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June 30, 1996
ANNUAL REPORT TO SHAREHOLDERS
OF
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LETTER FROM THE PRESIDENT
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Dear Shareholder:
This is your copy of the First Funds' Annual Report for the fiscal year
ending June 30, 1996. This report will familiarize you with each Portfolio
Manager's thoughts about how the Portfolio was positioned over the past
twelve months and why, the individual securities held by each Portfolio and
their respective values, and how your shares have appreciated or depreciated
over the period of time covered by this report.
The last six months of 1995 and the first six months of 1996 created
quite a ride for investors in both the bond and stock markets. During these
twelve months, yields in the bond market varied widely, while the stock
market grew at what could easily be described as a frantic pace.
As you read through the Portfolio Manager commentaries of this report,
you may notice the flexibility of each Portfolio's management in responding
to newly available or anticipated economic data. This flexibility has
benefitted all of the First Funds portfolios in positive economic situations
or shielded them in adverse market conditions. While no person or theory can
consistently and reliably predict what the future holds for the stock and
bond markets, it is reassuring to know that our team of investment experts
has harnessed this adaptability to effectively manage your assets with a
minimum amount of risk.
During the Annual Report period, the First Funds Portfolios enjoyed
positive yields and competitive rates of return, reflecting the general
strength of the United States bond and stock markets. As evidence of stock
market vigor, the Dow Jones Industrial Average surpassed the 5,000 mark for
the first time.
As always, we welcome your inquiries on our 800 line (1-800-422-1941)
or, if your prefer, please contact us in writing at 370 17th Street, Suite
2700, Denver, Colorado 80202. Thank you for your continued interest in the
First Funds.
Sincerely,
/s/ RICHARD RANTZOW
Richard C. Rantzow
President
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IMPORTANT NOTICE
FIRST FUNDS SHARES
* are NOT insured by the FDIC, the Federal Reserve Board or any other
governmental agency.
* are NOT bank deposits or other obligations of or guaranteed by First
Tennessee Bank National Association or any of its affiliates.
* involve investment risks, including the possible loss of the principal
amount invested.
First Funds are managed by First Tennessee Bank National Association, Garland
Capital Management (one of its divisions), Highland Capital Management Corp.
and PNC Institutional Management Corp. First Tennessee Bank National
Association and Highland Capital Management Corp. are subsidiaries of First
Tennessee National Corporation. The Funds are sponsored and distributed by
ALPS Mutual Funds Services, Inc., member NASD.
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FIRST FUNDS TOTAL RETURN FIXED INCOME PORTFOLIO
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YEAR IN REVIEW --------------------------------------------------------------
The Total Return Fixed Income Portfolio seeks to achieve maximum total
return investing in income-producing securities. These securities will
primarily involve intermediate-to long-term bonds. While the Portfolio may
invest in obligations of any maturity, its dollar-weighted average portfolio
maturity will normally fluctuate between 5 and 15 years depending on the
interest rate and investment environment.
The single most dominant characteristic of the bond market for the
fiscal year ending June 30, 1996 was volatility. Fluctuations in yields were
substantial. For instance, from July 1 to August 11, 1995, yields on 30-year
Treasuries rose from 6.62% to 6.98%. This was prompted by an unanticipated
pickup in the rate of economic growth and concerns that rising inflation
would follow. This was fortuitous for the Portfolio because it was positioned
conservatively in the face of rising yields (and declining prices). The
Portfolio's manager subsequently lengthened maturities. This restructuring
was to enhance the Portfolio's return in case rates fell (and prices rose) -
an event which began unfolding soon thereafter. By mid-August, the growth and
inflation scare began subsiding, followed by a substantial bond market rally
lasting through the end of 1995. During this period, the 30-year Treasury
bond's yield declined significantly from 6.98% down to 5.95%.
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Total Return Fixed Income Portfolio
Asset Type Profile as of June 30, 1996
[PIE CHART]
COMMERCIAL PAPER 3.9%
FOREIGN BONDS 1.4%
CORPORATE BONDS & NOTES 35.1%
MORTGAGE-BACKED 5.0%
U.S. GOVERNMENT & AGENCY OBLIGATIONS 54.6%
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COMPARISON OF CHANGE IN VALUE OF A $100,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN FIXED INCOME PORTFOLIO (CLASS I) AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS I INCEPTION IS AUGUST 2, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
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FIRST FUNDS TOTAL RETURN FIXED INCOME PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN FIXED INCOME PORTFOLIO (CLASS II) AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 20, 1995. CLASS II IS SUBJECT TO
A 3.75% SALES LOAD AND $9,625 IS THE NET INVESTMENT AFTER THE SALES LOAD IS
DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
The Portfolio remained positioned somewhat aggressively going into
January 1996 based upon forecasts of continued soft growth, mild inflation,
and prospects of modest declines in rates. Yields were stable during January.
Then, the bond market started performing poorly in mid-February in part based
upon rumors (later confirmed) of hedge funds shifting assets out of bonds
into other markets. Later in March, news began appearing that economic growth
might be stronger than expected. This was subsequently confirmed by economic
data over the next two months causing inflation fears to reappear. This,
combined with the earlier hedge-fund selling, rapidly drove 30-year Treasury
yields up to 7.12% by early May. Rates remained near this level until late
June when the market sensed that growth might start slowing, making inflation
less of a concern. Bonds rallied and the 30-year Treasury yield ended the
year at 6.87%, only slightly lower than where it began the fiscal year at
6.98%.
While the Portfolio's structure usually reflects some assumptions about
the direction of interest rates, this did not constitute a major component of
Portfolio strategy. Why? Because such trends are highly unpredictable.
Rather, the Portfolio Manager focused primarily on avoiding bad credits,
investing in the right assets, and seeking good yield without incurring undue
risk.
TOTAL RETURN FIXED INCOME PORTFOLIO
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN* TOTAL RETURN*
SINCE 1 YEAR SINCE
INCEPTION INCEPTION
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CLASS I 15.00% 4.23% 4.91%
CLASS II 10.22% (0.14)% 3.39%
CLASS III 11.02% 3.11% 3.65%
LEHMAN BROS. 15.57% 4.66% 5.09%
GOV'T/CORP
BOND INDEX
* TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1996 AND REFLECT
REINVESTMENT OF ALL DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, ALL FEE WAIVERS
IN EFFECT AND ANY EXPENSE REIMBURSEMENTS. WITHOUT THE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS, THE TOTAL RETURN FIGURES WOULD HAVE BEEN LOWER. FUND
INCEPTION DATE IS AUGUST 2, 1993. ON DECEMBER 2, 1993, THE PORTFOLIO
COMMENCED SALES OF CLASS III SHARES, WHICH INCLUDE A HIGHER TRANSFER AGENCY
FEE, A .75% DISTRIBUTION FEE AND A .25% SHAREHOLDER SERVICES FEE. PERFORMANCE
INFORMATION PRIOR TO DECEMBER 2, 1993 FOR CLASS III DOES NOT REFLECT THE
EFFECTS OF THESE FEES, WHICH, IF INCLUDED WOULD LOWER CLASS III PERFORMANCE.
THE TOTAL RETURN FIXED INCOME PORTFOLIO COMMENCED SALES OF CLASS II SHARES ON
DECEMBER 20, 1995. THESE SHARES INCLUDE A HIGHER TRANSFER AGENCY FEE AND A 25%
SHAREHOLDER SERVICES FEE. PERFORMANCE INFORMATION FOR CLASS II SHARES PRIOR
TO THEIR INCEPTION DATE DO NOT REFLECT THE EFFECTS OF THESE FEES WHICH, IF
INCLUDED, WOULD LOWER CLASS II PERFORMANCE. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.
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FIRST FUNDS TOTAL RETURN FIXED INCOME PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN FIXED INCOME PORTFOLIO (CLASS III) AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 2, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
As a result, the Portfolio's credit quality on June 30, 1996 was very high
with an average rating for its portfolio securities of AAA. And, during the
year the weighting of corporate bonds increased by nearly 9% as a means of
increasing the Portfolio's yield. Demand for corporates was strong all year,
making them one of the best performing asset classes in the market.
First Funds does not emphasize derivatives in its Portfolios. The
Portfolio held positions in Collateralized Mortgage Obligations and
Mortgage-Backed Pass-Throughs, in addition to its other portfolio securities,
during the past fiscal year. Exposure to these securities was a modest 5% of
Portfolio assets on June 30, 1996. Highland Capital Management Corp.
considers these instruments to be conservative. The Portfolio held no other
position in derivative instruments as of June 30, 1996.
As the new fiscal year begins, there is speculation that the Federal
Reserve may seek to boost interest rates if signs of more modest economic
growth do not materialize fairly soon. Bond market yields already tend to
reflect this possibility. In the interim, the market will continue to focus
on the economic and inflation data and adjust accordingly. And, continued
volatility should be no surprise.
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FIRST FUNDS TOTAL RETURN EQUITY PORTFOLIO
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YEAR IN REVIEW --------------------------------------------------------------
In last year's annual report for the Total Return Equity Portfolio, we
stated that "fiscal year 1995 proved to be a year that investors will fondly
remember for a long time." The same comment can be made for fiscal year 1996.
Each quarter of this year provided positive returns and once again, the
market's advance was best characterized as onward and upward. During the past
twelve months, the stock market did not experience a correction in excess of
3.1% as measured by the S&P 500.
In reviewing fiscal year 1996, it was a year of contrasts. During the
first half, economic growth was sluggish and interest rates receded. However,
in the second half of fiscal year 1996, after the Federal Reserve's final
reduction in the closely watched federal funds rate, the economy began to
recover and real Gross Domestic Product exceeded most forecasts. Coincident
with the economy's resurgence, interest rates reversed their downward trend
and 30-year Treasury bonds rose above 7% again for the first time since March
1995. However, inflation continued to be benign with the Consumer Price Index
remaining below 3% on an annual basis.
There are many factors that contributed to the strong equity markets
during last year. Lower interest rates in the first half and reasonably good
earnings reports certainly helped to bolster investor enthusiasm. However,
one of the biggest catalysts to last year's strong stock market was the
enormous inflow of money into equity mutual funds, particularly in the final
half of fiscal year 1996.
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Total Return Equity Portfolio
Asset Type Profile as of June 30, 1996
[PIE CHART]
COMMERCIAL PAPER 6.8%
UTILITIES 3.5%
BASIC MATERIALS 5.1%
ENERGY & NATURAL RESOURCES 10.8%
CONSUMER SERVICES 11.0%
TECHNOLOGY 12.3%
FINANCE 14.3%
CAPITAL GOODS 16.2%
CONSUMER NON-DURABLES 20.0%
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COMPARISON OF CHANGE IN VALUE OF A $100,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN EQUITY PORTFOLIO (CLASS I) AND THE S&P 500.
[GRAPH]
PLEASE NOTE: CLASS I INCEPTION IS AUGUST 2, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
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FIRST FUNDS TOTAL RETURN EQUITY PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN EQUITY PORTFOLIO (CLASS II) AND THE S&P 500.
[GRAPH]
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 20, 1995. CLASS II IS SUBJECT TO
A 4.50% SALES LOAD AND $9,550 IS THE NET INVESTMENT AFTER THE SALES LOAD IS
DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
The strongest performing sectors for the Portfolio for fiscal year 1996
were healthcare, financial and retail stocks, with particularly strong
returns generated from Elan, Schering Plough, Merck, Price Costco, Federated,
and Chase Manhattan. Cash reserves were reduced from 12% at the beginning of
fiscal year 1996 to 6.5% by year-end.
As we begin the new year, it is unlikely that returns will reach the
level of the past two years. However, we believe that superior growth
companies that can produce above average earnings in a moderate growth
economy, and that sell at attractive valuations, will produce good returns
for the Portfolio's long-term equity investors.
TOTAL RETURN EQUITY PORTFOLIO
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN* TOTAL RETURN*
SINCE 1 YEAR SINCE
INCEPTION INCEPTION
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CLASS I 64.77% 23.54% 18.67%
CLASS II 56.74% 17.68% 16.65%
CLASS III 59.69% 22.19% 17.40%
S&P 500 61.62% 25.96% 17.89%
* TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1996 AND REFLECT
REINVESTMENT OF ALL DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, ALL WAIVERS IN
EFFECT AND ANY EXPENSE REIMBURSEMENTS. WITHOUT THE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS, THE TOTAL RETURN FIGURES WOULD HAVE BEEN LOWER. FUND
INCEPTION DATE IS AUGUST 2, 1993. ON DECEMBER 9, 1993, THE PORTFOLIO
COMMENCED SALES OF CLASS III SHARES, WHICH INCLUDE A HIGHER TRANSFER AGENCY
FEE, A .75% DISTRIBUTION FEE AND A .25% SHAREHOLDER SERVICES FEE. PERFORMANCE
INFORMATION PRIOR TO DECEMBER 9, 1993 FOR CLASS III DOES NOT REFLECT THE
EFFECTS OF THESE FEES, WHICH, IF INCLUDED WOULD LOWER CLASS III PERFORMANCE.
