1933 Act File No. 33-49701
1940 Act File No. 811-7065
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 2 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 2 X
THE PLANTERS FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on September 29, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on September 20, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin, L.L.P.
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of THE PLANTERS FUNDS,
which consists of one portfolio, Tennessee Tax-Free Bond Fund, is comprised
of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Summary of Fund Expenses.
Item 3. Condensed Financial
Information Financial Highlights.
Item 4. General Description of
Registrant Performance Information; General
Information; Investment Information;
Investment Objective; Investment
Policies; Tennessee Municipal
Securities; Investment Risks; Non-
Diversification; Investment
Limitations.
Item 5. Management of the Fund The Planters Funds Information;
Management of the Trust; Distribution
of Fund Shares; Administration of the
Fund; Expenses of the Fund.
Item 6. Capital Stock and Other
Securities Dividends and Distributions;
Shareholder Information; Voting
Rights; Massachusetts Partnership Law;
Effect of Banking Laws; Tax
Information; Federal Income Tax; State
of Tennessee Taxes; Other State and
Local Taxes.
Item 7. Purchase of Securities Being
Offered Net Asset Value; Investing in the
Fund; Share Purchases; Minimum
Investment Required; What Shares Cost;
Reducing the Sales Load; Certificates
and Confirmations.
Item 8. Redemption or Repurchase Redeeming Shares; Accounts With Low
Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information About the Fund.
Item 13. Investment Objectives and
Policies Investment Objective and Policies.
Item 14. Management of the Fund Management of The Trust.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchasing Shares; Determining Net
Asset Value; Redeeming Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data Total Return; Yield; Tax-Equivalent
Yield; Performance Comparisons.
Item 23. Financial Statements Filed in Part A.
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
PROSPECTUS
The shares of Tennessee Tax-Free Bond Fund (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of securities
which is an investment portfolio in The Planters Funds (the "Trust"), an
open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income exempt from
federal income tax and personal income taxes imposed by the state of Tennessee
and Tennessee municipalities. The Fund invests primarily in a portfolio of
municipal securities which are exempt from federal income tax and personal
income taxes imposed by the state of Tennessee and Tennessee municipalities
("Tennessee Municipal Securities"). These securities include those issued by or
on behalf of the state of Tennessee and Tennessee municipalities as well as
those issued by states, territories and possessions of the United States that
are not issued by or on behalf of Tennessee and its political subdivisions, but
which are exempt from Tennessee state income tax.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF UNION
PLANTERS NATIONAL BANK, ARE NOT ENDORSED OR GUARANTEED BY UNION PLANTERS
NATIONAL BANK, OR ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated September
30, 1994 with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge, obtain other information, or make inquiries about
the Fund by calling Union Planters Brokerage Services at 1-800-238-7125.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Characteristics 4
Participation Interests 4
Variable Rate Municipal Securities 4
Municipal Leases 4
Restricted and Illiquid Securities 5
Investing in Securities of Other
Investment Companies 5
When-Issued and Delayed
Delivery Transactions 5
Temporary Investments 5
Tennessee Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
THE PLANTERS FUNDS INFORMATION 7
- ------------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 8
Portfolio Managers 8
Distribution of Fund Shares 8
Payments to Financial Institutions 8
Administration of the Fund 9
Administrative Services 9
Custodian 9
Transfer Agent, Dividend
Disbursing Agent and
Portfolio Accounting Services 9
Legal Counsel 9
Independent Auditors 9
Expenses of the Fund 9
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN THE FUND 10
- ------------------------------------------------------
Share Purchases 10
Minimum Investment Required 10
What Shares Cost 11
Purchases at Net Asset Value 11
Dealer Concessions 11
Reducing the Sales Load 12
Quantity Discounts and Accumulated
Purchases 12
Letter of Intent 12
Reinvestment Privilege 12
Certificates and Confirmations 12
Dividends and Distributions 13
REDEEMING SHARES 13
- ------------------------------------------------------
By Telephone 13
By Mail 14
Signatures 14
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 14
- ------------------------------------------------------
Voting Rights 14
Massachusetts Partnership Law 15
EFFECT OF BANKING LAWS 15
- ------------------------------------------------------
TAX INFORMATION 16
- ------------------------------------------------------
Federal Income Tax 16
State of Tennessee Taxes 16
Other State and Local Taxes 16
PERFORMANCE INFORMATION 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 18
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)........................... 4.00%*
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)............................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable).................................... None
Exchange Fee.......................................................................................... None
ANNUAL FUND OPERATING EXPENSES**
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................................... 0.04%
12b-1 Fees............................................................................................ None
Other Expenses (after waiver) (2)..................................................................... 0.52%
Total Fund Operating Expenses (3)............................................................ 0.56%
</TABLE>
(1)_ The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.75%.
(2)_ Other expenses have been reduced to reflect the voluntary waiver of the
administration fee. The administrator can terminate this voluntary waiver
at any time at its sole discretion.
(3)_ Total Fund Operating Expenses for the Fund would have been 1.43% absent the
voluntary waivers of the management fee and the administrative fee. (See
(1) and (2) above).
_*_ During the period from October 1, 1994, through and including September 30,
1995, the maximum sales load imposed on the purchase of shares of the Fund
will be 2.00% of the offering price of the shares purchased.
** Expenses in this table are based on expenses incurred during the fiscal year
ended July 31, 1994. During the course of this period, expenses may be more
or less than the amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE PLANTERS FUNDS INFORMATION," AND "INVESTING IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return; (2) redemption at the end of each time period; and (3)
payment of the maximum sales load....................................... $46 $57 $70 $107
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Accountants' Report on page 31.
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31,
1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.50
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.44
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.31)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.13
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.41)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 10.22
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 1.19%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 0.56%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 4.69%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.87%(a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $42,400
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 30%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from August 30, 1993 (date of initial
public investment) to
July 31, 1994. For the period from August 5, 1993 (start of business) to
August 29, 1993, net investment income aggregating $0.02 per share ($178) was
distributed to Federated Administrative Services.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Planters Funds (the "Trust") was established as a Massachusetts business
trust under a Declaration of Trust dated May 14, 1993. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to this Fund, as
of the date of this prospectus, the Board of Trustees ("Trustees") has not
established separate classes of shares.
Shares of the Fund are designed for customers of financial institutions such as
broker/dealers, banks, fiduciaries, and investment advisers as a convenient
means of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in Tennessee Municipal Securities. A minimum
initial investment of $1,000 is required. The Fund is not likely to be a
suitable investment for non-Tennessee taxpayers or retirement plans since the
Fund invests in Tennessee Municipal Securities.
Except as otherwise noted in this prospectus, shares of the Fund are sold at net
asset value plus a sales charge and are redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income exempt from
federal income tax and personal income taxes imposed by the state of Tennessee
and Tennessee municipalities. The investment objective cannot be changed without
approval of shareholders of a majority of the Fund's shares. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this prospectus.
Interest income of the Fund that is exempt from the income tax described above
retains its exempt status when distributed to the Fund's shareholders. However,
income distributed by the Fund may not necessarily be exempt from state or
municipal taxes in states other than Tennessee.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a portfolio
of Tennessee Municipal Securities. As a matter of investment policy, which may
not be changed without shareholder approval, under normal market conditions at
least 80% of the Fund's income will be exempt from federal income tax (including
alternative minimum tax) and personal income tax imposed by the state of
Tennessee and Tennessee municipalities. Unless indicated otherwise, the other
investment policies of the Fund described below may be changed by the Trustees
without approval of shareholders. Shareholders will be notified before any
material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Tennessee Municipal Securities in which the Fund
invests are:
obligations issued by or on behalf of the state of Tennessee, its
political subdivisions, or agencies;
debt obligations of any state, territory, or possession of the United
States, including the District of Columbia or any political subdivision
of any of these; and
participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Fund and/or the investment adviser to the Fund,
exempt from both federal income tax and the personal income taxes imposed by the
state of Tennessee and Tennessee municipalities.
