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, 1997, with the Securities and Exchange Commission
("SEC"). 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. The
Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the
Trust is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated September 30, 1997
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Tennessee Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
THE PLANTERS FUNDS INFORMATION 7
Management of the Trust 7
Distribution of Fund Shares 8
Administration of the Fund 8
NET ASSET VALUE 9
INVESTING IN THE FUND 9
Share Purchases 9
Minimum Investment Required 9
What Shares Cost 9
Reducing the Sales Charge 10
REDEEMING SHARES 11
By Telephone 11
By Mail 12
Accounts with Low Balances 13
SHAREHOLDER INFORMATION 13
Voting Rights 13
Massachusetts Partnership Law 13
EFFECT OF BANKING LAWS 14
TAX INFORMATION 14
Federal Income Tax 14
State of Tennessee Taxes 14
Other State and Local Taxes 15
PERFORMANCE INFORMATION 15
FINANCIAL STATEMENTS 16
INDEPENDENT ACCOUNTANTS' REPORT 26
ADDRESSES 27
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 2.00%
Maximum Sales Charge 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) 0.00%
12b-1 Fee None
Other Expenses 1.10%
Total Fund Operating Expenses(2) 1.10%
</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) Total Fund Operating Expenses are anticipated to be 1.85% absent
the voluntary waiver of the management fee (See (1) above).
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 and
(2) redemption at the end of each time period $31 $54 $79 $151
</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 EACH PERIOD)
Reference is made to the Independent Accountants' Report on page 26.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.54 $10.46 $10.22 $10.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.50 0.51 0.44
Net realized and unrealized gain (loss) on investments 0.38 0.07 0.24 (0.31)
Total from investment operations 0.83 0.57 0.75 0.13
LESS DISTRIBUTIONS
Distributions from net investment income (0.46) (0.49) (0.51) (0.41)
NET ASSET VALUE, END OF PERIOD $10.91 $10.54 $10.46 $10.22
TOTAL RETURN(B) 8.12% 5.57% 7.60% 1.19%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.10% 0.86% 0.61% 0.56%*
Net investment income 4.23% 4.62% 4.93% 4.69%*
Expense waiver/reimbursement(c) 0.75% 0.80% 0.95% 0.87%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $25,849 $29,668 $35,888 $42,400
Portfolio turnover 11% 0% 3% 30%
</TABLE>
* Computed on an annualized basis.
(a) 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, all income was
distributed to the administrator.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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
Investors Service, Inc. ("Moody's") or BBB or above by Standard &
Poor's Ratings 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 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 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 canceled.
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 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. See the Fund's Statement of Additional Information for a
discussion of the state's economy.
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, as amended. 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 limitations 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 Board's responsibilities between meetings of the Board.
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 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 adviser has a lending
relationship.
ADVISORY FEES. The 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 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
adviser has been managing trust assets for over 80 years. As of
December 31, 1996, the Trust Group of Union Planters had approximately
$4.6 billion under administration, of which it had investment
discretion over approximately $1 billion. The adviser has served as
adviser to the Fund since its inception.
As part of its 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 MANAGER. The following individual is primarily responsible for the
day-to-day management of the Fund's portfolio:
James Plunkett, Senior Vice President in the Funds Management Division
of Union Planters National Bank, has been the Fund's portfolio Manager
since February 1997. Prior to joining Union Planters, Mr. Plunkett was
Senior Vice President in the Funds Management Division of Sunburst
Bank, Mississippi. Before that, he was an institutional financial
consultant with Merrill Lynch, Pierce, Fenner & Smith Incorporated.
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 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, 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
Services Company provides these at an annual rate as specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $120,000 per Fund. Federated Services Company may voluntarily
choose to waive a portion of its fee.
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
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 responsibility 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 charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF NET
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
Less than $250,000 2.00% 2.04%
$250,000 but less than $500,000 1.50% 1.52%
$500,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 or more 0.00% --
</TABLE>
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, 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, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving
Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at
net asset value, without a sales charge, 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 charge 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 charge. Any portion
of the sales charge 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 charge it normally retains. If accepted by
the dealer, such additional payments will be predicated upon the
amount of Fund shares sold.