THE PORTFOLIO COMMENCED SALES OF CLASS II SHARES ON DECEMBER 20, 1995, WHICH
INCLUDE A HIGHER TRANSFER AGENCY FEE AND A .25% SHAREHOLDER SERVICES FEE.
PERFORMANCE INFORMATION FOR CLASS II SHARES PRIOR TO THEIR INCEPTION DATE DO
NOT REFLECT THE EFFECTS OF THESE FEES WHICH, IF INCLUDED, WOULD LOWER CLASS
II PERFORMANCE. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
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FIRST FUNDS TOTAL RETURN EQUITY PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS TOTAL
RETURN EQUITY PORTFOLIO (CLASS III) AND THE S&P 500.
[GRAPH]
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 9, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
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FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
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YEAR IN REVIEW --------------------------------------------------------------
The Tennessee Tax-Free Portfolio seeks to provide a high level of
current income that is exempt from federal and state income taxes by
investing in intermediate to long-term bonds exempt from State of Tennessee
income taxes. The Portfolio will normally have an average maturity
fluctuating from 5 to 15 years depending on the interest rate environment and
perceived changes in the investment environment. This maturity range helps to
limit the volatility of the asset value.
The bond market entered 1996 in a very optimistic mood. Following a
Federal Reserve Bank rate cut in December and another rate cut in January, it
appeared the market was off to a good start. A recession was actually being
mentioned. However, in mid-February, in Congressional testimony, Fed Chairman
Greenspan suggested that the economy was a little stronger than what most
people thought. The unemployment statistics for February and March supported
this suggestion. Housing, retail sales, and manufacturing activity statistics
also came in strong during the first and second quarters. Speculation of a
Fed tightening (rate hike) was being discussed by the market-making investors
even more nervous. Scattered indications of wage inflation seemed to grip the
market in May and early June, contributing to municipal yields rising about
1/2 of 1% in the first half of 1996.
The municipal bond market has been a little more resilient than the
taxable markets due to a lack of supply. Bonds prerefunded in 1993 continue
to be called today with almost no new bonds being sold to replace them, as is
the case with a Treasury refunding. Bonds sold in 1986 to avoid restrictions
placed on issuance by the Tax Reform Act of 1986 are now reaching their 10
year calls. Higher
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Tennessee Tax-Free Portfolio
Asset Type Profile as of June 30, 1996
[PIE CHART]
REVENUE BONDS 34.4%
DEMAND NOTES 7.8%
GENERAL OBLIGATION BONDS 57.8%
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COMPARISON OF CHANGE IN VALUE OF A $100,000 INVESTMENT IN FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS I) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS I INCEPTION IS DECEMBER 15, 1995. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
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FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS II) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 29, 1995. CLASS II IS SUBJECT TO
A 3.75% SALES LOAD AND $9,625 IS THE NET INVESTMENT AFTER THE SALES LOAD IS
DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
rates in the first quarter of 1996 did not make refinancings attractive.
Nationwide, broker inventories of secondary paper reported three year lows.
Billions of dollars in municipal bonds are maturing or being called in June
and July. For the immediate future, the forward supply of bonds appears to be
relatively low.
We remain cautiously optimistic about the bond market for the rest of
the year and into next year. A Fed rate hike may materialize if housing and
employment remain strong or if inflation begins to accelerate. Therefore,
yields may be close to their peak, so some selective buying may prove to be
beneficial when the economy begins to slow. Given this viewpoint, the
relatively higher rates now available in the market, and the lack of supply,
we will begin to look for opportunities to extend the average maturity of the
Portfolio. However, should the economy show signs of igniting, we will review
our strategy and seek to take defensive actions to avoid substantial
principal loss.
TENNESSEE TAX-FREE PORTFOLIO
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN* TOTAL RETURN*
SINCE 1 YEAR SINCE
INCEPTION INCEPTION
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CLASS I (0.65)% N/A N/A
CLASS II (4.36)% N/A N/A
CLASS III (0.87)% N/A N/A
LEHMAN BROS. 10-YEAR 0.27% N/A N/A
MUNICIPAL BOND INDEX
* TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1996 AND REFLECT
REINVESTMENT OF ALL DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, ALL FEE WAIVERS
IN EFFECT AND ANY EXPENSE REIMBURSEMENTS. WITHOUT THE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS, THE TOTAL RETURN FIGURES WOULD HAVE BEEN LOWER. FUND
INCEPTION DATE IS DECEMBER 15, 1995. ON DECEMBER 15, 1995, THE PORTFOLIO
COMMENCED SALES OF CLASS III SHARES, WHICH INCLUDE A HIGHER TRANSFER AGENCY
FEE, A .75% DISTRIBUTION FEE. ON DECEMBER 29, 1995, THE PORTFOLIO COMMENCED
SALES OF CLASS II SHARES, WHICH INCLUDE A HIGHER TRANSFER AGENCY FEE. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
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FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS III) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 15, 1995. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE RESULTS.*
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FIRST FUNDS ANNUAL REPORT
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DEFINITION OF COMMON TERMS
GAIN (OR LOSS)
If a stock or bond appreciates in price, there is an unrealized gain; if
it depreciates there is an unrealized loss. A gain or loss is "realized" upon
the sale of a security; if a Portfolio's net gains exceed net losses, there
may be a capital gain distribution to shareholders. There could also be an
ordinary income distribution if the net gain is short term or no distribution
if there is a capital loss carryover.
DIVIDEND
Net income distributed to shareholders generated by securities in a
Portfolio. The Total Return Fixed Income, Tennessee Tax-Free and all the
Money Market Portfolios pay dividends monthly. The Total Return Equity
Portfolio pays dividends quarterly.
NET ASSET VALUE (NAV)
Total market value of all securities and other assets held by a
Portfolio, minus liabilities, divided by the number of shares outstanding. It
is the value of a single share of a mutual fund on a given day. The total
market value of your investment would be the NAV multiplied by the number of
shares you own. NAV generally fluctuates daily for all the First Funds
Portfolios except the Money Market Portfolios, which seek to maintain a
stable $1.00 per share NAV.
CERTIFICATES OF PARTICIPATION
Certificates of participation (COPs), or lease-secured bonds, represent
a bondholder's proportionate interest in rental payments made under a
municipal lease contract. The payments are normally made pursuant to a lease
and trust agreement. This type of tax-exempt municipal leasing has become an
attractive alternative to traditional bond financing.
INSURED BONDS
Insured Bonds refer to municipal obligations which are covered by an
insurance policy issued by independent insurance companies. The policies
insure the payment of principal and interest of the issuer. Examples of such
companies would be MBIA (Municipal Bond Investors Assurance Corporation), or
AMBAC (American Municipal Bond Assurance Corporation). Bonds insured by
either AMBAC or MBIA are rated AAA.
GENERAL OBLIGATION BONDS
General obligation bonds (GOs) are debts backed by the general taxing
power of the issuer. Payment of the obligation may be backed by a specific
tax or the issuer's general tax fund. Examples of GOs include sidewalk bonds,
sewer bonds, street bonds and so on. These bonds are also known as FULL FAITH
AND CREDIT bonds because the debt is a general obligation of the issuer.
REVENUE BONDS
Revenue Bonds are issued to provide capital for the construction of a
revenue-producing facility. The interest and principal payments are backed to
the extent that the facility produces revenue to pay. Examples of revenue
bonds include toll bridges, roads, parking lots and ports. The municipality
is not obligated to cover debt payments on revenue bonds in default.
BOND RATINGS
The quality of bonds can, to some degree, be determined from the ratings
of the two most prominent rating services: Moody's and Standard & Poor's.
The ratings are used by the government and industry regulatory agencies, the
investing public, and portfolio managers as a guide to the relative security
and value of each bond. The ratings are not used as an absolute factor in
determining the strength of the pledge securing a particular issue. However,
since Moody's and Standard & Poor's rate bonds on a fee basis, some issuers
choose not to be rated. Many non-rated issues are sound investments. The
rating symbols of the two services are shown in the accompanying table.
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MOODY'S INVESTORS STANDARD & POOR'S CORP.
SERVICES, INC. (PLUS (+) OR MINUS (-))
----------------- -----------------------
Prime Aaa AAA
Excellent Aa AA
Good A A
Average Baa BBB
Fair Ba BB
Poor B B
Marginal Caa C
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FIRST FUNDS ANNUAL REPORT
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DEFINITION OF COMMON TERMS (CONTINUED)
SEC YIELD
The SEC Yield was mandated by the Securities and Exchange Commission in
1988 as a standardized yield calculation intended to put performance
presentations for all bond and money market funds on a level playing field.
The SEC yield does not take into account income derived from capital gains,
option writing, futures, or return of capital. The formula also adjusts the
income from premium or discounted bonds to reflect the amortization of that
bond.
TOTAL RETURN
Total return measures a Portfolio's performance over a stated period of
time, taking into account the combination of dividends paid and the gain or
loss in the value of the securities held in the Portfolio. It may be
expressed on an average annual basis or a cumulative basis (total change over
a given period).
Whenever a Portfolio, other than a Money Market Portfolio, reports any
type of performance, it must also report the average annual total return
according to the standardized calculation developed by the SEC. This
standardized calculation was introduced to help investors compare different
mutual funds on an equal performance basis. The SEC average annual total
return calculation includes the effects of all of the fund's fees and
expenses, and assumes the reinvestment of all dividends and capital gains.
DEFINITION OF INDICES
STANDARD & POOR'S 500 is a broad-based measurement of changes in stock market
conditions based on the average performance of 500 widely-held common stocks.
It is an unmanaged index.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX, an unmanaged index, is a
broad measure of bond performance, and includes reinvestment of dividends and
capital gains.
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX, an unmanaged index, is a broad
measure of municipal bond performance and includes reinvestment of dividends
and capital gains.
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FIRST FUNDS ANNUAL REPORT
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of First Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Total Return
Equity Portfolio, the Total Return Fixed Income Portfolio, the Tennessee
Tax-Free Portfolio, the U.S. Treasury Money Market Portfolio, the U.S.
Government Money Market Portfolio, the Municipal Money Market Portfolio, and
the Cash Reserve Portfolio (portfolios of First Funds, hereafter, referred to
as the "Portfolios") at June 30, 1996, and the results of each of their
operations, the changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Portfolios' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which include confirmation of securities at June 30, 1996 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 12, 1996
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FIRST FUNDS ANNUAL REPORT
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TOTAL RETURN FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE PRINCIPAL VALUE
DATE COUPON AMOUNT (NOTE 1)
- ---- ------ ------------ ------------
U.S GOVERNMENT & AGENCY OBLIGATIONS - 54.6%
U.S. TREASURY BONDS
05/15/16 7.250% $ 15,090,000 $ 15,457,819
08/15/17 8.875% 4,055,000 4,866,000
U.S. TREASURY NOTES
11/30/97 6.000% 6,435,000 6,439,023
04/15/98 7.875% 460,000 473,656
05/31/98 5.375% 9,900,000 9,766,963
04/30/00 6.750% 7,335,000 7,412,934
08/15/02 6.375% 8,005,000 7,929,953
02/15/04 5.875% 8,965,000 8,558,769
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $61,722,228) 60,905,117
------------
CORPORATE BONDS AND NOTES - 35.1%
FINANCE - 17.7%
Associates Corp. of N.A.
05/15/99 7.500% 1,010,000 1,034,401
BHP Finance USA
03/01/06 6.690% 2,225,000 2,119,012
Bankers Trust - NY Corp.
03/15/06 7.125% 1,850,000 1,799,125
CNA Financial
11/15/03 6.250% 2,150,000 2,030,561
Donaldson, Lufkin & Jenrette
02/15/16 5.625% 2,000,000 1,882,414
First Chicago
1/15/03 7.625% 1,600,000 1,641,282
Ford Capital
05/01/98 9.125% 910,000 951,561
Ford Motor Credit Co.
10/06/00 6.375% 2,000,000 1,960,176
General Motors Acceptance Corp.
02/15/01 5.625% 1,575,000 1,494,596
Morgan Stanley Group, Inc.
10/01/03 6.125% 2,200,000 2,066,486
Norwest Corp.
12/01/05 6.200% 1,950,000 1,810,536
Tenneco Credit, Inc.
11/01/96 9.250% 950,000 960,123
------------
TOTAL FINANCE 19,750,273
------------
INDUSTRIAL & SERVICE - 16.3%
American Home Products Corp.
02/15/00 7.700% 1,550,000 1,598,402
Anheuser Busch
09/01/05 7.000% 2,000,000 1,969,162
Caremark International, Inc.
08/15/03 6.875% 1,500,000 1,413,618
Dover Corp.
11/15/05 6.450% 1,900,000 1,804,421
Federal Express Corp.
03/23/10 8.400% 1,750,000 1,874,390
Lockheed Martin
05/15/01 6.850% 2,000,000 1,990,406
Northwest Airlines Corp.
