1,055 ------------------- --------------------- -------------------- Boston Water & Sewer Common Revenue, 7.10%, 11/01/19, 516 516 Prerefunded 11/1/99 @ 102, LOC: US Government Securities Dedham, 3.75%, 10/8/99 2,280 2,280 Greenfield, 3.50%, 1/14/00 5,305 5,305 Hingham, 5.50, 10/15/99 301 301 Massachusetts State Convention Center Authority, 6.00%, 501 501 9/1/99 ------------------- --------------------- -------------------- 1,318 7,585 8,903 ------------------- --------------------- -------------------- Macomb County Transportation Funding Notes, 6.50%, 125 125 Marquette Electric Utility Revenue, 4.80%, 7/1/00, AMBAC 25 25 ------------------- --------------------- -------------------- - 150 150 ------------------- --------------------- -------------------- Mississippi Higher Education, Series B, 6.00%, 1/1/00 - 253 253 ------------------- --------------------- -------------------- American Public Energy Agency, Series A, Nebraska Gas 249 249 Supply, 3.35%, 6/1/00, AMBAC Nebraska Public Power Revenue, 4.50%, 1/1/00 994 994 ------------------- --------------------- -------------------- - 1,243 1,243 ------------------- --------------------- -------------------- Washoe County, Reno Sparks Convention/Visitor, 7.10%, - 26 26 7/1/07, Prerefunded 7/1/00 @ 102, AMBAC ------------------- --------------------- -------------------- Hudson School District, Lot C, 7.25%, 12/15/99 131 131 Nashua, 3.50%, 12/10/99 2,001 2,001 New Hampshire State Capital Appreciation, College 2,000 2,000 Savings Bond Program, 0.00%, 8/1/99 Salem, 3.75%, 12/16/99, GO 2,152 2,152 Strafford, 3.60%, 12/31/99, GO 4,203 4,203 ------------------- --------------------- -------------------- 2,000 8,487 10,487 ------------------- --------------------- -------------------- Arlington Central School District, 3.88%, 11/9/99, GO 2,503 2,503 New York City Transitional Finance Authority Revenue, 450 450 4.00%, 8/15/99 B-110 488 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- --------------------- --------------- ----------------------------------------------------------- 4.00%, 8/15/99 20 20 New York City, Series B, 7.50%, 10/1/11, Prerefunded 10/1/99 @ 101.50, GO 250 250 New York State Dorm Authority, Series B, 4.80%, 5/15/00 5,000 5,000 New York, Series F-3, 3.30%*, 2/15/13, GO 100 100 Suffock County, Series B, 4.50%, 10/15/99, AMBAC NORTH CAROLINA (0.2%): 155 155 Clinton, 4.00%, 6/1/00, GO 250 250 Stokes County, 4.80%, 6/1/00, LOC: FGIC OHIO (3.6%): 1,000 1,000 Columbus Sewer Revenue, 5.70%, 6/1/00 1,500 1,500 Cuyahoga County, 6.70%, 10/1/10, Prerefunded 10/1/99 @ 102, LOC: US Government Securities 3,425 3,425 Dayton Water System Revenue, 3.50%,12/1/99 700 700 Ohio Air Quality Development Authority Revenue, Mead Corp., 3.80%*, 10/1/01 625 625 Ottawa County, 4.25%, 9/1/99, LOC: MBIA OKLAHOMA (2.0%): 750 750 Broken Arrow, 7.00%, 7/1/00, GO 610 610 Cleveland County Independent School District, 7.40%, 4/1/00, GO 1,100 1,100 Oklahoma City, 4.65%, 8/1/99 1,555 1,555 Oklahoma County Independent School District #12, Series B, 4.50-6.20%, 7/1/00, GO PENNSYLVANIA (4.8%): 5,000 5,000 Allegheny County Hospital Development Authority, St. Francis Medical Center, 3.65%*, 11/1/27 50 50 Derry Township School District, 6.20%, 9/1/13. Prerefunded 3/1/00 @ 100, AMBAC 1,000 1,000 Lehigh County Purpose Authority Revenue, 8.75%, 11/1/14, Prerefunded 11/1/99 @ 102, LOC: US Treasury Obligation 25 25 Mahheim Township School District, 4.50%, 6/1/00, FGIC, GO 1,000 1,000 Pennsylvania State Turnpike Commission Turnpike Revenue, 7.63%, 12/1/09, Prerefunded 12/1/99 @ 102 2,000 2,000 Pennsylvania Housing Finance Agency, Rental Housing, 5.40%, 1/1/00, FNMA COLL 25 25 Perkiomen Valley School District, 4.35%, 3/1/00, AMBAC, 600 600 Philadelphia, School District, 4.00%, 6/30/00, LOC: Mellon Bank 25 25 Westmorland County Municipal Authority Revenue, 7.25%, 7/1/15, Prerefunded 7/1/00 @ 100, MBIA RHODE ISLAND (0.5%): 1,000 1,000 Rhode Island State Construction Capital Development Loan, Series A, 4.25% 9/1/99, LOC: FGIC AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - ------------------------------------------------------------------------------- --------------------- ----------------------- 