CHARACTERISTICS. The Tennessee Municipal Securities in which the Fund
invests are rated "investment grade," i.e., Baa or above by Moody's
Investor Service, Inc. ("Moody's") or BBB or above by Standard & Poor's
Rating Group ("S&P") or Fitch Investors Service, Inc. ("Fitch"). A
description of the rating categories is contained in the Appendix to the
Statement of Additional Information. In certain cases, the Fund's adviser
may choose bonds that are unrated if it judges the bonds to be of
comparable quality to one of the foregoing rating categories. Bonds rated
"BBB" by S&P or "Baa" by Moody's have speculative characteristics. Changes
in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. The prices of fixed income securities fluctuate inversely to the
direction of interest rates. If the Fund purchases an investment grade
bond, and the rating of such bond is subsequently downgraded so that the
bond is no longer classified as investment grade, the Fund is not required
to sell the bond, but will consider whether such action is appropriate. As
a matter of investment policy, under normal market conditions, the Fund
will invest at least 65% of its assets in bonds.
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Tennessee Municipal Securities from financial institutions such as commercial
banks, savings and loan associations and insurance companies. These
participation interests may take the form of participations, beneficial
interests in a trust, partnership interests or any other form of indirect
ownership that allows the Fund to treat the income from the investment as exempt
from federal income tax. The financial institutions from which the Fund
purchases participation interests frequently provide or secure irrevocable
letters of credit or guarantees to assure that the participation interests are
of high quality.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Tennessee Municipal Securities
which the Fund purchases may have variable interest rates. Variable interest
rates are ordinarily based on a published interest rate or interest rate index.
Many variable rate municipal securities are subject to payment of principal on
demand by the Fund in not more than seven days. All variable rate municipal
securities will meet the quality standards for the Fund. The Fund's investment
adviser has been instructed by the Trustees to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including participation
interests held by the Fund, on the basis of published financial information and
reports of the rating agencies and other analytical services.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract or a
participation certificate on any of the above. The lease payments and other
rights under the lease provide for and secure the payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be subject to
periodic appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate
trustee cannot accelerate lease obligations upon default. The trustee would only
be able to enforce lease payments as they become due. In the event of a default
or failure of appropriation, it is unlikely that the trustee would be able to
obtain an acceptable substitute source of payment.
If the Fund purchases unrated municipal leases, the Trustees will be responsible
for determining on an ongoing basis, the credit quality of such leases and the
likelihood that a lease will not be cancelled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction upon resale under federal securities laws. To the extent
these securities are deemed to be illiquid, the Fund will limit its purchases,
together with other securities considered to be illiquid, to 15% of its net
assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will invest
in other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. The adviser
will waive its investment advisory fee on assets invested in securities of
open-end investment companies.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. _The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENTS. The Fund normally invests its assets so that at least
80% of its annual interest income is exempt from federal income tax and the
personal income taxes imposed by the state of Tennessee and Tennessee
municipalities and at least 65% of the value of its total assets will be
invested in bonds. From time to time, during periods of other than normal market
conditions, the Fund may invest in short-term tax exempt or taxable temporary
investments. These temporary investments include: notes issued by or on behalf
of municipal or corporate issuers; obligations issued or guaranteed by the U.S.
government, its agencies, or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase agreements
(arrangements in which the organization selling the Fund a bond or temporary
investment agrees at the time of sale to repurchase it at a mutually agreed upon
time and price).
The investment adviser will limit temporary investments to those rated within
the investment grade categories described under "Acceptable
Investments--Characteristics" (if rated) or of comparable quality (if unrated).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal income tax or
personal income taxes imposed by the state of Tennessee or Tennessee
municipalities.
TENNESSEE MUNICIPAL SECURITIES
Tennessee Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Tennessee Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors, including: the
general conditions of the short-term municipal bond market and the municipal
bond market; the size and maturity of the particular offering; and the rating of
the issue. Further, any adverse economic conditions or developments affecting
the issuer or its municipalities could impact the Fund's portfolio. The ability
of the Fund to achieve its investment objective also depends on the continuing
ability of the issuers of Tennessee Municipal Securities and participation
interests, or the credit enhancers of either, to meet their obligations for the
payment of interest and principal when due.
Investing in municipal securities which meet the Fund's quality standards may
not be possible if the issuer or its municipalities do not maintain their
current credit ratings. In addition, certain constitutional amendments,
legislative measures, executive orders, administrative regulations, and voter
initiatives could result in adverse consequences affecting municipal securities.
NON-DIVERSIFICATION
The Fund is a non-diversified investment portfolio. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than investment in a
diversified portfolio of securities because the higher percentage of investments
among fewer issuers may result in greater fluctuation in the total market value
of the
Fund's portfolio. Any economic, political, or regulatory developments affecting
the value of the securities in the Fund's portfolio will have a greater impact
on the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year: (a)
with regard to at least 50% of the Fund's total assets, no more than 5% of its
total assets are invested in the securities of a single issuer; and
(b) no more than 25% of its total assets are invested in the securities of a
single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a percentage of
its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge assets as necessary to
secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
THE PLANTERS FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Trustee's responsibilities
between meetings of the Trustees.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Union Planters National Bank
("Union Planters" or the "adviser"), the Fund's investment adviser, subject to
direction by the Trustees. The investment adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the assets of the Fund.
From time to time, to the extent consistent with the objective, policies and
restrictions of the Fund, the Fund may invest in securities of issuers with
which the investment adviser has a lending relationship.
ADVISORY FEES. The investment adviser receives an investment advisory fee
at an annual rate equal to 0.75% of the Fund's average daily net assets.
The fee paid by the Fund, while higher than the advisory fees paid by other
mutual funds in general, is comparable to fees paid by other mutual funds
with similar objectives and policies. The investment adviser has undertaken
to reimburse the Fund, up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
investment adviser may voluntarily choose to waive a portion of its fee or
reimburse the Fund for certain other expenses, but reserves the right to
terminate such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Founded in 1869, Union Planters, a national banking
association, is a wholly-owned subsidiary of Union Planters Corporation
(the "Corporation") a multi-bank holding company headquartered in Memphis,
Tennessee. Union Planters is a commercial bank offering a wide range of
banking services to its customers. The investment adviser has been managing
trust assets for over 80 years. As of December 31, 1993, the Trust Group of
Union Planters had approximately $900 million under administration, of
which it had investment discretion over approximately $490 million. The
adviser has served as investment adviser to the Fund since its inception.
As part of it's regular banking operations, Union Planters may make loans
to public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending
clients of Union Planters. The lending relationship will not be a factor in
the selection of securities.
PORTFOLIO MANAGERS. The following individuals are primarily responsible
for the day-to-day management of the Fund's portfolio:
Robert G. L. Eason has been a co-portfolio manager since the Fund's
inception. Mr. Eason has been a Vice President and Senior Fixed Income
Portfolio Manager of Union Planters since 1989. From 1983-1989, Mr. Eason
was Portfolio Manager at First Tennessee National Bank.
P. Thomas Dorian has also been a co-portfolio manager since the Fund's
inception. Mr. Dorian has been a Senior Vice President of Union Planters
since 1989. From 1987-1989, Mr. Dorian was Vice President of Union
Planters. Mr. Dorian has been a Chartered Financial Analyst since 1985.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
PAYMENTS TO FINANCIAL INSTITUTIONS. _The distributor, the Adviser, or their
affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
certain administrative personnel and services necessary to operate the Fund,
such as legal and accounting services. Federated Administrative Services
provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$120,000 per Fund. FAS may voluntarily choose to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent and dividend disbursing agent for the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent accountants for the Fund are Price
Waterhouse, LLP, Boston, Massachusetts.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust expenses.
The expenses borne by the Fund include, but are not limited to, the costs of:
organizing the Trust and continuing its existence; Trustees' fees; investment
advisory and administrative services; printing prospectuses and other Fund
documents for shareholders; registering the Trust, the Fund and shares of the
Fund; taxes and commissions; issuing, purchasing, repurchasing, and redeeming
shares; fees for custodian, transfer agent, dividend disbursing agent,
shareholder servicing agents, and registrars; printing, mailing, auditing,
accounting, and legal expenses; reports to shareholders and government agencies;
meetings of Trustees and shareholders and proxy solicitations therefore;
insurance premiums; association membership dues; and such nonrecurring and
extraordinary items as may arise.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and all other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. An individual investor can purchase
shares of the Fund by telephoning Union Planters Brokerage Services at
1-800-238-7125 or by calling his financial institution (such as a bank or an
investment dealer). Orders through a financial institution are considered
received when the Fund is notified of the purchase order. Purchase orders
through a registered broker/dealer must be received by the broker before 4:00
p.m. (Eastern time) and must be transmitted by the broker to the Fund before
5:00 p.m. (Eastern time) in order for shares to be purchased at that day's
price. Purchase orders through other financial institutions must be received by
the financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for shares to be purchased at that day's price. It is the
financial institution's responsibilty to transmit orders promptly.
