PEACHTREE FUNDS, 497, 1994-04-20

PEACHTREE FUNDS
497, 1994-04-20

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Peachtree Prime Money Market Fund
Peachtree Government Money Market Fund
(Portfolios of Peachtree Funds)

Combined Prospectus

The Shares of Peachtree Government Money Market Fund (the "Government Money
Fund") and Peachtree Prime Money Market Fund (the "Prime Money Fund")
(individually referred to as a "Fund" and collectively as the "Funds") offered
by this Combined Prospectus represent interests in two separate portfolios of
securities with distinct investment objectives and policies. The Funds are two
of a series of investment portfolios comprising Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund).

The Funds attempt to maintain a stable net asset value of $1.00 per share; there
can be no assurance that the Funds will be able to do so.

This Prospectus contains the information you should read and know before you
invest in the Funds. Keep this prospectus for future reference.

Each Fund has also filed a Statement of Additional Information dated February
28, 1994, with the Securities and Exchange Commission. The information
contained in the Statement of Additional Information is incorporated by
reference into this Combined Prospectus. You may request a copy of the
Statement of Additional Information free of charge, obtain other information,
or make inquiries about the Funds by contacting the Peachtree Funds Service
Center at 1-404-989-6200 or 1-800-621-8969.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT
ISSUED, ENDORSED OR GUARANTEED BY, BANK SOUTH, N.A. (THE "BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

THE BANK IS THE INVESTMENT ADVISER TO THE FUNDS. THE FUNDS ARE DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

February 28, 1994

Table of Contents
- --------------------------------------------------------------------------------

Summary of Fund Expenses 1
- ------------------------------------------------------

General Information 2
- ------------------------------------------------------

Prime Money Fund Investment Information 2

- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Variable Rate Demand Notes 3
Demand Features 3
Bank Instruments 3
Asset-Backed Securities 3
Short-Term Credit Facilities 4
Ratings 4
Restricted and Illiquid Securities 4
Credit Enhancement 5
Investment Risks 5

Government Money Fund
Investment Information 5

- ------------------------------------------------------
Investment Objective 5
Investment Policies 5
Acceptable Investments 6
Investments and Strategies of the Funds 6
- ------------------------------------------------------

Repurchase Agreements 6
Lending of Portfolio Securities 6
When-Issued And Delayed Delivery
Transactions 6
Investing in Securities of Other
Investment Companies 7
Certain Borrowing and Investment Limitations 7
Regulatory Compliance 7

Peachtree Funds Information 8
- ------------------------------------------------------

Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Shares 8
Distribution Plan 9
Administrative Arrangements 9
Administration of the Trust 9
Administrative Services 9
Shareholder Services Plan 10
Custodian 10
Transfer Agent, Dividend Disbursing Agent
and Portfolio Accounting Services 10
Legal Counsel 10
Independent Auditors 10

Expenses of the Funds 11

Net Asset Value 11
- ------------------------------------------------------

Investing in the Funds 11
- ------------------------------------------------------

Share Purchases 11
By Telephone 11
By Mail 11
Payment by Check 11
Payment by Wire 12
Minimum Investment Required 12
Systematic Investment Program 12
What Shares Cost 12
Certificates and Confirmations 12
Dividends 12

Purchasing Shares of the Funds
with Securities 13

Exchange Privilege 13
- ------------------------------------------------------

Peachtree Funds 13
By Telephone 14

Redeeming Shares 15
- ------------------------------------------------------

By Telephone 15
By Mail 15
Signatures 15
Receiving Payment 16
Systematic Withdrawal Program 16
Accounts with Low Balances 16

Shareholder Information 16
- ------------------------------------------------------

Voting Rights 16
Massachusetts Partnership Law 17

Effect of Banking Laws 17
- ------------------------------------------------------

Tax Information 18
- ------------------------------------------------------

Federal Income Tax 18
State and Local Taxes 18

Performance Information 18
- ------------------------------------------------------

Peachtree Government Money Market
Fund Statement of Assets and Liabilities 19
- ------------------------------------------------------

Report of Ernst & Young,
Independent Auditors 20
- ------------------------------------------------------

Addresses Inside Back Cover
- ------------------------------------------------------

Peachtree Prime Money Market Fund
Peachtree Government Money Market Fund
Summary of Fund Expenses
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Shareholder Transaction Expenses
Prime Government
Money Fund Money Fund
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................... None None

Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................... None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)......................... None None
Redemption Fees (as a percentage of amount redeemed, if applicable)............. None None
Exchange Fee.................................................................... None None

Annual Fund Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)................................................ 0.29 % 0.30 %
12b-1 Fees(2)................................................................... 0.00 % 0.00 %
Other Expenses (after waiver)(3)................................................ 0.21 % 0.20 %
Total Fund Operating Expenses(4)............................................ 0.50 % 0.50 %
</TABLE>

- ---------
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee by the investment
adviser. The investment adviser can terminate this voluntary waiver at any
time in its sole discretion. The maximum management fee is 0.50%.

(2) As of the date of this prospectus, the Funds are not paying or accruing
12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Funds (which would not have a Rule 12b-1 plan) is created and such trust
clients' investments in the Funds are converted to such Trust class.

(3) Total Other Expenses are estimated to be 0.23% for Prime Money Fund and
0.21% for Government Money Fund absent the anticipated voluntary waiver by
the transfer agent.

(4) The Total Fund Operating Expenses are estimated to be 0.73% for Prime Money
Fund and 0.71% for Government Money Fund absent the anticipated voluntary
waivers by the adviser and transfer agent.

* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending September 30, 1994. During the course of this
period, expenses may be more or less than the average amount shown.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Funds will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Peachtree Funds Information" and "Investing in the Funds." Wire
transfer redemptions may be subject to an additional fee.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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. As noted in the table above, the Funds charge no
contingent deferred sales charge.
Prime Money Fund........................................................................... $5 $16
Government Money Fund...................................................................... $5 $16
</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. This
example is based on estimated data for the Funds' fiscal year ending September
30, 1994.

General Information
- --------------------------------------------------------------------------------

The Funds attempt to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price. See "Net Asset Value" on page 11.

Prime Money Fund Investment Information
- --------------------------------------------------------------------------------

Investment Objective

The Prime Money Fund's investment objective is to achieve current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the approval of the Prime Money Fund's shareholders.
While there is no assurance that the Prime Money Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.

Investment Policies

The Prime Money Fund pursues its investment objective by investing in a
portfolio of high quality money market instruments maturing in 13 months or
less. The average maturity of money market instruments in the Prime Money Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Board of
Trustees without the approval of Prime Money Fund shareholders. Shareholders
will be notified before any material changes in these policies become effective.

Acceptable Investments. The Prime Money Fund invests in high quality money
market instruments that are either rated in the highest short-term rating
category by one or more nationally recognized statistical rating organizations
("Rating Agencies") or are deemed by the Adviser to be of comparable quality to
securities having such ratings. Examples of these instruments include, but are
not limited to:

domestic issues of corporate debt obligations, including variable rate
demand notes;

commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);

certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other depository
institutions ("Bank Instruments");

short-term credit facilities;

asset-backed securities, including commercial paper;

obligations issued or guaranteed as to payment of principal and interest
by the U.S. Government or one of its agencies or instrumentalities
("Government Securities"); and

other money market instruments.

The Prime Money Fund invests only in instruments denominated and payable in U.S.
dollars.

Variable Rate Demand Notes. Variable rate demand notes are generally long-term
debt instruments that have variable or floating interest rates and provide the
Prime Money Fund with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par. The
interest rate may float or be adjusted at regular intervals (ranging from daily
to annually), and is normally based on an index or rate such as the prime rate,
LIBOR or another published rate or index. Most variable rate demand notes allow
the Prime Money Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit the Prime Money Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. The Prime Money Fund treats variable rate demand notes as maturing on
the later of the next interest adjustment date or the date on which the Prime
Money Fund may next tender the security for repurchase. See "Demand Features."

Demand Features. The Prime Money Fund may acquire securities that are subject
to puts and standby commitments ("demand features") to purchase such securities
at their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Prime Money Fund. A demand
feature may be issued by the issuer of the underlying securities, a dealer in
the securities, or by another third party, and may not be transferred separately
from the underlying security. The Prime Money Fund uses these arrangements to
provide the Prime Money Fund with liquidity and not to protect against changes
in the market value of the underlying securities. The bankruptcy, receivership,
or default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its exercise,
will adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying security may
be treated as a form of credit enhancement.

Bank Instruments. The Prime Money Fund only invests in Bank Instruments either
(i) issued by an institution having capital, surplus and undivided profits over
$100 million (an "Eligible Bank") or (ii) that are insured by the FDIC's Bank
Insurance Fund ("BIF") or Savings Association Insurance Fund ("SAIF"). Bank
Instruments may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs")
issued by Eligible Banks. The Fund will treat securities that are credit
enhanced by an Eligible Bank's irrevocable letter of credit or unconditional
guaranty as Bank Instruments.

Asset-Backed Securities. Asset-backed securities are securities issued
generally by special purpose entities, such as trusts, limited partnerships and
corporations whose primary assets consist of a pool of loans, leases or accounts
receivable (collectively, "Receivables"). The securities may take the form of
debt and other interests in the special purpose entities. Each special purpose
entity will be treated as a separate issuer for diversification purposes.
Although the securities often have some form of credit or liquidity enhancement,
payments on the securities depend predominantly upon
collections of the underlying Receivables and not upon the creditworthiness of
the originator or seller of the Receivables.

Short-Term Credit Facilities. The Prime Money Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations, often
consisting of either a short-term revolving credit facility or a master note
payable upon demand. Under these arrangements, the borrower may reborrow funds
during the term of the facility. The Prime Money Fund treats any commitments to
provide such advances as a standby commitment to purchase the borrower's notes.

Ratings. For purposes of the Prime Money Fund, a Rating Agency's highest rating
category is determined without regard for sub-categories and gradations. For
example, securities rated A-1 or A-1+ by Standard & Poor's Corporation ("S&P"),
Prime-1 by Moody's Investors Service, Inc. ("Moody's"), F-1 (+ or -) by Fitch
Investors Service, Inc. ("Fitch"), Duff-1 (+ or -) by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") are all considered rated in the highest short-term
rating category. The Prime Money Fund will follow applicable Securities and
Exchange Commission ("SEC") regulations in determining whether a security rated
by more than one Rating Agency can be treated as being in the highest short-term
rating category; currently, such securities must be rated by two Rating Agencies
in their highest rating categories. See "Regulatory Compliance." A credit rating
is not a recommendation to buy, sell or hold securities, and is subject to
change and/or withdrawal by the rating agency.

Restricted and Illiquid Securities. The Prime Money Fund intends to invest in
restricted securities. Restricted securities are any securities in which the
Prime Money Fund may otherwise invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. However, the Prime Money Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the Board
of Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to 10%
of the Prime Money Fund's net assets.

The Prime Money Fund may invest in commercial paper (including asset-backed
commercial paper) issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). Section 4(2) commercial paper is restricted as to disposition under the
Securities Act, and is generally sold to institutional investors, such as the
Prime Money Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the purchaser
must be in a transaction exempt from Securities Act registration. Section 4(2)
commercial paper is normally resold to other institutional investors like the
Prime Money Fund through or with the assistance of the issuer or investment
dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity. The Prime Money Fund believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees of the Prime Money Fund are quite liquid.
The Prime Money Fund intends, therefore, to treat the restricted securities
which meet the criteria for liquidity established by the Trustees, including
Section 4(2) commercial paper, as determined by the Fund's investment adviser,
as liquid and not subject to the investment limitations applicable to illiquid
securities. In addition, because Section 4(2) commercial paper is liquid, the
Prime Money Fund intends to not subject such paper to the limitation applicable
to restricted securities.

Credit Enhancement. Certain of the Prime Money Fund's acceptable investments
may be credit enhanced by a guaranty, letter of credit, cash collateral
accounts, or insurance. The Prime Money Fund typically evaluates the credit
quality and ratings of credit enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "Credit
Enhancer"), rather than the issuer. Generally, the Prime Money Fund will not
treat credit enhanced securities as having been issued by the Credit Enhancer
for diversification purposes. However, under certain circumstances, applicable
regulations may require the Prime Money Fund to treat the securities as having
been issued by both the issuer and the Credit Enhancer. Any decline in the
Rating Agency ratings of the Credit Enhancer, or any bankruptcy, receivership,
or default of the Credit Enhancer will adversely affect the quality, value and
marketability of the underlying security.

Investment Risks

ECDs, ETDs, Yankee CDs, CCPs and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. Examples of these risks
include international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding and taxes on interest income, difficulties in obtaining or
enforcing a judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may also
exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping, deposit insurance and the public availability of information.
These factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.

Government Money Fund Investment Information

- --------------------------------------------------------------------------------

Investment Objective

The Government Money Fund's investment objective is to achieve current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the approval of the Government Money Fund's
shareholders. While there is no assurance that the Government Money Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus.