4.00%, 8/15/99 New York City, Series B, 7.50%, 10/1/11, Prerefunded 20 20 10/1/99 @ 101.50, GO New York State Dorm Authority, Series B, 4.80%, 5/15/00 253 253 New York, Series F-3, 3.30%*, 2/15/13, GO 5,001 5,001 Suffock County, Series B, 4.50%, 10/15/99, AMBAC 100 100 --------------- --------------------- -------------------- 450 7,877 8,327 --------------- --------------------- -------------------- Clinton, 4.00%, 6/1/00, GO 155 155 Stokes County, 4.80%, 6/1/00, LOC: FGIC 252 252 --------------- --------------------- -------------------- 252 155 407 --------------- --------------------- -------------------- Columbus Sewer Revenue, 5.70%, 6/1/00 1,020 1,020 Cuyahoga County, 6.70%, 10/1/10, Prerefunded 10/1/99 @ 1,539 1,539 102, LOC: US Government Securities Dayton Water System Revenue, 3.50%,12/1/99 3,427 3,427 Ohio Air Quality Development Authority Revenue, Mead 700 700 Corp., 3.80%*, 10/1/01 Ottawa County, 4.25%, 9/1/99, LOC: MBIA 625 625 --------------- --------------------- -------------------- 2,164 5,147 7,311 --------------- --------------------- -------------------- Broken Arrow, 7.00%, 7/1/00, GO 772 772 Cleveland County Independent School District, 7.40%, 625 625 4/1/00, GO Oklahoma City, 4.65%, 8/1/99 1,100 1,100 Oklahoma County Independent School District #12, Series 1,583 1,583 B, 4.50-6.20%, 7/1/00, GO --------------- --------------------- -------------------- 1,100 2,980 4,080 --------------- --------------------- -------------------- Allegheny County Hospital Development Authority, St. 4,999 4,999 Francis Medical Center, 3.65%*, 11/1/27 Derry Township School District, 6.20%, 9/1/13. Prerefunded 51 51 3/1/00 @ 100, AMBAC Lehigh County Purpose Authority Revenue, 8.75%, 11/1/14, 1,034 1,034 Prerefunded 11/1/99 @ 102, LOC: US Treasury Obligation Mahheim Township School District, 4.50%, 6/1/00, FGIC, GO 25 25 Pennsylvania State Turnpike Commission Turnpike 1,035 1,035 Revenue, 7.63%, 12/1/09, Prerefunded 12/1/99 @ 102 Pennsylvania Housing Finance Agency, Rental Housing, 2,017 2,017 5.40%, 1/1/00, FNMA COLL Perkiomen Valley School District, 4.35%, 3/1/00, AMBAC, 25 25 Philadelphia, School District, 4.00%, 6/30/00, LOC: Mellon 603 603 Bank Westmorland County Municipal Authority Revenue, 7.25%, 26 26 7/1/15, Prerefunded 7/1/00 @ 100, MBIA --------------- --------------------- -------------------- 2,672 7,143 9,815 --------------- --------------------- -------------------- Rhode Island State Construction Capital Development Loan, 1,001 - 1,001 Series A, 4.25% 9/1/99, LOC: FGIC --------------- --------------------- -------------------- B-111 489 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- --------------------- ---------------- ---------------------------------------------------------- SOUTH CAROLINA (0.3%): 20 20 Oconee County School District, 5.50%, 1/1/00, MBIA 665 665 South Carolina State Capital Improvement, Series B, 5.60%, 3/1/00 TENNESSEE (7.1%): 2,245 2,245 Knox County Health & Hospital Facilities, Baptist Health System, 5.00%, 4/15/00, AMBAC 25 25 Knox County Hospital Facilities Revenue, Series A, Mercy Health System, 7.60%, 9/1/19, Prerefunded 9/1/99 @ 102, AMBAC 25 25 Knox County Hospital Facilities Revenue, Series C, Fort Sanders Alliance Obligation, 7.00, 1/1/08, Prerefunded 1/1/00 @ 102, MBIA 1,000 1,000 Metro Government Nashville & Davidson Public Improvement, Series A, 4.60%, 11/15/99 40 40 Metropolitan Government Nashville & Davidson, County, Series C, Airport Revenue 5.90%, 7/1/00, FGIC 30 30 Metropolitan Government Nashville & Davidson, County, 4.63%, 5/15/00 5,000 5,000 Metropolitan Government, Nashville & Davidson County, Country Music Hall of Fame, 3.65%*, 6/1/22 40 40 Rhea County, 5.25%, 3/1/00, AMBAC, GO 5,000 5,000 Sevier County Public Building Authority, Local Public Improvement, 4.00%*, 6/1/25 1,000 1,000 Sullivan County, Health Education & Housing, 7.20%, 2/15/00, LOC: MBIA TEXAS (1.7%): 500 500 Dallas Water Works & Sewer Revenue, 5.90%, 10/1/99 80 80 Houston Water & Sewer System Revenue, Series C, Jr. Lien, 5.90%, 12/1/99, MBIA-IBC 435 435 Hurst Bedford Independent School District, 6.60%, 8/15/05, Prerefunded 8/15/99 @ 102 1,000 1,000 Irving Independent School District GO, 4.50%, 8/15/99 300 300 Lone Star Texas Airport Improvement Authority, Series A-5, Multiple Mode, 3.85%*, 12/1/14 400 400 Lone Star Texas Airport Improvement Authority, Series B-1, Multiple Mode, 3.85%*, 12/1/14 25 25 San Antonio Certificates of Obligation, 6.80%, 8/1/06, Prerefunded 8/1/99 @ 100, GO 100 100 San Antonio Certificates of Obligation, 7.75%, 8/1/99, GO 700 700 Texas State Public Finance Authority, Series D, 6.60%, 10/1/03 Prerefunded 10/1/99 @ 100 VIRGINIA (0.7%): 1,000 1,000 Arlington Count, 5.50%, 6/1/00, GO 355 355 James City County, 6.40%, 12/15/99, LOC: FGIC AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT P RO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - ----------------------------------------------------------- --------------------- ---------------- ----------------- Oconee County School District, 5.50%, 1/1/00, MBIA 20 20 South Carolina State Capital Improvement, Series B, 5.60%, 673 673 3/1/00 --------------- --------------------- ---------------- 673 20 693 --------------- --------------------- ---------------- Knox County Health & Hospital Facilities, Baptist Health 2,270 2,270 System, 5.00%, 4/15/00, AMBAC Knox County Hospital Facilities Revenue, Series A, Mercy 26 26 Health System, 7.60%, 9/1/19, Prerefunded 9/1/99 @ 102, AMBAC Knox County Hospital Facilities Revenue, Series C, Fort 26 26 Sanders Alliance Obligation, 7.00, 1/1/08, Prerefunded 1/1/00 @ 102, MBIA Metro Government Nashville & Davidson Public 1,004 1,004 Improvement, Series A, 4.60%, 11/15/99 Metropolitan Government Nashville & Davidson, County, 41 41 Series C, Airport Revenue 5.90%, 7/1/00, FGIC Metropolitan Government Nashville & Davidson, County, 30 30 4.63%, 5/15/00 Metropolitan Government, Nashville & Davidson County, 5,000 5,000 Country Music Hall of Fame, 3.65%*, 6/1/22 Rhea County, 5.25%, 3/1/00, AMBAC, GO 40 40 Sevier County Public Building Authority, Local Public 5,000 5,000 Improvement, 4.00%*, 6/1/25 Sullivan County, Health Education & Housing, 7.20%, 1,040 1,040 2/15/00, LOC: MBIA --------------- --------------------- ---------------- 2,044 12,433 14,477 --------------- --------------------- ---------------- Dallas Water Works & Sewer Revenue, 5.90%, 10/1/99 502 502 Houston Water & Sewer System Revenue, Series C, Jr. Lien, 80 80 5.90%, 12/1/99, MBIA-IBC Hurst Bedford Independent School District, 6.60%, 8/15/05, 444 444 Prerefunded 8/15/99 @ 102 Irving Independent School District GO, 4.50%, 8/15/99 1,001 1,001 Lone Star Texas Airport Improvement Authority, Series A-5, 300 300 Multiple Mode, 3.85%*, 12/1/14 Lone Star Texas Airport Improvement Authority, Series B-1, 400 400 Multiple Mode, 3.85%*, 12/1/14 San Antonio Certificates of Obligation, 6.80%, 8/1/06, 25 25 Prerefunded 8/1/99 @ 100, GO San Antonio Certificates of Obligation, 7.75%, 8/1/99, GO 100 100 Texas State Public Finance Authority, Series D, 6.60%, 704 704 10/1/03 Prerefunded 10/1/99 @ 100 --------------- --------------------- ---------------- 1,503 2,053 3,556 --------------- --------------------- ---------------- Arlington Count, 5.50%, 6/1/00, GO 1,019 1,019 James City County, 6.40%, 12/15/99, LOC: FGIC 359 359 --------------- --------------------- ---------------- 359 1,019 1,378 --------------- --------------------- ---------------- B-112 490 AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT/SHARES AMOUNT/SHARES AMOUNT/SHARES DESCRIPTION --------------------- --------------------- --------------------- ------------------------------------------------------ WASHINGTON (5.1%): 500 500 King County, GO, 4.70% 10/1/99 435 435 Richland Electric Revenue, 5.30% 11/1/99 1,000 1,000 Snohomish County Public Utility, 6.40%, 1/1/00 100 100 Snohomish Water & Sewer, 4.45%, 11/1/99, FSA 1,750 1,750 Spokane Revenue Anticipation Note, 3.50%, 1/31/00 500 500 Tacoma Electric System Revenue, 7.30%, 1/1/00 1,000 1,000 Washington State Public Power Supply, Series B, Project 3 7.25%, 7/1/15, Prerefunded 1/1/00 @ 102 30 30 Washington State Public Power Supply, Series B, 7.50%, 7/1/18, Prerefunded 7/1/00 @ 102 50 50 Washington State Public Water Supply, 5.10%, 7/1/00 