01/02/15 7.670% 1,500,000 1,512,960
DUE PRINCIPAL VALUE
DATE COUPON AMOUNT (NOTE 1)
- ---- ------ ------------ ------------
INDUSTRIAL & SERVICE (CONTINUED)
Philip Morris
12/01/99 7.125% $ 1,225,000 $ 1,234,986
Raytheon Co.
07/15/05 6.500% 1,800,000 1,718,285
USX Corp.
01/21/99 8.050% 1,190,000 1,212,253
Waste Management
10/01/02 7.700% 1,825,000 1,892,151
------------
TOTAL INDUSTRIAL & SERVICE 18,221,034
------------
UTILITIES - 1.1%
Public Service Electric & Gas
11/01/01 7.875% 1,150,000 1,179,107
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $39,817,920) 39,150,414
------------
FOREIGN BOND - 1.4%
Fomento Economico Mexico S.A.
07/22/97 9.500% 1,500,000 1,522,500
(Cost $1,517,868) ------------
ASSET BACKED OBLIGATIONS - 0.0%
Security Pacific Home Equity
Loan, Series 1991-2A
06/15/20 8.100% 31,551 31,689
(Cost $32,546) ------------
MORTGAGE-BACKED OBLIGATIONS - 5.0%
Federal Home Loan Mortgage
Corp., CMO 1698 E PAC
10/15/06 6.000% 2,400,000 2,344,824
Federal National Mortgage
Association, 1994-M3 CL B
04/25/06 7.710% 2,225,000 2,280,277
Guaranteed Mortgage Corp.
III, L4 07/20/19 9.050% 193,695 196,448
Resolution Trust Corp.,
Series 1992-8 A2 12/25/26 8.250%+ 101,516 101,516
Resolution Trust Corp.,
Series 1992-C6 A2 07/25/24 6.500%* 633,208 635,187
------------
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $5,636,989) 5,558,252
------------
SHORT-TERM INVESTMENTS - COMMERCIAL PAPER - 3.9%
American Express Corp.
07/01/96 5.392% 2,342,800 2,342,800
Merrill Lynch & Co.
07/08/96 5.350% 2,000,000 1,997,919
------------
TOTAL SHORT-TERM INVESTMENTS - COMMERCIAL PAPER
(Cost $4,340,719) 4,340,719
------------
TOTAL INVESTMENTS - 100%
(Cost $113,068,270) $111,508,691
------------
------------
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------- 2
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TOTAL RETURN FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
(Showing Percentage of Total Value of Investments)
*Floating or variable rate security - rate disclosed as of June 30, 1996.
+Security is valued at fair value. See Note 1.
INCOME TAX INFORMATION:
At June 30, 1996, the net unrealized depreciation
based on cost for income tax purposes of $113,068,270
was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $466,184
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (2,025,763)
-----------
Net unrealized depreciation $(1,559,577)
-----------
-----------
As of June 30, 1996, Total Return Fixed Income Portfolio had a capital loss
carryover of approximately $962,000 available to offset capital gains to the
extent provided in regulations, which will expire on June 30, 2003.
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities and U.S.
Government and Agency securities for the year ended June 30, 1996 aggregated
$33,179,683 and $13,253,906, respectively. Purchases and sales of U.S.
Government and Agency securities, other than short-term securities for the
year ended June 30, 1996 aggregated $46,031,282 and $43,606,879,
respectively.
TOTAL RETURN EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
VALUE
SHARES (NOTE 1)
-------- -----------
COMMON STOCKS - 93.2%
BASIC MATERIALS - 5.1%
Air Products & Chemicals, Inc. 61,100 $ 3,528,525
Morton International, Inc. 171,700 6,395,825
-----------
TOTAL BASIC MATERIALS 9,924,350
-----------
CAPITAL GOODS - 16.2%
Belden, Inc. 175,800 5,274,000
General Electric Co. 70,775 6,122,038
Grainger (W.W.), Inc. 54,650 4,235,375
Raytheon Co. 90,800 4,687,550
WMX Technologies, Inc. 198,300 6,494,325
York International Corp. 92,600 4,792,050
-----------
TOTAL CAPITAL GOODS 31,605,338
-----------
CONSUMER NON-DURABLES - 20.0%
Abbott Laboratories 148,400 6,455,400
Elan Corp. ADR* 91,900 5,249,787
Merck & Co., Inc. 79,500 5,137,688
Procter & Gamble Co. 29,550 2,677,969
Ralston Purina Group 20,700 1,327,387
Sara Lee Corp. 182,650 5,913,294
Schering-Plough Corp. 94,800 5,948,700
Sysco Corp. 181,000 6,199,250
-----------
TOTAL CONSUMER NON-DURABLES 38,909,475
-----------
CONSUMER SERVICES - 11.0%
Belo (A.H.) Corp., COM Series A 132,800 4,946,800
Federated Department Stores* 135,100 4,610,288
Interpublic Group of Companies, Inc. 121,600 5,700,000
Price/Costco, Inc.* 290,200 6,203,025
-----------
TOTAL CONSUMER SERVICES 21,460,113
-----------
ENERGY & NATURAL RESOURCES - 10.8%
Apache Corp. 48,300 1,587,863
Coastal Corp. 119,900 5,005,825
Repsol S.A. ADR 157,617 5,477,191
Texaco, Inc. 45,100 3,782,762
YPF S.A. ADR 225,500 5,073,750
-----------
TOTAL ENERGY & NATURAL RESOURCES 20,927,391
-----------
FINANCE - 14.3%
Bank of Boston Corp. 100,200 4,959,900
Chase Manhattan Corp. 73,600 5,198,000
Federal National Mortgage Association 186,000 6,231,000
Norwest Corp. 184,500 6,434,437
UNUM Corp. 80,500 5,011,125
-----------
TOTAL FINANCE 27,834,462
-----------
TECHNOLOGY - 12.3%
Airtouch Communications, Inc.* 203,400 5,746,050
EMC Corp.* 192,300 3,581,587
Intel Corp. 66,600 4,886,775
The accompanying notes are an integral part of the financial statements.
3 ---------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TOTAL RETURN EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
(Showing Percentage of Total Value of Investments)
VALUE
SHARES (NOTE 1)
-------- ------------
TECHNOLOGY (CONTINUED)
Motorola, Inc. 87,400 $ 5,495,275
Sprint Corp. 102,800 4,317,600
------------
TOTAL TECHNOLOGY 24,027,287
------------
UTILITIES - 3.5%
GTE Corp. 152,500 6,824,375
------------
TOTAL COMMON STOCKS
(Cost $144,730,328) 181,512,791
------------
DUE DISCOUNT RATE OR PRINCIPAL
DATE COUPON RATE AMOUNT
- ---- ---------------- ----------
SHORT-TERM INVESTMENTS - COMMERCIAL PAPER - 6.8%
American Express
07/01/96 5.392% $5,124,300 5,124,300
Idaho Power
07/29/96 5.380% 2,000,000 1,991,631
Merrill Lynch Co.
07/08/96 5.350% 2,595,000 2,592,301
Mitsubishi Motors
07/15/96 5.370% 2,000,000 1,995,823
Travelers Ins. Co.
07/10/96 5.382% 1,470,000 1,470,000
------------
TOTAL SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER
(Cost $13,174,055) 13,174,055
------------
TOTAL INVESTMENTS - 100%
(Cost $157,904,383) $194,686,846
------------
------------
*Non-income producing security
ADR - American Depository Receipt
INCOME TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation
based on cost for income tax purposes of
$157,951,929 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $ 37,183,451
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (448,534)
------------
Net unrealized appreciation. $ 36,734,917
------------
------------
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1996 aggregated $99,236,268 and $67,446,967,
respectively.
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE PRINCIPAL VALUE
DATE COUPON AMOUNT (NOTE 1)
- ---- ------ --------- ----------
DEMAND NOTES - 7.8%
Lincoln County Wyoming
11/01/14 3.600%* $400,000 $ 400,000
New York City General
Obligation, Series B-4
08/15/23 3.600%* 200,000 200,000
New York City Water
Revenue, Series 92-C
06/15/22 3.600%* 100,000 100,000
----------
TOTAL DEMAND NOTES
(Cost $700,000) 700,000
----------
GENERAL OBLIGATION BONDS - 57.8%
Bradley County Tennessee
03/01/08 5.200% 320,000 310,176
Chattanooga Tennessee
06/01/03 5.000% 100,000 100,556
11/01/04 5.400% 250,000 256,050
Cleveland Tennessee
09/01/09 5.375% 330,000 325,987
Grundy County Tennessee
05/01/06 5.350% 300,000 303,171
Hamblen County Tennessee
Hospital 05/01/06 4.900% 150,000 145,995
Hamilton County Tennessee
09/01/05 5.000% 300,000 297,369
Johnson City Tennessee
06/01/12 5.900% 245,000 248,339
Kingsport Tennessee
09/01/02 5.500% 100,000 102,888
Knox County Tennessee
04/01/08 5.100% 350,000 339,731
Knoxville Tennessee
05/01/08 5.300% 350,000 345,737
Memphis Tennessee
03/01/11 5.250% 100,000 96,327
10/01/12 5.500% 90,000 88,756
Metropolitan Nashville
05/15/05 5.000% 350,000 348,247
Putnam County Tennessee
04/01/07 5.100% 330,000 322,763
Rutherford County Tennessee
04/01/04 5.125% 40,000 40,328
Shelby County Tennessee
08/01/01 6.600% 250,000 253,530
03/01/11 5.800% 400,000 404,380
State of Tennessee
03/01/07 5.400% 240,000 243,483
Weakly County Tennessee
05/01/09 5.000% 350,000 333,389
Williamson County Tennessee
09/01/02 4.900% 150,000 150,783
Wilson County Tennessee
04/01/07 5.250% 140,000 139,192
----------
TOTAL GENERAL OBLIGATION BONDS
(Cost $5,295,556) 5,197,177
----------
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------- 4
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE PRINCIPAL VALUE
DATE COUPON AMOUNT (NOTE 1)
- ---- ------ ------------ ----------
REVENUE BONDS - 34.4%
AIRPORT - 0.5 %
Metropolitan Nashville Airport
07/01/97 5.600% $ 40,000 $ 40,523
----------
HOSPITAL - 9.9%
Blount County Hospital
07/01/12 6.125% 250,000 259,350
Jackson Hospital
04/01/10 5.500% 300,000 294,582
Knox County Tennessee Health &
Education (St. Mary's Hospital)
09/01/03 5.200% 40,000 40,354
Knox County Tennessee Health &
Education (Ft. Sanders Hospital)
01/01/11 5.750% 300,000 300,291
----------
TOTAL HOSPITAL 894,577
----------
HOUSING - 7.2%
Tennessee Housing Development
Authority 07/01/00 4.950% 250,000 250,178
01/01/11 5.800% 400,000 401,028
----------
TOTAL HOUSING 651,206
----------
STATE AUTHORITY - 3.2%
Tennessee State Local
Development Authority
03/01/11 5.750% 250,000 246,088
Tennessee State School
Board Authority 05/01/03 5.750% 35,000 36,585
----------
TOTAL STATE AUTHORITY 282,673
----------
UTILITY - 13.6%
Jackson Tennessee Water &
Sewer 07/01/10 5.100% 190,000 180,329
Knoxville Tennessee Gas
03/01/08 5.050% 400,000 387,960
Lawrenceburg Tennessee
Electric 07/01/06 5.200% 345,000 345,531
Memphis Tennessee Sewer
10/01/09 5.250% 175,000 170,422
Memphis Tennessee Water
01/01/97 4.900% 40,000 40,191
Metropolitan Nashville Water &
Sewer 01/01/99 5.000% 100,000 101,149
----------
TOTAL UTILITY 1,225,582
----------
TOTAL REVENUE BONDS
(Cost $3,149,393) 3,094,561
----------
TOTAL INVESTMENTS - 100%
(Cost $9,144,949) $8,991,738
----------
----------
*Floating or variable rate security - rate disclosed as of June 30, 1996.
INCOME TAX INFORMATION:
At June 30, 1996, the net unrealized depreciation
based on cost for income tax purposes of
$9,144,949 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $ 10,458
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (163,669)
---------
Net unrealized depreciation $(153,211)
---------
---------
OTHER INFORMATION:
The Tennessee Tax-Free Portfolio intends to elect to defer to its fiscal year
ending June 30, 1997 $7,688 of losses recognized during the period November
1, 1995 to June 30, 1996.
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1996 aggregated $8,851,566 and $394,300, respectively.
UNAUDITED INCOME TAX INFORMATION:
Tennessee Tax-Free Portfolio had designated all dividends paid during the
year as exempt-interest dividends. Thus 100% of these distributions are
exempt from Federal income tax.
The accompanying notes are an integral part of the financial statements.