The sales charge 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 charge 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 CHARGE
The sales charge 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
under "What Shares Cost," larger purchases reduce the sales charge
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 charge.
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 $240,000 and purchases $10,000 more at the current
public offering price, the sales charge on the additional purchase
according to the schedule now in effect would be 1.50%, not 2.00%.
To receive the sales charge reduction, Federated Securities Corp. must
be notified by the shareholder in writing or by the shareholder's
financial institution at the time the purchase is made that shares are
already owned or that purchases are being combined. The Fund will
reduce the sales charge 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
charge may be reduced by signing a letter of intent to that effect.
This letter of intent includes a provision for a sales charge
adjustment depending on the amount actually purchased within the
13-month period and a provision for the custodian to hold up to 2.00%
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 charge.
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 charge 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 charge. 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 charge. 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 Shareholder 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 Services 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 charge, unless cash payments
are requested by writing to your financial institution, broker/dealer,
Union Planters Brokerage Services 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 Shareholder 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 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 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. As of
September 2, 1997, Union Planters Bank, Memphis, Tennessee, acting in
various capacities for numerous accounts, was the owner of record of
approximately 2,132,207 shares (90.18%) 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 the Fund's
existing 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 personal 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 SEC) 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 charge,
which, if excluded, would increase the total return, yield, and
tax-equivalent yield.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
TENNESSEE TAX-FREE BOND FUND
(A PORTFOLIO OF THE PLANTERS FUNDS)
PORTFOLIO OF INVESTMENTS
JULY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL NOTES--96.6%
TENNESSEE--96.6%
$ 215,000 Chattanooga-Hamilton County, TN Hospital Authority,
Refunding Revenue Bonds, 5.50% (Erlanger Medical Center)/
(FSA Insured)/ (Original Issue Yield: 5.60%), 10/1/2006 AAA $ 231,492
1,000,000 Chattanooga-Hamilton County, TN Hospital Authority,
Refunding Revenue Bonds, 5.50% (Erlanger Medical Center)/
(FSA Insured)/(Original Issue Yield: 5.85%), 10/1/2013 AAA 1,033,790
1,000,000 Clarksville, TN, Electric System Refunding Revenue Bonds,
5.125%, 9/1/2011 NR 1,006,200
500,000 Clarksville, TN, Water Sewer & Gas Refunding Revenue Bonds,
6.125% (MBIA Insured)/ (Original Issue Yield: 6.15%), 2/1/2007 AAA 540,950
500,000 Clarksville, TN, Water Sewer & Gas Refunding Revenue Bonds,
6.125% (MBIA Insured)/ (Original Issue Yield: 6.328%), 2/1/2012 AAA 533,140
600,000 Germantown, TN, GO UT Refunding Bonds, 4.10%, 1/1/2000 AAA 605,208