Investment Policies

The Government Money Fund pursues its investment objective by investing in a
portfolio of short-term securities either issued directly by the U.S. government
or issued by agencies and instrumentalities of the U.S. government and backed by
the full faith and credit of the U.S. government, and, in either case, maturing
in 13 months or less from the date of acquisition unless they are purchased
under a repurchase agreement that provides for repurchase by the seller within
one year from the date of acquisition. The Government Money Fund invests only in
instruments denominated and payable in U.S. dollars. The average maturity of
U.S. government securities in the Government Money Fund's portfolio, computed on
a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Board of
Trustees without the approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.

Acceptable Investments. The U.S. government securities in which the Government
Money Fund invests are either issued directly by the U.S. government or are
issued by agencies or instrumentalities of the U.S. government and are backed by
the full faith and credit of the U.S. government. These securities include, but
are not limited to:

direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

notes, bonds, and discount notes of U.S. government agencies and
instrumentalities, such as the Government National Mortgage Association,
the Small Business Administration and the Federal Financing Bank.

Investments and Strategies of the Funds
- --------------------------------------------------------------------------------

Repurchase Agreements

Certain securities in which the Funds invest may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
securities broker-dealers, and other financial institutions sell securities to
the Funds and agree at the time of sale to repurchase them at a mutually agreed
upon time and price with interest. As collateral for the obligation of the
seller to repurchase the securities from the Funds, the Funds or their custodian
will take possession of the securities subject to repurchase agreements, and
these securities will be marked to market daily. To the extent that the seller
does not repurchase the securities from the Funds, the Funds could receive less
than the repurchase price on any sale of such securities.

Lending of Portfolio Securities

In order to generate additional income, the Funds may lend their portfolio
securities on a short-term basis to securities broker-dealers, banks, or other
institutional borrowers of securities. The Funds will limit the amount of
portfolio securities they may lend to not more than 50% of their respective
total assets. The Funds will only enter into loan arrangements with
broker-dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the Trust's Board of
Trustees, where loaned securities are marked to market daily and where the Funds
receive collateral equal to at least 100% of the value of the securities loaned
at all times. The Government Money Fund does not intend to lend portfolio
securities during its first fiscal year.

When-Issued And Delayed Delivery Transactions

The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause the Funds to miss a price or
yield considered to be advantageous.

Investing in Securities of Other Investment Companies

The Funds may invest in the securities of other investment companies, but 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 the
aggregate. The Funds will only invest in other investment companies that are
money market funds having investment objectives and policies similar to those of
the respective Fund and primarily for the purpose of investing short-term cash
which has not yet been invested in other portfolio instruments. It should be
noted that investment companies incur certain expenses and therefore, any
investment by the Funds in shares of another investment company would be subject
to certain duplicate expenses, particularly transfer agent and custodian fees.
The Adviser will waive its advisory fee on assets invested in securities of
open-end investment companies.

Certain Borrowing and Investment Limitations

The Funds will not borrow money directly or through reverse repurchase
agreements (arrangements in which a Fund sells a money market 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 Funds may borrow up
to 33 1/3% of the value of their respective total assets and secure such
borrowings with up to 15% of the value of their respective total assets at the
time of borrowing.

With respect to 75% of the value of its total assets, Prime Money Fund will not
invest more than 5% of the value of its total assets in securities of any one
issuer (other than cash, cash items or securities issued or guaranteed by the
U.S. government, or its agencies or instrumentalities, and repurchase agreements
collateralized by such securities), or acquire more than 10% of the outstanding
voting securities of any one issuer.

The above limitations cannot be changed without shareholder approval. Both Funds
will limit their investment in restricted and illiquid securities, including
repurchase agreements providing for settlement more than seven days after
notice, to 10% of net assets. See "Restricted and Illiquid Securities."

Regulatory Compliance

The Funds may follow non-fundamental operational policies that are more
restrictive than their fundamental investment limitations, as set forth in this
Combined Prospectus and respective Statements of Additional Information, in
order to comply with applicable laws and regulations, including the provisions
of and regulations under the Investment Company Act of 1940, as amended (the
"ICA"). In particular, the Funds will comply with the various requirements of
SEC Rule 2a-7 under the ICA which regulates money market mutual funds. For
example, with limited exceptions, Rule 2a-7 prohibits the investment of more
than 5% of a Fund's total assets in the securities of any one issuer, although
the Prime Money Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Prime Money Fund will
invest more than 5% of its assets in any one issuer only under the circumstances
permitted by Rule 2a-7. The Prime Money Fund will also determine the effective
maturity of its investments, as well as its ability to consider a security as
having received the requisite short-term ratings by the Rating Agencies,
according to Rule 2a-7. The
Prime Money Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.

Peachtree Funds Information
- --------------------------------------------------------------------------------

Management of the Trust

Board of Trustees. The Trust is managed by a Board of Trustees (the "Board" or
"Trustees"). The Board is 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 handles various of the
Board's delegable responsibilities between meetings of the Board.

Investment Adviser. Investment decisions for the Funds are made by the Bank, as
the Funds' investment adviser (the "Adviser"), subject to direction by the
Board. The Adviser conducts investment research and supervision for the Funds
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Funds' assets.

Advisory Fees. The Adviser receives an annual investment advisory fee
equal to 0.50% of the Funds' average daily net assets. The Adviser has
undertaken to reimburse the Funds, up to the amount of the advisory fee,
for operating expenses in excess of limitations established by certain
states. The Adviser also may voluntarily choose to waive a portion of its
fee or reimburse other expenses of the Funds, but reserves the right to
terminate such waiver or reimbursement at any time at their sole
discretion. See "Summary of Fund Expenses" on page 1.

Adviser's Background. The Adviser, a national bank headquartered in
Atlanta, Georgia, is a wholly owned subsidiary of Bank South Corporation, a
Georgia corporation which is a registered bank holding company. The Adviser
serves consumers through its network of banking offices with a full range
of deposit and lending products, as well as investment services. The
principal executive offices of the Adviser are located at 3350 Cumberland
Circle, Marietta, GA 30339.

The Adviser has managed discretionary assets for its customers since 1931.
As of December 1, 1993, the Adviser managed in excess of $1 billion of
discretionary assets. Prior to January 1994, the Bank had not served as an
investment adviser to mutual funds.

As part of its regular banking operations, the Bank may make loans to
public companies. Thus, it may be possible, from time to time, for the
Funds to hold or acquire the securities of issuers which are also lending
clients of the Bank. The lending relationship will not be a factor in the
selection of securities.

Distribution of Shares

Federated Securities Corp. (the "Distributor") is the principal distributor for
shares of the Funds. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies. The
Distributor is a subsidiary of Federated Investors.

Distribution Plan. Under a distribution plan (the "Plan") adopted in accordance
with SEC Rule 12b-1 under the Investment Company Act of 1940, as amended, each
of the Funds will pay an amount computed at an annual rate of up to 0.25% of the
average daily net asset value of the shares to finance any activity which is
principally intended to result in the sale of shares subject to the Plan.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Plan because the Plan will not be activated unless and until a second,
"Trust" class of shares of each of the Funds (which would not have a Rule 12b-1
plan) is created and such trust clients' investments in the Funds are converted
to such Trust class.

The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These financial institutions (including
the Bank) will receive fees from the Distributor based upon shares owned by
their clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Distributor.

The Funds' Plan is a compensation type plan. As such, each of the Funds pay the
Distributor the fee described above as opposed to reimbursing the Distributor
for actual expenses incurred. Therefore, the Funds do not pay for amounts
expended by the Distributor in excess of amounts received by it from each of the
Funds, which may include interest, carrying or other financing charges in
connection with excess amounts expended, or the Distributor's overhead expenses.
However, the Distributor may be able to recover such amounts or may earn a
profit from future payments made by the Funds under the Plan.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.

State securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to certain states' securities laws.

Administrative Arrangements. The Distributor may also pay administrators a fee
based upon the average net asset value of shares of their customers invested in
the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.

Administration of the Trust

Administrative Services. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Funds. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:

<TABLE>
<CAPTION>
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$100,000 per portfolio. Federated Administrative Services may choose voluntarily
to waive a portion of its fee.

Shareholder Services Plan. The Funds have adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Funds to provide administrative support services to their customers who from
time to time may be owners of record or beneficial owners of the shares. In
return for providing these support services, a financial institution may receive
payments from the Funds at a rate not exceeding 0.25% of the average daily net
assets of the shares benefically owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Funds; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Funds reasonably request.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Funds (which would not have a
Services Plan) is created and such trust clients' investments in the Funds are
converted to such Trust class.

Custodian. The Bank of New York, New York, New York is custodian for the
securities and cash of the Funds.

Transfer Agent, Dividend Disbursing Agent and Portfolio Accounting Services.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent (the "Transfer Agent") for the shares of, and
dividend disbursing agent for, the Funds. It also provides certain accounting
and recordkeeping services with respect to the Funds' portfolio investments.

Legal Counsel. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro & Morin, Washington, DC.

Independent Auditors. The independent auditors for the Funds are Ernst & Young,
Pittsburgh, Pennsylvania.

Expenses of the Funds

The Funds pay all of their own respective expenses and their allocable shares of
the Trust's expenses. The expenses borne by the Funds include, but are not
limited to, the cost of: organizing the Trust and continuing its existence;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering the Trust,
the Funds and shares of the Funds with federal and state securities authorities;
taxes and commissions; issuing, purchasing, repurchasing, and redeeming shares;
fees for custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing, mailing, auditing, accounting, and
legal expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance premiums;
association membership dues; and such nonrecurring and extraordinary items as
may arise.

Net Asset Value
- --------------------------------------------------------------------------------

The Funds attempt to stabilize the net asset value of their respective shares at
$1.00 by valuing the portfolio securities of each Fund using the amortized cost
method. The net asset value per share of each Fund is determined by subtracting
total liabilities from total assets and dividing the remainder by the number of
shares outstanding. The Funds, of course, cannot guarantee that their net asset
value will always remain at $1.00 per share.

Investing in the Funds
- --------------------------------------------------------------------------------

Share Purchases

The Funds' shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Funds may be
purchased through the Bank. In connection with the sale of Fund shares, the
Distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Funds reserve the right to reject any purchase
request.

By Telephone. To place an order to purchase shares of the Funds, call the
Peachtree Funds Service Center at 1-404-989-6200 or 1-800-621-8969. Texas
residents must purchase shares of the Funds through Bank South Securities
Corporation at 1-404-989-6181 or 1-800-621-8967. Your purchase order will be
taken directly over the telephone. The order must be placed by 4:00 p.m.
(Eastern time) for shares to be purchased at that day's price.

By Mail. Provide a letter of instruction to the appropriate Fund indicating
your purchase order, including the dollar amount of your order, your account
title and/or name, and your account number, and include a check made payable to
the appropriate Fund.

Payment by Check. Mail to Peachtree Prime Money Market Fund or Peachtree
Government Money Market Fund, c/o Peachtree Funds Service Center, MC 684, P.O.
Box 4387, Atlanta, Georgia 30302.

Payment by Wire. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Funds, the Bank and the Federal Reserve Banks are open for business.

Payment by federal funds must be received before 12:00 noon (Eastern time) on
the same day as the order to earn dividends for that day.

Minimum Investment Required

The minimum initial investment in either of the Funds by an investor is $1,000
($500 for IRA accounts). Subsequent investments in each Fund must be in amounts
of at least $100. The Funds may choose to waive their minimum investment
requirement from time to time and for accounts which select the Systematic
Investment Program.

Systematic Investment Program

Once a Fund account has been opened, shareholders may add to their investment in
such Fund on a regular basis in minimum amounts of $100, unless waived. Under
this program, funds may be automatically withdrawn periodically from the
shareholder's checking or other transaction deposit account and invested in Fund
shares at the net asset value next determined after an order is received by the
Bank. A shareholder may apply for participation in this program through the
Bank.

What Shares Cost

Shares of the Funds are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Funds.

The net asset value is determined at 12:00 noon (Eastern time) and 4:00 p.m.
(Eastern time), Monday through Friday, except on: (i) days on which changes (if
any) in the value of the Funds' portfolio securities do not materially affect
its net asset value; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) on 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.

Certificates and Confirmations

The Transfer Agent for the Funds maintains a share account for each shareholder.
Share certificates are not issued unless requested in writing from the Funds or
the Transfer Agent.

Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.

Dividends

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the appropriate Fund, unless
a shareholder makes a written request for cash payments to the Bank or the
Funds. Shares purchased by wire before 12:00 (Eastern time) begin earning
dividends that day. Shares purchased by check begin earning dividends the day
after the check is converted into available federal funds.

The Funds do not expect to realize any capital gains or losses. If capital gains
or losses were to occur, they could result in an increase or decrease in
dividends. The Funds will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.