5 ---------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- --------------
U.S. TREASURY OBLIGATIONS - 55.2%
U.S. TREASURY NOTES
08/31/96 6.25% $2,500,000 $ 2,501,876
09/30/96 6.50% 2,000,000 2,003,245
10/31/96 6.88% 1,000,000 1,004,963
11/30/96 6.50% 1,000,000 1,003,519
11/30/96 7.25% 3,500,000 3,524,916
12/31/96 7.50% 4,500,000 4,542,699
01/15/97 8.00% 1,000,000 1,012,621
01/31/97 7.50% 2,000,000 2,021,338
02/28/97 6.75% 3,000,000 3,022,545
02/28/97 6.88% 1,250,000 1,263,551
U.S. TREASURY BILLS
09/05/96 5.07% 20,000,000 19,814,100
12/12/96 5.20% 2,000,000 1,952,622
-----------
TOTAL U.S.TREASURY OBLIGATIONS 43,667,995
-----------
MATURITY
AMOUNT
------------
REPURCHASE AGREEMENTS - 44.8%
Donaldson, Lufkin & Jenrette
Securities Corp., 5.40%,
dated 06/28/96, due 07/01/96,
collateralized by $12,701,000
U.S. Treasury Notes, 6.75%
due 04/30/00 12,724,724 12,719,000
HSBC Securities, Inc., 5.375%,
dated 06/28/96, due 07/01/96,
collateralized by $12,475,000
U.S. Treasury Notes, 7.12%
due 02/29/00 12,723,697 12,718,000
Lehman Brothers, 5.29%, dated
06/26/96, due 07/17/96,
collateralized by $7,970,000
U.S. Treasury Bonds, 11.12%
due 08/15/03 10,030,858 10,000,000
-----------
TOTAL REPURCHASE AGREEMENTS 35,437,000
-----------
TOTAL INVESTMENTS - 100% $79,104,995
-----------
-----------
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $79,104,995
The U.S. Treasury Money Market Portfolio intends to elect to defer to its
fiscal year ending June 30, 1997 $6,168 of losses recognized during the
period November 1, 1995 to June 30, 1996.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- -----------
U.S. GOVERNMENT TREASURY OBLIGATIONS - 9.5%
U.S. TREASURY NOTES
12/31/96 7.50% $2,500,000 $ 2,523,800
01/31/97 7.50% 2,500,000 2,527,525
02/28/97 6.75% 2,000,000 2,015,439
02/28/97 6.88% 1,250,000 1,263,551
-----------
TOTAL U.S. GOVERNMENT TREASURY OBLIGATIONS 8,330,315
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 80.3%
Federal Farm Credit Bank
07/01/96 5.60% 1,500,000 1,500,000
Federal Home Loan Bank
07/20/96 5.25%* 5,000,000 4,999,194
08/21/96 7.55% 2,000,000 2,005,664
09/23/96 6.72% 3,000,000 3,008,356
Federal Home Loan Mortgage Corp.
07/22/96 5.27% 1,000,000 996,926
08/22/96 5.32% 1,500,000 1,488,466
08/26/96 5.30% 1,570,000 1,557,056
09/03/96 5.33% 1,350,000 1,337,208
09/13/96 5.34% 1,500,000 1,483,535
Federal National Mortgage Association
07/01/96 5.21%* 5,000,000 4,995,521
07/01/96 5.22%* 10,000,000 9,992,753
07/01/96 5.25%* 5,000,000 4,999,175
07/01/96 5.50%* 3,000,000 2,999,784
07/02/96 5.45%* 5,000,000 5,000,000
09/06/96 5.35%* 5,000,000 4,997,435
09/23/96 5.09% 2,000,000 1,976,247
09/24/96 5.33% 1,500,000 1,481,123
12/02/96 5.29% 2,000,000 1,954,741
Student Loan Marketing Association
07/02/96 5.59%* 12,650,000 12,645,961
07/02/96 5.62%* 1,200,000 1,200,080
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 70,619,225
-----------
MATURITY
AMOUNT
------------
REPURCHASE AGREEMENTS - 10.2%
HSBC Securities, Inc. 5.375%,
dated 06/28/96, due 07/01/96,
collateralized by $4,400,000
U.S. Treasury Notes, 7.12%
due 02/29/00 4,472,002 4,470,000
Donaldson, Lufkin, Jenrette
Securities Corp., 5.40%, dated
06/28/96, due 07/01/96,
collateralized by $4,390,000
U.S. Treasury Notes, 7.12% due
09/30/99 4,473,012 4,471,000
-----------
TOTAL REPURCHASE AGREEMENTS 8,941,000
-----------
TOTAL INVESTMENTS - 100% $87,890,540
-----------
-----------
*Floating or variable rate security - rate disclosed as of June 30, 1996.
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------- 6
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
(Showing Percentage of Total Value of Investments)
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $87,890,540
The U.S. Government Money Market Portfolio intends to elect to defer to its
fiscal year ending June 30, 1997 $2,691 of losses recognized during the
period November 1, 1995 to June 30, 1996.
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- -----------
MUNICIPAL BONDS & NOTES - 100.0%
DISTRICT OF COLUMBIA - 3.5%
District of Columbia,
Series 92A
07/01/96 3.80%* $2,600,000 $ 2,600,000
-----------
GEORGIA - 4.0%
Thomasville Georgia
Payroll Development
Authority
07/04/96 3.55%* 3,000,000 3,000,000
-----------
ILLINOIS - 13.9%
Chicago Illinois,
Gas Supply
12/01/96 3.85% 1,600,000 1,600,000
Illinois Development
Authority
07/05/96 3.60%* 2,300,000 2,300,000
Illinois Housing
Development Authority
09/03/96 3.75% 1,465,000 1,465,000
Peoria Illinois
Industrial
Development Revenue
07/05/96 3.55%* 3,000,000 3,000,000
Quad Cities Economic
Development
07/05/96 3.55%* 1,960,000 1,960,000
-----------
10,325,000
-----------
INDIANA - 12.2%
Franklin County,
Indiana
07/05/96 3.50%* 2,225,000 2,225,000
Indiana Development
Finance Authority
07/05/96 3.60%* 4,900,000 4,900,000
Indiana State Housing
07/01/96 4.00% 1,000,000 1,000,000
Noblesville, Indiana
Industrial Development
Revenue
07/05/96 3.65%* 960,000 960,000
-----------
9,085,000
-----------
KENTUCKY - 4.9%
Maysville, Kentucky
Solid Waste
09/10/96 3.80% 3,600,000 3,600,00
-----------
LOUISIANA - 0.1%
Calcasieu Parish
Industrial Development
07/01/96 3.80%* 100,000 100,000
-----------
MICHIGAN - 2.5%
Michigan State
Strategic Fund
07/03/96 3.50%* 700,000 700,000
Michigan State
Strategic Fund,
Series 88
08/08/96 3.45% 1,150,000 1,150,000
-----------
1,850,000
-----------
NEW HAMPSHIRE - 9.0%
New Hampshire
Health Facilities
07/05/96 3.35%* 200,000 200,000
New Hampshire I.D.A.
Solid Waste
09/03/96 3.30% 3,000,000 3,000,000
The accompanying notes are an integral part of the financial statements.
7 ---------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- --------------
NEW HAMPSHIRE (CONTINUED)
New Hampshire PCR
NE - Power
08/23/96 3.60% $1,450,000 $ 1,450,000
New Hampshire PCR -
Power, Series A
09/10/96 3.65% 1,000,000 1,000,000
New Hampshire State
Housing Authority
01/15/97 3.65% 1,000,000 1,000,000
-----------
6,650,000
-----------
OHIO - 3.3%
Greater Cleveland Regional
Transportation Authority
10/17/96 3.90% 1,000,000 1,001,301
Stark County Ohio
06/19/97 4.12% 1,450,000 1,452,959
-----------
2,454,260
-----------
SOUTH CAROLINA - 2.0%
South Carolina
Education Assistance
Authority
09/01/96 4.75% 1,500,000 1,502,369
-----------
TENNESSEE - 24.3%
Clarksville, Tennessee
Public Building
Authority
07/05/96 3.30%* 200,000 200,000
Knox County Tennessee
07/05/96 3.35%* 100,000 100,000
Knox County
Tennessee IDB
07/15/96 3.60% 1,650,000 1,650,000
Knox County Tennessee
Health Education,
Mercy Health System
Series 94B
07/04/96 3.50%* 900,000 900,000
Memphis Tennessee
07/03/96 3.35%* 1,800,000 1,800,000
Memphis Tennessee,
Series B
07/03/96 3.50%* 3,400,000 3,400,000
Metropolitan
Government Nashville
07/03/96 3.50%* 2,000,000 2,000,000
Metropolitan Nashville
Airport
07/05/96 3.40%* 1,200,000 1,200,000
Metropolitan Nashville
Airport
07/03/96 3.40%* 2,810,000 2,810,000
Shelby County,
Tennessee
08/01/96 3.90% 1,965,000 1,965,000
South Pittsburg
Tennessee Industrial
Development
07/03/96 3.50%* 2,000,000 2,000,000
-----------
18,025,000
-----------
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- -----------
TEXAS - 10.0%
Angelina Neches
River Texas
09/09/96 3.60% $2,000,000 $ 2,000,000
Brazos River
Harbor Texas
08/13/96 3.60% 4,000,000 4,000,000
Brazos River
Texas
08/08/96 3.45% 1,400,000 1,400,000
-----------
7,400,000
-----------
UTAH - 2.2%
Emery County PCR
(Pacificorp)
07/01/96 3.55%* 1,600,000 1,600,000
-----------
WASHINGTON - 5.4%
Yakima County
Washington Public
Corp.
02/01/11 3.70%* 4,000,000 4,000,000
-----------
WISCONSIN - 2.7%
Racine Wisconsin,
UNI School District
08/23/96 4.500% 2,000,000 2,001,251
-----------
TOTAL MUNICIPAL BONDS & NOTES 74,192,880
-----------
TOTAL INVESTMENTS - 100% $74,192,880
-----------
-----------
*Floating or variable rate security - rate disclosed as of June 30, 1996.
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $74,192,880.
As of June 30, 1996 Municipal Money Market Portfolio had a capital loss
carryover of approximately $3,000 available to offset capital gains to the
extent provided in the regulations, which will expire on June 30, 2002.
UNAUDITED INCOME TAX INFORMATION:
Municipal Money Market Portfolio had designated all dividends paid during the
year as exempt-interest dividends. Thus 100% of these distributions are
exempt from Federal income tax.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------- 8
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
CASH RESERVE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996
(Showing Percentage of Total Value of Investments)
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- -----------
AGENCY OBLIGATIONS - 7.4%
Federal Home
Loan Bank
07/01/96 5.52% $3,000,000 $ 3,000,000
-----------
CERTIFICATES OF DEPOSITS - 14.3%
Bank of America
09/26/96 5.36% 1,000,000 1,000,000
Comerica Bank
08/01/96 5.43%* 800,000 799,724
First National Bank
of Chicago
11/07/96 5.51% 1,000,000 999,967
LaSalle National Bank
09/11/96 5.48% 2,000,000 2,000,000
National Bank of
Detroit
09/12/96 5.47% 1,000,000 1,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT 5,799,691
-----------
BANKERS' ACCEPTANCES - 4.5%
Citibank
07/15/96 5.40% 832,152 830,404
09/20/96 5.23% 1,000,000 988,234
-----------
TOTAL BANKERS' ACCEPTANCES 1,818,638
-----------
CORPORATE NOTES - 10.6%
CONSTRUCTION MACHINERY - 2.4%
Caterpillar Inc.
12/02/96 7.04% 1,000,000 1,004,748
-----------
SECURITY BROKER/DEALERS - 8.2%
Bear Stearns Co.
08/04/96 5.50%* 800,000 800,000
CS First Boston Inc.
08/03/96 5.48%* 1,700,000 1,700,000
Goldman Sachs
Group, L.P.
08/06/96 5.63%* 825,000 825,000
-----------
TOTAL SECURITY BROKER/DEALERS 3,325,000
-----------
TOTAL CORPORATE NOTES 4,329,748
-----------
COMMERCIAL PAPER - 52.0%
BANKS - 12.2%
Chase Manhattan Corp.
07/09/96 5.33% 900,000 898,935
08/07/96 5.35% 1,000,000 994,501
JP Morgan & Co., Inc.
08/20/96 4.88% 1,600,000 1,589,156
National City
Credit Corp.
08/08/96 5.22% 1,500,000 1,491,735
-----------
TOTAL BANKS 4,974,327
-----------
BEVERAGES - 2.4%
Anheuser Busch Co.
10/10/96 5.30% 1,000,000 985,130
-----------
DUE DISCOUNT RATE OR PRINCIPAL VALUE
DATE COUPON RATE AMOUNT (NOTE 1)
- ---- ---------------- ---------- -----------
CHEMICALS & ALLIED PRODUCTS - 6.3%
Monsanto
09/27/96 5.30% $1,800,000 $ 1,776,680
Proctor & Gamble
08/29/96 5.38% 800,000 792,946
-----------
TOTAL CHEMICALS & ALLIED PRODUCTS 2,569,626
-----------
ELECTRIC SERVICES - 4.3%
Carolina Power &
Light
09/27/96 5.22% 1,750,000 1,727,692
-----------
HEALTH SERVICES - 1.2%
Kaiser Foundation
Hospitals
07/02/96 5.20% 500,000 499,927
-----------
PAPER & ALLIED SERVICES - 2.9%
Weyerhauser Co.
