Following is the Annual Report for the Tennessee Tax-Free Bond Fund, covering
the twelve month reporting period ended July 31, 1999. If you have any
questions or comments, please contact your investment representative.
Investment Review
- -------------------------------------------------------------------------------
The Tennessee Tax-Free Bond Fund continues to invest in a mix of instruments
intended to provide income free of federal and state taxes for Tennessee
residents./1/ In keeping with the Fund's investment policies, only investment
grade bonds were purchased or held by the Fund during the fiscal year ended
July 31, 1999, with AAA rated securities comprising the largest percentage of
assets.
Overall, interest rates increased significantly during the fiscal year. The
ten-year treasury yield rose by about 0.40%. Municipal yields moved
substantially, with the ten-year AAA rated municipal yields increasing by
1.47%. The disparity between increases in treasury yields and tax-free bond
yields was more pronounced in lower-rated sectors. Consequently, the Fund
emphasized issues in the highest credit ratings. Net redemptions during the
year meant this goal was accomplished primarily by liquidations of lower-rated
issues.
The Fund's total rate of return for the fiscal year ended July 31, 1999, was
1.89% or (0.13%) adjusted for the 2% sales charge./2/ The net asset value
ended the year at $10.70 versus $10.90 at the beginning of the fiscal year. A
monthly double-tax-free income stream totaling $0.40 per share accounted for
the majority of the total return. Since the Tennessee Tax-Free Bond Fund began
operation on August 30, 1993, it has produced an annualized total return of
4.74% or 4.39% adjusted for the 2% sales charge as of July 31, 1999./2/ The
Fund's five-year annualized total return as of July 31, 1999 was 5.39% or
4.96% adjusted for the 2% sales charge.
/1/ Income may be subject to the federal alternative minimum tax, and state
and local taxes in states other than Tennessee.
/2/ 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 $10,000/1/ in the
Tennessee Tax-Free Bond Fund (the "Fund") from August 30, 1993 (start of
performance) to July 31, 1999, compared to the Lehman Brothers 10-Year Municipal
Bond Index ("LBMBI")/2/ and the Lipper Intermediate Municipal Bond Average
("LIMBA")./3/
[Graph representation omitted. See Appendix.]
AVERAGE ANNUAL TOTAL RETURN/4/ FOR THE PERIOD ENDED JULY 31, 1999
1 Year.................................................................. (0.13%)
5 Year.................................................................. 4.96%
Start of Performance (8/30/93).......................................... 4.39%
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 their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
1 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 LBMBI and the LIMBA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
2 The LBMBI is a broad market performance index of municipal bonds with a
minimum credit rating of at least Baa. The LBMBI is not adjusted to reflect
sales charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. The index is
unmanaged.
3 The LIMBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling in the
respective category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the Securities and Exchange Commission requires to be reflected in a fund's
performance.