Purchasing Shares of the Funds with Securities

The Funds, in their sole discretion, may sell shares of each Fund to investors
that desire to purchase shares of each Fund with certain securities or a
combination of certain securities and cash. Each Fund reserves the right to
determine the acceptability of securities used to effect such purchases. On the
day securities are accepted by a Fund, they are valued based upon independent
bid and in the same manner as the Fund values its own assets. Investors wishing
to use securities to purchase shares of one or both of these Funds should first
contact the Bank. Any such transfer of securities is treated as a sale of the
securities and will result in the recognition of any gain or loss for federal
income tax purposes by the seller of such securities, except to the extent the
seller is an ERISA plan or similar entity not subject to tax.

Exchange Privilege
- --------------------------------------------------------------------------------

Peachtree Funds

All shareholders of the Funds are shareholders of the Peachtree Funds. The
Peachtree Funds currently include the Peachtree Government Money Fund, Peachtree
Prime Money Fund, Peachtree Bond Fund, Peachtree Equity Fund and Peachtree
Georgia Tax-Free Income Fund. Shareholders have easy access to each of the
portfolios of the Peachtree Funds through a telephone exchange program. All
Peachtree Funds are advised by the Bank and distributed by the Distributor.

Shareholders may exchange shares of each Fund for shares of the other Fund and
any other Peachtree Funds. In addition, shares of the Funds may also be
exchanged for certain other funds designated by the Bank which are distributed
by the Distributor, but that are not advised by the Bank ("Federated Funds").
For further information on the availability of Federated Funds for exchanges,
please call the Peachtree Funds Service Center at 1-404-989-6200 or
1-800-621-8969. Shares of funds with a sales charge may be exchanged at net
asset value for shares of other funds with an equal sales charge or no sales
charge. Shares of funds with a sales charge may be exchanged for shares of funds
with a higher sales charge at net asset value, plus the additional sales charge.
Shares of funds with no sales charge, whether acquired by direct purchase,
reinvestment of dividends on such shares, or otherwise, may be exchanged for
shares of funds with a sales charge at net asset value, plus the applicable
sales charge.

When an exchange is made from a fund with a sales charge to a fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends or capital gains on such shares retain the character of
the exchanged shares for purposes of exercising further exchange privileges;
thus, an exchange of such shares for shares of a fund with a sales charge would
be at net asset value.

Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.

The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.

The Funds reserve the right to terminate the exchange privilege at any time on
60 days notice. Shareholders will be notified if this privilege is terminated. A
shareholder may obtain further information on the exchange privilege by calling
the Peachtree Funds Service Center at 1-404-989-6200 or 1-800-621-8969.

By Telephone. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Peachtree Funds Service Center at
1-404-989-6200 or 1-800-621-8969; or to the Distributor. Shares may be exchanged
by telephone only between fund accounts having identical shareholder
registrations.

Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Funds' Transfer Agent by the Bank and deposited to the
shareholder's mutual fund account before being exchanged. See "Addresses".

An authorization form permitting the Funds to accept telephone exchanges must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information regarding this service are
available from the Bank. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Funds, they may be liable for
losses due to unauthorized or fraudulent telephone instructions.

Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through the Bank during times of drastic economic or
market changes. If a shareholder cannot contact the Bank by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Peachtree Funds, 3350 Cumberland Circle, 10th Floor, Marietta, GA 30339.

Redeeming Shares
- --------------------------------------------------------------------------------

The Funds redeem shares at their net asset value next determined after the Bank
receives the redemption request. Redemptions will be made on days on which the
respective Fund computes its respective net asset value. Telephone or written
requests for redemption must be received in proper form and can be made through
the Bank or directly to the appropriate Fund.

By Telephone. A shareholder may redeem shares of the Funds by contacting his
account officer or by calling the Peachtree Funds Service Center to request the
redemption. (Call 1-404-989-6200 or
1-800-621-8969.) Shares will be redeemed at the net asset value next determined
after the Funds receive the redemption request from the Bank. Redemption
requests to the Bank must be received before 4:00 p.m. (Eastern time) in order
for shares to be redeemed at that day's net asset value, and the Bank will
promptly submit such redemption requests and provide proper written redemption
instructions to the Funds. If, at any time, the Funds should determine it
necessary to terminate or modify this method of redemption, shareholders would
be promptly notified.

An authorization form permitting the Funds to accept telephonic redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service are
available from the Bank. Telephone redemption instructions may be recorded. If
reasonable procedures are not followed by the Funds, they may be liable for
losses due to unauthorized or fraudulent telephone instructions.

A shareholder may have the redemption proceeds directly deposited by electronic
funds transfer or wired directly to the Bank or another domestic commercial bank
previously designated by the shareholder. Wire redemption orders will only be
accepted on days on which the Funds, the Bank and the Federal Reserve Wire
System are open for business. Wire-transferred redemptions may be subject to an
additional fee.

In the event of extraordinary 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 your account officer at the Bank.

By Mail. Shareholders may redeem shares by sending a written request to the
Bank. The written request should include the shareholder's name, the Fund's
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 to the Bank.
Shareholders should call the Bank at 1-800-282-6680 extension 7066 for
assistance in redeeming shares by mail.

Signatures. Shareholders requesting a redemption of $50,000 or more, a
redemption requesting payment to an address other than that on record with the
Funds, or other than to the shareholder of record must make written redemption
requests with signatures guaranteed by:

a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.

The Funds do not accept signatures guaranteed by a notary public.

The Funds and their Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and their Transfer Agent reserve the
right to amend these standards at any time without notice.

Receiving Payment. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven calendar
days, after receipt of a proper written redemption request, provided that the
Transfer Agent has received payment for shares from the shareholder.

Systematic Withdrawal Program

Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares of
the selected Fund or Funds are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. Depending upon the amount of
the withdrawal payments and the amount of dividends paid with respect to shares
of the Funds, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Funds. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Funds.
To be eligible to participate in this program, a shareholder must have an
account value of at least $10,000. A shareholder may apply for participation in
this program through the Bank.

Accounts with Low Balances

Due to the high cost of maintaining accounts with low balances, each Fund may
redeem shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance in either Fund falls below the
required minimum of $1,000 ($500 for IRAs).

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 Funds entitles the shareholders to one vote in Trustee
elections and other matters submitted to shareholders of the Trust for vote. All
shares of each portfolio in the Trust have equal voting rights except that, in
matters affecting only a particular Fund, only shareholders of that Fund are
entitled to vote. 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 Funds' operation and for the election
of Trustees under certain circumstances.

Any Trustee may be removed by the Board of Trustees or by the shareholders at a
special meeting. A special meeting of the shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders of the Funds for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign on behalf of the Funds.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments against it from the
assets of the Funds.

Effect of Banking Laws
- --------------------------------------------------------------------------------

Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling or distributing a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prevent banks generally from underwriting or distributing
securities in general. However, such laws and regulations do not prohibit such a
holding company affiliate from acting as investment adviser, transfer agent, or
custodian to such an investment company or from acting as agent for their
customers in purchasing securities. The Funds' Adviser is subject to such
banking laws and regulations.

The Bank believes, based on the advice of its counsel, that it may perform the
services for the Funds 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 affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Funds.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative investment advisers and means of continuing
available investment services. In such event, changes in the operation of the
Funds may occur, including possible termination of any automatic or other Fund
share investment and redemption services then being provided by the Bank. It is
not expected that shareholders would suffer any adverse financial consequences
(if another adviser with equivalent abilities to the Bank is found) as a result
of any of these occurrences.

Tax Information
- --------------------------------------------------------------------------------

Federal Income Tax

The Funds expect to pay no federal income tax because they intend to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by either of the Funds.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.

State and Local Taxes

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 Funds may advertise their yield and effective yield.

Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized amount of dividends earned during the
period on an investment shown as a percentage of the investment. The effective
yield is calculated similarly to the yield, but when annualized, the income
earned by an investment is assumed to be reinvested daily. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.

Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.

From time to time, the Funds may advertise their performance using certain
financial publications and/or compare their performance to certain indices.

Peachtree Government Money Market Fund
(A Portfolio of Peachtree Funds)
Statement of Assets and Liabilities
January 3, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
- ------------------------------------------------------------------------------------------------------
Cash $100,000
- ------------------------------------------------------------------------------------------------------
Liabilities: 1/2
- ------------------------------------------------------------------------------------------------------ ----------
Net Assets for 100,000 shares of beneficial interest outstanding $100,000
- ------------------------------------------------------------------------------------------------------ ----------
Net Asset Value, Offering Price, and Redemption Price Per Share ($100,000 / 100,000 shares of
beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ ----------
</TABLE>

Notes:

(1) Peachtree Funds (the "Trust"), which includes Peachtree Government Money
Market Fund (the "Fund"), was established as a Massachusetts business trust
under a Declaration of Trust dated September 22, 1993, as amended and
restated dated December 20, 1993. The Fund has had no operations since that
date other than those relating to organizational matters, including the
issuance on January 3, 1994, of 100,000 shares at $1.00 per share to
Federated Administrative Services, the Administrator to the Fund. Expenses
of organization incurred by the Fund, $41,500, were borne initially by the
Administrator. The Fund has agreed to reimburse the Administrator for the
organization expenses initially borne by the Administrator during the
five-year period following the date the Fund's registration statement first
became effective.

Report of Ernst & Young, Independent Auditors
- --------------------------------------------------------------------------------

To the Board of Trustees and Shareholders of
Peachtree Funds:

We have audited the accompanying statement of assets and liabilities of
Peachtree Government Money Market Fund, as of January 3, 1994. This statement of
assets and liabilities is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities presents fairly, in all
material respects, the net assets of the Peachtree Government Money Market Fund
as of January 3, 1994 in conformity with generally accepted accounting
principles.

ERNST & YOUNG

Pittsburgh, Pennsylvania
January 5, 1994

Addresses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Peachtree Prime Money Market Fund Federated Investors Tower
Peachtree Government Money Market Fund Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------

Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------

Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

Peachtree Bond Fund
(A Portfolio of Peachtree Funds)
Prospectus

The shares of the Peachtree Bond Fund (the "Fund") offered by this Prospectus
represent interests in a diversified portfolio of Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to achieve current income. The Fund pursues this
objective by investing primarily in a portfolio of long-term bonds and other
fixed income securities.

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 February 28,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
Prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing to the Bank South, N.A. (the "Bank") Mutual Funds Center or calling
1-800-282-6680 extension 4550.

SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT ISSUED,
ENDORSED OR GUARANTEED BY, THE BANK OR ANY OF ITS AFFILIATES. SUCH SHARES ARE
NOT ISSUED, INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.

THE BANK IS THE INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.

February 28, 1994

Table of Contents
- --------------------------------------------------------------------------------

Summary of Fund Expenses 1
- ------------------------------------------------------

General Information 2
- ------------------------------------------------------

Investment Information 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Government Securities 3
Mortgage-Backed Securities 4
ARMS 4
CMOs 5
Asset-Backed Securities 5
Options and Futures 5
Obligations of Foreign Issuers 6
Foreign Government Securities 6
Repurchase Agreements 6
Restricted and Illiquid Securities 6
When-Issued and Delayed Delivery
Transactions 6
Investing in Securities of
Other Investment Companies 6
Lending of Portfolio Securities 7
Average Portfolio Maturity 7
Temporary Investments 7
Foreign Securities Risks 7
Portfolio Turnover 7
Certain Borrowing and Investment Limitations 8

Peachtree Funds Information 8
- ------------------------------------------------------

Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 9
Portfolio Manager 9
Distribution of Fund Shares 9
Distribution Plan 9
Administrative Arrangements 10
Administration of the Trust 10
Administrative Services 10
Shareholder Services Plan 10
Custodian 11
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 11
Legal Counsel 11
Independent Auditors 11
Expenses of the Fund 11

Net Asset Value 11
- ------------------------------------------------------

Investing in the Fund 11
- ------------------------------------------------------

Share Purchases 11
By Telephone 12
By Mail 12
Payment By Check 12
Payment By Wire 12
Minimum Investment Required 12
Systematic Investment Program 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Quantity Discounts and Accumulated
Purchases 13
Letter of Intent 13
Reinvestment Privilege 14
Concurrent Purchases 14
Certificates and Confirmations 14
Dividends and Distributions 14
Purchasing Fund Shares with Securities 14

Exchange Privilege 15
- ------------------------------------------------------

Peachtree Funds 15
By Telephone 16

Redeeming Shares 16
- ------------------------------------------------------

By Telephone 16
By Mail 17
Signatures 17
Receiving Payment 17
Redemption Before Purchase
Instruments Clear 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18

Shareholder Information 18
- ------------------------------------------------------

Voting Rights 18
Massachusetts Partnership Law 18

Effect of Banking Laws 19
- ------------------------------------------------------

Tax Information 19
- ------------------------------------------------------

Federal Income Tax 19
State and Local Taxes 20

Performance Information 20
- ------------------------------------------------------

Addresses Inside Back Cover
- ------------------------------------------------------

Peachtree Bond Fund
Summary of Fund Expenses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................................... 2.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee............................................................................................ None

Annual Fund Operating Expenses*
(As a percentage of projected average net assets)
Management Fee.......................................................................................... 0.75%
12b-1 Fees(1)........................................................................................... 0.00%
Other Expenses (after waiver)(2)........................................................................ ]0.27%
Total Fund Operating Expenses(3).................................................................... 1.02%
</TABLE>

- ---------
(1) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund can pay up to 0.75% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Fund (which would not have a Rule 12b-1 plan) is created and such
clients' investments in the Fund are converted to such Trust class.

