FIRST FUNDS
INTERMEDIATE BOND PORTFOLIO
SUPPLEMENT DATED JANUARY 29, 1998, TO
THE PROSPECTUS DATED OCTOBER 24, 1997
At a meeting on January 23, 1998, the Trustees of First Funds
approved for the Intermediate Bond Portfolio (the Portfolio) a proposed
Sub-Advisory Agreement between First Tennessee Bank National Association (First
Tennessee), the Portfolio's investment adviser, and its affiliated company,
Martin & Company, Inc. (Martin), acting as sub-adviser. The sub-advisory
arrangement with Martin will be implemented instead of the sub-advisory
arrangement described in the Prospectus between First Tennessee and Highland
Capital Management Corp. (Highland), also an affiliate of First Tennessee.
Accordingly, all references in the Prospectus to Highland should be changed to
refer instead to Martin. The following additional changes are also made to the
Prospectus:
The fourth paragraph under the heading "What Advisory and Other Fees
Does the Portfolio Pay? - Investment Advisory and Management and Sub-Advisory
Agreements" should be deleted in its entirety and the following substituted in
its place:
"Martin serves as the Sub-Adviser for the Portfolio subject to
the supervision of First Tennessee and pursuant to the authority
granted to it under its Sub-Advisory Agreement with First TenIn
January 1998, Martin became an investment advisory subsidiary of
First Tennessee National Corporation, which also owns First
Tennessee. Martin and its predecessors have been in the investment
advisory business for over 8 years and have considerable experience
in securities selection, including expertise in the selection of
fixed-income securities. Martin has not previously advised or
sub-advised a registered investment company such as First Funds,
although Martin is subject to
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the supervision of First Tennessee, which has a history of
investment management since 1929 and has served as the investment
adviser to First Funds since its inception in 1992. First Tennessee
is obligated to pay Martin a monthly sub-advisory fee at the annual
rate of 0.30% of the Portfolio's average net assets. The Portfolio
is not responsible for paying any portion of Martin's sub-advisory
fee. Martin has agreed to voluntarily waive its sub- advisory fee,
although this waiver could be discontinued in whole or in part at
any time. Martin's principal office is located at Two Centre Square,
Suite 200, 625 South Gay Street, Knoxville, TN 37902."
The two paragraphs under the heading "How is the Portfolio
Organized? -- Portfolio Management" should be deleted in their entirety and the
following substituted in their place:
"Ralph W. Herbert, Vice President and Portfolio Manager
with Martin, is a co-manager for the Intermediate Bond
Portfolio. Mr. Herbert has over 19 years of experience in
the financial services industry and specializes in fixed-
income securities. Mr. Herbert is a 1977 graduate of The
University of Tennessee.
"Ted L. Flickinger, Jr., Vice President and Fixed
Income Portfolio Manager with Martin, co-manages the
Intermediate Bond Portfolio with Mr. Herbert. Mr.
Flickinger is a Chartered Financial Analyst and has over 14
years of experience in the investment management industry,
at least 7 of which have been with Martin concentrating on
fixed-income securities. Mr. Flickinger is a 1977 graduate
of The University of Tennessee."
Although the Portfolio can invest in securities of any maturity, the
Portfolio's dollar-weighted average portfolio maturity is expected to range
between 3 and 6 years. Accordingly, all references in the Prospectus to the
range of the Portfolio's dollar-weighted average maturity should be read as 3 to
6 years.
The first sentence under the heading "What is the Effect of Federal
Income Tax on This Investment? - Federal Taxes" is deleted in its entirety and
the following substituted in its place:
"Distributions of gains from the sale of assets held by the
Portfolio for more than one year generally are taxable to
shareholders at the applicable mid-term or long-term
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capital gains rate, regardless of how long they have owned
their Portfolio shares. Distributions from other sources
generally are taxed as ordinary income."
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