FFB SHARES OF FIRST UNION HIGH GRADE TAX FREE PORTFOLIO
(A Portfolio of First Union Funds)
Class B Investment Shares
Supplement to Prospectus dated February 28, 1994
Effective September 1, 1994, the FFB (Class B Investment) Shares of First
Union High Grade Tax Free Portfolio (the "Fund") will change its front-end
sales charge schedule to increase the maximum charge to 4.75%.
A. Please delete the "Summary of Fund Expenses" table on pages 3 and 4
and replace it with the following:
SUMMARY OF
FUND EXPENSES
FFB (CLASS B) SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Redemption Fees (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FFB SHARES OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee (after waiver) (1) 0.49%
12b-1 Fees(2) 0.25%
Total Other Expenses (after waiver) 0.32%
Total FFB Shares Operating Expenses (3) 1.06%
(1)The management fee has been reduced to reflect the voluntary waiver by the
Adviser. The Adviser may terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.50%.
(2)FFB Shares can pay up to 0.75% of FFB Shares' average daily net assets
as a 12b-1 fee. For the foreseeable future, the Fund plans to limit the
FFB Shares' 12b-1 payments to 0.25% of FFB Shares' average daily net assets.
(3)High Grade Tax Free Fund's Total FFB Shares Annual Operating Expenses were
0.85% for the year ended December 31, 1993. Total FFB Shares Annual
Operating Expenses, absent
the voluntary waiver of the management fee by the Adviser and
waiver of the 12b-1 fee, were 1.07% for the year ended December 31,
1993. FFB Shares are subject to identical fees and expenses as
Class B Shares. Annual FFB Shares Operating Expenses in the table
above are based on expenses expected during the fiscal year ending
December 31, 1994. The total FFB Shares expected operating expenses
would be 1.07%, absent the anticipated voluntary waiver described
above in note 1.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of FFB Shares of the
Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fees and
Expenses." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
Because of the asset-based sales charge, long-term shareholders may
pay more than the economic equivalent of the maximum front-end sales
charges permitted under the rules of the National Association of
Securities Dealers, Inc.
EXAMPLE
1 year 3 years 5 years 10 years
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. The Fund
charges no redemption fees
for FFB Shares $58 $80 $103 $171
The above example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
The information set forth in the foregoing table and example relates
only to FFB Shares of the Fund. The Fund also offers two additional
classes of shares called Trust Shares and Class C Shares. In general,
all expenses are allocated based upon the daily net assets of each
class. Trust Shares bear no sales charge or 12b-1 fee. Class C
Shares are subject to a 12b-1 fee of 0.75 of 1%, a shareholder service
fee of 0.25 of 1% and bear a maximum contingent deferred sales charge
of 5.00%. Trust Shares and Class C Shares bear no front-end sales
charge. See "Other Classes of Shares."
B. Please delete the third sentence in the first paragraph under
the section entitled "Description of the Fund" on page 7 and
replace it with the following:
"At least 65% of the value of its total assets will be invested in
high grade bonds. High grade bonds, as used in this section, mean
bonds rated single A or better by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group or, if unrated, of comparable quality
as determined by the Adviser."
C. Please delete the third sentence of the section entitled
"Purchase of Shares" on page 13, and the table immediately
following the paragraph, and replace them with the following:
"The sales charge for purchases of shares of the Fund may range
from 0.25% to 4.75% of the public offering price (which is equal
to 0.25% to 4.99% of the net amount invested), with the amount
of the sales charge varying with the size of the purchase,
according to the following schedule:
Sales Charge as
a Percentage ofSales Charge as a
Public Offering Percentage of Net
Amount of Transaction Price Amount Invested
$0-99,999 4.75% 4.99%
$100,000-249,999 3.75% 3.90%
$250,000-499,999 3.00% 3.10%
$500,000-1,000,000 2.00% 2.04%
$1,000,000-2,500,000 1.00% 1.01%
$2,500,000 and above 0.25% 0.25%"
D. Please insert the following paragraph as the third paragraph under the
section entitled "Other Classes of Shares" on page 23:
"Class C Shares are sold to customers of First Union and others at net
asset value plus a maximum contingent deferred sales charge of 5.00%
at a minimum investment of $1,000. Class C Shares are distributed
pursuant to a Rule 12b-1 Plan adopted by the Trust, whereby the
Distributor is paid a fee of 0.75 of 1%. Class C Shares are subject
to a shareholder services fee of 0.25 of 1%."
December 12, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
337359301
G00389-18 (12/94)