(2) Total Other Expenses are estimated to be 0.28% absent the anticipated
voluntary waiver by the transfer agent.

(3) The Total Fund Operating Expenses are estimated to be 1.03% absent the
anticipated voluntary waiver by the transfer agent.

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 "Peachtree Funds Information" and "Investing in the Fund." Wire
transfer redemptions may be subject to an additional fee.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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. As noted in the table above, the Fund charges no
redemption fees................................................................................ $35 $57
</TABLE>

General Information
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
1993. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. This Prospectus relates only to the Trust's Peachtree Bond Fund. The
Fund is designed as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio consisting primarily of
government, mortgage-backed, asset-backed and corporate securities, as well as
collateralized mortgage obligations ("CMOs") and adjustable rate mortgage
securities ("ARMS"). A minimum initial investment of $1,000 is required ($500
for Individual Retirement Accounts ("IRAs")) and subsequent investments must be
in amounts of at least $100. See "Investing in the Fund."

Fund shares are sold at net asset value plus a maximum sales charge of 2.50% and
redeemed at net asset value.

Investment Information
- --------------------------------------------------------------------------------

Investment Objective

The Fund's investment objective is to achieve current income. The investment
objective cannot be changed without the approval of the Fund's shareholders.
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.

Investment Policies

The Fund pursues its investment objective by investing primarily in a portfolio
of U.S. government, mortgage-backed, asset-backed and corporate bonds and other
securities as well as CMOs and ARMS. Under normal market conditions, the Fund
will invest at least 65% of its assets in bonds. The Fund intends to maintain a
dollar-weighted average portfolio maturity of 15 years or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without the
approval of Fund shareholders. Shareholders will be notified before any material
change in these policies becomes effective.

Acceptable Investments. The securities in which the Fund may invest include,
but are not limited to:

domestic issues of corporate debt obligations, so long as such debt
obligations are rated by one or more nationally recognized statistical
rating organizations ("Rating Agencies") in one of the four highest rating
categories at the time of purchase (e.g., AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or
Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's")) or, if unrated, determined by
Bank South, N.A. (the "Adviser") to be of comparable quality to securities
having such ratings;

commercial paper (including asset-backed commercial paper) which matures
in 270 days or less so long as at least two ratings are high quality
ratings by Rating Agencies. Such ratings would include: A-1 or A-2 by S&P,
Prime-1 or Prime-2 by Moody's, F-1 or F-2 by Fitch, or Duff-1 or Duff-2 by
Duff & Phelps;

obligations issued or guaranteed as to payment of principal and interest
by the U.S. government, or its agencies or instrumentalities ("Government
Securities");

asset-backed securities in one of the two highest ratings categories by a
Rating Agency, or if unrated, of comparable quality in the judgment of the
Adviser;

U.S. dollar denominated debt obligations of foreign issuers;

repurchase agreements;

time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF"),
which are administered by the Federal Deposit Insurance Corporation
("FDIC"), and certificates of deposit and other time deposits issued by
foreign branches of BIF-insured banks;

bankers' acceptances; and

securities of other investment companies.

Securities rated Baa or BBB, while of investment grade, have speculative
characteristics with respect to the issuer's capacity to pay interest and repay
principal. If an investment grade security loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell the
security from its portfolio; however, the Adviser will endeavor to dispose of
the security as soon as practicable thereafter, taking into account existing
market conditions and the cost of such sale, including potential losses. A
credit rating is not a recommendation to buy, sell or hold securities, and is
subject to change and/or withdrawal by the rating agency.

The Adviser attempts to manage the Fund's total performance, which includes both
changes in principal value of the Fund's portfolio and income earned, by
anticipating opportunities in the capital markets and risks of changes in market
interest rates. When the Adviser expects that market interest rates may decline,
which would cause prices of outstanding bonds to rise, it generally extends the
average maturity of the Fund's portfolio. When the Adviser expects that market
interest rates may rise, which would cause prices of outstanding bonds to
decline, it generally shortens the average maturity of the Fund's portfolio.
Further, the Adviser attempts to improve the Fund's total return by weighing the
relative value of alternative bond issues having similar maturities in selecting
portfolio securities. By actively managing the Fund's portfolio in this manner,
the Adviser seeks to provide capital appreciation during periods of falling
interest rates and protection against capital depreciation during periods of
rising rates.

Government Securities. The types of Government Securities in which the Fund may
invest generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by U.S.
government agencies or instrumentalities. These securities are backed by:

the full faith and credit of the U.S. Treasury;

the issuer's right to borrow from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

Federal Home Loan Banks;

Federal Home Loan Mortgage Corporation;

Federal Farm Credit Banks;

Student Loan Marketing Association; and

Federal National Mortgage Association.

Mortgage-Backed Securities. Some of the U.S. Government Securities in which the
Fund will invest can represent an undivided interest in a pool of residential
mortgages or may be collateralized by a pool of residential mortgages
("Mortgage-backed securities"). Mortgage-backed securities have yield and
maturity characteristics corresponding to the underlying mortgages.
Distributions to holders of mortgage-backed securities include both interest and
principal payments. Principal payments represent the amortization of the
principal of the underlying mortgages and any prepayments of principal due to
prepayment, refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective maturities of
mortgage-backed securities. Due to these features, mortgage-backed securities
are less effective as a means of "locking-in" attractive long-term interest
rates than fixed-income securities which pay only a stated amount of interest
until maturity, when the entire principal amount is returned. Prepayments, which
become more likely as mortgage interest rates decline, create a need to reinvest
distribution of principal at then-current lower rates. Since comparatively high
interest rates cannot be effectively "locked in", mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
Mortgage-backed securities utilizing ARMS may fluctuate less in value and suffer
fewer prepayments than mortgage-backed securities utilizing fixed rate
mortgages.

ARMS. ARMS are mortgage-backed securities representing interests in adjustable
rather than fixed interest rate mortgages. The Fund invests in ARMS issued by
the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC"), and by non-government and private entities and are actively traded.
The underlying mortgages which collateralize ARMS issued by GNMA are fully
guaranteed by the Federal Housing Administration ("FHA") or Veterans
Administration ("VA"), while those collateralizing ARMS issued by FHLMC or FNMA
are typically conventional residential mortgages conforming to strict
underwriting size and maturity constraints.

CMOs. CMOs are debt obligations collateralized by mortgage loans or
mortgage-backed securities. Typically, CMOs are collateralized by GNMA, FNMA or
FHLMC certificates, but may be collateralized by whole loans or private
mortgage-backed securities.

The Fund will only invest in CMOs which are rated AAA by a Rating Agency, and
which may be: (a) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of mortgages
in which payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. Government Securities; (c) securities in
which the proceeds of the issuance are invested in mortgage securities and the
payment of the principal and interest is supported by the credit of an agency or
instrumentality of the U.S. government; or (d) collateralized by pools of
mortgages or mortgage-backed securities not guaranteed by the U.S. government or
any government agency.

Asset-Backed Securities. Asset-backed securities are obligations of trusts or
special purpose corporations that directly or indirectly represent a
participation in, or are secured by and payable from various types of assets. At
the present time, automobile and credit card receivables are among the most
common collateral supporting asset-backed securities. In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans
and is less likely to experience substantial prepayments. As with
mortgage-backed securities, asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties and use
similar credit enhancement techniques.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of asset-backed securities backed by automobile receivables permit the
servicers of such receivables to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related asset-backed securities. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of asset-backed
securities backed by automobile receivables may not have a recorded security
interest in all of the obligations backing such receivables. Therefore, there is
a possibility that recoveries on repossessed collateral may not, in some cases,
be available to support payments on these securities.

In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the Adviser considers any rating
given to such securities, the financial strength of the provider of credit
support, the type and extent of credit enhancement provided, as well as the
documentation and structure of the issue itself and the credit support.

Options and Futures. The Fund may purchase and sell financial futures contracts
and purchase and sell options on financial futures contracts and on its
portfolio securities.

Obligations of Foreign Issuers. The Fund may invest in debt obligations of
foreign issuers including foreign governments, foreign governmental agencies, or
supranational institutions. In addition, the Fund may invest in high quality
debt securities issued by corporations subject to the credit limitations listed
above.

Foreign Government Securities. The foreign government securities in which
the Fund may invest generally consist of obligations supported by national,
state or provincial governments or similar political subdivisions. Foreign
government securities also include debt obligations of supranational
entities, which include international organizations designed or supported
by governmental entities to promote economic reconstruction or development,
international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development
(the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank.

Foreign government securities also include debt securities of
"quasi-governmental agencies". Debt securities of quasi-governmental
agencies are either debt securities issued by entities which are owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit
and general taxing powers. Further, foreign government securities include
mortgage-related securities issued or guaranteed by national, state or
provincial government instrumentalities, including quasi-governmental
agencies.

Repurchase Agreements. Repurchase agreements are arrangements in which banks,
broker-dealers, and other financial institutions sell securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price including interest. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. Repurchase agreements will be collateralized by
securities having a value equal at all times to at least 100% of the amount of
the securities subject to the repurchase agreement.

Restricted and Illiquid Securities. The Fund intends to 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 on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice, to 15% of its net assets.

When-Issued and Delayed Delivery Transactions. The Fund may purchase portfolio
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.

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in the aggregate.
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. It should be noted that investment companies incure certain
expenses, and therefore, any investment by the Fund in shares of another
investment Company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.

Lending of Portfolio Securities. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, to
broker-dealers, banks, or other institutional borrowers of securities. The Fund
will limit the amount of portfolio securities it may lend to not more than 50%
of the value of its total assets at any time. The Fund will only enter into loan
arrangements with broker-dealers, banks, or other institutions which the Adviser
has determined are creditworthy under guidelines established by the Trustees,
and will receive collateral equal to at least 100% of the value of the
securities loaned at all times.

Average Portfolio Maturity. Although the Fund will not maintain a stable net
asset value, the Adviser will seek to limit, to the extent consistent with the
Fund's investment objective of current income, the magnitude of fluctuations in
the Fund's net asset value by limiting the dollar-weighted average maturity of
the Fund's portfolio to 15 years or less. Securities with shorter maturities
generally have less price movement than securities of comparable quality with
longer maturities. In periods of anticipated rising interest rates, a greater
portion of the Fund's assets may be invested in shorter term and variable rate
securities, the value of which are believed to be less sensitive to interest
rate changes.

Temporary Investments. From time to time for defensive purposes, the Fund may
invest temporarily in the securities described under "Acceptable Investments"
having short-term maturities.

Foreign Securities Risks. Investments in foreign securities, particularly those
of non-governmental issuers, may involve additional risks not ordinarily
associated with investments in domestic issuers. Specifically, such securities
may be affected by the strength of foreign currencies relative to the U.S.
Dollar, possible expropriation or nationalization, or by political, social,
diplomatic or economic developments and the difficulties of assessing economic
trends in foreign countries. Accounting procedures and government supervision
may be less stringent than those applicable to U.S. companies. Financial
information may be unavailable or less detailed, and interpretation of financial
information prepared under foreign accounting standards more difficult than is
the case of domestic issuers. Foreign securities and securities markets may be
less liquid or more volatile than U.S. securities markets and may offer less
protection to investors. It may also be more difficult to enforce contractual
obligations abroad than would be the case in the United States because of
differences in the legal systems. Foreign securities may be subject to foreign
taxes or tax withholding, which may reduce yield, and may be less marketable
than comparable U.S. securities. Transaction costs in foreign securities may be
higher. The Adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.

Portfolio Turnover. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Adviser does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200% under normal market conditions. A high
portfolio turnover rate may lead to increased costs and may also result in
higher taxes paid by the Fund's shareholders.

Certain Borrowing and 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 33 1/3% of the value of its total assets and secure such
borrowings with up to 15% of the value of those assets at the time of
borrowing; or

with respect to 75% of its total assets, invest more than 5% of the value
of its total assets in securities of any one issuer (other than cash, cash
items, or securities issued or guaranteed by the U.S. government and its
agencies or instrumentalities, and repurchase agreements collateralized by
such securities or acquire more than 10% of the outstanding voting
securities of any one issuer).

The above investment limitations cannot be changed without shareholder approval.

Peachtree Funds Information
- --------------------------------------------------------------------------------

Management of the Trust

Investment Adviser. Investment decisions for the Fund are made by the Bank as
the Fund's investment adviser (the "Adviser"), subject to direction by the
Board. The Adviser 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 Fund's assets. From time to time, to the extent
consistent with the investment objective, policies and restrictions of the Fund,
the Fund may invest in securities of issuers with which the Adviser has a
lending relationship. However, at this time, the Adviser has no intention to
invest in securities of issuers that have a lending relationship with the
investment Adviser or its affiliates.