Texas residents must purchase shares of the Fund through Federated Securities
Corp. at 1-800-618-8573. In connection with the sale of shares, the distributor
may, from time to time, offer certain items of nominal value to any shareholder
or investor. The Fund reserves the right to reject any purchase request.
Payment may be made by either check or federal funds. Payments should be made to
your financial institution, broker/dealer, Union Planters Brokerage Service or
Federated Securities Corp., as appropriate. It is the Fund's policy to be as
fully invested as possible so that maximum interest may be earned. To this end,
all payments from shareholders must be in federal funds or be converted into
federal funds before shareholders begin to earn dividends.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares of the Fund are sold at their net asset value next determined after an
order is received plus a sales load as follows:
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS
A PERCENTAGE A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED
<S> <C> <C>
Less than $50,000 4.00% 4.17%
$50,000 but less than $100,000 3.50% 3.63%
$100,000 but less than $250,000 3.00% 3.09%
$250,000 but less than $500,000 2.00% 2.04%
$500,000 but less than $750,000 1.50% 1.52%
$750,000 but less than $1,000,000 1.00% 1.01%
$1 million or more 0.00%
</TABLE>
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
During the period from October 1, 1994, through and including September 30,
1995, the maximum sales load imposed on the purchase of shares of the Fund will
be 2.00% of the offering price of the shares purchased.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales load, by Trust customers of Union Planters and employees
and retired employees of Union Planters and its affiliates and their spouses and
children under 21.
No sales load is imposed for shares purchased through bank trust departments,
investment advisers registered under the Investment Advisers Act of 1940, as
amended, insurance companies and credit unions. However, investors who purchase
shares through a trust department or investment adviser may be charged an
additional service fee by that institution.
DEALER CONCESSIONS. For sales of shares of the Fund, a dealer will normally
receive up to 85% of the applicable sales load. Any portion of the sales load
which is not paid to a dealer will be retained by the distributor. However, the
distributor, in its sole discretion, may uniformly offer to pay to all dealers
selling shares of the Fund, all or a portion of the sales load it normally
retains. If accepted by the dealer, such additional payments will be predicated
upon the amount of Fund shares sold.
The sales load for shares sold other than through registered broker/dealers will
be retained by the distributor. The distributor may pay fees to banks out of the
sales load in exchange for sales and/or administrative services performed on
behalf of the bank's customers including the initiation of customer accounts and
purchases of shares.
REDUCING THE SALES LOAD
The sales load can be reduced on the purchase of shares of the Fund through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent; or
using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on the
previous page, larger purchases reduce the sales load paid. The Fund will
combine purchases of shares made on the same day by the investor, his spouse,
and his children under age 21 when it calculates the sales load.
If an additional purchase of shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
shares having a current value at the public offering price of $40,000 and
purchases $10,000 more at the current public offering price, the sales load on
the additional purchase according to the schedule now in effect would be 3.50%,
not 4.00%.
To receive the sales load reduction, Federated Securities Corp. must be notified
by the shareholder in writing at the time the purchase is made that shares are
already owned or that purchases are being combined. The Fund will reduce the
sales load after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales load may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales load adjustment depending on the amount actually purchased
within the 13-month period and a provision for the custodian to hold up to 4.00%
of the total amount intended to be purchased in escrow (in shares) until such
purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales load.
This letter of intent will not obligate the shareholder to purchase shares, but
if he does, each purchase during the period will be at the sales load applicable
to the total amount intended to be purchased. This letter may be dated as of a
prior date to include any purchases made within the past 90 days towards the
dollar fulfillment of the letter of intent. Prior trade prices will not be
adjusted.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load.
Federated Securities Corp. must be notified by the shareholder in writing or by
the shareholder's financial institution of the reinvestment in order to
eliminate a sales load. If the shareholder redeems shares in the Fund, there may
be tax consequences, and exercise of the reinvestment privilege may result in
additional tax considerations. Shareholders contemplating such transactions
should consult their own tax advisers.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
requested by contacting your financial
institution, broker/dealer, Union Planters Brokerage Service or Federated
Securities Corp., as appropriate.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends are sent to each shareholder.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date.
Dividends are declared just prior to determining net asset value. Capital gains
realized by the Fund, if any, will be distributed at least once every 12 months.
Dividends and capital gains will be reinvested in additional shares on payment
dates at the ex-dividend date's net asset value without a sales load, unless
cash payments are requested by writing to your financial institution,
broker/dealer, Union Planters Brokerage Service or Federated Securities Corp.,
as appropriate.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemption
must be received in proper form.
BY TELEPHONE. A shareholder may redeem shares by calling his financial
institution (such as a bank or an investment dealer) to request the redemption.
Shares will be redeemed at the net asset value next determined after the Fund
receives the redemption request from the financial institution. Redemption
requests through a registered broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for shares to be redeemed at that
day's net asset value. Redemption requests through other financial institutions
must be received by the financial institution and transmitted to the Fund before
4:00 p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The financial institution may charge customary fees and commissions for
this service.
For orders received before 4:00 p.m. (Eastern time), proceeds will normally be
wired the next day to the shareholder's account as instructed on the
shareholder's authorization form or a check will be sent to the address of
record. Proceeds delivered in the form of a check will be sent within seven days
after a proper request for redemption has been received, provided Federated
Services Company has received the purchase price for the shares from the
shareholder. Before a financial institution may request redemption by telephone
on behalf of a shareholder, an authorization form permitting the Fund to accept
redemption requests by telephone must be completed.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, it is
recommended that a redemption request be made in
writing and be hand delivered or sent by overnight mail to Federated Securities
Corp. If, at any time, the Fund should determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
BY MAIL. Shareholders may redeem shares by sending a written request to
Federated Securities Corp. as appropriate. The written request should include
the shareholder's name, the Fund name, the account number, and the share or
dollar amount requested. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request. Shareholders should call Federated Securities Corp. at
1-800-618-8573 for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record, must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the FDIC;
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum of $1,000 due to shareholder
redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As of September 6, 1994, Union Planters National Bank,
Memphis, Tennessee, acting in various capacities for numerous accounts, was the
owner of record of approximately 3,781,759
shares (92.33%) of the Fund, and therefore, may, for certain purposes, be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by the Trustees or by
shareholders at a special meeting. A special meeting of the shareholders for
this purpose shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of all series in the
Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust or its Trustees enter into or sign on
behalf of the Fund.
In the unlikely event that a shareholder of the Fund is held personally liable
for the Trust's obligations on behalf of the Fund, the Trust is required to use
the property of the Fund to protect or compensate the shareholder. On request,
the Trust will defend any claim made and pay any judgment against a shareholder
of the Fund for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of their customers. The Fund's adviser, Union Planters, is
subject to such banking laws and regulations.
Union Planters believes that it may perform the investment advisory services for
the Fund contemplated by its advisory agreement with the Trust without violating
the Glass-Steagall Act or other applicable banking laws or regulations. Changes
in either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of present or future
statutes and regulations, could prevent Union Planters from continuing to
perform all or a part of the above services for its customers and/or the Fund.
In such event, changes in the operation of a Fund may occur, including the
possible alteration or termination of any automatic or other Fund share
investment or redemption services then being provided by Union Planters, and the
Trustees would consider alternative investment advisers
and other means of continuing available investment services. It is not expected
that existing Fund's shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Union Planters is
found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code, as amended ("the Code"), applicable
to regulated investment companies and to receive the special tax treatment
afforded to such companies.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net
long-term capital gains realized by the Fund, if any, will be taxable as
long-term capital gains regardless of the length of time shareholders have held
their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
STATE OF TENNESSEE TAXES
Under existing Tennessee law, shareholders of the Fund will not be subject to
Tennessee income taxes on Fund dividends to the extent that such dividends
represent "exempt-interest dividends" as defined in the Code, which are directly
attributable to (i) interest on obligations of the state of Tennessee or any of
its political subdivisions; or (ii) interest on certain obligations of the
United States, or any agency or instrumentality thereof.