5,000 5,000 Washington State, Series VR 96B, 3.40%*, 6/1/20, GO WEST VIRGINIA (0.7%): 500 500 West Virginia State Hospital Finance Authority, 7.00%, 8/1/04, Prerefunded 8/1/99 @ 102, LOC: FSA 1,000 1,000 West Virginia State, State Road, 3.50%, 6/1/00 WISCONSIN (0.8%): 100 100 Madison Waterworks Management, 6.80%, 1/1/00 30 30 Wisconsin State Health & Educational Facilities Authority Revenue, Series B, SSM Healthcare Projects, 7.00%, 6/1/20 Prerefunded 6/1/00 @ 102, MBIA 1,500 1,500 Wisconsin State Transportation Revenue, 4.10%, 7/1/00 WYOMING (0.3%): 600 600 Lincoln County PCR, Series C, Exxon Co. Project, 3.80%*, 11/1/14 TOTAL MUNICIPAL BONDS INVESTMENT COMPANIES (5.3%): 5,093,044 5,093,044 Aim Tax Free Money Market 100 100 Bank Of New York Cash Reserve Money Market Fund 1,000 1,000 Dreyfus Tax Free Money Market 4,012,917 4,012,917 Federated Tax-Free Fund 1,890,596 1,890,596 Goldman Sachs Tax-Free Fund TOTAL INVESTMENT COMPANIES TOTAL (COST $206,704) (a) AMSOUTH ISG TAX-EXEMPT TAX-EXEMPT PRO FORMA MMF MMF COMBINED AMORTIZED AMORTIZED AMORTIZED DESCRIPTION COST COST COST - --------------------------------------------------------------------------------- --------------------- -------------------- King County, GO, 4.70% 10/1/99 501 501 Richland Electric Revenue, 5.30% 11/1/99 437 437 Snohomish County Public Utility, 6.40%, 1/1/00 1,012 1,012 Snohomish Water & Sewer, 4.45%, 11/1/99, FSA 100 100 Spokane Revenue Anticipation Note, 3.50%, 1/31/00 1,750 1,750 Tacoma Electric System Revenue, 7.30%, 1/1/00 508 508 Washington State Public Power Supply, Series B, Project 3 1,035 1,035 7.25%, 7/1/15, Prerefunded 1/1/00 @ 102 Washington State Public Power Supply, Series B, 7.50%, 32 32 7/1/18, Prerefunded 7/1/00 @ 102 Washington State Public Water Supply, 5.10%, 7/1/00 50 50 Washington State, Series VR 96B, 3.40%*, 6/1/20, GO 5,001 5,001 ------------------- --------------------- -------------------- 938 9,488 10,426 ------------------- --------------------- -------------------- West Virginia State Hospital Finance Authority, 7.00%, 510 510 8/1/04, Prerefunded 8/1/99 @ 102, LOC: FSA West Virginia State, State Road, 3.50%, 6/1/00 1,000 1,000 ------------------- --------------------- -------------------- 1,510 - 1,510 ------------------- --------------------- -------------------- Madison Waterworks Management, 6.80%, 1/1/00 101 101 Wisconsin State Health & Educational Facilities Authority 31 31 Revenue, Series B, SSM Healthcare Projects, 7.00%, 6/1/20 Prerefunded 6/1/00 @ 102, MBIA Wisconsin State Transportation Revenue, 4.10%, 7/1/00 1,509 1,509 ------------------- --------------------- -------------------- - 1,641 1,641 ------------------- --------------------- -------------------- Lincoln County PCR, Series C, Exxon Co. Project, 3.80%*, - 600 600 11/1/14 ------------------- --------------------- -------------------- ------------------- --------------------- -------------------- TOTAL MUNICIPAL BONDS $ 35,404 $ 100,472 $135,876 ------------------- --------------------- -------------------- Aim Tax Free Money Market 5,093 5,093 Bank Of New York Cash Reserve Money Market Fund *** *** Dreyfus Tax Free Money Market 1 1 Federated Tax-Free Fund 4,013 4,013 Goldman Sachs Tax-Free Fund 1,891 1,891 ------------------- --------------------- -------------------- TOTAL INVESTMENT COMPANIES $ 5,904 $ 5,094 $ 10,998 ------------------- --------------------- -------------------- ------------------- --------------------- -------------------- TOTAL (COST $206,704) (a) $ 96,133 $ 110,571 $206,704 ------------------- --------------------- -------------------- - ----------------------- PERCENTAGES INDICATED ARE BASED ON NET ASSETS OF $204,829. (a) Cost for federal income tax and financial reporting purposes are the same. * Variable rate security. Rate presented represents rate in effect at July 31, 1999. Date presented reflects next rate change date. ** Put and demand features exist allowing the fund to require the repurchase of the instrument within variable time periods including daily, weekly, monthly, and semiannually. *** Amount is less than one thousand dollars. AMBAC - Insured by AMBAC Indemnity Corp. FGIC - Insured by