4 Total returns quoted reflect the current 2.00% sales charge.
Tennessee Tax-Free Bond Fund
(A Portfolio of The Planters Funds)
Portfolio of Investments
July 31, 1999
- --------------------------------------------------------------------------------
Principal Credit
Amount Rating/1/ Value
---------- ------------------------------------------- --------- -----------
Long-Term Municipal Notes--99.8%
------------------------------------------------------
Tennessee--99.8%
-------------------------------------------
$ 215,000 Chattanooga-Hamilton County, TN, Hospital
Authority, Refunding Revenue Bonds, 5.500%
(Erlanger Medical Center)/(FSA
INS)/(Original Issue Yield: 5.600%),
10/1/2006 AAA $ 225,685
-------------------------------------------
1,000,000 Chattanooga-Hamilton County, TN, Hospital
Authority, Refunding Revenue Bonds, 5.500%
(Erlanger Medical Center)/(FSA
INS)/(Original Issue Yield: 5.850%),
10/1/2013 AAA 1,014,790
-------------------------------------------
1,000,000 Clarksville, TN, Electric System, Refunding
Revenue Bonds, 5.125%, 9/1/2011 A2 986,670
-------------------------------------------
500,000 Clarksville, TN, Water Sewer & Gas,
Refunding Revenue Bonds, 6.125% (MBIA
INS)/(Original Issue Yield: 6.328%),
2/1/2012 AAA 527,790
-------------------------------------------
105,000 Cleveland, TN , GO UT Bonds, 4.70%,
9/1/2015 A 98,894
-------------------------------------------
150,000 Germantown, TN, GO UT, 4.200%, 1/1/2001 AAA 150,766
-------------------------------------------
400,000 Jackson, TN, Water & Sewer, Refunding
Revenue Bonds, 5.125% (AMBAC INS)/(Original
Issue Yield: 5.350%), 1/1/2010 AAA 402,424
-------------------------------------------
440,000 Johnson City, TN, Health & Education Facilities Board, Refunding
Revenue Bonds, 6.750% (Johnson City Medical Center Hospital)/(MBIA
INS)/(Original Issue Yield:
6.912%), 7/1/2006 AAA 468,503
-------------------------------------------
250,000 Johnson City, TN, Health & Education
Facilities Board, Revenue Bonds, 6.750%
(MBIA INS)/(United States Treasury
PRF)/(Original Issue Yield: 6.912%),
7/1/2001 (@102) AAA 267,085
-------------------------------------------
500,000 Knox County, TN, Health Education & Housing
Facilities Board, Hospital Facilities
Revenue Bonds, Series A, 4.900% (Fort
Sanders Alliance)/(MBIA INS)/(Original
Issue Yield: 5.099%), 1/1/2005 AAA 509,865
-------------------------------------------
900,000 Knox County, TN, GO UT, 4.750%, 2/1/2006 AA 909,783
-------------------------------------------
$ 500,000 Knoxville, TN, Electric, Refunding Revenue
Bonds, 4.400% (Original Issue Yield:
4.480%), 7/1/2009 AA $ 477,460
-------------------------------------------
1,030,000 Knoxville, TN, Water System, Refunding
Revenue Bonds, Series M, 5.200% (Original
Issue Yield: 5.450%), 3/1/2010 AA 1,034,522
-------------------------------------------
700,000 Memphis, TN, GO UT, 5.000% (Original Issue
Yield: 5.100%), 10/1/2018 AA 667,170
-------------------------------------------
1,000,000 Metropolitan Government Nashville &
Davidson County, TN, HEFA, Refunding
Revenue Bonds, 5.200% (Vanderbilt
University), 7/1/2018 AA 978,170
-------------------------------------------
750,000 Metropolitan Government Nashville &
Davidson County, TN, Revenue Bonds, Series
A, 6.000% (United States Treasury PRF)
(Original Issue Yield: 6.282%), 5/15/2002
(@102) AAA 799,027
-------------------------------------------
230,000 Metropolitan Government Nashville &
Davidson County, TN, Water & Sewer,
Refunding Revenue Bonds, 5.200% (FGIC
INS)/(Original Issue Yield: 5.530%),
1/1/2013 AAA 232,316