600,000 Germantown, TN, GO UT, 4.20%, 1/1/2001 AAA 607,992
250,000 Jackson, TN Health Educational & Housing Facilities Board,
Hospital Revenue Bonds, 5.90% (Jackson-Madison County
General Hospital)/(MBIA Insured)/(Original Issue Yield: 5.95%),
4/1/2000 AAA 261,370
400,000 Jackson, TN, Water & Sewer Refunding Revenue Bonds, 5.125%
(AMBAC Insured)/(Original Issue Yield: 5.35%), 1/1/2010 AAA 406,292
440,000 Johnson City, TN Health & Education Facilities Board, Refunding
Revenue Bonds, 6.75% (Johnson City Medical Center Hospital)/
(MBIA Insured)/(Original Issue Yield: 6.912%), 7/1/2006 AAA 484,396
250,000 (a)Johnson City, TN Health & Education Facilities Board,
Revenue Bonds, 6.75% (MBIA Insured)/(United States Treasury
PRF)/(Original Issue Yield: 6.912%), 7/1/2006, prerefunded
7/1/2001 (@102) AAA 277,760
500,000 Knox County, TN Health Education & Housing Facilities Board,
Hospital Facilities Revenue Bonds (Series A), 4.90% (Fort Sanders
Alliance)/(MBIA Insured)/(Original Issue Yield: 5.099%),
1/1/2005 AAA 514,700
</TABLE>
TENNESSEE TAX-FREE BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL NOTES--CONTINUED
TENNESSEE--CONTINUED
$ 500,000 (a)Knox County, TN Health Education & Housing Facilities Board,
Hospital Facilities Revenue Bonds (Series C), 7.00% (Fort Sanders
Alliance)/(MBIA Insured)/(United States Treasury PRF),
1/1/2008, prerefunded 1/1/2000 (@102) AAA $ 542,870
1,000,000 Knox County, TN, GO UT, 4.75%, 2/1/2006 AA 1,025,310
1,030,000 Knoxville, TN Water System, Refunding Revenue Bonds
(Series M), 5.20% (Original Issue Yield: 5.45%), 3/1/2010 AA 1,051,826
1,000,000 Memphis-Shelby County, TN, Airport Refunding Revenue Bonds,
6.75% (Federal Express Corp.), 9/1/2012 BBB 1,097,840
1,500,000 Metropolitan Government Nashville & Davidson County,
TN HEFA, Refunding Revenue Bonds, 5.20% (Vanderbilt
University), 7/1/2018 AA 1,505,730
750,000 Metropolitan Government Nashville & Davidson County, TN,
Revenue Bonds (Series A), 6.00% (Original Issue Yield: 6.282%),
5/15/2017 AA 791,775
230,000 Metropolitan Government Nashville & Davidson County, TN,
Water & Sewer Refunding Revenue Bonds, 5.20%
(FGIC Insured)/(Original Issue Yield: 5.53%), 1/1/2013 AAA 240,700
75,000 (a)Metropolitan Government Nashville & Davidson County, TN,
Water & Sewer Refunding Revenue Bonds, 7.25% (United States
Treasury PRF), 1/1/2006 A 75,956
120,000 (a)Metropolitan Government Nashville & Davidson County, TN,
Water & Sewer Refunding Revenue Bonds, 7.30% (United States
Treasury PRF), 1/1/2008 A 120,265
170,000 Montgomery County, TN Public Building Authority, Pooled
Financing Government Obligation Revenue Bonds, 7.50%
(Tennessee County Loan Pool)/(Prudential Insurance Co. of
America), 12/15/2000 AA- 172,237
800,000 Mount Juliet, TN Public Building Authority, Revenue Bonds
(Series O), 7.00% (MBIA Insured), 2/1/2006 AAA 886,320
1,000,000 Putnam County, TN, GO UT Bonds, 5.125% (MBIA Insured)/
(Original Issue Yield: 5.35%), 4/1/2011 AAA 1,009,780
</TABLE>
TENNESSEE TAX-FREE BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL NOTES--CONTINUED
TENNESSEE--CONTINUED
$ 750,000 Shelby County, TN Health Education & Housing Facilities Board,
Refunding Revenue Bonds (Series A), 7.40% (Methodist Health
System, Inc.)/(MBIA Insured)/(Original Issue Yield: 7.50%),
6/1/2003 AAA $ 785,783
1,000,000 Shelby County, TN Health Education & Housing Facilities Board,
Revenue Bonds, 6.00% (St. Joseph Hospital East, Inc.)/(Original
Issue Yield: 6.37%), 3/1/2005 AAA 1,067,430
500,000 Shelby County, TN, GO UT Bonds (Series A), 5.10% (Original
