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JULY 29, 1996
TENNESSEE TAX-FREE PORTFOLIO
SUPPLEMENT TO THE PROSPECTUS DATED OCTOBER 25, 1995
The following information supplements should be read in conjunction with
the information provided in the Prospectus dated October 25, 1995.
The following information and text shall be inserted in lieu of the section
under "SUMMARY OF PORTFOLIO EXPENSES - A. EXPENSE SUMMARY" on pages 3 and 4 of
the prospectus.
TENNESSEE TAX-FREE
PORTFOLIO
--------------------------------
SHAREHOLDER TRANSACTION EXPENSES: CLASS I CLASS II CLASS III
------- -------- ---------
Maximum Sales Load on Purchases
(as a percentage of offering price) None 3.75% None
Sales Load Imposed on Reinvested
Distributions None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
ANNUAL PORTFOLIO OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees* .00% .00% .00%
12b-1 Fees .00% .00% .00%
Shareholder Servicing* .00% .00% .00%
Other Expenses* .00% .00% .00%
--- --- ---
Total Portfolio Operating Expenses* .00% .00% .00%
--- --- ---
--- --- ---
*Net of expense waivers
ANNUAL PORTFOLIO OPERATING EXPENSES. The Portfolio is obligated to pay
Management Fees to First Tennessee Bank National Association (First Tennessee)
for managing the Portfolio's investments. First Tennessee has voluntarily agreed
to waive its entire investment advisory fees, however, there is no guarantee
that this voluntary waiver will continue. The Portfolio incurs Other Expenses,
including Administrative and Co-Administrative Fees, which have been estimated
for the current year, for maintaining shareholder records, furnishing
shareholder statements and reports, and other services. ALPS, the Administrator,
is entitled to .15% of the Portfolio's average net assets for administration
services. ALPS has agreed to voluntarily waive its administration fees as well
as voluntarily assume all Portfolio expenses in order to maintain an expense
ratio of 0.00% for all Classes of the Portfolio. ALPS reserves the right to
modify or terminate this voluntary fee waiver and assumption of expenses at any
time. Garland Capital Management (Garland), a division of First Tennessee, 4990
Poplar Avenue, 3rd Floor, Memphis, TN 38117, the Co-Administrator, is entitled
to .05% of the Portfolio's average net assets for co-administration services.
Garland has voluntarily agreed to waive its co-administration fee for all
Classes, however, there is no guarantee that this voluntary waiver will
continue.
If the waivers and assumption of expenses were not in effect, Management
Fees would be .50% of average net assets for each Class, 12b-1 Fees would be
.75% for Class III, and Shareholder Servicing Fees would be .25% for Class II
and Class III. Other Expenses and Total Portfolio Operating Expenses would be
estimated as follows:
TENNESSEE TAX-FREE
PORTFOLIO
--------------------------------
CLASS I CLASS II CLASS III
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Other Expenses .74% .87% .85%
Total Portfolio Operating Expenses 1.24% 1.62% 2.35%
There is no guarantee that any waivers will continue at their stated
levels.
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Management Fees, 12b-1 Fees, Shareholder Servicing Fees, and Other
Expenses, are reflected in the Portfolio's share price and are not charged
directly to individual accounts. 12b-1 Fees are paid by Class III to ALPS for
services and expenses in connection with distribution. Shareholder Servicing
Fees are paid by Class II and III to securities brokers or financial institution
representatives (Investment Professionals) for services and expenses incurred in
connection with providing personal service to shareholders and/or maintenance of
shareholder accounts. Long-term shareholders may eventually pay more than the
economic equivalent of the maximum 8.50% front-end sales charge permitted by the
National Association of Securities Dealers, Inc. (NASD) due to 12b-1 fees.
Please see page 16 for further information.
B. EXAMPLE: You would pay the following expenses for every $1,000
investment in each Class of shares of the Tennessee Tax-Free Portfolio assuming
(1) 5% annual return, (2) redemption at the end of each time period, (3) that
operating expenses are the same as described above, and (4) reinvestment of all
dividends and distributions. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE
CONSIDERED INDICATIONS OF ACTUAL OR EXPECTED PERFORMANCE OR PORTFOLIO OPERATING
EXPENSES, BOTH OF WHICH MAY VARY SIGNIFICANTLY:
TENNESSEE TAX-FREE
PORTFOLIO
-------------------------------------
CLASS I CLASS II CLASS III
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1 year $0 $38* $0
3 years $0 $38* $0
*Reflects imposition of the maximum sales charge at the beginning of the period.
The following sentence shall be inserted in lieu of the third sentence of
the first paragraph under the section entitled "HOW ARE INVESTMENTS, EXCHANGES
AND REDEMPTIONS MADE? - Class II and III - Investment Requirement" on page 8 of
the prospectus:
"If you are an employee of First Tennessee or any of its affiliates and
you participate in the Systematic Investing Program, the minimum initial
investment is $50, and subsequent investments may be in any amount of $25
or greater."
The following sentence shall be inserted after the third sentence
of the section entitled "HOW ARE INVESTMENTS, EXCHANGES AND REDEMPTIONS MADE?
- Class II and Class III - Systematic Investment Program" on page 12 of the
prospectus:
"If you are an employee of First Tennessee or any of its affiliates, the
minimum initial investment in the Portfolio is $50."
The following sentences shall be inserted in lieu of the third and fourth
sentences under the first paragraph of the section entitled "WHAT ADVISORY AND
OTHER FEES DOES THE PORTFOLIO PAY? - Administrator and Distributor" on page 15
of the prospectus:
"ALPS is entitled to receive from each Class of the Portfolio a monthly
fee at the annual rate of .15% of average net assets. ALPS has agreed to
voluntarily waive its full administration fee as well as voluntarily
assume all Portfolio expenses, in order to maintain an expense ratio of
0.00% for all Classes of the Portfolio. ALPS reserves the right to
modify or terminate this voluntary fee waiver and assumption of expenses
at any time."
The following sentences shall be inserted in lieu of the sixth sentence
under section entitled "WHAT ADVISORY AND OTHER FEES DOES THE PORTFOLIO PAY?
- - Distribution Plans and Shareholder Servicing Plans" on page 16 of the
prospectus:
"The Trustees have also adopted Shareholder Servicing Plans on behalf of
Class II and Class III of the Portfolio under which Investment
Professionals may be paid at an annual rate of .25% of the average net
assets of each Class for shareholder services and account maintenance
including responding to shareholder inquiries, directing shareholder
communications, account balance maintenance and dividend posting. All
fees and expenses under these Shareholder Servicing and Distribution
Plans are currently being waived or assumed although there is no
guarantee that these voluntary waivers will continue."