Financial Guaranty Insurance Corp. FNMA - Insured by Federal National Mortgage Assoc. FSA - Insured by Financial Security Assoc. GO - General Obligation LOC - Letter of Credit MBIA - Insured by Municipal Bond Insurance Assoc. PCR - Pollution Control Revenue B-113 491 AMSOUTH FUNDS REGISTRATION STATEMENT ON FORM N-14 PART C. OTHER INFORMATION Item 15. Indemnification The information required by this item is incorporated by reference to Item 25 of Post-Effective Amendment No. 30 (filed October 1, 1999) to Registrant's Registration Statement on Form N-1A (File No. 33-21660) under the Securities Act of 1933 and the Investment Company Act of 1940 (File No. 811-5551). Item 16. Exhibits - -------- -------- (1) (a) Amended Declaration of Trust, dated as of June 25, 1993 and filed on August 19, 1993, is incorporated by reference to Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A. (2) (a) Bylaws -- incorporated by reference to Registrant's Registration Statement on Form N-1A. (2) (b) Amendment No. 1 to Bylaws incorporated by reference to Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form N-1A. (3) Not applicable. (4) Form of Agreement and Plan of Reorganization is filed herewith. (5) (a) 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. C-1 492 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 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 C-2 493 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. 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 C-3 494 Shareholders shall have such power to vote as is provided for in, and may hold meetings and take actions pursuant to the provisions of the Bylaws. ARTICLE VIII Indemnification Shareholders Section 4. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense, arising from such liability, but only out of the assets, of the particular series of Shares of which he or she is or was a Shareholder. ARTICLE IX Miscellaneous Trustees, Shareholders, etc. Not Personally Liable; Notice Section 1. All persons extending credit to, contracting with or having any claim against the Trust or a particular series of Shares shall look only to the assets of the Trust or the assets of that particular series of Shares for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable 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. C-4 495 Duration and Termination of Trust Section 4. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the vote of Shareholders holding at least a majority of the Shares of each series entitled to vote or by the Trustees by written notice to the Shareholders. Any series of Shares may be terminated at any time by vote of Shareholders holding at least a majority of the Shares of such series entitled to vote or by the Trustees by written notice to the Shareholders of such series. Upon termination of the Trust or of any one or more series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, of the Trust or of the particular series as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds to the Shareholders of the series involved, ratably 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 C-5 496 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 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 C-6 497 Trustees. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing such notice at least seven days before such meeting, postage prepaid, stating the time and place of the meeting, to each Shareholder at the Shareholder's address as it appears on the records of the Trust. Whenever notice of a meeting is required to be given to a Shareholder under the Declaration of Trust or these Bylaws, a written waiver thereof, executed before or after the meeting by such Shareholder or his attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice. 11.3 Quorum and Required Vote. A majority of Shares entitled to vote shall be a quorum for the transaction of business at a Shareholders' meeting, except that where any provision of law or of the Declaration of Trust or these Bylaws permits or requires that holders of any series shall vote as a series, then a majority of the aggregate number of Shares of that series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. Except when a larger vote is required by any provision of law or the Declaration of Trust or these Bylaws, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of the Declaration of Trust or these Bylaws permits or requires that the holders of any series shall vote as a series, then a majority of the Shares of that series voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that series is concerned. 