08/29/96 5.38% 1,184,000 1,173,560
-----------
PERSONAL CREDIT INSTITUTIONS - 6.9%
Ford Motor
Credit Corp.
07/17/96 5.29% 2,000,000 1,995,298
Transamerica Finance
09/26/96 5.23% 800,000 789,888
-----------
TOTAL PERSONAL CREDIT INSTITUTIONS 2,785,186
-----------
PETROLEUM REFINING - 4.9%
Koch Industries
07/01/96 5.55% 2,000,000 2,000,000
-----------
SECURITY BROKER/DEALERS - 5.4%
Morgan Stanley Group
07/30/96 5.31% 2,200,000 2,190,589
-----------
TELEPHONE COMMUNICATIONS - 5.5%
AT&T Corp.
08/16/96 5.39% 1,200,000 1,191,735
08/22/96 5.38% 750,000 744,172
Bell South Telecom
08/20/96 5.37% 300,000 297,763
-----------
TOTAL TELEPHONE COMMUNICATIONS 2,233,670
-----------
TOTAL COMMERCIAL PAPER 21,139,707
-----------
MATURITY
AMOUNT
--------
REPURCHASE AGREEMENT 11.2%
Donaldson, Lufkin & Jenrette
Securities Corp., 5.400%,
dated 06/28/96, due 07/01/96,
collateralized by $4,334,000
U.S. Treasury Notes, 8.25% due
07/15/98 4,577,059 4,575,000
-----------
TOTAL INVESTMENTS - 100% $40,662,784
-----------
-----------
*Floating or variable rate security - rate disclosed as of June 30, 1996.
Total cost for income tax purposes - $40,662,784
The accompanying notes are an integral part of the financial statements.
9 ---------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TOTAL RETURN FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
ASSETS:
Investments, at value
(Cost $113,068,270) (Note 1) $111,508,691
Receivable for investments sold 1,621,256
Receivable for portfolio shares sold 12,500
Interest receivable 1,598,536
Other assets 1,899
------------
Total assets 114,742,882
------------
LIABILITIES:
Payable for investments purchased 3,164,072
Payable for portfolio shares redeemed 106,009
Accrued advisory fee 26,878
Accrued administration fee 13,859
Accrued co-administration fee 4,479
Dividends payable 30,766
Accrued 12b-1 fee 3,115
Accrued shareholder servicing fee 1,063
Other payables and accrued expenses 48,539
------------
Total liabilities 3,398,780
------------
NET ASSETS $111,344,102
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $113,903,480
Over-distributed net investment income (36,367)
Accumulated net realized loss on investments (963,432)
Net unrealized depreciation in value of investments (1,559,579)
------------
NET ASSETS $111,344,102
------------
------------
CLASS I:
Net Asset Value, offering price and redemption
price per share ($107,832,238/11,082,542 shares
outstanding of $.001 par value capital
stock, unlimited shares authorized) $ 9.73
------
------
CLASS II:
Net Asset Value, offering price and redemption
price per share ($67,168/6,917 shares outstanding
of $.001 par value capital stock, unlimited
shares authorized) $ 9.71
------
------
Offering price per share (net asset value plus sales
charge of 3.75% of offering price) $10.09
------
------
CLASS III:
Net Asset Value, offering price and redemption
price per share ($3,444,696/354,758 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $ 9.71
------
------
TOTAL RETURN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
ASSETS:
Investments, at value
(Cost $157,904,383) (Note 1) $194,686,846
Cash 99
Receivable for investments sold 3,347,299
Receivable for portfolio shares sold 93,635
Dividends receivable 216,588
Interest receivable 3,621
Other assets 5,063
------------
Total assets 198,353,151
------------
LIABILITIES:
Payable for portfolio shares redeemed 90,251
Accrued advisory fee 161,201
Accrued administration fee 22,432
Accrued co-administration fee 8,040
Dividends payable 5,795
Accrued 12b-1 fee 30,035
Accrued shareholder servicing fee 10,508
Other payables and accrued expenses 69,062
------------
Total liabilities 397,324
------------
NET ASSETS $197,955,827
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $153,405,960
Accumulated net realized gain on investments 7,767,404
Net unrealized appreciation in value of investments 36,782,463
------------
NET ASSETS $197,955,827
------------
------------
CLASS I:
Net Asset Value, offering price and redemption
price per share ($159,145,845/11,273,266 shares
outstanding of $.001 par value capital
stock, unlimited shares authorized) $14.12
------
------
CLASS II:
Net Asset Value, offering price and redemption
price per share ($1,918,109/135,858 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $14.12
------
------
Offering price per share (net asset value plus sales
charge of 4.50% of offering price) $14.79
------
------
CLASS III:
Net Asset Value, offering price and redemption
price per share ($36,891,873/2,614,206 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $14.11
------
------
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------- 10
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
ASSETS:
Investments, at value
(Cost $9,144,949) (Note 1) $8,991,738
Interest receivable 130,800
Receivable for portfolio shares sold 103,514
Due from administrator 5,632
----------
Total assets 9,231,684
----------
LIABILITIES:
Payable for investments purchased 411,213
Payable for portfolio shares redeemed 59,598
Payable to custodian 26,101
Dividends payable 21,537
Accrued 12b-1 fee 513
Other payables and accrued expenses 16,417
Total liabilities 535,379
----------
NET ASSETS $8,696,305
----------
----------
NET ASSETS CONSIST OF:
Paid in capital $8,857,204
Accumulated net realized loss (7,688)
Net unrealized depreciation in value of investments (153,211)
----------
NET ASSETS $8,696,305
----------
----------
CLASS I:
Net Asset Value, offering price and redemption
price per share ($5,924,883/610,116 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $ 9.71
------
------
CLASS II:
Net Asset Value, offering price and redemption
price per share ($1,875,015/192,796 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $ 9.73
------
------
Offering price per share (net asset value plus sales
charge of 3.75% of offering price) $10.11
------
------
CLASS III:
Net Asset Value, offering price and redemption
price per share ($896,407/92,248 shares
outstanding of $.001 par value capital stock,
unlimited shares authorized) $ 9.72
------
------
The accompanying notes are an integral part of the financial statements.
11 --------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
<TABLE>
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT MUNICIPAL CASH
MONEY MARKET MONEY MARKET MONEY MARKET RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (1)(Note 1) $79,104,995 $87,890,540 $74,192,880 $40,662,784
Cash 534 495 111,090 93
Interest receivable 507,885 853,060 509,442 81,062
Registration and organization costs 4,420 6,468 3,873 0
Other assets 1,971 2,237 2,750 374
----------------------------------------------------
Total assets 79,619,805 88,752,800 74,820,035 40,744,313
----------------------------------------------------
LIABILITIES:
Dividends payable 321,932 353,520 195,733 147,655
Accrued management fee 14,253 15,019 13,451 6,739
Accrued administration fee 5,251 5,469 4,735 2,477
Accrued co-administration fee 1,776 1,871 1,743 834
Accrued 12b-1 fee 2,709 227 984 6,056
Other payables and accrued expenses 42,363 37,807 33,198 20,972
----------------------------------------------------
Total liabilities 388,284 413,913 249,844 184,733
----------------------------------------------------
NET ASSETS $79,231,521 $88,338,887 $74,570,191 $40,559,580
----------------------------------------------------
----------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $79,235,466 $88,341,465 $74,573,204 $40,559,518
Accumulated net realized gain(loss) on
investments (3,945) (2,578) (3,013) 62
----------------------------------------------------
NET ASSETS $79,231,521 $88,338,887 $74,570,191 $40,559,580
----------------------------------------------------
----------------------------------------------------
NET ASSET VALUE, offering price and
redemption price per share (2) $1.00 $1.00 $1.00 $1.00
----------------------------------------------------
----------------------------------------------------
</TABLE>
(1) Including repurchase agreements for the U.S. Treasury Money Market, U.S.
Government Money Market, Municipal Money Market, and Cash Reserve Portfolios
in the amounts of $35,437,000, $8,941,000, $0 and $4,575,000 respectively.
(2) SHARES OUTSTANDING
NET ($.001 PAR VALUE, UNLIMITED
ASSETS SHARES AUTHORIZED)
------ ------------------
U.S. Treasury Money Market
Class I $75,703,114 75,706,952
Class III 3,528,407 3,528,514
U.S. Government Money Market
Class I 88,111,264 88,113,818
Class III 227,623 227,647
Municipal Money Market
Class I 71,664,860 71,667,895
Class III 2,905,331 2,905,309
Cash Reserve
Class I 16,369,393 16,369,263
Class III 24,190,187 24,190,255
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------12
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TOTAL RETURN FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1996
INTEREST INCOME $ 6,574,322
-----------
EXPENSES:
Management fee (Note 3) 563,748
Administration fee (Note 4) 153,749
Co-administration fee 51,198
Fund accounting/Transfer agent fee:
Class I 68,107
Class II 17
Class III 2,950
Blue Sky fee:
Class I 3,604
Class II 14
Class III 1,897
Distribution fee:
Class III 23,789
Shareholder servicing fee:
Class II 36
Class III 7,930
Custodian fee 26,793
Trustees fee 5,303
Registration fee 11,176
Audit 20,571
Legal 6,692
Reports to Shareholders 6,251
Miscellaneous 14,317
-----------
Total expenses before waiver 968,142
Waiver of expenses (Note 5) (506,441)
Custodian fees paid indirectly (2,524)
-----------
Net expenses 459,177
-----------
Net investment income 6,115,145
-----------
Net realized gain on investments 423,779
Change in net unrealized appreciation/
depreciation (2,870,969)
-----------
Net loss on investments (2,447,190)
-----------
Net increase in net assets from operations $ 3,667,955
-----------
-----------
TOTAL RETURN EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1996
INVESTMENT INCOME:
Dividends $ 2,533,190
Interest 1,046,761
-----------
Total investment income 3,579,951
-----------
EXPENSES:
Management fee (Note 3) 1,076,198
Administration fee (Note 4) 248,353
Co-administration fee 82,965
Fund accounting/Transfer agent fee:
Class I 85,576
Class II 467
Class III 49,582
Blue Sky fee:
Class I 3,778
Class II 19
Class III 4,340
Distribution fee:
Class III 226,023
Shareholder servicing fee:
Class II 989
Class III 75,107
Custodian fee 40,307
Trustees fee 8,132
Registration fee 21,932
Audit 23,147
Legal 9,382
Reports to Shareholders 12,983
Miscellaneous 23,229
-----------
Total expenses before waiver 1,992,509
Waiver of expenses (Note 5) (392,889)
Custodian fees paid indirectly (546)
-----------
Net expenses 1,599,074
-----------
Net investment income 1,980,877
-----------
Net realized gain on investments 13,237,842
Change in net unrealized appreciation/
depreciation 19,574,675
-----------
Net gain on investments 32,812,517
-----------
Net increase in net assets from operations $34,793,394
-----------
-----------
The accompanying notes are an integral part of the financial statements.
