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TENNESSEE TAX-FREE PORTFOLIO
SUPPLEMENT DATED MARCH 5, 1996
The following supplement is provided to update and 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
sections under "SUMMARY OF PORTFOLIO EXPENSES" on pages 3 and 4 of the
prospectus.
A. EXPENSE SUMMARY
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<CAPTION>
TENNESSEE TAX-FREE
PORTFOLIO
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SHAREHOLDER TRANSACTION EXPENSES: CLASS I CLASS II CLASS III
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<S> <C> <C> <C>
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% .50%
Shareholder Servicing* .00% .00% .00%
Other Expenses* .54% .67% .65%
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Total Portfolio Operating Expenses* .54% .67% 1.15%
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*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 investment advisory fees, however, there is
no guarantee that the 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 and charges .15% of the Portfolio's average net
assets for administration services. ALPS has agreed to waive its full
administration fee for the first six months of the PortfolioOs operation.
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 agreed to waive its co-administration fee, however,
there is no guarantee that the waiver will continue.
If the waivers were not in effect, Management Fees would be .50% 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:
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<CAPTION>
TENNESSEE TAX-FREE
PORTFOLIO
----------------------------------
CLASS I CLASS II CLASS III
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<S> <C> <C> <C>
Other Expenses .74% .87% .85%
Total Portfolio Operating Expenses 1.24% 1.62% 2.35%
</TABLE>
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:
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<CAPTION>
TENNESSEE TAX-FREE
PORTFOLIO
----------------------------------
CLASS I CLASS II CLASS III
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<S> <C> <C> <C>
1 year $ 6 $44* $12
3 years $17 $58* $37
</TABLE>
*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 sentence shall be inserted in lieu of the fourth 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 III of the Portfolio, under which Invest-
ment Professionals may be paid at an annual rate of .25% of the
Portfolio's average net assets, for shareholder services and
account maintenance..."
The following sentence shall be inserted after the fourth 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:
"All fees under these Shareholder Servicing Plans are currently
being waived although there is no guarantee that these waivers
will continue."