-------------------------------------------
800,000 Mount Juliet, TN, Public Building
Authority, Revenue Bonds, Series O, 7.000%
(MBIA INS)/(United States Treasury PRF),
2/1/2001 (@102) AAA 850,448
-------------------------------------------
900,000 Putnam County, TN, GO UT Bonds, 5.125%
(MBIA INS)/ (Original Issue Yield: 5.350%),
4/1/2011 AAA 897,588
-------------------------------------------
350,000 /2/Shelby County, TN, Health Education &
Housing Facilities Board, Revenue Bonds,
6.000% (St. Joseph Hospital East, Inc.)/
(Original Issue Yield: 6.370%), 3/1/2005 AAA 365,145
-------------------------------------------
500,000 Shelby County, TN, GO UT Bonds, 5.100% (State & Local PRF) (Original
Issue Yield:
5.250%), 3/1/2001 (@101) AA+ 513,065
-------------------------------------------
65,000 Shelby County, TN, GO UT Refunding Bonds, Series B, 5.875% (Original
Issue Yield:
5.950%), 3/1/2007 AA+ 67,612
-------------------------------------------
185,000 Shelby County, TN, GO UT Refunding Bonds,
Series B, 5.875% (United States Treasury
PRF) (Original Issue Yield: 5.950%),
3/1/2001 (@101.5) AAA 192,885
-------------------------------------------
$ 400,000 Sullivan County, TN, Health Educational &
Housing Facilities Board, Revenue Bonds,
5.750% (Holston Valley Health Board)/(MBIA
INS)/(Original Issue Yield: 5.930%),
2/15/2013 AAA $ 412,112
-------------------------------------------
900,000 Tennessee Housing Development Agency,
Refunding Revenue Bonds, Series A, 5.850%,
7/1/2013 A+ 924,363
-------------------------------------------
500,000 Tennessee State Local Development
Authority, Refunding Revenue Bonds, Series
A, 5.650%, 3/1/2007 AA 520,960
-------------------------------------------
495,000 Tennessee State Local Development
Authority, Revenue Bonds, 6.100% (Community
Provider Pooled Loan Program)/ (Tennessee
State GTD)/(United States Treasury PRF),
10/1/2004 (@102) AAA 540,560
-------------------------------------------
500,000 Tennessee State School Board Authority,
Higher Education Facilities, Revenue Bonds,
Series A, 6.250% (United States Treasury
PRF) (Original Issue Yield: 6.309%),
5/1/2002 (@101.5) AAA 533,370
-------------------------------------------
700,000 Tennessee State, GO UT Bonds, Series A,
5.550% (United States Treasury PRF),
3/1/2005 (@100) AAA 737,506
-------------------------------------------
450,000 Tennessee State, GO UT Bonds, Series B,
6.600% (United States Treasury
PRF)/(Original Issue Yield: 6.600%),
6/1/2001 (@101.5) AAA 476,910
-------------------------------------------
785,000 Williamson County, TN, GO UT Refunding Bonds, 6.000% (Original Issue
Yield:
6.217%), 3/1/2008 Aa1 851,474
------------------------------------------- -----------
Total Long-Term Municipal Notes
(identified cost $17,263,402) 17,634,918
------------------------------------------- -----------
Mutual Fund--0.0%
------------------------------------------------------
2,081 Tennessee Municipal Cash Trust Fund (at net
asset value) 2,081
------------------------------------------- -----------
Total Investments (identified cost
$17,265,483)/3/ $17,636,999
------------------------------------------- -----------
1 Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
2 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.
3 The cost of investments for federal tax purposes amounts to $17,265,483. The
net unrealized appreciation of investments on a federal tax basis amounts to
$371,516 which is comprised of $425,133 appreciation and $53,617 depreciation
at July 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($17,662,743) at July 31, 1999.