Advisory Fees. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee
paid by certain other mutual funds, is comparable to fees paid by many
mutual funds with similar objectives and policies. The Adviser has
undertaken to reimburse the Fund, up to the amount of the advisory fee, for
operating expenses in excess of limitations established by certain states.
The Adviser may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.

The Adviser has managed discretionary assets for its customers since 1931.
As of September 30, 1993 the Adviser managed in excess of $1 billion of
discretionary assets. Prior to the date hereof, the Adviser has not served
as an investment adviser to mutual funds.

Portfolio Manager. Mr. J.M. Johnston, Jr. is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Johnston began at the
Adviser in September of 1992. Mr. Johnston directs the investment
management of the employee benefit plans, fixed income fund, and personal
trusts. He is also responsible for securities analysis for various
industries.

Mr. Johnston began his investment career in 1981. Prior to his affiliation
with the Bank, he spent six years with The Citizens & Southern National
Bank, Atlanta, Georgia as a portfolio manager.

Mr. Johnston holds a Bachelor of Science degree from the University of
Alabama and a Master of Business Administration in Finance from Georgia
State University. He is a member of the Atlanta Society of Financial
Analysts.

Distribution of Fund Shares

Federated Securities Corp. (the "Distributor") is the principal distributor for
shares of the Fund. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies. The
Distributor is a subsidiary of Federated Investors.

Distribution Plan. Under a distribution plan (the "Plan") adopted in accordance
with Securities and Exchange Commission ("SEC") Rule 12b-1 under the Investment
Company Act of 1940, as amended, the Fund will pay an amount computed at an
annual rate of up to 0.75% of the average daily net asset value of the shares to
finance any activity which is principally intended to result in the sale of
shares subject to the Plan. Certain trust clients of the Bank, including ERISA
plans, will not be affected by the Plan because the Plan will not be activated
unless and until a second, "Trust" class of shares of the Fund (which would not
have a Rule 12b-1 plan) is created and such trust clients' investments in the
Fund are converted to such Trust class.

The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These
financial institutions (including the Bank) will receive fees from the
Distributor based upon shares subject to the Plan and owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Distributor.

The Fund's Plan is a compensation type plan. As such, the Fund pays the
Distributor the fee described above as opposed to reimbursing the Distributor
for actual expenses incurred. Therefore, the Fund does not pay for amounts
expended by the Distributor in excess of amounts received by it from the Fund,
which may include interest, carrying or other financing charges in connection
with excess amounts expended, or the Distributor's overhead expenses. However,
the Distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.

Administration of the Trust

Administrative Services. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Fund. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:

<TABLE>
<CAPTION>
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$100,000 per Fund. Federated Administrative Services may voluntarily choose to
waive a portion of its fee.

Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Fund to provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of the shares. In
return for providing these support services, a financial institution may receive
payments from the Fund at a rate not exceeding 0.25% of the average daily net
assets of the shares benefically owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Fund; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Fund reasonably requests.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Fund (which would not have a
Services Plan) is created and such trust clients' investments in the Fund are
converted to such Trust class.

Custodian. The Bank of New York, New York, New York is custodian for the
securities and cash of the Fund.

Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent (the "Transfer Agent") for the shares of, and
dividend disbursing agent for, the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

Legal Counsel. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.

Independent Auditors. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.

Expenses of the Fund

The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and other
Fund documents for shareholders; registering the Trust, the Fund, and shares of
the Fund with federal and state securities authorities; taxes and commissions;
issuing, purchasing, repurchasing, and redeeming shares; fees for custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing, mailing, auditing, accounting, and legal expenses; reports
to shareholders and governmental agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; insurance premiums; association membership
dues; and such nonrecurring and extraordinary items as may arise.

Net Asset Value
- --------------------------------------------------------------------------------

The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.

Investing in the Fund
- --------------------------------------------------------------------------------

Share Purchases

Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be purchased
through the Bank. In connection with the sale of shares of the Fund, 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.

By Telephone. To place an order to purchase Fund shares, call the Bank South
Mutual Funds Center toll free at 1-800-282-6680 extension 4550. Texas residents
must purchase shares of the Fund through Bank South Securities Corporation at
404-521-7063. Your purchase order will be taken directly over the telephone. The
order must be place by 4:00 p.m. (Eastern time) for shares to be purchased at
that day's price.

By Mail. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to the Fund.

Payment by Check. Mail to Peachtree Bond Fund, c/o Bank South Mutual Funds
Center, MC 16, P.O. Box 4387, Atlanta, Georgia 30302.

Payment by Wire. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Fund, the Bank, and the Federal Reserve Banks are open for business.

Minimum Investment Required

The minimum initial investment in the Fund by an investor is $1,000 ($500 for
IRAs). Subsequent investments must be in amounts of at least $100. The Fund may
choose to waive its minimum investment requirements from time to time and for
accounts which select the Systematic Investment Program.

Systematic Investment Program

Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $100, unless waived. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking or other transaction deposit account and invested in Fund shares at the
net asset value next determined after an order is received by the Bank, plus an
applicable sales charge. A shareholder may apply for participation in this
program through the Bank.

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 Sales Charge as
a Percentage a Percentage
of Public of Net Amount
Amount of Transaction Offering Price Invested
<S> <C> <C>
Less than $100,000 2.50% 2.56%
$100,000 but less than $250,000 2.00% 2.04%
$250,000 but less than $500,000 1.50% 1.52%
$500,000 but less than $750,000 1.00% 1.01%
$750,000 but less than $1,000,000 0.50% 0.50%
$1,000,000 and more 0.00% 0.00%
</TABLE>

The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which changes (if any) in the value of the Fund's
portfolio securities do not materially affect its net asset value; (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 certain trust customers of the Bank and
current and retired directors, advisory committee members and employees of the
Bank and its affiliates and their spouses and children under 21.

Sales Charge Reallowance. The Bank and any authorized dealer or bank will
normally receive up to 85% of the applicable sales charge as a transaction fee
from its customers, and for sales and/or administrative services performed on
behalf of its customers in connection with the initiation of customer accounts
and purchases of Fund shares. Any portion of the sales charge which is not paid
to the Bank or a dealer will be retained by the Distributor. The Distributor
will, periodically, uniformly offer to pay cash, or promotional incentives in
the form of trips to sales seminars at luxury resorts, tickets or other items,
to all dealers selling shares of the Fund. Such payments will be predicated upon
the amount of shares of the Fund that are sold by the dealer.

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;

using the reinvestment privilege; or

concurrent purchases.

Quantity Discounts and Accumulated Purchases. As shown in the table on the
previous page, 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 $90,000 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 2.00%,
not 2.50%.

To receive the sales charge reduction, the Bank must be notified by the
shareholder in writing at the time the purchase is made that shares are already
owned or that purchases are being combined. The Fund will reduce the sales
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 2.50% 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 the shareholder 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.

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. The
Bank 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 his shares in the Fund, there may be tax
consequences.

Concurrent Purchases. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.

To receive this sales charge reduction, the Distributor must be notified by the
shareholder in writing or by the Bank at the time the concurrent purchases are
made. The Fund will reduce the sales charge after it confirms the purchases. See
"What Shares Cost" and "Addresses".

Certificates and Confirmations

The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued unless requested in writing from
the Fund or the Transfer Agent.

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 daily and paid monthly to all shareholders invested in
the Fund on the record date.

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 a shareholder makes written request for cash payments to
the Fund or the Bank.

Purchasing Fund Shares with Securities

The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values its assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.

Exchange Privilege
- --------------------------------------------------------------------------------

Peachtree Funds

All shareholders of the Fund are shareholders of Peachtree Funds. Peachtree
Funds currently include the Fund, Peachtree Equity Fund, Peachtree Georgia
Tax-Free Income Fund, Peachtree Prime Money Market Fund, and Peachtree
Government Money Market Fund. Shareholders have easy access to each of the
portfolios of Peachtree Funds through a telephone exchange program. All
Peachtree Funds are advised by the Bank and distributed by the Distributor.

Shareholders may exchange shares of the Fund for shares of the other Peachtree
Funds in the Trust. In addition, shares of the Fund may also be exchanged for
certain other funds designated by the Bank which are distributed by the
Distributor, but are not advised by the Bank ("Federated Funds"). For further
information on the availability of Federated Funds for exchanges, please call
the Bank South Mutual Funds Center at 1-800-282-6680 extension 4550. Shares of
funds with a sales charge may be exchanged at net asset value for shares of
other funds with an equal sales charge or no sales charge. Shares of funds with
a sales charge may be exchanged for shares of funds with a higher sales charge
at net asset value, plus the additional sales charge. Shares of funds with no
sales charge, whether acquired by direct purchase, reinvestment of dividends on
such shares, or otherwise, may be exchanged for shares of funds with a sales
charge at net asset value, plus the applicable sales charge.

The Fund reserves the right to terminate the exchange privilege at any time on
60 days notice. Shareholders will be notified if this privilege is terminated. A
shareholder may obtain further information on the exchange privilege by calling
the Bank at 1-800-282-6680 extension 4550.

By Telephone. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Bank South Mutual Funds Center at
1-800-282-6680 extension 4550; or to the Distributor. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.

Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Fund's Transfer Agent by the Bank and deposited to the
shareholder's mutual fund account before being exchanged. See "Addresses".

An authorization form permitting the Fund to accept telephone exchanges must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information regarding this service are
available from the Bank. Telephone exchange 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.

Redeeming Shares
- --------------------------------------------------------------------------------

The Fund redeems shares at their net asset value next determined after the Bank
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 and can be made through the Bank or directly to
the Fund.

By Telephone. A shareholder may redeem shares of the Fund by contacting his
account officer or by calling the Bank South Mutual Funds Center to request the
redemption. (Call 1-800-282-6680 extension 4550.) Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the Bank. Redemption requests to the Bank must be received before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value,
and the Bank will promptly submit such redemption requests and provide written
redemption instructions to the Fund. If, at any time, the Fund should determine
it necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.

An authorization form permitting the Fund to accept telephonic redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service are
available from the Bank. 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.

A shareholder may have the redemption proceeds directly deposited by electronic
funds transfer or wired directly to a domestic commercial bank previously
designated by the shareholder. Wire redemption orders will only be accepted on
days on which the Fund, the Bank and the Federal Reserve Wire System are open
for business. Wire-transferred redemptions may be subject to an additional fee.

By Mail. Shareholders may redeem shares by sending a written request to the
Bank. 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 to the Bank.
Shareholders should call the Bank for assistance in redeeming shares by mail.

Signatures. Shareholders requesting a redemption of $50,000 or more, a
redemption requesting payment to an address other than that on record with the
Fund, or other than to the shareholder of record must make written redemption
requests with signatures guaranteed by:

a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.

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.

Redemption Before Purchase Instruments Clear

When shares are purchased by check or through an Automated Clearing House
("ACH"), the proceeds from the redemption of those shares are not available, and
the shares may not be exchanged, until the Bank is reasonably certain that the
check or clearing house funds have cleared, which could take up to 10 calendar
days.

Systematic Withdrawal Program

Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments and the
amount of dividends paid with respect to Fund shares, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in the Fund. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through the Bank.

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, due to
shareholder redemptions, the account balance falls below the required minimum of
$1,000.

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 entitles shareholders to one vote in Trustee elections
and other matters submitted to shareholders of the Trust for vote. All shares of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular Fund, only shareholders of that Fund are entitled to
vote. 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.

Any Trustee may be removed by the Board or by the shareholders at a special
meeting. A special meeting of the shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the Trust's
outstanding shares.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, 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 the Trust or its
Trustees enter into or sign on behalf of the Fund.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from assets
of the Fund.

Effect of Banking Laws
- --------------------------------------------------------------------------------

Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting or
distributing securities. However, such banking laws and regulations do not
prohibit such a holding company affiliate or bank generally from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from acting as agent for their customers in purchasing securities. The Fund's
Adviser, the Bank, is subject to such banking laws and regulations.

The Bank believes, based on the advice of its counsel, that it may perform the
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 affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative advisers and means of continuing available
investment services. In such event, changes in the operation of the Fund may
occur, including possible termination of any automatic or other Fund share
investment and redemption services then being provided by the Bank. It is not
expected that existing shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to the Bank 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 intends to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.

State and Local Taxes

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 may advertise its total return and yield.

Total return represents the change, over a specified period of time, in the
value of an investment in the Fund 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 each day by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a 30-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 yield
does not necessarily reflect income actually earned by the Fund and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.

From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.

Addresses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Peachtree Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------

Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------

Peachtree Bond Fund
Prospectus

A Diversified Portfolio of
Peachtree Funds, an Open-End
Management Investment Company

Prospectus dated February 28, 1994

3092205A (2/94)

Peachtree Equity Fund
(A Portfolio of Peachtree Funds)
Prospectus

The shares of the Peachtree Equity Fund (the "Fund") offered by this Prospectus
represent interests in a diversified portfolio of Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to achieve long-term growth of capital and income. The
Fund pursues this objective by investing primarily in a portfolio of common
stocks of United States issuers.