To the extent that distributions by the Fund are derived from capital gains on
such obligations, or from dividends or capital gains on other types of
obligations, such distributions will be subject to Tennessee income taxes.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than Tennessee or from personal property taxes. State laws differ on this
issue, and shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises total return, yield, and tax-equivalent
yield. Total return represents the change, over a specified period of time, in
the value of an investment in shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that the
Fund would have had to earn to equal its actual yield, assuming a specific tax
rate. The yield and the tax-equivalent yield do not necessarily reflect income
actually earned by the Fund and, therefore, may not correlate to the dividends
or other distributions paid to shareholders.
The performance information reflects the effect of the sales load, which, if
excluded, would increase the total return, yield, and tax-equivalent yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--98.8%
- ---------------------------------------------------------------------------------
$ 500,000 Anderson County, TN, 6.30% Refunding UT GO Bonds, (Rural High
School)/(Callable 1/1/97 @ 102), 7/1/2001 A $ 522,565
------------------------------------------------------------------
465,000 Chattanooga--Hamilton County, TN, Hospital Authority Revenue,
5.50% Refunding Bonds, (Erlanger Medical Center)/(FSA
Insured)/(Original Issue Yield: 5.60%),
10/1/2006 AAA 459,685
------------------------------------------------------------------
1,000,000 Chattanooga--Hamilton County, TN, Hospital Authority Revenue,
5.50% Refunding Bonds, (Erlanger Medical Center)/(Callable
10/1/2003 @ 102)/(FSA Insured)/
(Original Issue Yield: 5.85%), 10/1/2013 AAA 926,240
------------------------------------------------------------------
1,130,000 Clarksville, TN, Electric System Revenue, 5.125%
Refunding and Improvement Bonds, (Callable 9/1/2003 @
102)/(Original Issue Yield: 5.45%), 9/1/2011 A 1,006,299
------------------------------------------------------------------
1,235,000 Clarksville, TN, Water, Sewer and Gas Systems, 6.125% Refunding
and Improvement Revenue Bonds, (Callable 2/1/2002 @ 102)/(MBIA
Insured)/(Original Issue Yield: 6.15%-6.328%), 2/1/2007-2/1/2012 AAA 1,264,325
------------------------------------------------------------------
400,000 Hamblen County, TN, Hospital Revenue, 4.90% UT
GO Bonds, (Callable 5/1/99 @ 102)/(AMBAC Insured),
5/1/2006 AAA 368,944
------------------------------------------------------------------
400,000 Hamilton County, TN, Industrial Development Revenue, 9.50%
Refunding Bonds, (Series 1985)/(Callable 9/1/95 @ 102), 9/1/96
(Escrowed to Maturity) AAA**+ 431,520
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 1,185,000 Jackson, TN, Health, Educational and Housing Facilities Revenue,
5.70%-5.90%, (Jackson-Madison County
General Hospital)/(MBIA Insured), 4/1/99-4/1/2000 AAA $ 1,234,910
------------------------------------------------------------------
400,000 Jackson, TN, Water and Sewer Authority Revenue, 5.125% Refunding
Bonds, (Callable 1/1/2003 @ 102)/ (AMBAC Insured)/(Original Issue
Yield: 5.35%),
1/1/2010 AAA 366,592
------------------------------------------------------------------
810,000 Johnson City, TN, Health and Educational Facilities, 6.75%
Refunding Revenue Bonds, (Johnson City Med.)/ (MBIA
Insured)/(Original Issue Yield: 6.912%)/
(Pre-Refunded 7/1/2001 @ 102), 7/1/2006 AAA 900,526
------------------------------------------------------------------
440,000 Johnson City, TN, Health and Educational Facilities, 6.75%
Refunding Revenue Bonds, (Johnson City Med.)/ (Callable 7/1/2001 @
102)/(MBIA Insured)/(Original
Issue Yield: 6.912%), 7/1/2006 AAA 477,325
------------------------------------------------------------------
1,000,000 Knox County, TN, Health, Educational and Housing
Facilities Revenue, 7.00%, (Fort Sanders Alliance)/(Series
C)/(MBIA Insured)/(Original Issue Yield: 7.15%)/
(Pre-Refunded 1/1/2000 @ 102), 1/1/2008 AAA 1,110,220
------------------------------------------------------------------
500,000 Knox County, TN, Health, Educational and Housing
Facilities Revenue, 5.40% Refunding Bonds, (Fort Sanders Medical
Center)/(Callable 1/1/2002 @ 102)/(MBIA
Insured)/(Original Issue Yield: 5.50%), 1/1/2005 AAA 493,710
------------------------------------------------------------------
805,000 Knox County, TN, Health, Educational and Housing
Facilities Revenue, 4.90%, (Fort Sanders Alliance)/
(Series A)/(Callable 1/1/2004 @ 102)/(MBIA Insured)/
(Original Issue Yield: 5.10%), 1/1/2005 AAA 753,673
------------------------------------------------------------------
475,000 Knoxville, TN, 5.80% UT GO Bonds, Refunding and
Improvement Revenue, (Series A)/(Callable 5/1/96
@ 102), 5/1/99 AA- 490,281
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 1,000,000 Knoxville, TN, Natural Gas Revenue, 5.05% Refunding Bonds,
(Callable 3/1/2000 @ 102)/(Original Issue Yield: 5.10%), 3/1/2008 AA $ 921,250
------------------------------------------------------------------
1,330,000 Knoxville, TN, Water Revenue, 5.20% Refunding and
Improvement Bonds, (Callable 3/1/2000 @ 102)/
(Original Issue Yield: 5.45%), 3/1/2010 AA 1,226,938
------------------------------------------------------------------
1,775,000 Memphis-Shelby County, TN, Airport Revenue, 6.75% Refunding Bonds,
(Federal Express Corp.)/(Callable
9/1/2002 @ 102)/(Original Issue Yield: 8.35%),
9/1/2012 BBB 1,797,205
------------------------------------------------------------------
3,000,000 Memphis, TN, Zero Coupon UT GO Bonds, (Recreational Facilities
Improvements)/(Series C)/(Pre-Refunded
12/1/95 @ 102), 12/1/2004 AAA 1,382,460
------------------------------------------------------------------
465,000 Memphis, TN, Electric System Revenue, 5.00%
Refunding Bonds, (Series A)/(Original Issue Yield:
5.05%), 1/1/99 AA 469,566
------------------------------------------------------------------
230,000 Metropolitan Government Nashville and Davidson
County, TN, 5.25% Refunding UT GO Bonds, (Original Issue Yield:
5.45%), 5/15/2007 AA 223,307
------------------------------------------------------------------
750,000 Metropolitan Government Nashville and Davidson
County, TN, Electric Revenue, 6.00%, (Series A)/
(Callable 5/15/2002 @ 102)/(Original Issue Yield: 6.282%),
5/15/2017 AA 740,745
------------------------------------------------------------------
1,500,000 Metropolitan Government Nashville and Davidson
County, TN, Health and Educational Facilities Revenue, 5.20%
Refunding Bonds, (Vanderbilt University)/
(Callable 7/1/2003 @ 102)/(Original Issue Yield:
5.55%), 7/1/2018 AA 1,332,900
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 1,170,000 Metropolitan Government Nashville and Davidson
County, TN, Water and Sewer Revenue, 7.25%-7.30%
Refunding Bonds, (Callable 1/1/96 @ 102), 1/1/2006-
1/1/2008 A $ 1,234,688
------------------------------------------------------------------
785,000 Metropolitan Government Nashville and Davidson
County, TN, Water and Sewer Revenue, 5.50%-5.75%, (Callable
1/1/2002 @ 102)/(AMBAC Insured)/(Original
Issue Yield: 5.55%-6.15%), 1/1/2003-1/1/2012 AAA 789,786
------------------------------------------------------------------
230,000 Metropolitan Government Nashville and Davidson
County, TN, Water and Sewer Revenue, 5.20%
Refunding Bonds, (FGIC Insured)/(Original Issue
Yield: 5.53%), 1/1/2013 AAA 208,688
------------------------------------------------------------------
1,380,000 Montgomery County, TN, Public Building Authority
Revenue, 7.50%, (Tennessee County Loan Pool)/
(Callable 12/15/94 @ 100)/(Prudential Insurance
Company of America Insured), 12/15/2000 AA+ 1,380,055
------------------------------------------------------------------
800,000 Mt. Juliet, TN, Public Building Authority Revenue, 7.00%, (Series
O)/(Callable 2/1/2001 @ 102)/(MBIA Insured),
2/1/2006 AAA 871,984
------------------------------------------------------------------
1,500,000 Putnam County, TN, 5.125%, UT GO Bonds, (Public
Improvements)/(Callable 4/1/2003 @ 102)/(MBIA
Insured)/(Original Issue Yield: 5.35%), 4/1/2011 AAA 1,373,100
------------------------------------------------------------------
400,000 Rutherford County, TN, 5.10% UT GO Bonds, Cap.