13--------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
STATEMENT OF OPERATIONS
For the Period From December 15, 1995 to June 30, 1996
INTEREST INCOME $ 124,081
-----------
EXPENSES:
Management fee (Note 3) 12,692
Administration fee (Note 4) 3,755
Co-administration fee 1,252
Fund accounting/Transfer agent fee:
Class I 4,292
Class II 766
Class III 911
Blue Sky fee:
Class I 72
Class II 68
Class III 11
Distribution fee:
Class III 2,032
Shareholder servicing fee:
Class II 7
Class III 78
Audit 6,854
Registration fee 3,500
Custodian fee 1,450
Trustees fee 132
Legal 175
Miscellaneous 547
-----------
Total expenses before waiver 38,594
Waiver of expenses (Note 5) (17,699)
Fees reimbursed by administrator (5,310)
Custodian fees paid indirectly (746)
-----------
Net expenses 14,839
-----------
Net investment income 109,242
-----------
Net realized loss on investments (7,688)
Change in net unrealized appreciation/
depreciation (153,211)
-----------
Net loss on investments (160,899)
-----------
Net decrease in net assets from operations $ (51,657)
-----------
-----------
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------14
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1996
<TABLE>
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT MUNICIPAL CASH
MONEY MARKET MONEY MARKET MONEY MARKET RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $4,654,965 $5,430,552 $3,687,176 $1,559,959
--------------------------------------------------------
EXPENSES:
Management fee (Note 3) 209,632 241,977 241,730 69,195
Administration fee (Note 4) 62,889 72,593 72,519 20,758
Co-administration fee 41,850 48,327 48,285 13,808
Fund accounting/Transfer agent fee
Class I 38,422 45,160 48,913 14,444
Class III 1,265 82 1,501 6,050
Blue sky fee:
Class I 3,186 3,479 3,420 2,192
Class III 87 48 122 564
Distribution fee:
Class III 5,572 280 6,207 28,939
Custodian fee 40,402 38,584 27,469 14,995
Trustees fee 4,196 5,242 5,600 1,335
Amortization of organization costs 9,831 10,614 9,410 0
Registration fee 14,053 910 0 7,528
Audit 18,219 16,464 17,640 4,545
Legal 4,863 6,710 7,003 1,246
Reports to shareholders 6,325 8,317 7,638 2,190
Miscellaneous 11,940 14,960 13,666 4,550
--------------------------------------------------------
Total expenses before waiver 472,732 513,747 511,123 192,339
Waiver of expenses (Note 5) (164,237) (191,542) (192,737) (52,537)
Custodian fees paid indirectly (112) (1,288) (6,660) (476)
--------------------------------------------------------
Net expenses 308,383 320,917 311,726 139,326
--------------------------------------------------------
Net investment income 4,346,582 5,109,635 3,375,450 1,420,633
Net realized loss on investments (6,105) (2,691) 0 (26)
--------------------------------------------------------
Net increase in net assets from operations $4,340,477 $5,106,944 $3,375,450 $1,420,607
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15--------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
TOTAL RETURN FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
-------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 6,115,145 $ 4,915,474
Net realized gain (loss) on
investments 423,779 (966,627)
Change in net unrealized
appreciation/depreciation (2,870,969) 5,585,727
------------------------------
Net increase in net assets
from operations 3,667,955 9,534,574
------------------------------
DISTRIBUTIONS:
Net investment income:
Class I (5,960,426) (4,863,070)
Class II (818) 0
Class III (154,608) (59,489)
------------------------------
Net decrease in net assets
from distributions (6,115,852) (4,922,559)
------------------------------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 23,774,506 11,459,258
Reinvested dividends 5,846,105 4,875,148
Cost of shares redeemed (8,318,523) (5,065,035)
------------------------------
Net increase in net assets
from share transactions 21,302,088 11,269,371
------------------------------
Total increase in net assets 18,854,191 15,881,386
NET ASSETS:
Beginning of period 92,489,911 76,608,525
------------------------------
End of period (including
overdistributed net
investment income
of $36,367 and $0,
respectively) $111,344,102 $ 92,489,911
------------------------------
------------------------------
TOTAL RETURN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
-------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,980,877 $ 2,115,923
Net realized gain on
investments 13,237,842 3,359,339
Change in net unrealized
appreciation/depreciation 19,574,675 18,052,964
------------------------------
Net increase in net assets
from operations 34,793,394 23,528,226
------------------------------
DISTRIBUTIONS:
Net investment income:
Class I (1,889,477) (2,004,637)
Class II (3,654) 0
Class III (136,801) (80,975)
Net realized gain:
Class I (6,655,167) (4,306,191)
Class II (250) 0
Class III (1,542,598) (239,881)
------------------------------
Net decrease in net assets
from distributions (10,227,947) (6,631,684)
------------------------------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 50,948,844 31,506,867
Reinvested dividends 9,854,367 6,552,112
Cost of shares redeemed (20,775,834) (6,437,332)
------------------------------
Net increase in net assets
from share transactions 40,027,377 31,621,647
------------------------------
Total increase in net assets 64,592,824 48,518,189
NET ASSETS:
Beginning of period 133,363,003 84,844,814
------------------------------
End of period (including
undistributed net
investment income of $0
and $49,055, respectively) $197,955,827 $ 133,363,003
------------------------------
------------------------------
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------16
<PAGE>
- ----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ----------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DECEMBER 15, 1995 TO
JUNE 30, 1996
--------------------
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 109,242
Net realized loss on investments (7,688)
Change in net unrealized
appreciation/depreciation (153,211)
-----------
Net decrease in net assets
from operations (51,657)
-----------
DISTRIBUTIONS:
Net investment income:
Class I (79,345)
Class II (14,474)
Class III (15,423)
-----------
Net decrease in net assets
from distributions (109,242)
-----------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 9,584,335
Reinvested dividends 24,578
Cost of shares redeemed (751,709)
-----------
Net increase in net assets
from share transactions 8,857,204
Total increase in net assets 8,696,305
NET ASSETS:
Beginning of period 0
-----------
End of period $ 8,696,305
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 ---------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. TREASURY MONEY U.S. GOVERNMENT MONEY
MARKET PORTFOLIO MARKET PORTFOLIO
----------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
----------------------------- ----------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 4,346,582 $ 2,556,300 $ 5,109,635 $ 4,355,151
Net realized gain (loss) on investments (6,105) 1,775 (2,691) 375
----------------------------------------------------------
Net increase in net assets from
operations 4,340,477 2,558,075 5,106,944 4,355,526
----------------------------------------------------------
DISTRIBUTIONS:
Net investment income
Class I (4,239,680) (2,556,300) (5,104,189) (4,355,151)
Class III (106,902) -- (5,446) --
----------------------------------------------------------
Net decrease in net assets from
distributions (4,346,582) (2,556,300) (5,109,635) (4,355,151)
----------------------------------------------------------
SHARE TRANSACTIONS AT NET ASSET VALUE
OF $1.00 PER SHARE:
Proceeds from sales of shares 328,560,842 375,237,481 174,127,519 128,356,448
Reinvested dividends 87,904 1,790 10,490 1,952
Cost of shares redeemed (316,787,797) (408,732,664) (173,853,608) (108,155,888)
----------------------------------------------------------
Net increase (decrease) in net assets
from share transactions 11,860,949 (33,493,393) 284,401 20,202,512
----------------------------------------------------------
Total increase (decrease) in net
assets 11,854,844 (33,491,618) 281,710 20,202,887
NET ASSETS:
Beginning of year 67,376,677 100,868,295 88,057,177 67,854,290
----------------------------------------------------------
End of year $ 79,231,521 $ 67,376,677 $ 88,338,887 $ 88,057,177
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 18
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MUNICIPAL MONEY CASH RESERVE
MARKET PORTFOLIO PORTFOLIO
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995*
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 3,375,450 $ 2,808,987 $ 1,420,633 $ 695,324
Net realized gain (loss) on investments 0 0 (26) 88
----------------------------------------------------------
Net increase in net assets from
operations 3,375,450 2,808,987 1,420,607 695,412
----------------------------------------------------------
DISTRIBUTIONS:
Net investment income
Class I (3,296,898) (2,808,987) (853,244) (695,324)
Class III (78,552) -- (567,389) --
----------------------------------------------------------
Net decrease in net assets from
distributions (3,375,450) (2,808,987) (1,420,633) (695,324)
----------------------------------------------------------
SHARE TRANSACTIONS AT NET ASSET VALUE
OF $1.00 PER SHARE:
Proceeds from sales of shares 148,776,685 159,708,408 82,609,913 44,752,641
Reinvested dividends 70,601 1,211 478,625 0
Cost of shares redeemed (168,355,382) (141,861,897) (57,988,532) (29,293,129)
----------------------------------------------------------
Net increase (decrease) in net assets
from share transactions (19,508,096) 17,847,722 25,100,006 15,459,512
----------------------------------------------------------
Total increase (decrease) in net
assets (19,508,096) 17,847,722 25,099,980 15,459,600
NET ASSETS:
Beginning of year 94,078,287 76,230,565 15,459,600 0
----------------------------------------------------------
End of year $ 74,570,191 $ 94,078,287 $ 40,559,580 $ 15,459,600
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
* Fund commenced operations on September 26, 1994.
The accompanying notes are an integral part of the financial statements.
19 ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TOTAL RETURN FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
-------------------------- ------------- ------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
-------------------------- ------------- ------------------------
1996 1995 1994** 1996**** 1996 1995 1994***
---- ---- ------ -------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $ 9.91 $ 9.41 $10.00 $10.18 $ 9.89 $ 9.40 $10.04
--------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.60 0.57 0.45 0.29 0.49 0.43 0.21
Net realized and unrealized gain (loss)
on investments (0.18) 0.50 (0.57) (0.47) (0.18) 0.49 (0.62)
--------------------------------------------------------------------------
Total from investment operations 0.42 1.07 (0.12) (0.18) 0.31 0.92 (0.41)
--------------------------------------------------------------------------
Distributions:
Net investment income (0.60) (0.57) (0.46) (0.29) (0.49) (0.43) (0.22)
Net realized gain - - (0.01) - - - (0.01)
--------------------------------------------------------------------------
Total distributions (0.60) (0.57) (0.47) (0.29) (0.49) (0.43) (0.23)
--------------------------------------------------------------------------
Net asset value, end of period $ 9.73 $ 9.91 $ 9.41 $ 9.71 $ 9.71 $ 9.89 $ 9.40
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total Return+ 4.23% 11.87% (1.38)%# (1.75)%# 3.11% 10.12% (4.19)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $107,832 $90,574 $75,686 $ 67 $3,445 $1,916 $ 923
Ratio of expenses to average daily
net assets(1) 0.41% 0.35% 0.36%* 0.80%* 1.49% 1.84% 1.82%*
Ratio of net investment income to average
net assets 5.99% 6.07% 5.07%* 5.61%* 4.92% 4.58% 3.61%*
Portfolio turnover rate 56% 23% 36%* 56% 56% 23% 36%*
(1) During the period, various fees were
waived. The ratio of expenses to
average net assets had such waivers
not occurred is as follows 0.91% 0.91% 0.96%* 1.30%* 1.99% 3.35% 6.36%*
</TABLE>
* Annualized.
** Class commenced operations on August 2, 1993.
*** Class commenced operations on December 2, 1993.
**** Class commenced operations on December 20,1995.
+ Total return would have been lower had various
fees not been waived during the period.
# Total return for periods of less than one year are
not annualized.
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 20
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TOTAL RETURN EQUITY PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
-------------- ---------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
-------------- ---------------- --------------------------
1996 1995 1994** 1996**** 1996 1995 1994***
---- ---- ------ -------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $12.22 $10.53 $10.00 $13.05 $12.23 $10.51 $10.60
-----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19 0.23 0.17 0.09 0.03 0.06 0.06
Net realized and unrealized gain (loss)
on investments 2.58 2.21 0.57 1.74 2.60 2.24 (0.05)
-----------------------------------------------------------------------
Total from investment operations 2.77 2.44 0.74 1.83 2.63 2.30 0.01
-----------------------------------------------------------------------
Distributions:
Net investment income (0.19) (0.23) (0.17) (0.08) (0.07) (0.06) (0.06)
Net realized gain (0.68) (0.52) (0.04) (0.68) (0.68) (0.52) (0.04)
-----------------------------------------------------------------------
Total distributions (0.87) (0.75) (0.21) (0.76) (0.75) (0.58) (0.10)
-----------------------------------------------------------------------
Net asset value, end of period $14.12 $12.22 $10.53 $14.12 $14.11 $12.23 $10.51
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Total Return+ 23.54% 24.20% 7.39%# 14.71%# 22.19% 22.61% 0.08%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $159,146 $114,000 $82,751 $1,918 $36,892 $19,363 $2,094
Ratio of expenses to average daily net
assets (1) 0.76% 0.47% 0.34%* 1.06%* 1.87% 1.72% 1.83%*
Ratio of net investment income to
average net assets 1.40% 2.12% 1.83%* 1.10%* 0.29% 0.87% 0.34%*
Portfolio turnover rate 41% 33% 83%* 41% 41% 33% 83%*
(1) During the period, various fees
were waived. The ratio of expenses
to average net assets had such
waivers not occurred is as follows 1.00% 0.99% 1.05%* 1.30%* 2.11% 2.26% 6.03%*
</TABLE>
* Annualized.
** Class commenced operations on August 2, 1993.
*** Fund commenced operations on December 9, 1993.
**** Class commenced operations on December 20,1995.
+ Total return would have been lower had
various fees not been waived during the
period.
# Total return for periods of less than one year
are not annualized.
The accompanying notes are an integral part of the financial statements.
21 ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TENNESSEE TAX-FREE PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
--------------- --------------- ---------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996** JUNE 30, 1996** JUNE 30, 1996**
--------------- --------------- ---------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $10.00 $10.06 $10.00
-----------------------------------------
Income from investment operations:
Net investment income 0.23 0.21 0.19
Net realized and unrealized gain (loss)
on investments (0.29) (0.33) (0.28)
-----------------------------------------
Total from investment operations (0.06) (0.12) (0.09)
-----------------------------------------
Distributions:
Net investment income (0.23) (0.21) (0.19)
Net realized gain - - -
-----------------------------------------
Total distributions (0.23) (0.21) (0.19)
-----------------------------------------
Net asset value, end of period $9.71 $9.73 $9.72
-----------------------------------------
-----------------------------------------
Total Return+ (0.65)%# (1.25)%# (0.87)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $5,925 $1,875 $896
Ratio of expenses to average daily
net assets 0.50%* 0.49%* 0.98%*
Ratio of net investment income to average
net assets 4.31%* 4.32%* 3.83%*
Portfolio turnover rate 8%* 8%* 8%*
(1) During the period, various fees were
waived. The ratio of expenses to average
net assets had such waivers not occurred
is as follows 1.42% 1.42% 1.91%
</TABLE>
* Annualized.