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 February 28,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing to the Bank South, N.A. (the "Bank") Mutual Funds Center or calling
1-800-282-6680 extension 4550.

SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT ISSUED,
ENDORSED OR GUARANTEED BY, BANK SOUTH, N.A. OR ANY OF ITS AFFILIATES. SUCH
SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.

THE BANK IS THE INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.

February 28, 1994

Table of Contents
- --------------------------------------------------------------------------------

Summary of Fund Expenses 1
- ------------------------------------------------------

General Information 2
- ------------------------------------------------------

Investment Information 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Common Stocks 2
Other Corporate Securities 3
U.S. Government Securities 3
Options and Futures 3
Foreign Securities 3
Repurchase Agreements 3
When-Issued and Delayed Delivery
Transactions 3
Investing in Securities of
Other Investment Companies 3
Lending of Portfolio Securities 4
Temporary Investments 4
Restricted and Illiquid Securities 4
Certain Borrowing and Investment Limitations 4

Peachtree Funds Information 5
- ------------------------------------------------------

Management of the Trust 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 5
Adviser's Background 5
Portfolio Manager 6
Distribution of Fund Shares 6
Distribution Plan 6
Administrative Arrangements 7
Administration of the Trust 7
Administrative Services 7
Shareholder Services Plan 7
Custodian 7
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 8
Legal Counsel 8
Independent Auditors 8
Expenses of the Fund 8
Brokerage Transactions 8

Net Asset Value 8
- ------------------------------------------------------

Investing in the Fund 8
- ------------------------------------------------------

Share Purchases 8
By Telephone 9
By Mail 9
Payment by Check 9
Payment by Wire 9
Minimum Investment Required 9
Systematic Investment Program 9
What Shares Cost 9
Purchases at Net Asset Value 10
Sales Charge Reallowance 10
Reducing the Sales Charge 10
Quantity Discounts and Accumulated
Purchases 10
Letter of Intent 11
Reinvestment Privilege 11
Concurrent Purchases 11
Certificates and Confirmations 11
Dividends and Distributions 12
Purchasing Fund Shares with Securities 12

Exchange Privilege 12
- ------------------------------------------------------

Peachtree Funds 12
By Telephone 13

Redeeming Shares 14
- ------------------------------------------------------

By Telephone 14
By Mail 14
Signatures 14
Receiving Payment 15
Redemption Before Purchase Instruments
Clear 15
Systematic Withdrawal Program 15
Accounts with Low Balances 15

Shareholder Information 16
- ------------------------------------------------------

Voting Rights 16
Massachusetts Partnership Law 16

Effect of Banking Laws 16
- ------------------------------------------------------

Tax Information 17
- ------------------------------------------------------

Federal Income Tax 17
State and Local Taxes 17

Performance Information 17
- ------------------------------------------------------

Addresses Inside Back Cover
- ------------------------------------------------------

Peachtree Equity Fund
Summary of Fund Expenses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................................... 3.75%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable).................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee............................................................................................ None

Annual Fund Operating Expenses*
(As a percentage of projected average net assets)
Management Fee.......................................................................................... 0.75%
12b-1 Fees(1)........................................................................................... 0.00%
Other Expenses (after waiver)(2)........................................................................ 0.25%
Total Fund Operating Expenses(3).................................................................... 1.00%
</TABLE>

(1) As of the date of this Prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund can pay up to 0.75% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Fund (which would not have a Rule 12b-1 plan) is created and such trust
clients' investments in the Fund are converted to such Trust class.

(2) Total Other Expenses are estimated to be 0.27% absent the anticipated
voluntary waiver by the transfer agent.

(3) The Total Fund Operating Expenses are estimated to be 1.02% absent the
anticipated voluntary waiver by the transfer agent.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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. As noted in the table above, the Fund charges no
redemption fees................................................................................ $47 $68
</TABLE>

General Information
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
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.
This Prospectus relates only to the Trust's Peachtree Equity Fund. The Fund is
designed as a convenient means of accumulating an interest in a professionally
managed, diversified portfolio consisting primarily of common stocks of United
States issuers. A minimum initial investment of $1,000 is required ($500 for
Individual Retirement Accounts ("IRAs")), and subsequent investments must be in
amounts of at least $100. See "Investing in the Fund".

Fund shares are sold at net asset value plus a maximum sales charge of 3.75% and
redeemed at net asset value.

Investment Information
- --------------------------------------------------------------------------------

Investment Objective

The Fund's investment objective is to achieve long-term growth of capital and
income. The investment objective cannot be changed without the approval of the
Fund's shareholders. 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.

Investment Policies

The Fund pursues its investment objective by investing in the securities of high
quality companies. Emphasis is placed on stocks where the market price of the
stock appears low when compared to present earnings. The Fund's investment
approach is based on the conviction that, over the long term, the economy will
continue to expand and develop and that this economic growth will be reflected
in the growth of the revenues and earnings of publicly-held corporations. Unless
indicated otherwise, the investment policies of the Fund may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.

Acceptable Investments. The securities in which the Fund invests include, but
are not limited to:

Common Stocks. The Fund invests primarily in common stocks of companies
selected by the Fund's investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects of
the companies. Ordinarily, these companies will be in the top 30% of their
industries with regard to revenues. However, other factors such as product
position, market share, potential earnings growth, or asset values will be
considered by the investment adviser and may outweigh revenues. At least 65% of
the Fund's portfolio will be invested in common stocks, unless it is in a
defensive position.

Other Corporate Securities. The Fund may invest in preferred stocks,
convertible securities, notes rated A or better by Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff & Phelps Credit Rating Co. or Fitch
Investors Service, Inc., or securities deemed by the investment adviser to be of
comparable quality to securities having such ratings, and warrants of these
companies. Corporate fixed income securities are subject to market and credit
risks. If any note invested in by the Fund loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell or
otherwise dispose of the security, but may consider doing so.

U.S. Government Securities. The Fund may invest in U.S. government securities
and obligations of U.S. government agencies and instrumentalities.

Options and Futures. The Fund may purchase and sell financial futures contracts
and purchase and sell options on financial futures contracts and on its
portfolio securities.

Foreign Securities. The Fund may invest in foreign securities which are traded
publicly in the United States. Investments in foreign securities, particularly
those of non-governmental issuers, involve considerations which are not
ordinarily associated with investments in domestic issuers. These considerations
include the possibility of expropriation or nationalization, exchange rate
fluctuations, foreign taxation and withholding, the unavailability of financial
information or the difficulty of interpreting financial information prepared
under foreign accounting standards, less liquidity and more volatility in
foreign securities markets, the impact of political, social, or diplomatic
developments, and the difficulty of assessing economic trends in foreign
countries. It may also be more difficult to enforce contractual obligations
abroad than would be the case in the United States because of differences in the
legal systems. Transaction costs in foreign securities may be higher. The Fund's
investment adviser will consider these and other factors before investing in
foreign securities and will not make such investments unless, in its opinion,
such investments will meet the Fund's standards and objectives.

Repurchase Agreements. Repurchase agreements are arrangements in which banks,
broker-dealers and other financial institutions sell securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price including interest. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. Repurchase agreements will be collateralized by
securities having a value equal at all times to at least 100% of the amount of
the securities subject to the repurchase agreement.

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in the aggregate.
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. It should be noted that investment companies incur certain
expenses, and therefore, any investment by the Fund in Shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.

Lending of Portfolio Securities. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, to
broker-dealers, banks, or other institutional borrowers of securities. The Fund
will limit the amount of portfolio securities it may lend to not more than 50%
of its total assets at any time. The Fund will only enter into loan arrangements
with broker-dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Board of
Trustees, and will receive collateral equal to at least 100% of the value of the
securities loaned at all times.

Temporary Investments. For defensive purposes only, the Fund may also invest
temporarily in cash and money market instruments during times of unusual market
conditions. These investments include the following:

prime commercial paper, including master demand notes;

instruments of domestic and U.S. dollar denominated foreign banks and
savings and loans (such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances);

securities issued and/or guaranteed as to payment of principal and
interest by the U.S. government, its agencies, or instrumentalities;

repurchase agreements;

securities of other investment companies; and

other short-term money market instruments.

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 on resale under federal securities law. However, the Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice to 15% of its net assets.

Certain Borrowing and Investment Limitations

The Fund will not:

engage in short sales; or

with respect to 75% of its total assets, invest more than 5% in securities
of any one issuer other than cash, cash items, or securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, or acquire more
than 10% of the outstanding voting securities of any one issuer.

The above investment limitations cannot be changed without Fund shareholder
approval.

Peachtree Funds Information
- --------------------------------------------------------------------------------

Management of the Trust

Advisory Fees. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by certain other mutual
funds, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser has undertaken to reimburse the Fund,
up to the amount of the advisory fee, for operating expenses in excess of
limitations established by certain states. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the
Fund, but reserves the right to terminate such waiver or reimbursement at
any time at its sole discretion.

The Adviser has managed discretionary assets for its customers since 1931.
As of September 30, 1993 the Adviser managed in excess of $1 billion of
discretionary assets. Prior to the date hereof, the Bank has not served as
an investment adviser to mutual funds.

Portfolio Manager. Mr. W. Shelton Prince is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Prince joined the
Adviser in March of 1968, and was promoted to Vice President in November
1979, and Senior Investment Manager in February 1993. He is responsible for
the management of large personal trusts, foundations, and employee benefit
accounts as well as the Adviser's equity and common trust funds for both
institutional and personal trusts. He serves on the Adviser's Portfolio
Strategy and Trust Fiduciary Committees.

Mr. Prince's educational background includes a Bachelor of Science degree
from North Georgia College and a Master of Business Administration in both
Finance and Management from Georgia State University. He is a member of the
Atlanta Society of Financial Analysts.

Distribution of Fund Shares

The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These financial institutions (including
the Bank ) will receive fees from the Distributor based upon shares subject to
the Plan and owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Distributor.

Administration of the Trust

Administrative Services. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Fund. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:

The administrative fee received during any fiscal year shall be at least
$100,000 per Fund. Federated Administrative Services may voluntarily choose to
waive a portion of its fee.

Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Fund to provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of the shares. In return
for providing these support services, a financial institution may recieve
payments from the Fund at a rate not exceeding 0.25% of the average daily net
assets of the shares beneficially owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Fund; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Fund reasonably requests.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Fund (which would not have a
Services Plan) is created and such trust clients' investments in the Fund are
converted to such Trust class.

Custodian. The Bank of New York, New York, New York is custodian for the
securities and cash of the Fund.

Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent for the shares of, and dividend disbursing agent
for the Fund. It also provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments.

Legal Counsel. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.

Independent Auditors. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.

Expenses of the Fund

Brokerage Transactions

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Fund's Board.

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 other assets, less
liabilities, by the number of shares outstanding.

Investing in the Fund
- --------------------------------------------------------------------------------

Share Purchases

Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be purchased
through the Bank. In connection with
the sale of shares of the Fund, 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.

By Telephone. To place an order to purchase Fund shares, call Bank South Mutual
Funds Center toll free at 1-800-282-6680 extension 4550. Texas residents must
purchase shares of the Fund through Bank South Securities Corporation at
404-521-7063. Your purchase order will be taken directly over the telephone. The
order must be placed by 4:00 p.m. (Eastern time) for shares to be purchased at
that day's price.

Payment by Check. Mail to Peachtree Equity Fund, c/o Bank South Mutual Fund
Center, MC 16, P.O. Box 4387, Atlanta, Georgia 30302.

Payment by Wire. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Fund, the Bank and the Federal Reserve Banks are open for business.

Minimum Investment Required

The minimum initial investment in the Fund by an investor is $1,000 ($500 for
IRAs). Subsequent investments must be in amounts of at least $100. The Fund may
choose to waive its minimum investment from time to time and for accounts which
select the Systematic Investment Program.

Systematic Investment Program

Once an account has been opened, shareholders may add to their investment on a
regular basis in minimum amounts of $100, unless waived. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking or other transaction deposit account and invested in Fund shares at the
net asset value next determined after an order is received by the Bank, plus an
applicable sales charge. A shareholder may apply for participation in this
program through the Bank.

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 Sales Charge as
a Percentage a Percentage
of Public of Net Amount
Amount of Transaction Offering Price Invested
<S> <C> <C>
Less than $100,000 3.75% 3.90%
$100,000 but less than $250,000 3.25% 3.38%
$250,000 but less than $500,000 2.75% 2.83%
$500,000 but less than $750,000 2.25% 2.30%
$750,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 but less than $2,000,000 0.50% 0.50%
$2,000,000 or more 0.00% 0.00%
</TABLE>

Sales Charge Reallowance. The Bank and any authorized dealer or bank will
normally receive up to 85% of the applicable sales charge as a transaction fee
from its customers and for sales and/or administrative services performed on
behalf of its customers in connection with the initiation of customer accounts
and purchases of Fund shares. Any portion of the sales charge which is not paid
to the Bank or a dealer will be retained by the Distributor. The Distributor
will, periodically, uniformly offer to pay cash, or promotional incentives in
the form of trips to sales seminars at luxury resorts, tickets or other items,
to all dealers selling shares of the Fund. Such payments will be predicated upon
the amount of shares of the Fund that are sold by the dealer.