11.4 Action by Written Consent. Any action taken by Shareholders may be taken without a meeting if a majority of Shareholders entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of law or the Declaration of Trust or these Bylaws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. 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 C-7 498 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. (6) (a) 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). (6) (b) Amendment No. 1 dated as of December 5, 1989 to Investment Advisory Agreement dated as of August 1, 1988 between the Registrant and AmSouth Bank N.A. -- incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (6) (c) Form of Amended Schedule A dated September 15, 1998 to the Investment Advisory Agreement dated as of August 1, 1988 between the Registrant and AmSouth Bank, N.A. is incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (6) (d) Form of Amended Schedule A to the Investment Advisory Agreement between the Registrant and AmSouth Bank, N.A. -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33- 21660). (6) (e) Investment Advisory Agreement between the Group and AmSouth Bank N.A. dated as of January 20, 1989 with respect to The ASO Outlook Group Limited Maturity Fund -- incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (6) (f) 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) (g) 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 C-8 499 No. 23 to the Registrant's Registration Statement filed on July 3, 1997 on Form N-1A (File No. 33-21660). (6) (h) 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). (6) (i) 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). (6) (j) 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). (6) (k) Form of the Investment Sub-Advisory Agreement between AmSouth Bank and Lazard Asset Management -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33- 21660). (6) (l) Form of the Investment Sub-Advisory Agreement between AmSouth Bank and Bennett Lawrence Management -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33- 21660). (7) (a) 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). (7) (b) Form of Amended Schedules A, B, C and D dated September 15, 1998 to the Distribution Agreement between the Registrant and BISYS Fund Services Limited Partnership are incorporated by reference to Exhibit 6(b) of Post-Effective Amendment No. 28 to the Registrant's C-9 500 Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (7) (c) Form of Amended Schedules A, B, C and D to the Distribution Agreement between the Registrant and BISYS Fund Services Limited Partnership -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (7) (d) 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). (7) (e) 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). (7) (f) 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). (8) Not applicable. (9) (a) 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). (b) Form of Amended Schedule A dated September 15, 1998 to the Custodian Agreement between the Registrant and AmSouth Bank is incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (c) Form of Amended Schedule A to the Custodian Agreement between the Registrant and AmSouth Bank -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). C-10 501 (10) (a) Management and Administration Agreement dated as of April 1, 1996 between the Registrant and ASO Services Company -- incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (b) Form of Amended Schedule A dated September 15, 1998 to the Management and Administration Agreement between the Registrant and ASO Services Company is incorporated by reference to Exhibit 