Class action suits have been filed concerning certain mutual funds of the Regions Morgan Keegan Select family of open-end funds and the RMK family of closed-end funds held by trust, custodial and agency accounts for which Regions Bank, doing business as Regions Morgan Keegan Trust, is trustee, custodian or agent.
The various complaints name as defendants Morgan Keegan Asset Management, Inc., the Funds' investment advisor, Morgan Keegan & Company, Inc., the distributor of the Funds' shares, their officers and directors, Regions Financial Holdings, Inc. and their parent corporation Regions Financial Corporation, and the Funds' accounting firm, PriceWaterhouseCoopers LLP. The RMK Funds are also defendants in the suits affecting those respective Funds. Not all these persons or entities are named as defendants in all the complaints. While there are different specific legal and factual allegations in each of the five complaints, generally the various complaints allege that the defendants violated the disclosure and/or anti-fraud requirements of federal securities laws and in some instances the Investment Company Act. The Funds and the defendants misrepresented or failed to disclose material facts relating to (i) the nature of the risks being assumed by an investment in the Funds, (ii) the illiquidity of certain securities in which the Funds invested, (iii) the extent to which the Funds' portfolios contained securities that were illiquid or exhibited the characteristics of illiquid securities so that they were highly vulnerable to suddenly becoming unsalable at their estimated values at the prices at which they were being carried on the Funds' records, (iv) the extent to which the Funds' portfolios were subject to fair value procedures, (v) the extent to which the values of such securities, and, consequently, the net asset values of the Funds, were based on estimates of value and the uncertainty inherent in such estimated values, (vi) the concentration of investments in a single industry and (vii) the net asset values of the Funds.
The complaints allege that as a result of the eventual disclosures and partial disclosures of these misstatements and omissions, the prices of the Funds declined significantly. Prices on December 6, 2004 (January 23, 2006 in the case of the RMK Multi-Sector High Income Fund), before the true facts were known, and after the facts were known, on February 6, 2008, were as follows: -0- Percentage Before After loss in value Regions Morgan Keegan Select High Income Fund (class A shares) $10.76 $2.94 (72.7%) Regions Morgan Keegan Select Intermediate Bond Fund (class A shares) 10.09 3.52 (65.1%) Regions Morgan Keegan Select Short-Term Bond Fund (class A shares) 10.16 8.15 (19.8%) RMK Advantage Income Fund 15.82 4.10 (74.1%) RMK High Income Fund 18.20 4.20 (76.9%) RMK Multi-Sector High Income Fund 15.50 4.35 (71.9%) RMK Strategic Income Fund 16.60 3.90 (74.7%)