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;

using the reinvestment privilege; or

concurrent 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 3.75% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.

To receive this sales charge reduction, the Distributor must be notified by the
shareholder in writing or by the Bank at the time the concurrent purchases are
made. The Fund will reduce the sales charge after if confirms the purchases. See
"What Shares Cost" and "Addresses".

Certificates and Confirmations

The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued unless requested in writing from
the Fund or the Transfer Agent.

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 quarterly to all shareholders invested in the
Fund on the record date.

Purchasing Fund Shares for Securities

Exchange Privilege
- --------------------------------------------------------------------------------

Peachtree Funds

All shareholders of the Fund are shareholders of Peachtree Funds. Peachtree
Funds currently include the Fund, Peachtree Bond Fund, Peachtree Georgia
Tax-Free Income Fund, Peachtree Prime Money Market Fund, and Peachtree
Government Money Market Fund. Shareholders have easy access to each of the
portfolios of Peachtree Funds through a telephone exchange program. All
Peachtree Funds are advised by the Bank and distributed by the Distributor.

Shareholders may exchange shares of the Fund for shares of the other Peachtree
Funds. In addition, shares of the Fund may also be exchanged for certain other
funds designated by the Bank which are distributed by the Distributor but are
not advised by the Bank ("Federated Funds"). For further information on the
availability of Federated Funds for exchanges, please call the Bank South Mutual
Funds Center at 1-800-282-6680 extension 4550. Shares of funds with a sales
charge may be exchanged at net asset value for shares of other funds with an
equal sales charge or no sales charge. Shares of funds with a sales charge may
be exchanged for shares of funds with a higher sales charge at net asset value,
plus the additional sales charge. Shares of funds with no sales charge, whether
acquired by direct purchase, reinvestment of dividends on such shares, or
otherwise, may be exchanged for shares of funds with a sales charge at net asset
value, plus the applicable sales charge.

By Telephone. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Bank South Mutual Funds Center at
1-800-282-6680 extension 4550 or to the Distributor. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.

Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through the Bank, during times of drastic economic or
market changes. If a shareholder cannot contact the Bank, by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Peachtree Funds, 55 Marietta Street, N.W., Atlanta, Georgia 30303.

Redeeming Shares
- --------------------------------------------------------------------------------

By Telephone. A shareholder may redeem shares of the Fund by contacting his
account officer or by calling the Bank South Mutual Funds Center to request the
redemption. Call 1-800-282-6680 extension 4550). Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the Bank. Redemption requests to the Bank must be received before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value,
and the Bank will promptly submit such redemption requests and provide written
redemption instructions to the Fund. If, at any time, the Fund should determine
it necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.

a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.

The Fund does not accept signatures guaranteed by a notary public.

Redemption Before Purchase Instruments Clear

Systematic Withdrawal Program

Accounts with Low Balances

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

Massachusetts Partnership Law

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from assets
of the Fund.

Effect of Banking Laws
- --------------------------------------------------------------------------------

Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting or
distributing securities. However, such banking laws and regulations do not
prohibit such a holding company affiliate or banks generally from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from acting as agent for their customers in purchasing securities. The Fund's
Adviser, the Bank, is subject to such banking laws and regulations.

The Bank believes, based on the advice of its counsel, that it may perform the
services for the Fund contemplated by its advisory agreement with the Trust
without violating of 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 affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative advisers and means of continuing available
investment services. In such event, changes in the operation of the Fund may
occur, including possible termination of any automatic or other Fund share
investment and redemption services then being provided by the Bank. It is not
expected that existing shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to the Bank is found)
as a result of any of these occurrences.

Tax Information
- --------------------------------------------------------------------------------

Federal Income Tax

State and Local Taxes

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 may advertise its total return and yield.

From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.

Addresses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Peachtree Equity Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------

Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------

Peachtree
Equity Fund
Prospectus

A Diversified Portfolio of
Peachtree Funds, an Open-End
Management Investment Company

Prospectus dated February 28, 1994

3092102A (2/94)

Peachtree Georgia Tax-Free
Income Fund
(A Portfolio of Peachtree Funds)
Prospectus

The shares of the Peachtree Georgia Tax-Free Income Fund (the "Fund") offered by
this Prospectus represent interests in a non-diversified portfolio of Peachtree
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 the personal income taxes imposed by the state of
Georgia. The Fund invests primarily in securities issued by and on behalf of the
State of Georgia and its political subdivisions, authorities and agencies, and
securities issued by other states, territories, and possessions of the United
States which are exempt from federal income tax and the personal income taxes
imposed by the State of Georgia ("Georgia Municipal Securities").

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 February 28,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing to the Bank South, N.A. (the "Bank") Mutual Funds Center or calling
1-800-282-6680 extension 4550.

THE BANK IS INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY FEDERATED
SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.

February 28, 1994

Table of Contents
- --------------------------------------------------------------------------------

Summary of Fund Expenses 1
- ------------------------------------------------------

General Information 2
- ------------------------------------------------------

Investment Information 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Characteristics 3
Participation Interests 3
Variable Rate Municipal Securities 3
Municipal Leases 4
Restricted and Illiquid Securities 4
When-Issued and Delayed Delivery
Transactions 4
Investing in Securities of
Other Investment Companies 4
Temporary Investments 4
Portfolio Turnover 5
Georgia Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Certain Borrowing and Investment Limitations 6

Peachtree Funds Information 7
- ------------------------------------------------------

Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Portfolio Manager 7
Distribution of Fund Shares 8
Distribution Plan 8
Administrative Arrangements 9
Administration of the Trust 9
Administrative Services 9
Shareholder Services Plan 9
Custodian 9
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 10
Legal Counsel 10
Independent Auditors 10
Expenses of the Fund 10

Net Asset Value 10
- ------------------------------------------------------

Investing in the Fund 10
- ------------------------------------------------------

Share Purchases 10
By Telephone 10
By Mail 11
Payment by Check 11
Payment by Wire 11
Minimum Investment Required 11
Systematic Investment Program 11
What Shares Cost 11
Purchases at Net Asset Value 12
Sales Charge Reallowance 12
Reducing the Sales Charge 12
Quantity Discounts and Accumulated
Purchases 12
Letter of Intent 12
Reinvestment Privilege 13
Concurrent Purchases 13
Certificates and Confirmations 13
Dividends and Distributions 13
Purchasing Fund Shares with Securities 13

Exchange Privilege 14
- ------------------------------------------------------

Peachtree Funds 14
By Telephone 15

Redeeming Shares 15
- ------------------------------------------------------

By Telephone 15
By Mail 16
Signatures 16
Receiving Payment 16
Redemption Before Purchase
Instruments Clear 16
Systematic Withdrawal Program 17
Accounts with Low Balances 17

Shareholder Information 17
- ------------------------------------------------------

Voting Rights 17
Massachusetts Partnership Law 17

Effect of Banking Laws 18
- ------------------------------------------------------

Tax Information 18
- ------------------------------------------------------

Federal Income Tax 18
State of Georgia Income and
Intangibles Taxes 19
Other State and Local Taxes 20

Performance Information 20
- ------------------------------------------------------

Addresses Inside Back Cover
- ------------------------------------------------------

Peachtree Georgia Tax-Free Income Fund
Summary of Fund Expenses
- --------------------------------------------------------------------------------

Annual Fund Operating Expenses*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)........................................................................ 0.00%
12b-1 Fees(2)........................................................................................... 0.00%
Other Expenses (after waivers)(3)....................................................................... 0.57%
Total Fund Operating Expenses(4).................................................................... 0.57%
</TABLE>

(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund can pay up to 0.75% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Fund (which would not have a Rule 12b-1 plan) is created and such trust
clients' investments in the Fund are converted to such Trust class.

(3) Total Other Expenses are estimated to be 1.16% absent the anticipated
voluntary waiver by the administrator and transfer agent.

(4) The Total Fund Operating Expenses are estimated to be 1.91% absent the
anticipated voluntary waivers by the adviser, administrator, and transfer
agent.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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. As noted in the table above, the Fund charges no
redemption fees................................................................................ $31 $43
</TABLE>

General Information
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
1993. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. This Prospectus relates only to the Trust's Peachtree Georgia Tax-
Free Income Fund. The Fund is designed as a convenient means of accumulating an
interest in a professionally managed, non-diversified portfolio investing
primarily in Georgia Municipal Securities. A minimum initial investment of
$1,000 is required and subsequent investments must be in amounts of at least
$100.

The Fund is not likely to be a suitable investment for non-Georgia taxpayers or
retirement plans since Georgia municipal securities are not likely to produce
competitive after-tax yields for such persons and entities when compared to
other investments. A minimum initial investment of $1,000 is required, and
subsequent investments must be in amounts of at least $100.

Fund shares are sold at net asset value plus a maximum sales charge of 2.50%,
and are redeemed at net asset value.

Investment Information
- --------------------------------------------------------------------------------

Investment Objective

The Fund's investment objective is to provide current income exempt from federal
income tax and the personal income taxes imposed by the State of Georgia. The
investment objective cannot be changed without the approval of the Fund's
shareholders. 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 taxes 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 jurisdictions other than Georgia.

Investment Policies

The Fund pursues its investment objective by investing primarily in Georgia
Municipal Securities. As a matter of investment policy, which may not be changed
without shareholder approval, the Fund will invest its assets so that, under
normal circumstances, at least 80% of its annual interest income is exempt from
federal income tax (including alternative minimum tax). Unless indicated
otherwise, the other investment policies of the Fund may be changed by the Board
of Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.

Acceptable Investments. Under normal circumstances, the Fund will invest at
least 65% of its total assets in Georgia Municipal Securities, which are
obligations issued by and on behalf of the State of Georgia, its political
subdivisions, authorities and 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 tax imposed by the State of
Georgia. While the Fund intends to invest primarily in securities issued by or
on behalf of the State of Georgia, its political subdivisions, authorities and
agencies, it will invest in other securities issued by states, territories, and
possessions of the United States which are exempt from federal income tax and
the personal income taxes imposed by the State of Georgia. The Fund will invest
in such securities in instances where, in the judgment of the Fund's investment
adviser, the supply and yield of such securities would be beneficial to the
Fund's investment performance.

Characteristics. The Georgia Municipal Securities which the Fund buys are
investment-grade bonds rated, at the time of purchase, Aaa, Aa, A, or Baa
by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A, or BBB by
Standard and Poor's Corporation ("S&P"), Fitch Investors Service, Inc.
("Fitch"), or Duff & Phelps Credit Rating Co. ("Duff & Phelps"). In certain
cases, the Fund's investment adviser may choose bonds which are unrated if
it determines that such bonds are of comparable quality or have similar
characteristics to investment-grade bonds. Bonds rated "BBB" by S&P, Fitch,
or Duff & Phelps 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. Downgrades will be evaluated on a case-by-case basis by
the investment adviser. The adviser will determine whether or not the
security continues to be an acceptable investment. If not, the security
will be sold when deemed appropriate by its adviser given the costs of such
a sale, including potential losses. A description of the rating categories
is contained in the Appendix to the Statement of Additional Information. A
credit rating is not a recommendation to buy, sell or hold securities and
is subject to change and/or withdrawal by the rating agency.

Participation Interests. The Fund may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests give
the Fund a fractional undivided interest in Georgia Municipal Securities.
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.
The Trustees will determine that participation interests meet the
prescribed quality standards for the Fund.

Variable Rate Municipal Securities. Some of the Georgia Municipal
Securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily stated as a percentage of the prime
rate of a bank or a similar standard, such as the 91-day U.S. Treasury
bill rate or established by a remarketing agent as the minimum rate that
it judges would be necessary on the securities prior to the next
remarketing date, having due regard for the prevailing financial markets
in order to sell such securities in a secondary market transaction. 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 be selected consistent with the Fund's quality
standards. The Fund's investment adviser has been instructed by the
Trustees to monitor the pricing, quality, and liquidity of the variable
rate municipal securities, including participation interests held by the
Fund, on the basis of published financial information and reports of the
rating agencies and other analytical services.

Municipal Leases. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and some may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, a conditional sales
contract, or a certificate of participation in any of the above.

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 on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice, to 15% of its net assets.

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 the transaction may cause the Fund
to miss a price or yield considered to be advantageous.

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in the aggregate .
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. It should be noted that investment companies incur certain
expenses, and therefore, any investment by the Fund in shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.

Temporary Investments. From time to time, during periods of abnormal 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; securities of other investment
companies; and repurchase agreements (generally short-term arrangements in which
the Fund may buy securities subject to the seller's agreement to repurchase such
securities at a mutually agreed upon time and price such that the Fund earns
interest during the term of the agreement).

There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those within the
investment-grade categories described
under "Acceptable Investments_Characteristics" (if rated) or those which the
investment adviser judges to have similar characteristics as such
investment-grade securities (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 Georgia.