9(b) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (10) (c) Form of Amended Schedule A to the Management and Administration Agreement between the Registrant and ASO Services Company -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (d) Sub-Administration Agreement between ASO Services Company and AmSouth Bank -- incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (e) Form of Amended Schedules A and B dated September 15, 1998 to the Sub-Administration Agreement between ASO Services Company and AmSouth Bank are incorporated by reference to Exhibit 9(d) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (10) (f) Form of Amended Schedules A and B to the Sub-Administration Agreement between ASO Services Company and AmSouth Bank --incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (g) Sub-Administration Agreement between ASO Services Company and BISYS Fund Services, LP -- incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (h) Form of Amended Schedules A and B dated September 15, 1998 to the Sub-Administration Agreement between ASO Services Company and BISYS Fund Services Limited Partnership are incorporated by reference C-11 502 to Exhibit 9(f) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement on filed on September 24, 1998 Form N-1A (File No. 33-21660). (10) (i) Form of Amended Schedules A and B to the Sub-Administration Agreement between ASO Services Company and BISYS Fund Services Limited Partnership -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (j) Transfer Agency and Shareholder Service Agreement dated as of July 16, 1989, as amended October 3, 1997, between the Registrant and BISYS Fund Services, Inc.-- incorporated by reference to Exhibit 9(g) to Post-Effective Amendment No. 26 to the Registrant's Registration Statement filed on May 22, 1998 on Form N-1A (File No. 33-21660). (10) (k) Form of Amended Schedule A dated September 15, 1998 to the Transfer Agency and Shareholder Services Agreement between the Registrant and BISYS Fund Services Ohio, Inc. is incorporated by reference to Exhibit 9(h) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (10) (l) Form of Amended Schedule A to the Transfer Agency and Shareholder Services Agreement between the Registrant and BISYS Fund Services Ohio, Inc.-- incorporated by reference to Post-Effective Amendment No. 30 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (m) Amended Schedule D dated September 15, 1998 to the Transfer Agency Agreement between the Registrant and BISYS Fund Services Ohio, Inc. -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (n) Fund Accounting Agreement dated as of April 1, 1996 between the Registrant and BISYS Fund Services, Inc. is incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (o) Shareholder Servicing Plan for AmSouth Funds adopted by the Board of Trustees on December 6, 1995 is incorporated by reference to C-12 503 Exhibit 18(b) to Post-Effective Amendment No. 18 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (p) Amended Schedule I to the Shareholder Servicing Plan -- incorporated by reference to Exhibit 18(d) to Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed on July 3, 1997 on Form N-1A (File No. 33-21660). (10) (q) Amended Schedule I dated September 15, 1998 to the Shareholder Servicing Plan is incorporated by reference to Exhibit 18(e) of Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (10) (r) Form of Amended Schedule I to the Shareholder Servicing Plan -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (10) (s) 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). (11) Opinion of Ropes & Gray -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (12) Not Applicable. (13) (a) 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). (13) (b) 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). (13) (c) 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). C-13 504 (13) (d) 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). (13) (e) Distribution and Shareholder Services Plan between the Registrant and BISYS Fund Services, LP, dated as of March 12, 1997, as amended and restated as of March 18, 1998 -- incorporated by reference to Exhibit 18(e) to Post-Effective