Issue Yield: 5.25%), 3/1/2011 AA+ 506,565
250,000 Shelby County, TN, GO UT Refunding Bonds (Series B), 5.875%
(Original Issue Yield: 5.95%), 3/1/2007 AA+ 264,703
400,000 Sullivan County, TN Health Educational & Housing Facilities
Board, Revenue Bonds, 5.75% (Holston Valley Health Board)/
(Original Issue Yield: 5.93%), 2/15/2013 AAA 417,364
1,205,000 Tennessee Housing Development Agency, Refunding Revenue
Bonds (Series A), 5.70%, 7/1/2008 A+ 1,244,813
1,000,000 Tennessee Housing Development Agency, Refunding Revenue
Bonds (Series A), 5.85%, 7/1/2013 A+ 1,025,840
430,000 Tennessee Housing Development Agency, Revenue Bonds, 6.90%
(Homeownership Program)/( Issue U), 7/1/2005 A+ 456,002
500,000 Tennessee State Local Development Authority, Refunding
Revenue Bonds (Series A), 5.65%, 3/1/2007 AA- 530,640
495,000 Tennessee State Local Development Authority, Revenue Bonds,
6.10% (Community Provider Pooled Loan Program)/(Tennessee
State GTD), 10/1/2007 A- 540,169
500,000 Tennessee State School Board Authority, Higher Education
Facilities Revenue Bonds (Series A), 6.25% (Original Issue Yield:
6.309%), 5/1/2017 AA 529,625
195,000 Tennessee State School Board Authority, Refunding Revenue
Bonds (Series A), 5.75%, 5/1/2006 AA 195,661
700,000 Tennessee State, GO UT Bonds (Series A), 5.55%, 3/1/2010 AA+ 738,381
</TABLE>
TENNESSEE TAX-FREE BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL NOTES--CONTINUED
TENNESSEE--CONTINUED
$ 450,000 (a)Tennessee State, GO UT Bonds (Series B), 6.60% (Original Issue
Yield: 6.60%), 6/1/2004, prerefunded 6/1/2001 (@101.5) AA+ $ 495,194
1,035,000 Williamson County, TN, GO UT Refunding Bonds, 6.00%
(Original Issue Yield: 6.217%), 3/1/2008 Aaa 1,161,756
TOTAL LONG-TERM MUNICIPAL NOTES (IDENTIFIED COST $24,152,990)
24,983,825
MUTUAL FUND--1.9%
485,482 Tennessee Municipal Cash Trust Fund (AT NET ASSET VALUE) 485,482
TOTAL INVESTMENTS (IDENTIFIED COST $24,638,472)(B) $ 25,469,307
</TABLE>
(a) The issuer of this security has 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 the security.
(b) The cost of investments for federal tax purposes amounts to
$24,638,472. The net unrealized appreciation of investments on a
federal tax basis amounts to $830,835 which is comprised of $832,601
appreciation and $1,766 depreciation at July 31, 1997.
* Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings. Current credit
ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($25,849,250) at July 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation FGIC --Financial
Guaranty Insurance Company FSA --Financial Security Assurance GO
- --General Obligation GTD --Guaranty HEFA --Health and Education
Facilities Authority MBIA --Municipal Bond Investors Assurance PRF
- --Prerefunded 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, 1997
<TABLE>
<S> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $24,638,472) $ 25,469,307
Cash 15,021
Income receivable 387,377
Receivable for shares sold 5,400
Deferred expenses 7,073
Total assets 25,884,178
LIABILITIES:
Accrued expenses 34,928
NET ASSETS for 2,369,821 shares outstanding $ 25,849,250
NET ASSETS CONSIST OF:
Paid in capital $ 25,080,622
Net unrealized appreciation of investments 830,835
Accumulated net realized loss on investments (137,059)
Undistributed net investment income 74,852
Total Net Assets $ 25,849,250
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
Net Asset Value Per Share ($25,849,250 / 2,369,821 shares outstanding) $10.91
Offering Price Per Share (100/98.00 of $10.91)* $11.13
</TABLE>
* See "What Shares Cost" in the Prospectus.