** Class I and III commenced operations on December 15, 1995.
Class II commenced operations on December 29, 1995.
+ Total return would have been lower had various
fees not been waived during the period.
# Total return for periods of less than one year are
not annualized.
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 22
<PAGE>
- ----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS III
----------------------------------- ---------------
FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- ---------------
1996 1995 1994 1993** 1996***
----- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 1.00 $1.00 $1.00 $1.00
--------------------------------------------------
Income from investment operations:
Net investment income 0.052 0.050 0.030 0.018 0.044
Distributions:
Net investment income (0.052) (0.050) (0.030) (0.018) (0.044)
--------------------------------------------------
Net asset value, end of period $1.00 1.00 $1.00 $1.00 $1.00
--------------------------------------------------
--------------------------------------------------
TOTAL RETURN+ 5.30% 5.10% 3.06% 1.76%# 4.47%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) 75,703 $67,377 $100,868 $59,326 $3,528
Ratio of expenses to average net assets (1) 0.36% 0.36% .0.33% 0.39%* 0.62%*
Ratio of net investment income to
average net assets 5.19% 5.00% 3.04% 2.73%* 4.93%*
(1) During the period, various fees were
waived. The ratio of expenses to
average net assets had such waivers
not occurred is as follows 0.56% 0.63% 0.60% 0.65%* 0.82%*
</TABLE>
* Annualized.
** Class commenced operations on November 12, 1992.
*** Class commenced operations on August 8, 1995.
+ Total return would have been lower had various fees
not been waived during the period.
# Total return for periods of less than one year are not annualized.
The accompanying notes are an integral part of the financial statements.
23 -------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS III
----------------------------------- ---------------
FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- ---------------
1996 1995 1994 1993** 1996***
----- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 1.00 $1.00 $1.00 $1.00
--------------------------------------------------
Income from investment operations:
Net investment income 0.053 0.053 0.032 0.019 0.044
--------------------------------------------------
Distributions:
Net investment income (0.053) (0.053) (0.032) (0.019) (0.044)
--------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------
--------------------------------------------------
TOTAL RETURN+ 5.37% 5.39% 3.23% 1.87%# 4.49%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) 88,111 $88,057 $67,854 $94,903 $228
Ratio of expenses to average net assets (1) 0.33% 0.31% 0.28% 0.27%* 0.65%*
Ratio of net investment income to
average net assets 5.28% 5.27% 3.18% 2.98%* 4.96%*
(1)During the period, various fees were
waived. The ratio of expenses to average
net assets had such waivers not occurred
is as follows. 0.53% 0.58% 0.55% 0.55%* 0.85%*
</TABLE>
* Annualized.
** Class commenced operations on November 12, 1992.
*** Class commenced operations on August 8, 1995.
+ Total return would have been lower had various fees
not been waived during the period.
# Total return for periods of less than one year are not annualized.
The accompanying notes are an integral part of the financial statements.
- ------------------------------------------------------------------------- 24
<PAGE>
- ----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
MUNICIPAL MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS III
----------------------------------- ---------------
FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30,
----------------------------------- ---------------
1996 1995 1994 1993** 1996***
----- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 1.00 $1.00 $1.00 $1.00
--------------------------------------------------
Income from investment operations:
Net investment income 0.035 0.034 0.024 0.014 0.030
Distributions:
Net investment income (0.035) (0.034) (0.024) (0.014) (0.030)
--------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------
--------------------------------------------------
TOTAL RETURN+ 3.52% 3.48% 2.40% 1.40%# 3.03%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $71,665 $94,078 $76,231 $74,362 $2,905
Ratio of expenses to average net assets (1) 0.32% 0.30% 0.28% 0.31%* 0.58%*
Ratio of net investment income to average net
assets 3.50% 3.44%. 2.39% 2.26%* 3.24%*
(1)During the period, various fees were
waived. The ratio of expenses to average
net assets had such waivers not occurred
is as follows. 0.52% 0.57% 0.55% 0.58%* .0.78%*
</TABLE>
* Annualized.
** Class commenced operations on November 12, 1992.
*** Class commenced operations on July 28, 1995.
+ Total return would have been lower had various fees
not been waived during the period.
# Total return for periods of less than one year are not annualized.
The accompanying notes are an integral part of the financial statements.
25 -------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CASH RESERVE PORTFOLIO
<TABLE>
<CAPTION>
CLASS I CLASS III
------------------ --------------
FOR THE YEAR FOR YEAR
ENDED JUNE 30, ENDED JUNE 30,
------------------ --------------
1996 1995** 1996***
---- ------ -------
<S> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 1.00 $1.00
--------------------------------------------------
Income from investment operations:
Net investment income 0.053 0.042 0.047
--------------------------------------------------
Distributions:
Net investment income. (0.053) (0.042) (0.047)
--------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
--------------------------------------------------
--------------------------------------------------
TOTAL RETURN+ 5.39% 4.27%# 4.78%#
Ratios and Supplemental Data
Net assets, end of period (thousands) $16,369 $15,460 $24,190
Ratio of expenses to average net assets (1) 0.42% 0.43%* 0.62%*
Ratio of net investment income to average net
assets 5.22% 5.48%* 5.02%*
(1)During the period, various fees were
waived. The ratio of expenses to average
net assets had such waivers not occurred
is as follows. 0.61% 0.70%* 0.81%*
</TABLE>
* Annualized.
** Class commenced operations on September 26, 1994.
*** Class commenced operations on July 28, 1995.
+ Total return would have been lower had various fees
not been waived during the period.
# Total return for periods of less than one year are not annualized.
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 26
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND OPERATING POLICIES
First Funds (the Trust) is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-ended management investment
company organized as a Massachusetts business trust by a Declaration of Trust
dated March 6, 1992, as amended and restated on September 4, 1992.
The Trust currently has seven active investment portfolios (each referred to
as a "Portfolio"). The Trust's financial statements are prepared in
accordance with generally accepted accounting principles. This requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
The following summarizes the significant accounting policies for the Trust.
Each Portfolio may offer three classes of shares (Class I, Class II and Class
III). As of June 30, 1996, Class II shares have been issued only for the
Total Return Equity, Total Return Fixed Income, and Tennessee Tax-Free
Portfolios. Class I and Class III shares have been issued for all Portfolios.
Each Class of shares has equal rights as to earnings, assets and voting
privileges except that each Class bears different distribution, shareholder
service, transfer agent and blue sky expenses. Each Class has exclusive
voting rights with respect to its Distribution Plans and Shareholder
Servicing Plans. Income, expenses (other than expenses incurred under each
Class Distribution and Service Plans and other class specific expenses) and
realized and unrealized gains or losses on investments are allocated to each
Class of shares based upon their relative net assets or dividend assets.
SECURITY VALUATION:
TOTAL RETURN EQUITY, TOTAL RETURN FIXED INCOME AND TENNESSEE TAX-FREE
PORTFOLIOS: Securities held in the Total Return Equity Portfolio for which
exchange quotations are readily available are valued at the last sale price,
or if no sale price or if traded on the over-the-counter market, at the
closing bid price. Securities held in the Total Return Fixed Income and
Tennessee Tax-Free Portfolios are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider market
transactions and dealer-supplied valuations. Securities for which quotations
are not readily available are valued using dealer-supplied valuations or at
the fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days are valued at amortized cost
or original cost plus accrued interest, both of which approximate current
value.
MONEY MARKET PORTFOLIOS: Each of the Money Market Portfolios values
securities utilizing the amortized cost method of valuation under Rule 2a-7
of the 1940 Act, pursuant to which each Money Market Portfolio must adhere to
certain conditions. Under this method, investments are valued initially at
cost and thereafter assume a constant amortization to maturity of any
discount or premium.
ORGANIZATIONAL COSTS: Costs incurred by the Trust in connection with its
initial share registration were deferred and are being amortized on a
straight-line basis over 5 years.
REPURCHASE AGREEMENTS: Each Portfolio, through its custodian, receives
delivery of underlying securities, whose market value, including interest,
is required to be at least equal to 102% of the resale price. The Trust's
sub-advisers, under the supervision of the investment adviser, Garland
Capital Management (Garland), are responsible for determining that the value
of these underlying securities remains at least equal to 102% of the resale
price. If the seller defaults, each Portfolio would suffer a loss to the
extent that the proceeds from the sale of the underlying securities were
less than the repurchase price.
OPTIONS CONTRACTS: Each of the Total Return Equity and Total Return Fixed
Income Portfolios may purchase or write options contracts to manage their
exposure to changing interest rates and security prices. Options involve to
varying degrees, elements of market risk and risks possibly in excess of the
amount recognized in the Statement of Assets and Liabilities. Risks may be
caused by an imperfect correlation between movements in the price of the
instruments and the price of the underlying securities and interest rates.
Risks also may arise if there is an illiquid secondary market for the
instruments, or due to the inability of counterparties to perform. The risk
of loss from purchasing options is limited to initial amounts invested, while
the risk of loss from writing options may be unlimited.
INCOME TAXES: As a qualified regulated investment company under Subchapter M
of the Internal Revenue Code, each Portfolio is not subject to income taxes
to the extent that it distributes all of its taxable income for its fiscal
year.
INTEREST INCOME: Interest income, which includes amortization of premium and
accretion of discount, is accrued as earned. For the Municipal Money Market
Portfolio, accretion of market discount represents unrealized gain until
realized at the time of security disposition or maturity. Dividend income
is recorded on the ex-dividend date.
EXPENSES: Most expenses of the Trust can be directly attributed to a
Portfolio. Expenses which cannot be directly attributed are apportioned among
the Portfolios based on average net assets. For the year ended June 30, 1996,
total Trust expenses were reduced $12,352 under expense offset arrangements
with the Custodian. The Trust could have invested a portion of the assets
utilized in connection with the offset arrangements in an income producing
asset.
DISTRIBUTIONS TO SHAREHOLDERS: For Total Return Fixed Income Portfolio and
Tennessee Tax-Free Portfolio, distributions are declared daily and paid
monthly from net investment income. Distributions for Total Return Equity
Portfolio are declared and paid monthly. For the Money Market Portfolios,
distributions are declared daily and paid monthly from net investment income.
Any net capital gains earned by each Portfolio are normally distributed to
the extent necessary to avoid federal income and excise taxes.
Income and capital gains to be distributed are determined in accordance with
income tax regulations which may differ from income and gains reported under
generally accepted accounting principles. For the year ended June 30, 1996,
the effects of certain differences were reclassified by the Total Return
Fixed Income Portfolio to reflect an increase in accumulated net investment
loss of $35,660, a decrease in accumulated net realized loss on investments
of $27,690 and an increase in Paid in capital of $7,970.
27 --------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING AND OPERATING POLICIES (CONTINUED)
OTHER: Investment security transactions are accounted for as of trade date.
Realized gains and losses from securities transactions are determined using
the identified cost basis for both financial reporting and income tax purposes
2. SHARES OF BENEFICIAL INTEREST
TOTAL RETURN FIXED INCOME PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Dollars issued and redeemed:
Class I:
Issued $21,362,353 $10,127,222
Distributions reinvested 5,699,923 4,820,882
Redeemed (7,447,448) (4,586,423)
Net increase $19,614,828 $10,361,681
----------- -----------
----------- -----------
Class II:*
Issued $ 69,932 -
Distributions reinvested 656 -
Redeemed (3,000) -
----------- -----------
Net increase $ 67,588 -
----------- -----------
----------- -----------
Class III:
Issued $ 2,342,221 $ 1,332,036
Distributions reinvested 145,526 54,266
Redeemed (868,075) (478,612)
----------- -----------
Net increase $ 1,619,672 $ 907,690
----------- -----------
----------- -----------
Shares issued and redeemed:
Class I:
Issued 2,117,107 1,072,781
Distributions reinvested 572,716 509,715
Redeemed (747,397) (485,578)
----------- -----------
Net increase 1,942,426 1,096,918
----------- -----------
----------- -----------
Class II:*
Issued 7,145 -
Distributions reinvested 67 -
Redeemed (295) -
----------- -----------
Net increase 6,917 -
----------- -----------
----------- -----------
Class III:
Issued 234,519 139,777
Distributions reinvested 14,645 5,738
Redeemed (88,078) (50,053)
----------- -----------
Net increase 161,086 95,462
----------- -----------
----------- -----------
* Class II commenced operations on December 20, 1995.