Amendment No. 26 to the Registrant's Registration Statement filed on May 22, 1998 on Form N-1A (File No. 33-21660). (13) (f) Form of Amended Schedule A dated September 15, 1998 to the Distribution and Shareholder Services Plan is incorporated by reference to Exhibit 18(h) to Post-Effective Amendment No. 27 to the Registrant's Registration Statement filed on June 17, 1998 on Form N-1A (File No. 33-21660). (13) (g) Form of Amended Schedule A to the Distribution and Shareholder Services Plan -- incorporated by reference to Post- Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (13) (h) Multiple Class Plan for AmSouth Funds adopted by the Board of Trustees on December 6, 1995, as amended and restated as of July 16, 1997 and as of March 17, 1998 -- incorporated by reference to Exhibit 18(a) to Post-Effective Amendment No. 26 to the Registrant's Registration Statement filed on May 22, 1998 on Form N-1A (File No. 33-21660). (13) (i) Amended Schedule I dated September 15, 1998 to the Multiple Class Plan is incorporated by reference to Exhibit 18(b) to Post-Effective Amendment No. 28 to the Registrant's Registration Statement filed on September 24, 1998 on Form N-1A (File No. 33-21660). (13) (j) Form of Amended Schedule I to the Multiple Class Plan -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1A (File No. 33-21660). (14) (a) Consent of KPMG LLP is filed herewith. (14) (b) Consent of PricewaterhouseCoopers LLP is filed herewith. C-14 505 (14) (c) Consent of Ropes & Gray -- incorporated by reference to Post-Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1 A (File No. 33-21660). (15) Not applicable. (16) Executed Powers of Attorney -- incorporated by reference to Post- Effective Amendment No. 30 filed on October 1, 1999 to the Registrant's Registration Statement on Form N-1 A (File No. 33-21660). Item 17. Undertakings (1) The registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. C-15 506 SIGNATURES As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant in the City of Washington, District of Columbia, on the nineteenth day of November, 1999. AmSouth Funds Registrant _____________________ *J. David Huber Chairman As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- * Chairman November 19, 1999 ---------------------------------------- J. David Huber * Treasurer November 19, 1999 ---------------------------------------- Charles L. Booth * Trustee November 19, 1999 ---------------------------------------- James H. Woodward, Jr. * Trustee November 19, 1999 ---------------------------------------- Homer H. Turner, Jr. * Trustee November 19, 1999 ---------------------------------------- Wendell D. Cleaver * Trustee November 19, 1999 ---------------------------------------- Dick D. Briggs, Jr. * By November 19, 1999 ---------------------------------------- Alan G. Priest, Attorney-in-fact, pursuant to Powers of Attorney filed herewith C-16 507 SIGNATURES As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant in the City of Washington, District of Columbia, on the nineteenth day of November, 1999. AmSouth Funds Registrant /s/ J. David Huber ------------------- *J. David Huber Chairman As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- */s/ J. David Huber Chairman November 19, 1999 ------------------------------- J. David Huber */s/ Charles L. Booth Treasurer November 19, 1999 ------------------------------- Charles L. Booth */s/ James H. Woodward, Jr. Trustee November 19, 1999 ------------------------------- James H. Woodward, Jr. */s/ Homer H. Turner, Jr. Trustee November 19, 1999 ------------------------------- Homer H. Turner, Jr. */s/ Wendell D. Cleaver Trustee November 19, 1999 ------------------------------- Wendell D. Cleaver */s/ Dick D. Briggs, Jr. Trustee November 19, 1999 ------------------------------- Dick D. Briggs, Jr. * By: /s/ Alan G. Priest November 19, 1999 ------------------------------- Alan G. Priest, Attorney-in-fact, pursuant to Powers of Attorney filed herewith C-17 508 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- (4) Form of Agreement and Plan of Reorganization. (14) (a) Consent of KPMG LLP. (14) (b) Consent of PricewaterhouseCoopers LLP.