Portfolio Turnover

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in the portfolio will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. The Adviser does not anticipate that the Fund's annual portfolio
turnover rate will exceed 200% under normal market conditions. A high portfolio
turnover rate may lead to increased costs and may also result in higher taxes
paid by the Fund's shareholders.

Georgia Municipal Securities

Georgia 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. These are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and, under certain circumstances, to make loans for profit and non-profit public
and private entities.

The two principal classifications of municipal securities are "general
obligations" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and/or 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.

A significant portion of revenue bonds issued by governmental units constitute
"private activity" bonds. Private activity bonds are issued by or on behalf of a
governmental unit, generally to finance the acquisition, construction and
equipping of facilities to be used, directly or indirectly, by private
for-profit and non-profit companies. These private activity bonds are generally
secured by a pledge of the revenues to be paid by such private companies under a
financing agreement (which usually takes the form of a lease, installment sale
or loan agreement) between a private company and a governmental unit, as well as
a security interest in the real and personal property acquired or constructed
with the proceeds of such bonds. Often the credit securing these types of
private activity bonds is enhanced through the issuance of a letter of credit or
guarantee by a credit-worthy financial institution. The credit ratings of these
so-called "credit enhanced" bond issues are based on the credit worthiness of
the financial institution issuing the credit enhancement and not the private
user of the facilities financed with the proceeds of such bonds or the
governmental unit issuing the bonds, which are not liable for the payment
thereof, other than through the assignment of revenues to be received by the
private user under the financing agreement.

Investment Risks

Yields on Georgia Municipal Securities depend on a variety of factors,
including, but not limited to: the general conditions of the municipal bond
market; the size of the particular offering; the maturity of the obligations;
and the rating of the issue. Further, any adverse economic conditions or
developments affecting the State of Georgia or its municipalities, or companies
and financial institutions obligated under private activity bonds, could affect
the Fund's portfolio. The Fund's ability to achieve its investment objective
also depends on the continuing ability of the obligors of securities held by the
Fund to meet their obligations for the payment of interest and principal when
due. Investing in Georgia Municipal Securities which meet the Fund's quality
standards may not be possible if the State of Georgia and its municipalities do
not maintain their current credit ratings. In addition, certain Georgia
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting various Georgia Municipal Securities. A discussion of the
current economic risks associated with the purchase of Georgia Municipal
Securities is contained in the Statement of Additional Information.

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 risks and fluctuation in
market value of the Fund's portfolio than investments in a diversified portfolio
of securities. Any economic, political, or regulatory developments affecting the
value of the securities in the Fund's portfolio will have a greater effect on
the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers. However, the Fund intends to comply with
Subchapter M of the Internal Revenue Code. This undertaking requires that at the
end of each quarter of the taxable year: (a) with regard to at least 50% of the
Fund's total assets, no more than 5% of its total assets are invested in the
securities of a single issuer and (b) no more than 25% of its total assets are
invested in the securities of a single issuer.

Certain Borrowing and Investment Limitations

The Fund will not:

The above limitation cannot be changed without shareholder approval. The
following limitation however, can be changed by the Trustees without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

invest more than 5% of its total assets in industrial development bonds
where the payment of principal and interest is the responsibility of
companies (including guarantors where applicable) with less than three
years of continuous operations, including the operation of any
predecessor.

Peachtree Funds Information
- --------------------------------------------------------------------------------

Management of the Trust

Advisory Fees. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by certain other mutual
funds, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser has undertaken to reimburse the Fund,
up to the amount of the advisory fee, for operating expenses in excess of
limitations established by certain states. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the
Fund, but reserves the right to terminate such waiver or reimbursement at
any time at its sole discretion.

The Adviser has managed discretionary assets for its consumers since 1931.
As of September 30, 1993 , the Adviser managed in excess of $1 billion of
discretionary assets. Prior to the date hereof, the Adviser has not served
as an investment adviser to mutual funds.

Portfolio Manager. Mr. J.M. Johnston, Jr. is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Johnston began at the
Adviser in September of 1992.

Mr. Johnston directs the investment management of the employee benefit
plans, fixed income fund, and personal trusts. He is also responsible for
securities analysis for various industries.

Mr. Johnston began his investment career in 1981. Prior to his affiliation
with the Bank, he spent six years with The Citizens & Southern National
Bank, Atlanta, Georgia as a portfolio manager.

Distribution of Fund Shares

Administration of the Trust

Administrative Services. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Fund. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:

The administrative fee received during any fiscal year shall be at least
$100,000 per Fund. Federated Administrative Services may voluntarily choose to
waive a portion of its fee.

Shareholder Services Plan. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Fund to provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of the shares. In return
for providing these support services, a financial institution may receive
payments from the Fund at a rate not exceeding 0.25% of the average daily net
assets of the shares benefically owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Fund; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Fund reasonably requests.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Fund (which would not have a
Services Plan) is created and such trust clients' investments in the Fund are
converted to such Trust class.

Custodian. The Bank of New York, New York, New York is custodian for the
securities and cash of the Fund.

Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent (the "Transfer Agent") for the shares of and
dividend disbursing agent for the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

Legal Counsel. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.

Independent Auditors. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.

Expenses of the Fund

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 other assets, less
liabilities, by the number of shares outstanding.

Investing in the Fund
- --------------------------------------------------------------------------------

Share Purchases

Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Fund may be
purchased through the Bank. In connection with the sale of Fund 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.

By Telephone. To place an order to purchase Fund shares, call the Bank South
Mutual Funds Center toll free at 1-800-282-6680 extension 4550. Texas residents
must purchase shares of the Fund through Bank South Securities Corporation at
404-521-7063. Your purchase order will be taken directly over the telephone. The
order must be placed by 4:00 p.m. (Eastern time) for shares to be purchased at
that day's price.

Payment by Check. Mail to Peachtree Georgia Tax-Free Income Fund, c/o Bank
South Mutual Funds Center, MC 16, P.O. Box 4387, Atlanta, Georgia 30302.

Minimum Investment Required

The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $100. The Fund may choose to waive
its minimum investment requirements from time to time and for accounts which
select the Systematic Investment Program.

Systematic Investment Program

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:

Sales Charge Reallowance. The Bank and any authorized dealer or bank will
normally receive up to 85% of the applicable sales charge as a transaction fee
from its customers, and for sales and/or administrative services performed on
behalf of its customers in connection with the initiation of customer accounts
and purchases of Fund shares. Any portion of the sales charge which is not paid
to the Bank or a dealer or other bank will be retained by the Distributor. The
Distributor will, periodically, uniformly offer to pay cash, or promotional
incentives in the form of trips to sales seminars at luxury resorts, tickets or
other items, to all dealers selling shares of the Fund. Such payments will be
predicated upon the amount of shares of the Fund that are sold by the dealer.

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;

using the reinvestment privilege; or

concurrent purchases.

Concurrent Purchases. For purposes of qualifying for a sale charge reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.

Certificates and Confirmations

The Transfer Agent maintains a share account for each shareholder of record.
Share certificates are not issued, unless requested in writing from the Fund or
the Transfer Agent.

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 daily and paid monthly to all shareholders invested in
the Fund on the record date.

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 a shareholder makes a written request for cash payments to
the Fund or the Bank.

Purchasing Fund Shares with Securities

Exchange Privilege
- --------------------------------------------------------------------------------

Peachtree Funds

All shareholders of the Fund are Shareholders of Peachtree Funds. Peachtree
Funds currently include the Fund, Peachtree Bond Fund, Peachtree Equity Fund,
Peachtree Prime Money Market Fund, and Peachtree Government Money Market Fund.
Shareholders have easy access to each of the portfolios of Peachtree Funds
through a telephone exchange program. All Peachtree Funds are advised by the
Bank and distributed by the Distributor.

Shareholders may exchange shares of the Fund for shares of the other Peachtree
Funds. In addition, shares of the Fund may also be exchanged for certain other
funds designated by the Bank which are distributed by the Distributor, but that
are not advised by the Bank ("Federated Funds"). For further information on the
availability of Federated Funds for exchanges, please call the Bank South Mutual
Funds Center at 1-800-282-6680 extension 4550. Shares of funds with a sales
charge may be exchanged at net asset value for shares of other funds with an
equal sales charge or no sales charge. Shares of funds with a sales charge may
be exchanged for shares of funds with a higher sales charge at net asset value,
plus the additional sales charge. Shares of funds with no sales charge, whether
acquired by direct purchase, reinvestment of dividends on such shares, or
otherwise, may be exchanged for shares of funds with a sales charge at net asset
value, plus the applicable sales charge.

By Telephone. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Bank South Mutual Funds Center at
1-800-282-6680 extension 4550, or to the Distributor. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.

Redeeming Shares
- --------------------------------------------------------------------------------

By Telephone. A shareholder may redeem shares of the Fund by contacting his
account officer or by calling the Bank South Mutual Funds Center to request the
redemption. Call 1-800-282-6680 extension 4550. Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the Bank. Redemption requests must be received by the Bank before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value
and the Bank will promptly submit such redemption requests and provide written
redemption instructions to the Fund. If, at any time, the Fund should determine
it necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.

a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the FDIC's
SAIF; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.

The Fund does not accept signatures guaranteed by a notary public.

Redemption Before Purchase Instruments Clear

Systematic Withdrawal Program

Accounts with Low Balances

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

Massachusetts Partnership Law

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust. Therefore, financial loss
resulting from liability as a shareholder will occur only if the Trust cannot
meet its obligations to indemnify shareholders and pay judgments against them
from assets of the Fund.

Effect of Banking Laws
- --------------------------------------------------------------------------------

Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting or
distributing securities. However, such banking laws and regulations do not
prohibit such a holding company affiliate or banks generally from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from acting as agent for their customers in purchasing securities. The Fund's
Adviser is subject to such banking laws and regulations.

Tax Information
- --------------------------------------------------------------------------------

Federal Income Tax

Shareholders are not required to include any dividends received from the Fund
that represent net interest on tax-exempt municipal bonds in gross income for
federal income tax purposes. However, under the Tax Reform Act of 1986,
dividends representing net interest income earned on some municipal bonds are
included in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.

The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income for the taxpayer increased by certain "tax
preference" items not included in regular taxable income and reduced by only a
portion of the deductions allowed in the calculation of the regular income tax.

The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax-preference item for both individuals and
corporations. Unlike traditional government purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, while the Fund
has no present intention of purchasing any private activity bonds that would be
treated as tax preference items, should it purchase any such bonds, a portion of
the Fund's dividends may be treated as a tax-preference item.

In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds will become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax-preference item.
"Adjusted current earnings" are based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.

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.

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 Georgia Income and Intangibles Taxes

Under existing Georgia law, shareholders of the Fund will not be subject to
Georgia income taxes on distributions from the Fund to the extent that such
distributions represent either (1) "exempt-interest dividends" for federal
income tax purposes that are attributable to interest-bearing obligations issued
by or on behalf of the State of Georgia or its political subdivisions or (2)
dividends derived from interest on obligations of the United States or of any
other issuer whose obligations are exempt from state income taxes under federal
law. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Georgia income tax purposes to shareholders of the
Fund who are subject to the Georgia income tax. The Fund, as a Massachusetts
business trust, is not expected to be required to pay the annual Georgia
intangible property tax on the securities it holds. It is, however, the current
practice of the Georgia Department of Revenue to subject trust interests similar
to the shares to the intangibles tax at a rate equal to 10 cents per $1,000 of
value if the owners of such interests reside or have their prinicipal business
location in Georgia. The Department of Revenue is currently considering whether
the taxable value of trust interests representing beneficial interests in
tax-exempt securities may be reduced to take into account the exempt nature of
such securities. Georgia law exempts the following securities from the
intangibles tax: (1) obligations of the United States (including United States
government agencies and corporations established by Acts of Congress), (2)
obligations of the State of Georgia (including its political subdivisions or
public institutions), and (3) industrial development revenue bonds issued
pursuant to the laws of Georgia.

Other State and Local Taxes

Dividends payable with respect to the shares of the Fund may or may not be
subject to state or local state income taxation in jurisdictions other than
Georgia under applicable state or local laws. Similarly, shares in the Fund may
or may not be subject to an intangible personal property tax in states other
than Georgia. Each purchaser of the shares of the Fund is urged to consult his
or her own tax adviser regarding the tax-exempt status of the Fund shares and
dividends in state or local jurisdictions other than the State of Georgia.

Performance Information
- --------------------------------------------------------------------------------

From time to time the Fund may advertise its total return, yield and
tax-equivalent yield.

The yield of the Fund is calculated each day by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by the Fund over a thirty-day period by the maximum offering price per share of
the Fund on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that the
Fund would have had to earn to equal the actual after tax 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.

From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.

Addresses
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Peachtree Georgia Tax-Free Federated Investors Tower
Income Fund Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------

Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------

Peachtree Georgia
Tax-Free Income Fund
Prospectus

A Non-Diversified Portfolio of
Peachtree Funds, an Open-End
Management Investment Company
Prospectus dated February 28, 1994

3100503A (2/94)