(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
YEAR ENDED JULY 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 1,488,966
EXPENSES:
Investment advisory fee $ 209,558
Administrative personnel and services fee 120,000
Custodian fees 26,689
Transfer and dividend disbursing agent fees and expenses 29,843
Directors'/Trustees' fees 10,080
Auditing fees 20,583
Legal fees 3,500
Portfolio accounting fees 49,665
Share registration costs 20,373
Printing and postage 9,914
Insurance premiums 2,773
Miscellaneous 13,651
Total expenses 516,629
Waiver of investment advisory fee (209,558)
Net expenses 307,071
Net investment income 1,181,895
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 67,723
Net change in unrealized appreciation of investments 884,764
Net realized and unrealized gain on investments 952,487
Change in net assets resulting from operations $ 2,134,382
</TABLE>
(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
YEAR ENDED JULY 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,181,895 $ 1,443,710
Net realized gain (loss) on investments ($67,723 net gain and
$51,494 net loss, respectively, as computed for federal tax purposes) 67,723 60,400
Net change in unrealized appreciation 884,764 284,790
Change in net assets resulting from operations 2,134,382 1,788,900
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,214,918) (1,444,519)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,420,926 1,564,767
Net asset value of shares issued to shareholders in payment of
distributions declared 110,472 136,585
Cost of shares redeemed (6,269,412) (8,265,453)
Change in net assets resulting from share transactions (4,738,014) (6,564,101)
Change in net assets (3,818,550) (6,219,720)
NET ASSETS:
Beginning of period 29,667,800 35,887,520
End of period (including undistributed net investment income
of $74,852 and $107,875, respectively) $ 25,849,250 $ 29,667,800
</TABLE>
(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, 1997
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 only
those of Tennessee Tax-Free Bond Fund (the "Fund"), a non-diversified
portfolio. At July 31, 1997, the Trust did not offer any other
portfolios. 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.
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. These policies are in conformity with generally accepted
accounting principles.
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 the pricing service deems relevant. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value. Investments in other
open-end regulated investment companies are valued at net asset value.
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.
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 income.
Accordingly, no provisions for federal tax are necessary.
At July 31, 1997, the Fund, for federal tax purposes, had a capital
loss carryforward of $137,059 which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any,
to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2003 $85,565
2004 $51,494
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.
DEFERRED EXPENSES -- The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the
initial expense of registering its shares, have been deferred and are
being amortized over a period not to exceed five years from the Fund's
commencement date.
USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31,
1997 1996
<S> <C> <C>
Shares sold 132,996 148,617
Shares issued to shareholders in payment of distributions declared 10,391 12,949
Shares redeemed (587,888) (777,662)
Net change resulting from share transactions (444,501) (616,096)
</TABLE>
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 0.75% of the Fund's average
daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
As of July 31, 1997, Union Planters National Bank was the owner of
record of approximately 2,134,983 shares which is 90.1% of the Fund.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ") provides
the Fund with certain administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate net assets of
the Fund for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least
$120,000 per portfolio and $25,000 per each additional class of
shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ,
through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $35,622 were
borne initially by FServ. The Fund has agreed to reimburse FServ for
the organizational expenses during the five-year period following
effective date. For the period ended July 31, 1997, the Fund paid
$9,499 pursuant to this agreement.
GENERAL -- Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended July 31, 1997, were as follows:
PURCHASES $3,092,190
SALES $7,451,473
6. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers
located in one state, it will be more susceptible to factors adversely
affecting issuers of that state than would be a comparable tax-exempt
mutual fund that invests nationally. In order to reduce the credit
risk associated with such factors, at July 31, 1997, 30.4% 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 percentage of investments
insured by or supported (backed) by a letter of credit from any one
institution or agency did not exceed 22.9% of total investments.
INDEPENDENT ACCOUNTANTS' REPORT
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 Credit Ratings)
(included on pages 16 through 20), and the related statements of
operations and of changes in net assets (included on pages 21 through
22) and the financial highlights (included on page 2 of the
prospectus) present fairly, in all material respects, the financial
position of the Tennessee Tax-Free Bond Fund (the "Fund") at July 31,
1997, the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereinafter 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 audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement
presentation. We believe that our audits which included confirmation
of securities at July 31, 1997 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
September 15, 1997
ADDRESSES
Tennesse 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 and Trust Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Shareholder Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
TENNESSEE TAX-FREE BOND FUND
PROSPECTUS
A Non-Diversified Portfolio
of The Planters Funds
An Open-End, Management Investment Company
September 30, 1997
[Graphic]
Union Planters National Bank Investment Adviser
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 727426108
3072709A (9/97)
[Graphic]
Tennessee Tax-Free Bond Fund
ANNUAL REPORT FOR FISCAL YEAR ENDED JULY 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
The Tennessee Tax-Free Bond Fund is a municipal bond fund that invests
in obligations issued by or on behalf of the State of Tennessee, its
political subdivisions or agencies. The managers of the fund expect to
continue investing exclusively in Tennessee-domiciled municipals. This
investment strategy allows the fund to seek monthly dividends which
are free from both federal and State of Tennessee personal income
taxes.