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 INS--Insured
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, 1999
- --------------------------------------------------------------------------------
Assets:
- ---------------------------------------------------------------
Total investments in securities, at value (identified and tax
cost $17,265,483) $17,636,999
- ---------------------------------------------------------------
Income receivable 301,783
- --------------------------------------------------------------- -----------
Total assets 17,938,782
- ---------------------------------------------------------------
Liabilities:
- -----------------------------------------------------
Payable to Bank $145,690
- -----------------------------------------------------
Payable for shares redeemed 47,199
- -----------------------------------------------------
Payable for auditing fees 42,014
- -----------------------------------------------------
Payable for administrative personnel and services fee 29,722
- -----------------------------------------------------
Accrued expenses 11,414
- ----------------------------------------------------- --------
Total liabilities 276,039
- --------------------------------------------------------------- -----------
Net Assets for 1,650,812 shares outstanding $17,662,743
- --------------------------------------------------------------- -----------
Net Assets Consist of:
- ---------------------------------------------------------------
Paid in capital $17,234,919
- ---------------------------------------------------------------
Net unrealized appreciation of investments 371,516
- ---------------------------------------------------------------
Accumulated net realized gain on investments 5,695
- ---------------------------------------------------------------
Undistributed net investment income 50,613
- --------------------------------------------------------------- -----------
Total Net Assets $17,662,743
- --------------------------------------------------------------- -----------
Net Asset Value, Offering Price and Redemption Proceeds Per
Share:
- ---------------------------------------------------------------
Net Asset Value Per Share ($17,662,743 / 1,650,812 shares
outstanding) $10.70
- --------------------------------------------------------------- -----------
Offering Price Per Share (100/98.00 of $10.70)/1/ $10.92
- --------------------------------------------------------------- -----------
Redemption Proceeds Per Share $10.70
- --------------------------------------------------------------- -----------
1 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, 1999
- --------------------------------------------------------------------------------
Investment Income:
- -------------------------------------------------------------------
Interest $ 960,702
- ------------------------------------------------------------------- ---------
Expenses:
- --------------------------------------------------------
Investment advisory fee $ 143,708
- --------------------------------------------------------
Administrative personnel and services fee 120,000
- --------------------------------------------------------
Custodian fees 649
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 30,555
- --------------------------------------------------------
Trustees' fees 10,649
- --------------------------------------------------------
Auditing fees 20,007
- --------------------------------------------------------
Legal fees 3,206
- --------------------------------------------------------
Portfolio accounting fees 53,162
- --------------------------------------------------------
Share registration costs 16,645
- --------------------------------------------------------
Printing and postage 13,049
- --------------------------------------------------------
Insurance premiums 1,213
- --------------------------------------------------------
Taxes 133
- --------------------------------------------------------
Miscellaneous 6,318
- -------------------------------------------------------- ---------
Total expenses 419,294
- --------------------------------------------------------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (143,708)
- -------------------------------------------------------- ---------
Net expenses 275,586
- ------------------------------------------------------------------- ---------
Net investment income 685,116
- ------------------------------------------------------------------- ---------
Realized and Unrealized Gain (Loss) on Investments:
- -------------------------------------------------------------------
Net realized gain on investments 14,072
- -------------------------------------------------------------------
Net change in unrealized appreciation of investments (307,792)
- ------------------------------------------------------------------- ---------
Net realized and unrealized loss on investments (293,720)
- ------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 391,396
- ------------------------------------------------------------------- ---------
(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,
------------------------
1999 1998
----------- -----------
Increase (Decrease) in Net Assets:
- ------------------------------------------------------
Operations--
- ------------------------------------------------------
Net investment income $ 685,116 $ 886,010
- ------------------------------------------------------
Net realized gain on investments ($14,072 and
$131,970, respectively, as computed for federal tax
purposes) 14,072 131,970
- ------------------------------------------------------
Net change in unrealized appreciation of investments (307,792) (151,527)
- ------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 391,396 866,453
- ------------------------------------------------------ ----------- -----------
Distributions to Shareholders--
- ------------------------------------------------------
Distributions from net investment income (707,893) (887,438)
- ------------------------------------------------------
Distributions from net realized gain on investments (3,323) --
- ------------------------------------------------------ ----------- -----------
Change in net assets resulting from distributions to
shareholders (711,216) (887,438)