Outlay Notes, (School Improvements)/(Original Issue
Yield: 5.15%), 6/1/2001 AA 401,572
------------------------------------------------------------------
480,000 Shelby County, TN, 6.20% Refunding UT GO Bonds,
(Series A)/(Callable 3/1/2000 @ 101-1/2)/(Original Issue Yield:
6.30%), 3/1/2006 AA+ 503,155
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 500,000 Shelby County, TN, 5.875% Refunding UT GO Bonds, (Series
B)/(Callable 3/1/2001 @ 101 1/2)/(Original Issue Yield: 5.95%),
3/1/2007 AA+ $ 511,980
------------------------------------------------------------------
500,000 Shelby County, TN, 5.10% UT GO Bonds, (Public
Improvements)/(Callable 3/1/2001 @ 101)/(Original
Issue Yield: 5.25%), 3/1/2011 AA+ 457,520
------------------------------------------------------------------
1,000,000 Shelby County, TN, Health, Educational and Housing
Facilities Revenue, 6.00%, (St. Joseph Hospital East,
Inc.)/(Callable 3/1/2005 @ 100)/(Escrowed to Maturity) AAA** 1,042,110
------------------------------------------------------------------
93,000 Shelby County, TN, Health, Educational and Housing
Facilities Revenue, 3.10% Refunding Bonds, (Methodist Health
System)/(Series C)/(MBIA Insured)/(Callable
8/1/94 @ par), 8/1/2013 AAA 93,000
------------------------------------------------------------------
1,250,000 Shelby County, TN, Health, Educational and Housing
Facilities Revenue, 7.40% Refunding Bonds, (Methodist
Health System)/(Series A)/(Callable 6/1/98 @ 102)/(MBIA Insured),
6/1/2003 AAA 1,378,787
------------------------------------------------------------------
465,000 Shelby County, TN, Health, Educational and Housing
Facilities Revenue, 5.00% Refunding Bonds, (Le Bonhuer Children's
Medical Center)/(Series D)/(MBIA Insured)/ (Original Issue Yield:
5.10%), 8/15/2001 AAA 461,991
------------------------------------------------------------------
425,000 Tennessee Housing Development Agency, 6.40%
Revenue Bonds, (Homeownership Program--Issue U),
7/1/2000 A+ 434,826
------------------------------------------------------------------
430,000 Tennessee Housing Development Agency, 6.90%
Revenue Bonds, (Homeownership Program--Issue U)/
(Callable 7/1/2001 @ 102), 7/1/2005 A+ 449,161
------------------------------------------------------------------
6,435,000 Tennessee Housing Development Agency Mortgage,
5.40%-5.85% Refunding Revenue Bonds, (Series A)/ (Callable
7/1/2003 @ 102), 7/1/2004-7/1/2013 A+ 6,203,116
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 1,000,000 Tennessee State, 6.60% UT GO Bonds, (Miscellaneous
Improvements)/(Series B)/(Callable 6/1/2001 @ 101-1/2),
6/1/2004 AA+ $ 1,090,780
------------------------------------------------------------------
300,000 Tennessee State, 6.10% Refunding UT GO Bonds,
(Series A)/(Original Issue Yield: 6.15%), 6/1/2000 AA+ 319,944
------------------------------------------------------------------
765,000 Tennessee State, 5.375%-5.50% UT GO Bonds, (Public
Improvements)/(Series A)/(Callable 7/1/2002
@ 101-1/2)/(Original Issue Yield: 5.45%-5.65%),
7/1/2003-7/1/2005 AA+ 779,969
------------------------------------------------------------------
500,000 Tennessee State Local Development Authority, 5.65%
Refunding Revenue Bonds, State Loan Program,
(Series A)/(Callable 3/1/2003 @ 102), 3/1/2007 AA- 504,730
------------------------------------------------------------------
495,000 Tennessee State Local Development Authority, 6.10% Revenue Bonds,
(Community Provider Pooled Loan
Program)/(State Aid Withholding Insured)/(Callable
10/1/2004 @ 102), 10/1/2007 A- 497,376
------------------------------------------------------------------
195,000 Tennessee State School Board Authority, 5.75% GO
Refunding Revenue Bonds, (Callable 9/23/94 @ 101),
5/1/2006 AA 196,351
------------------------------------------------------------------
750,000 Tennessee State School Board Authority, 6.25%
Refunding Revenue Bonds, (Higher Educational
Facilities)/(Series A)/(Callable 5/1/2002 @ 101-1/2)/
(Original Issue Yield: 6.30%), 5/1/2017 AA 753,990
------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
<C> <S> <C> <C>
- ------------- ------------------------------------------------------------------ -------------- --------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------
$ 1,035,000 Williamson County, TN, 6.00% Refunding UT GO Bonds, (Original
Issue Yield: 6.216%), 3/1/2008 AA $ 1,065,015
------------------------------------------------------------------ --------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $43,266,616) $ 41,904,860++
------------------------------------------------------------------ --------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
** The issuer of these securities have placed U.S. government securities in
escrow with a trustee. The proceeds from the government securities will be
used to pay principal and interest on these securities.
+ While this security is unrated, the Fund's managers are of the opinion that
it is comparable to the highest quality ratings issued by Moody's or Standard
& Poors.
++ The cost of investments for federal income tax purposes amounts to
$43,266,616. The net unrealized depreciation of investments on a federal
income tax basis amounts to $1,361,756, which is comprised of $85,488
appreciation and $1,447,244 depreciation at July 31, 1994.
Note: The category of investments is shown as a percentage of net assets
($42,399,723) at July 31, 1994.
The following abbreviations are used in this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance
GO--General Obligation
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities (Note 2A) (identified and tax cost, $43,266,616) $ 41,904,860
- --------------------------------------------------------------------------------------------------
Interest receivable 568,721
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 99,794
- --------------------------------------------------------------------------------------------------
Deferred expenses (Note 2E) 14,281
- -------------------------------------------------------------------------------------------------- --------------
Total assets 42,587,656
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable to Bank $ 159,887
- -------------------------------------------------------------------------------------
Payable for Fund shares repurchased 2,500
- -------------------------------------------------------------------------------------
Accrued expenses and other liabilities 25,546
- ------------------------------------------------------------------------------------- -----------
Total liabilities 187,933
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 4,148,383 shares of beneficial interest outstanding $ 42,399,723
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 43,687,247
- --------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (1,361,756)
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (49,499)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 123,731
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 42,399,723
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, and Redemption Proceeds Per Share:
($42,399,723 / 4,148,383 shares of beneficial interest outstanding) $10.22
- -------------------------------------------------------------------------------------------------- --------------
Computation of Offering Price: Offering Price Per Share
(100/98 of $10.22)* $10.43
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
*On sales of $50,000 or more, the offering price is reduced as stated under
"What Shares Cost" in the prospectus. During the period from October 1, 1994,
through and including September 30, 1995, the maximum sales load imposed on the
purchase of shares of the Fund will be 2.00% of the offering price of the
shares purchased.
(See Notes which are an integral part of the Financial Statements)
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM AUGUST 5, 1993 (START OF BUSINESS) TO JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------
Interest income (Note 2B) $ 1,749,481
- --------------------------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------------------------
Investment advisory fee* $ 249,876
- -------------------------------------------------------------------------------------
Administrative personnel and services fees* 110,137
- -------------------------------------------------------------------------------------
Custodian fees 16,914
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees* 29,883
- -------------------------------------------------------------------------------------
Portfolio accounting fees* 52,847
- -------------------------------------------------------------------------------------
Printing and postage 8,174
- -------------------------------------------------------------------------------------
Legal fees 1,667
- -------------------------------------------------------------------------------------
Fund share registration costs 3,561
- -------------------------------------------------------------------------------------
Miscellaneous 2,688
- ------------------------------------------------------------------------------------- -----------
Total expenses 475,747
- -------------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------------
Waiver of investment advisory fee* $ 237,172
- ------------------------------------------------------------------------
Waiver of administrative personnel and services fees* 53,269 290,441
- ------------------------------------------------------------------------ ----------- -----------
Net expenses 185,306
- -------------------------------------------------------------------------------------------------- -------------
Net investment income 1,564,175
- -------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (49,499)
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (1,361,756)
- -------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments (1,411,255)
- -------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 152,920
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
*(See Note 4).