TOTAL RETURN EQUITY PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Dollars issued and redeemed:
Class I:
Issued $ 32,703,374 $14,418,937
Distributions reinvested 8,189,401 6,234,194
Redeemed (15,914,561) (4,343,748)
------------ -----------
Net increase $ 24,978,214 $16,309,383
------------ -----------
------------ -----------
Class II:*
Issued $ 1,882,420 -
Distributions reinvested 3,869 -
Redeemed (21,582) -
------------ -----------
Net increase $ 1,864,707 -
------------ -----------
------------ -----------
Class III:
Issued $ 16,363,050 $17,087,930
Distributions reinvested 1,661,097 317,918
Redeemed (4,839,691) (2,093,584)
------------ -----------
Net increase $ 13,184,456 $ 15,312,264
------------ -----------
------------ -----------
Shares issued and redeemed:
Class I:
Issued 2,523,867 1,298,257
Distributions reinvested 645,878 571,838
Redeemed (1,227,208) (396,451)
------------ -----------
Net increase 1,942,537 1,473,644
------------ -----------
------------ -----------
Class II:*
Issued 137,126 -
Distributions reinvested 279 -
Redeemed (1,547) -
------------ -----------
Net increase 135,858 -
------------ -----------
------------ -----------
Class III:
Issued 1,263,416 1,543,982
Distributions reinvested 131,783 28,855
Redeemed (363,695) (189,309)
------------ -----------
Net increase 1,031,504 1,383,528
------------ -----------
------------ -----------
* Class II commenced operations on December 20, 1995.
- -------------------------------------------------------------------------- 28
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
TENNESSEE TAX-FREE PORTFOLIO
FOR THE
YEAR ENDED
JUNE 30, 1996
-------------
Dollars issued and redeemed:
Class I:*
Issued $6,254,616
Distributions reinvested 686
Redeemed (210,724)
----------
Net increase $6,044,578
----------
----------
Class II:**
Issued $1,887,494
Distributions reinvested 10,271
Redeemed (14,693)
----------
Net increase $1,883,072
----------
----------
Class III:*
Issued $1,442,225
Distributions reinvested 13,621
Redeemed (526,292)
----------
Net increase $ 929,554
----------
----------
Shares issued and redeemed:
Class I:*
Issued 631,913
Distributions reinvested 70
Redeemed (21,867)
----------
Net increase 610,116
----------
----------
Class II:**
Issued 193,243
Distributions reinvested 1,056
Redeemed (1,503)
----------
Net increase 192,796
----------
----------
Class III:*
Issued 144,921
Distributions reinvested 1,390
Redeemed (54,063)
----------
Net increase 92,248
----------
----------
* Class I and III commenced operations on December 15, 1995.
** Class II commenced operations on December 29, 1995.
U.S. TREASURY MONEY MARKET PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Shares/Dollars issued and redeemed:
Class I:*
Issued 319,601,543 375,237,481
Distributions reinvested 1,639 1,790
Redeemed (311,270,747) (408,732,664)
------------ ------------
Net increase 8,332,435 (33,493,393)
------------ ------------
------------ ------------
Class III:*
Issued 8,959,299 -
Distributions reinvested 86,265 -
Redeemed (5,517,050) -
------------ ------------
Net increase 3,528,514 -
------------ ------------
------------ ------------
* Class III commenced operations on August 8, 1995.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Shares/Dollars issued and redeemed:
Class I:
Issued 173,136,867 128,356,448
Distributions reinvested 6,070 1,952
Redeemed (173,086,183) (108,155,888)
------------ ------------
Net increase 56,754 20,202,512
------------ ------------
------------ ------------
Class III:*
Issued 990,652 -
Distributions reinvested 4,420 -
Redeemed (767,425) -
------------ ------------
Net increase 227,647 -
------------ ------------
------------ ------------
* Class III commenced operations on August 8, 1995.
MUNICIPAL MONEY MARKET PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Shares/Dollars issued and redeemed:
Class I:
Issued 139,423,634 159,708,408
Distributions reinvested 1,090 1,211
Redeemed (161,838,128) (141,861,897)
------------ ------------
Net increase (22,413,404) 17,847,722
------------ ------------
------------ ------------
Class III:*
Issued 9,353,051 -
Distributions reinvested 69,511 -
Redeemed (6,517,254) -
------------ ------------
Net increase 2,905,308 -
------------ ------------
------------ ------------
* Class III commenced operations on July 28, 1995.
CASH RESERVE PORTFOLIO
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Shares/Dollars issued and redeemed:
Class I:*
Issued 24,743,027 44,752,641
Distributions reinvested 0 0
Redeemed (23,833,276) (29,293,129)
------------ ------------
Net increase 909,751 15,459,512
------------ ------------
------------ ------------
Class III:**
Issued 57,866,886 -
Distributions reinvested 478,625 -
Redeemed (34,155,256) -
------------ ------------
Net increase 24,190,255 -
------------ ------------
------------ ------------
* Class I commenced operations on September 26, 1994.
** Class III commenced operations on July 28, 1995.
29 --------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT ADVISORY AND MANAGEMENT AND SUB-ADVISORY AGREEMENTS
For managing its investment and business affairs, Total Return Equity
Portfolio and Total Return Fixed Income Portfolio each pay Garland, a
division of First Tennessee Bank National Association ("First Tennessee"), a
monthly management fee at the annual rate of .65% and .55%, respectively, of
its average net assets. For managing its investment and business affairs,
Tennessee Tax Free Portfolio pays First Tennessee a monthly management fee at
the annual rate of .50% of its average net assets. For managing its
investment and business affairs, each of the Money Market Portfolios pays
Garland its pro-rated portion of a monthly management fee at the annual rate
of .25% of aggregate average monthly net assets of all Money Market
Portfolios of the Trust managed by Garland through $1 billion, and .22% on
amounts greater than $1 billion. Under the Investment Advisory and
Management Agreement, Garland is authorized, at its own expense, to hire
sub-advisers to provide investment advice to it and to each Portfolio.
For the Total Return Equity and Total Return Fixed Income Portfolios,
Highland Capital Management Corp. (Highland) serves as the sub-adviser of
each Portfolio pursuant to the authority granted to it under its Sub-Advisory
Agreement with First Tennessee. Highland is an affiliate of First Tennessee
and is a wholly-owned subsidiary of First Tennessee National Corporation.
Highland is paid by First Tennessee a monthly sub-advisory fee at the annual
rate of .38% of Total Return Equity Portfolio's average net assets and .33%
of Total Return Fixed Income Portfolio's average net assets. For the Money
Market Portfolios, PNC Institutional Management Corporation (PIMC) serves as
the sub-adviser of each Portfolio pursuant to the authority granted to it
under its Sub-Advisory Agreement with the Adviser. PIMC is a wholly-owned
subsidiary of PNCBank National Association. PIMC is paid by the Adviser a
monthly sub-advisory fee at the annual rate of .08% of each Portfolio's
average net assets through $500 million, .06% of the next $500 million, and
.05% of net assets greater than $1 billion.
4. ADMINISTRATOR, CO-ADMINISTRATOR AND DISTRIBUTOR
ALPS Mutual Funds Services, Inc. serves as Administrator and Distributor for
the Trust under separate Administration and General Distribution Agreements.
ALPS' duties include distribution services, providing office space and
various legal and accounting services in connection with the regulatory
requirements applicable to each Portfolio. ALPS is entitled to receive from
each of the Money Market Portfolios, a fee at the annual rate of .075% of
average net assets and, from the Total Return Equity, Total Return Fixed
Income and Tennessee Tax-Free Portfolios, a fee at the annual rate of .15% of
average net assets.
Garland serves as the Co-Administrator for each Portfolio. As the
Co-Administrator, Garland assists in each Portfolio's operation, including
but not limited to, providing non-investment related research and statistical
data and various operational and administrative services. Garland is
entitled to receive a fee from each Portfolio at the annual rate of .05% of
average net assets.
The Trustees have adopted a Distribution Plan on behalf of Class III of each
Portfolio pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Each Distribution Plan provides for payment of a fee to ALPS at the
annual rate of .75% of the average net assets of Class III of the Total
Return Equity and Total Return Fixed Income Portfolios, .50% of the average
net assets of Class III of the Tennessee Tax-Free Portfolio, and .25% of the
average net assets of Class III of each money market portfolio. The Trustees
have also adopted Shareholder Servicing Plans on behalf of Class II and III
of the Total Return Equity and Total Return Fixed Income Portfolios under
which Investment Professionals are paid at the annual rate of .25% of each
Class' average net assets for shareholder services and account maintenance.
5. WAIVER OF FEES
TOTAL RETURN EQUITY, TOTAL RETURN FIXED INCOME AND TENNESSEE TAX-FREE
PORTFOLIOS:
For the period from July 1, 1995 to December 31, 1995, Garland voluntarily
agreed to waive its management fee for the Total Return Equity Portfolio to
.35% of average net assets. Effective January 1, 1996, Garland voluntarily
agreed to waive its management fee to .50% of average net assets.
For the six months ended December 31, 1995, Garland agreed to waive its
entire management fee for the Total Return Fixed Income Portfolio. Effective
January 1, 1996, Garland voluntarily agreed to waive its management fee to
.15% of average net assets.
From inception of the Fund to June 30, 1996, First Tennessee agreed to waive
its entire management fee for the Tennessee Tax-Free Portfolio.
For the six months ended December 31, 1995, Garland voluntarily agreed to
waive its full co-administration fee for Class I of the Total Return Equity
and Total Return Fixed Income Portfolios. For the period from July 1, 1995
to November 7, 1995, Garland voluntarily agreed to waive its full
co-administration fee for Class II and III of the Total Return Equity and
Total Return Fixed Income Portfolios. From the inception of the Fund to June
30, 1996, Garland voluntarily agreed to waive its co-administration fee for
all classes of the Tennessee Tax-Free Portfolio.
Pursuant to the voluntary waiver agreements , for the year ended June 30,
1996, Garland and First Tennessee waived management fees and
co-administration fees as follows:
MANAGEMENT CO-ADMINISTRATION
---------- -----------------
Total Return Equity $358,250 $34,639
Total Return Fixed Income $482,559 $23,882
Tennessee Tax-Free $ 12,692 $ 1,252
From inception of the Tennessee Tax-Free Portfolio, ALPS voluntarily agreed
to waive its administration fee. Effective January 1, 1996, ALPS voluntarily
agreed to reimburse the Tennessee Tax-Free Portfolio for fund
accounting/transfer agent fees as well as Custody out-of-pocket fees. For the
period ended June 30, 1996, ALPS waived fees totaling $3,755 and reimbursed
the Tennessee Tax-Free Portfolio in the amount of $5,310.
- -------------------------------------------------------------------------- 30
<PAGE>
- -----------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. WAIVER OF FEES (CONTINUED)
MONEY MARKET PORTFOLIOS:
For the six months ended December 31, 1995, Garland agreed to waive a portion
of its management fee payable by each of the Money Market Portfolios so that
each Money Market Portfolio paid .08% of its average net assets.
Additionally, for the six months ended December 31, 1995, Garland agreed to
waive its full co-administration fee for the Money Market Portfolios.
Effective January 1, 1996, Garland voluntarily agreed to waive a portion of
its management and co-administration fees payable by each of the Money Market
Portfolios so that each Money Market Portfolio pays .10% and .025%,
respectively, of its average net assets. For the year ended June 30, 1996,
the expense waivers were as follows:
MANAGEMENT FEE CO-ADMINISTRATION FEE
-------------- ---------------------
U.S. Treasury Money Market $133,588 $30,649
U.S. Government Money Market $155,065 $36,477
Municipal Money Market $155,521 $37,216
Cash Reserve $ 43,354 $ 9,183
6. OTHER
As of June 30, 1996, one shareholder owned 47.0% of the Total Return Equity
Portfolio and 62.8% of the Total Return Fixed Income Portfolio. Additionally,
as of June 30, 1996, one shareholder owned 12.0% of the Tennessee Tax-Free
Portfolio and one shareholder owned 21.0% of the Treasury Money Market
Portfolio.
31 --------------------------------------------------------------------------
<PAGE>
[LOGO] 370 Seventeenth Street
Suite 2700
Denver, Colorado 80202
INVESTMENT ADVISER - Tennessee Tax-Free Portfolio
First Tennessee Bank National Association
Knoxville, Tennessee
INVESTMENT ADVISER - All other Portfolios except
Tennessee Tax-Free Portfolio
Garland Capital Management, a division of First
Tennessee Bank National Association
Memphis, Tennessee
SUB-ADVISER - Money-Market Portfolios
PNC Institutional Management Corporation
Wilmington, Delaware
SUB-ADVISER - Total Return Equity and Total Return
Fixed Income Portfolios
Highland Capital Management Corporation
Memphis, Tennessee
OFFICERS
Richard C. Rantzow, President
James Hyatt, Secretary
Mark Pougnet, Treasurer
TRUSTEES
Thomas M. Bachelor
John A. DeCell
L.R. Jalenak, Jr.
Larry W. Papasan
Richard C. Rantzow
ADMINISTRATOR AND DISTRIBUTOR
ALPS Mutual Funds Services, Inc.
Denver, Colorado
TRANSFER AND SHAREHOLDER SERVICING AGENT
Chase Global Funds Services Company
Boston, Massachusetts
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, New York
NOT FDIC INSURED [LOGO] [LOGO]