- ------------------------------------------------------ ----------- -----------
Share Transactions--
- ------------------------------------------------------
Proceeds from sale of shares 246,590 588,837
- ------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 189,716 155,726
- ------------------------------------------------------
Cost of shares redeemed (2,360,479) (6,666,092)
- ------------------------------------------------------ ----------- -----------
Change in net assets resulting from share
transactions (1,924,173) (5,921,529)
- ------------------------------------------------------ ----------- -----------
Change in net assets (2,243,993) (5,942,514)
- ------------------------------------------------------
Net Assets:
- ------------------------------------------------------
Beginning of period 19,906,736 25,849,250
- ------------------------------------------------------ ----------- -----------
End of period (including undistributed net investment
income of $50,613 and $73,424, respectively) $17,662,743 $19,906,736
- ------------------------------------------------------ ----------- -----------
(See Notes which are an integral part of the Financial Statements)
Tennessee Tax-Free Bond Fund
(A Portfolio of The Planters Funds)
Financial Highlights
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
Year Ended July 31,
-------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
Net asset value, beginning of
period $10.90 $10.91 $10.54 $10.46 $10.22
- ----------------------------------
Income from investment operations
- ----------------------------------
Net investment income 0.39 0.44 0.45 0.50 0.51
- ----------------------------------
Net realized and unrealized gain
(loss) on investments (0.18) (0.02) 0.38 0.07 0.24
- ---------------------------------- ------- ------- ------- ------- -------
Total from investment operations 0.21 0.42 0.83 0.57 0.75
- ---------------------------------- ------- ------- ------- ------- -------
Less distributions
- ----------------------------------
Distributions from net investment
income (0.40) (0.43) (0.46) (0.49) (0.51)
- ----------------------------------
Distributions from net realized
gain on investments (0.01) -- -- -- --
- ---------------------------------- ------- ------- ------- ------- -------
Total distributions (0.41) (0.43) (0.46) (0.49) (0.51)
- ---------------------------------- ------- ------- ------- ------- -------
Net asset value, end of period $10.70 $10.90 $10.91 $10.54 $10.46
- ---------------------------------- ------- ------- ------- ------- -------
Total return/1/ 1.89% 3.91% 8.12% 5.57% 7.60%
- ----------------------------------
Ratios to average net assets
- ----------------------------------
Expenses/2/ 2.19% 1.94% 1.85% 1.66% 1.56%
- ----------------------------------
Net investment income/2/ 2.83% 3.17% 3.48% 3.82% 3.98%
- ----------------------------------
Expenses (after waivers) 1.44% 1.19% 1.10% 0.86% 0.61%
- ----------------------------------
Net investment income (after
waivers) 3.58% 3.92% 4.23% 4.62% 4.93%
- ----------------------------------
Supplemental data
- ----------------------------------
Net assets, end of period (000
omitted) $17,663 $19,907 $25,849 $29,668 $35,888
- ----------------------------------
Portfolio turnover 3% 4% 11% 0% 3%
- ----------------------------------
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occured, the ratios would have been as indicated.
(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, 1999
- -------------------------------------------------------------------------------
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 31,1999, 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 60 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.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by methods authorized by the Fund's
Board of Trustees (the "Trustees").
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.
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.
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 Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
Year Ended July 31,
--------------------
1999 1998
- ---------------------------------------------- --------- ---------
Shares sold 22,572 53,992
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 17,337 14,293
- ----------------------------------------------
Shares redeemed (215,634) (611,569)
- ---------------------------------------------- --------- ---------
Net change resulting from share transactions (175,725) (543,284)
- ---------------------------------------------- --------- ---------
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, 1999, Union Planters National Bank was the owner of record of
approximately 1,503,351 shares, which is 91.1% 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.
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
year ended July 31, 1999, were as follows:
- ---------
Purchases $ 601,640
- --------- ----------
Sales $1,655,442
- --------- ----------
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, 1999, 32.9% 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 22.3% of total investments.
7. Year 2000 (unaudited)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Tennessee Tax-Free Bond Fund (the "Fund") at July 31, 1999, the results of
its operations for the year then ended, 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 (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 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
misstatements. 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 20, 1999
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-356-2805
www.federatedinvestors.com
Cusip 727426108
G01601-01 (9/99)
APPENDIX
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The Shares of Tennessee Tax-Free Bond Fund (the "Fund"), based on a
4.00% sales charge, are represented by a solid line. The Lehman Brothers 10-Year
Municipal Bond Index (the "LBMBI") is represented by a dash-dash-dotted line and
the Lipper Intermediate Municipal Bond Average (the "LIMBA") is represented by a
dashed line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Shares of the Fund, the
LBMBI and the LIMBA. The "x" axis reflects computation periods from 8/30/1993 to
7/31/1999. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Shares,
based on a 4.00% sales charge, as compared to the LBMBI and the LIMBA.