(See Notes which are an integral part of the Financial Statements)
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
- ------------------------------------------------------------------------------------------------ ----------------
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 1,564,175
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($49,499 net loss
as computed for federal tax purposes) (Note 2C) (49,499)
- ------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (1,361,756)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets resulting from operations 152,920
- ------------------------------------------------------------------------------------------------ ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (1,440,444)
- ------------------------------------------------------------------------------------------------ ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 50,071,452
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 151,236
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed (6,535,441)
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets from Fund share transactions 43,687,247
- ------------------------------------------------------------------------------------------------ ----------------
Change in net assets 42,399,723
- ------------------------------------------------------------------------------------------------
NET ASSETS--
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ----------------
End of period (including undistributed net investment income of $123,731) $ 42,399,723
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
*For the period from August 5, 1993 (start of business) to July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Planters Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The financial statements included herein are those of Tennessee Tax-Free Bond
Fund (the "Fund"), a non-diversified portfolio of the Trust. At July 31, 1994,
the Trust did not have any other Portfolios effective.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service taking into consideration yield, liquidity, risk, credit, quality,
coupon, maturity, type of issue, and any other factors or market data it
deems relevant in determining valuations for normal institutional size
trading units of debt securities. The independent pricing service does not
rely exclusively on quoted prices.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary. Additionally, net
capital losses of $49,499 attributable to security transactions incurred
after October 31, 1993, are treated as arising on August 1, 1994, the first
day of the Fund's next taxable year.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to the
registration of its shares in the first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1994*
<S> <C>
Shares sold 4,761,847
- ------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 14,402
- ------------------------------------------------------------------------------------------------
Shares redeemed (627,866)
- ------------------------------------------------------------------------------------------------ ----------------
Net change resulting from Fund share transactions 4,148,383
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
*For the period from August 5, 1993 (start of business) to July 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Union Planters National Bank, the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive all or a portion of its fee.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($35,622) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following August 5, 1993 (date the Trust first
became effective). For the period from August 30, 1993 (date of initial public
investment) to July 31, 1994, the Fund paid $2,367 to FAS.
During the period from August 5, 1993 (start of business) to July 31, 1994 the
Fund engaged in purchase transactions with other Funds advised by the Adviser
pursuant to Rule 17a-7 of the Act, amounting to $27,744,009.
Certain of the Officers and Trustees of the Fund are Officers or Trustees of the
above companies.
TENNESSEE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities and in-kind
contributions, for the period ended July 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 26,328,769
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 10,640,510
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since the Fund may invest a substantial portion of its assets in issuers located
in Tennessee, it will be more susceptible to factors adversely affecting issuers
of that state than would be a comparable general tax-exempt mutual fund. In
order to reduce the credit risk associated with such factors, at July 31, 1994,
37.2% of the securities in the portfolio of investments are backed by letters of
credit or bond insurance of various financial institutions and financial
guaranty assurance agencies. The value of investments insured by or supported
(backed) by a letter of credit for anyone institution or agency ranged from 0.5%
to 24.0%.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Tennessee Tax-Free Bond Fund
(a Portfolio of the Planters Funds)
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments (except for the Moody's & S&P Credit Ratings), and
the related statements of operations and of changes in net assets and the
financial highlights (included on page 2 of this Prospectus) present fairly, in
all material respects, the financial position of the Tennessee Tax-Free Bond
Fund (the "Fund") at July 31, 1994, and the results of operations, the changes
in net assets and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit 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
audit, which included confirmation of securities at July 31, 1994 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
September 19, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Tennessee Tax-Free Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Union Planters National Bank P.O. Box 387
Memphis, Tennessee 38147
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank P.O. Box 8604
and Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Price Waterhouse, LLP 160 Federal Street
Boston, Massachusetts 02110
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
TENNESSEE TAX-FREE
BOND FUND
PROSPECTUS
A Non-Diversified Portfolio
of The Planters Funds
An Open-End, Management
Investment Company
September 30, 1994
Union Planters National Bank
Investment Adviser
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3072709A (9/94)
727426108
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of shares of Tennessee Tax-Free Bond Fund (the "Fund")
dated September 30, 1994. This Statement is not a prospectus itself.
To receive a copy of the prospectus write or call Union Planters
Brokerage Service at 1-800-238-7125.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 2
Temporary Investments 2
Repurchase Agreements 2
Portfolio Turnover 2
Investment Limitations 2
Investment Risks 4
MANAGEMENT OF THE TRUST 4
- ---------------------------------------------------------------
Board of Trustees 4
Officers and Trustees 4
Fund Ownership 7
Trustee Liability 7
The Funds 7
INVESTMENT ADVISORY SERVICES 8
- ---------------------------------------------------------------
Adviser to the Fund 8
Advisory Fees 8
ADMINISTRATIVE SERVICES 8
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 8
- ---------------------------------------------------------------
PURCHASING SHARES 9
- ---------------------------------------------------------------
DETERMINING NET ASSET VALUE 9
- ---------------------------------------------------------------
Valuing Municipal Bonds 9
Use of Amortized Cost 9
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 10
- ---------------------------------------------------------------
The Fund's Tax Status 10
Shareholder's Tax Status 10
TOTAL RETURN 10
- ---------------------------------------------------------------
YIELD 10
- ---------------------------------------------------------------
TAX-EQUIVALENT YIELD 11
- ---------------------------------------------------------------
Tax-Equivalency Table 11
PERFORMANCE COMPARISONS 11
- ---------------------------------------------------------------
APPENDIX 13
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Tennessee Tax-Free Bond Fund (the "Fund") is a portfolio in The Planters Funds
(the "Trust"). The Trust was established as a Massachusetts business trust under
a Declaration of Trust dated May 14, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income exempt from federal
income tax and personal income taxes imposed by the state of Tennessee and
Tennessee municipalities. The investment objective cannot be changed without the
approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a portfolio of municipal securities which are
exempt from federal income tax and personal income taxes imposed by the state of
Tennessee and Tennessee municipalities ("Tennessee Municipal Securities"). The
municipal securities in which the Fund invests include those issued by or on
behalf of the state of Tennessee and Tennessee municipalities as well as those
issued by states, territories, and possessions of the United States which are
exempt from federal income tax and personal income taxes imposed by the state of
Tennessee and Tennessee municipalities.
CHARACTERISTICS
The Tennessee Municipal Securities in which the Fund invests have the
characteristics set forth in the prospectus. If ratings made by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Rating Group
("S&P") or Fitch's Investors Service, Inc. ("Fitch's") change because of
changes in those organizations or in their rating systems, the Fund will
try to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Tennessee Municipal Securities include:
governmental lease certificates of participation issued by state or
municipal authorities where payment is secured by installment payments
for equipment, buildings, or other facilities being leased by the state
or municipality;
municipal notes and tax-exempt commercial paper;
serial bonds;
tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;
bond anticipation notes sold in anticipation of the issuance of
long-term bonds;
pre-refunded municipal bonds whose timely payment of interest and
principal is ensured by an escrow of U.S. government obligations; and
general obligation bonds.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE-RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable-rate municipal
securities than for fixed-income obligations. Many municipal securities
with variable interest rates purchased by the Fund are subject to
repayment of principal (usually within seven days) on the Fund's demand.
The terms of these variable-rate demand instruments require payment of
principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests, or a guarantor of
either issuer.
MUNICIPAL LEASES
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees ("Trustees"), will
base its determination on the following factors: (a) whether the lease
can be terminated by the lessee; (b) the potential recovery, if any, from
a sale of the leased property upon termination of the lease; (c) the
lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics, and prospects); (d) the
likelihood that the lessee will discontinue appropriating
- --------------------------------------------------------------------------------
funding for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an event of
nonappropriation); and (e) any credit enhancement or legal recourse
provided upon an event of nonappropriation or other termination of the
lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, the
Fund may invest in short-term tax-exempt or taxable temporary investments.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund may only enter into repurchase agreements with
banks and other recognized financial institutions such as broker/dealers which
are found by the Fund's adviser to be creditworthy pursuant to guidelines
established by the Trustees.