At the close of the fiscal year ended July 31, 1997, investors had a
total of $25.8 million in net assets under the fund's management. The
fund invests in a wide variety of Tennessee municipal securities
across sector types. In an attempt to mitigate credit risk, the fund's
security selection process requires the use of issues rated investment
grade or above by one or more of the national municipal bond rating
services. As of July 31, 1997, there were 39 separate holdings within
the portfolio.
The past twelve months have been a period of some volatility in
interest rates in the municipal bond market. Rates for the 30-year
Treasury at the beginning of the fiscal year were 6.95%. By January
1997 rates were down to 6.75%, but due to the Federal Reserve Board
raising rates in March of 1997, prices of fixed income securities
declined as bond yields increased. Fueled by falling wholesale prices
and decelerating retail prices through the early part of the summer,
bonds rallied from their low in March to highs in July with the
30-year Treasury at 6.375% on July 31, 1997.
The fund began the fiscal year with a net asset value of $10.54. The
overall decline in rates during the fund's fiscal year raised the net
asset value to $10.91* on July 31, 1997. The fund has increased credit
quality and shortened average maturity slightly to become more
defensive in anticipation of higher rates and lower prices.
During the twelve-month reporting period ended July 31, 1997, the fund
had income distributions of $0.46 per share. Combining this income
with the changes in share price and the effect of the 2.0% sales
charge resulted in a total return of 5.91%* for the reporting period.
* Performance quoted represents past performance and is not indicative
of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
Tennessee Tax-Free Bond Fund
GROWTH OF $10,000 INVESTED IN TENNESSEE TAX-FREE BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in
the Tennessee Tax-Free Bond Fund (the "Fund") from August 30, 1993
(start of performance) to July 31, 1997, compared to the Lehman
Brothers 10 Year Municipal Bond Index ("LB10YRMBI")+ and the Lipper
Intermediate Municipal Bond Average ("LIMBA").++
[Graphic-see appendix]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
SEPTEMBER 30, 1997, AND TOGETHER WITH FINANCIAL STATEMENTS CONTAINED
THEREIN, CONSTITUTES THE FUND'S ANNUAL REPORT.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge on 8/30/93 of 4.00% ($10,000
investment minus $400 sales charge = $9,600). The Fund's maximum
sales charge was reduced to 2.00% on 9/30/95. The Fund's performance
assumes the reinvestment of all dividends and distributions. The
LB10YRMBI and the LIMBA have been adjusted to reflect reinvestment
of dividends on securities in the index and average.
** Total return quoted reflects the current 2.00% sales charge.
+ The LB10YRMBI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. The
index is unmanaged.
++ The LIMBA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the respective categories and is not adjusted
to reflect any sales charges. However, this total return is
reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 727426108
G00513-01 (9/97)
[Graphic]
APPENDIX
The graphic representation here displayed consists of a legend in the
upper left quadrant indicating the components of the corresponding
line graph. The solid black line represents the value of Tennessee
Tax-Free Bond Fund (the "Fund"). The dotted black line represents the
Lipper Intermediate Municipal Bond Average ("LIMBA"), and the broken
black line represents the Lehman Brothers 10 Year Municipal Bond Index
("LB10YRMBI") The line graph illustrates the hypothetical investment
of $10,000 in the Fund from August 30, 1993 to July y31, 1997 as
compared to the LB10YRMBI and LIMBA. The "x" axis reflects annual
computation periods from 8/30/93 to 7/31/97. The "y" axis reflects
values in $700 increments ranging from $9,500 to $13,000. The right
margin of the chart reflects the ending values of a hypothetical
investments in the Fund, LB10YRMBI and LIMBA which were $11,931,
$12,720, and $12,097, respectively.