From time to time, such as when suitable Tennessee Municipal Securities are not
available, the Fund may invest a portion of its assets in cash. Any portion of
the Fund's assets maintained in cash will reduce the amount of assets in
Tennessee Municipal Securities and thereby affect the Fund's yield.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the period from August 5, 1993 (start of business) to July
31, 1994, the portfolio turnover rate was 30%.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed. The Fund will not borrow money for
investment leverage, but rather as a temporary extraordinary, or
emergency measure to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while borrowings in excess of 5% of its total
assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of its total assets at the time of the pledge.
- --------------------------------------------------------------------------------
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies and limitations.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in municipal bonds secured
by real estate or interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. The Fund may, however,
acquire publicly or non-publicly issued municipal bonds or temporary
investments or enter into repurchase agreements in accordance with its
investment objective, policies and limitations.
DEALING IN PUTS AND CALLS
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, under other than normal market conditions, the Fund may invest
more than 25% of the value of its assets in cash or cash items,
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or instruments secured by these money market
instruments, i.e., repurchase agreements.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Board of Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities not
determined by the Trustees to be liquid, including certain municipal
leases.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
securities of issuers which invest in or sponsor such programs.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
- --------------------------------------------------------------------------------
The Fund does not expect to borrow money or pledge securities in excess
of 5% of the value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be cash items. Cash items may include obligations such as:
certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);
obligations issued or guaranteed as to principal and interest by the
U.S. government or any of its agencies or instrumentalities; and
repurchase agreements.
INVESTMENT RISKS
The Fund's performance can be expected to be closely tied to the prevailing
economic conditions of the state of Tennessee as a whole, its particular
geographic regions, and the industries located within state.
Traditionally divided into three geographic regions, the State's economy has
historically been dominated by agriculture in the west, manufacturing in the
east, and government in the middle region. Though trade and services have
replaced agriculture in terms of total output, manufacturing continues to be the
largest single sector of the economy. While the Gross State Product of Tennessee
was in excess of $100 billion in 1991 and the state placed 20th in national
rank, manufacturing comprised 24% of total production in that year. The recent
decision by Saturn and Nissan to locate automobile production facilities in the
state suggests that manufacturing, with its inherent susceptibility to economic
downturns, will continue to dominate.
Tennessee's economy experienced many of the problems associated with the
national economy during the past recession. Though it consistently remained
below the national average, the state's unemployment rate rose significantly
during the prior recessionary period. Also, overbuilding of commercial and
residential properties in prior years caused the state to experience some
difficulties with declining real estate values.
Along with the national economy, Tennessee has recently experienced a slow
recovery. Although moderate rates of economic growth in past recoveries along
with a steady influx of transplant corporations have helped the state avoid the
dramatic "boom and bust" cycle experienced by many sunbelt states, the recent
recession did put pressure on governmental receipts and outlays.
The constitution of the state requires a balanced budget. This constraint along
with relatively low debt and expenditure per capita ratios has helped the state
maintain its current long term bond rating of AAA by Standard and Poor's Rating
Group and Aaa by Moody's Investors Service Inc. While Tennessee is one of only
nine states which have such ratings, the ability of the state to maintain this
rating given the current economic and political environment is by no means
certain. Additionally, the ability of the Fund to achieve its investment
objective also depends on the continuing ability of the issuers of Tennessee
municipal securities and participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal when
due.
MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the powers
of Trust except those reserved for the shareholders. The Executive Committee of
the Board of Trustees handles the Trustee's responsibilities between meetings of
the Trustees.
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Union Planters National
Bank, Federated Investors, Federated Securities Corp., Federated Services
Company, Federated Administrative Services, and the Funds (as defined below).
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Development
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporaton; Senior Vice-President, John R. Wood
and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services; Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------
Richard B. Fisher*
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
President, Treasurer and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp. and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Trustees between
meetings of the Trustees.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of September 6, 1994, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: National Financial Services Corp. (as record
owner holding shares for its clients), New York, New York owned approximately
269,788 shares (6.59%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series II; Cash Trust Series Inc.; DG Investor Series; Edward
D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term
Trust, Inc.--1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; The Medalist Funds; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York
- --------------------------------------------------------------------------------
Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short Term Municipal
Trust; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust For Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; World Investment Series, Inc.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Union Planters National Bank ("Union Planters"
or the "adviser"). Union Planters is a wholly-owned subsidiary of Union Planters
Corporation, a multi-bank holding company headquartered in Memphis, Tennessee.
Because of the internal controls maintained by Union Planters National Bank to
restrict the flow of non-public information, Fund investments are typically made
without any knowledge of Union Planters National Bank or its affiliates' lending
relationships with an issuer. The investment adviser shall not be liable to the
Trust, the Fund or any shareholder of the Fund for any losses that may be
sustained in the purchase, holding, or sale of any security, or for anything
done or omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties imposed upon it
by its contract with the Fund.
From time to time, to the extent consistent with the objective, policies and
restrictions of the Fund, the Fund may invest in securities of issuers with
which the investment adviser has a lending relationship.
ADVISORY FEES
For its advisory services, Union Planters receives an annual investment advisory
fee as described in the prospectus.
For the period from August 5, 1993, (start of business) to July 31, 1994, the
investment adviser earned advisory fees of $249,876, of which $237,172 was
voluntarily waived.
STATE EXPENSE LIMITATIONS
The investment adviser has undertaken to comply with the expense
limitations established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2.5% per year of the first $30 million of average net
assets, 2% per year of the next $70 million of average net assets, and
1.5% per year of the remaining average net assets, the investment adviser
will reimburse the Trust for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the investment
adviser will be limited, in any single fiscal year, by the amount of the
investment advisory fee. This arrangement is not part of the advisory
contract and may be amended or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. For the period from August 5, 1993, (start of business) to July 31,
1994, the administrator earned $110,137 in administrative costs of which $53,269
was voluntarily waived.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the investment adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the investment adviser will generally
use those which are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
investment adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Trustees.
The investment adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund or to
the investment adviser and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
- --------------------------------------------------------------------------------
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The investment adviser and its affiliates exercise reasonable business judgment
in selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the investment adviser and
other accounts. To the extent that receipt of these services may supplant
services for which the investment adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
From August 5, 1993 (start of business) to July 31, 1994, the Fund paid $650 in
commissions on brokerage transactions .
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value with a sales load on days
the New York Stock Exchange and Federal Reserve Wire System are open for
business. The procedure for purchasing shares is explained in the prospectus
under "Investing in the Fund."
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated for the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less at the
time of purchase shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Fund's
portfolio instruments are valued at their fair value as determined in good faith
by the Trustees.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at the next computed net asset value after the Fund receives
the redemption request. Redemption procedures are explained in the prospectus
under "Redeeming Shares." Although the Fund does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Fund will pay all
or a portion of the remainder of the redemption in portfolio instruments, valued
in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable. To the extent available, such securities will be readily marketable.
- --------------------------------------------------------------------------------
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transactions costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during the
year.
SHAREHOLDER'S TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the dividends
received deduction available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
the availability of higher relative yields;
differentials in market values;
new investment opportunities;
changes in creditworthiness of an issuer; or
an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time that the
shareholder has owned shares. Any loss by a shareholder on shares held for less
than six months and sold after a capital gains distribution will be treated as a
long-term capital loss to the extent of the capital gains distribution.
TOTAL RETURN
- --------------------------------------------------------------------------------
Cumulative total return reflects the Fund's total performance over a specific
period of time. The cumulative total return for the Fund for the period from
August 30, 1993 (date of initial public investment) to July 31, 1994 was
- -2.88%. This total return is representative of only eleven months of activity
since the date of initial public investment.
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, less any applicable sales load, adjusted
over the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The Funds' yield for the thirty-day period ended July 31, 1994, was 4.91% based
on offering price.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and therefore, may not
correlate to the dividends or other distributions paid to shareholders.
- --------------------------------------------------------------------------------
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The Funds' tax-equivalent yield for the thirty-day period ended July 31, 1994
was 7.44%.
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a state and federal combined tax rate of 34%,
and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax, and often is
free from taxes imposed by the state of Tennessee and Tennessee municipalities.*
As the table below indicates, a "tax-free" investment is an attractive choice
for investors, particularly in times of narrow spreads between tax-free and
taxable yields.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes. However, the Fund has no current
intention to generate taxable income.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF TENNESSEE
- -----------------------------------------------------------------------------------------------------------------------
TAX BRACKET:
<S> <C> <C> <C> <C> <C>
FEDERAL: 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL
AND STATE: 21.00% 34.00% 37.00% 42.00% 45.60%
- -----------------------------------------------------------------------------------------------------------------------
JOINT RETURN: $1-38,000 $38,001-91,850 $91,851-140,000 $140,001-250,000 OVER $250,000
SINGLE RETURN: $1-22,750 $22,751-55,100 $55,101-115,000 $115,001-250,000 OVER $250,000
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00 2.53 3.03 3.17 3.45 3.68
2.50 3.16 3.79 3.97 4.31 4.60
3.00 3.80 4.55 4.76 5.17 5.51
3.50 4.43 5.30 5.56 6.03 6.43
4.00 5.06 6.06 6.35 6.90 7.35
4.50 5.70 6.82 7.14 7.76 8.27
5.00 6.33 7.58 7.94 8.62 9.19
5.50 6.96 8.33 8.73 9.48 10.11
6.00 7.59 9.09 9.52 10.34 11.03
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used to increase federal
deductions. If you itemize deductions, your taxable yield equivalent will
be lower.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of Fund shares.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates and market value of portfolio securities;
.changes in the Fund's expenses; and
.various other factors.
- --------------------------------------------------------------------------------
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return as
described above.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio comparisons of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
.LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in offering price over a specific period of time.
.MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP ("S&P")MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): Ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC., ("MOODY'S") MUNICIPAL BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the AAA group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in AAA securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in its generic rating category;
the modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH INVESTORS SERVICE, INC., ("FITCH") LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
- --------------------------------------------------------------------------------
Plus (+) or minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
STANDARD AND POOR'S MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety charactertics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC., SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This highest category designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
.Leading market positions in well established industries.
.High rates of return on funds employed.
.Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
.Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
.Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
727426108
3072709B (9/94)
EXHIBIT 11 UNDER FORM N-1A
EXHIBIT 23 UNDER REG 601/REG. SK
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting part of the Post-Effective
Amendment No. 2 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated July 31, 1994.
/s/ Price Waterhouse
Price Waterhouse
Boston, Massachusetts
September 26, 1994
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
September 29, 1994
The Planters Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to The Planters Funds ("Trust") we have reviewed Post-
effective Amendment No. 2 to the Trust's Registration Statement to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
(File No. 33-49701). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective pursuant to said
Rule on September 29, 1994.
Our review also included an examination of other relevant portions of
the amended 1933 Act Registration Statement of the Trust and such other
documents and records deemed appropriate. On the basis of this review we are
of the opinion that Post-effective Amendment No. 2 does not contain
disclosures which would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation letter as a part
of the Trust's Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and as part of any application or
registration statement filed under the Securities Laws of the States of the
United States.
Very truly yours,
Houston, Houston & Donnelly
By: Thomas J. Donnelly
TJD:smg
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg.
S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of THE PLANTERS FUNDS and
the Assistant General Counsel of Federated Investors, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and
authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents
and purposes as each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Trustee July 1, 1994
John F. Donahue (Chief Executive Officer)
/s/Edward C. Gonzales President and Treasurer July 1, 1994
and Trustee (Principal
Financial and Accounting
Officer)
/s/William J. Copeland Trustee July 1, 1994
William J. Copeland
/s/James E. Dowd Trustee July 1, 1994
James E. Dowd
/s/Lawrence D. Ellis, M.D. Trustee July 1, 1994
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Trustee July 1, 1994
Edward L. Flaherty, Jr.
/s/Gregor F. Meyer Trustee July 1, 1994
Gregor F. Meyer
/s/Wesley W. Posv ar Trustee July 1, 1994
Wesley W. Posvar
/s/Marjorie P. Smuts Trustee July 1, 1994
Marjorie P. Smuts
/s/Peter E. Madden Trustee July 1, 1994
Peter E. Madden
/s/John T. Conroy, Jr. Trustee July 1, 1994
John T. Conroy, Jr.
Sworn to and subscribed before me this 1st day of July, 1994.
/s/ Elaine T. Polens__________________________________
Notary Public
EXHIBIT 8 UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities
2
2.2 Delivery of Securities
2
2.3 Registration of Securities
5
2.4 Bank Accounts
6
2.5 Payments for Shares
7
2.6 Availability of Federal Funds
7
2.7 Collection of Income
7
2.8 Payment of Fund Moneys
8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents
10
2.12 Deposit of Fund Assets in Securities System
10
2.13 Segregated Account
12
2.14 Joint Repurchase Agreements
13
2.15 Ownership Certificates for Tax Purposes
13
2.16 Proxies
13
2.17 Communications Relating to Fund Portfolio Securities
13
2.18 Proper Instructions
14
2.19 Actions Permitted Without Express Authority
14
2.20 Evidence of Authority
15
2.21 Notice to Trust by Custodian Regarding Cash Movement.
15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Business trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of the other Funds
and from all other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds and all
payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds
from time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest/capital stock of the Funds
as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1Holding Securities. The Custodian shall hold and physically segr
egate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a Fund and r
eceipt of payment therefor;
(2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3)In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4)To the depository agent in connection with tender or other s
imilar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer into the n
ame of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7)Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8)For exchange or conversion pursuant to any plan of merger, c
onsolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9)In the case of warrants, rights or similar securities, the s
urrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio secu
rities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent ("Tran
sfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon recei
pt of, in addition to Proper Instructions, a certified copy
of a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (o
ther than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed pursuant
to Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the terms of
this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1)The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by
law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2)The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions, whi
ch may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1)Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of
title to futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of
the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the Trust and
any other party, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2)In connection with conversion, exchange or surrender of secu
rities owned by a Fund as set forth in Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4)For the payment of any expense or liability incurred by a Fu
nd, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5)For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6)For payment of the amount of dividends received in respect of
securities sold short;
(7)For any other proper purpose, but only upon receipt of, in a
ddition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities Purchas
ed. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund. Fr
om such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each
Fund in a Securities System provided that such
securities are represented in an account ("Account")
of the Custodian in the
Securities System which shall not include any
assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2)The records of the Custodian with respect to securities of
the Funds which are
maintained in a Securities System shall identify by book-entry
those securities
belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account of each
Fund upon (i)
receipt of advice from the Securities System that such
securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. The
Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of
advice from the Securities System that payment for such
securities has been
transferred to the Account, and (ii) the making of an entry
on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund. Copies of
all advices from the Securities System of transfers of
securities for the account of a
Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be
provided to the Trust at its request. Upon request,
the Custodian shall furnish the
Trust confirmation of each transfer to or from the account
of a Fund in the form of a
written advice or notice and shall furnish to the Trust
copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of
a Fund.
(4)The Custodian shall provide the Trust with any report obtained
by the Custodian on the
Securities System's accounting system, internal accounting
control and procedures for
safeguarding securities deposited in the Securities System;
(5)The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable
to the Trust for any loss or damage to a Fund resulting
from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the
Securities System; at the election of the Trust, it shall be
entitled to be subrogated
to the rights of the Custodian with respect to any claim
against the Securities System
or any other person which the Custodian may have as a
consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or
damage.
(7)The authorization contained in this Section 2.12 shall not
relieve the Custodian from
using reasonable care and diligence in making use of any
Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper Instruc
tions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall ex
ecute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities he
ld hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17Communications Relating to Fund Portfolio Securities. The Custo
dian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1)make payments to itself or others for minor expenses of hand
ling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securities in def
initive form;
(3)endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4)in general, attend to all non-discretionary details in conne
ction with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20Evidence of Authority. The Custodian shall be protected in acti
ng upon any instructions, notice, request, consent, certificate
or other instrument or paper reasonably believed by it to be
genuine and to have been properly executed on behalf of a Fund.
The Custodian may receive and accept a certified copy of a vote
of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination of or any action by the Board pursuant
to the Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The Custo
dian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.Duties of Custodian With Respect to the Books of Account and Calculati
on of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to t
he entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with
respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.____________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
Contract Date: December 1, 1993 Tennesse Tax-Free Bond Fund
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
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